All posts by Jason Rantanen

About Jason Rantanen

Jason is a Law Professor at the University of Iowa College of Law.

In re: Juniper Networks

By Jason Rantanen

In re: Juniper Networks (Panel: Judges Lourie, Bryson, Taranto)

By my count, it’s been over a month and a half since the Federal Circuit issued a decision granting a petition for writ of mandamus arising from the Western District of Texas.  (That decision was In re: Hulu on August 2, 2021.)  That streak has come to an end, as today the court issued In re: Juniper Networks.

Like other petitions for a writ of mandamus arising from the Western District of Texas, Juniper Networks, Inc.’s petition concerned the denial of a request for transfer under 28 U.S.C. § 1404(a).  The case itself involves an assertion of patent infringement by WSOU Investments LLC (referred to as “Brazos”) against Juniper that was filed in the Western District of Texas.  Juniper, a Delaware corporation headquartered in Sunnyvale, California (for those who aren’t familiar with the area, that’s Silicon Valley), moved to transfer to the Northern District of California.  Judge Albright denied the motion, reasoning that under the four private interest and four public interest factors governing which district is more convenient, Juniper had not established that the Northern District of California was a clearly more convenient forum for this litigation.

The Federal Circuit reversed in a per curium opinion.  Under the law of the Fifth Circuit, “a motion to transfer venue pursuant to section 1404(a) should be granted if ‘the movant demonstrates that the transferee venue is clearly more convenient.'” Slip Op. at 6, quoting In re Radmax, Ltd., 720 F.3d 285 (5th Cir. 2013).  Here, Judge Albright committed legal errors that required the granting of the petition.

Starting at the top, “the relative convenience for and cost of attendance of witnesses between the two forums is ‘probably the single most important factor in transfer analysis.'”  Slip Op. at 7, quoting In re Genentech, Inc., 566 F.3d 1338, 1343 (Fed. Cir. 2009).  Here, the district court didn’t give it the appropriate weight, especially since there was a big imbalance in terms of witness convenience.  Instead, the district court cited its own prior decisions for giving little weight to the identified witnesses – which was a problem since those propositions had previously been directly rejected by the Federal Circuit.

The district court also erred in its application of the local interest factor.  Most of the events forming the basis for Brazos’s infringement claims occurred in the Northern District of California and none occurred in the Western District of Texas.  This was enough to give the tranferee court a local interest.  Contrary to the district court’s reasoning, Juniper’s lease of a small office in Austin by the defendant for something that had no connection with the accused products wasn’t sufficient to establish a local interest.  A company’s general presence in a district are not enough to establish a local interest comparable to the events that gave rise to the suit.  Nor was Brazos’s status as a Waco-based entity incorporated in Texas entitled to significant weight: “The office was established only a few months before the complaints against Juniper were filed, and the activities of the office are largely tied to bring lawsuits in that court.  Brazos has only two employees who work from Waco, one of whom is its in-house attorney responsible for litigation.  The principal officers of Brazos are located in California.”  Slip Op. at 10.  “We have noted in other mandamus cases that little or no weight should be accorded to a party’s ‘recent and ephemeral’ presence in the transferor forum, such as by establishing an office in order to claim a presence in the district for purposes of litigation.”  Id.

The Federal Circuit also concluded that the district court erred in its assessment of the sources of proof and need for compulsory service factors, but the most interesting to me was the the final error that the Federal Circuit identified: the district court’s conclusion that the court-congestion factor weighed against transfer based on Brazos’s assertion that the Texas forum had a faster median time to trial than the California forum.  But, the Federal Circuit pointed out, the district judge’s “faster time to trial” statistic was based on scheduled trial dates (my emphasis), i.e.: those set out in Judge Albright’s aggressive scheduling order.  In any event, the Federal Circuit concluded that the relative speed with which this case may be brought to trial was not of particular significance, as the “court congestion” factor is the “most speculative of the factors bearing on the transfer decision.” Slip Op. at 14.

Ultimately, the Federal Circuit concluded, this was essentially the same as the recent decisions in Samsung and Hulu, both of involved situations in which several of the most important factors strongly favored the transferee court and no factor favored retaining the case in the transferor court.

As an ending note, the Federal Circuit also denied a petition for a writ of mandamus arising from the Court of Appeals for Veterans Claims in In re: Fermin on the basis that “mandamus relief is not appropriate when a petition fails to seek relief through the normal appeal process.”  Here, the petitioner’s prior appeal to the Federal Circuit had been dismissed for lack of subject matter, the petitioner had filed a motion to reconsider at the Veterans’ Court (which the court denied), and had not appealed the Veterans’ Court’s denial of that motion.  “Because [the petitioner] here failed to seek review of the Veterans Court’s order by way of a timely filed direct appeal, we must deny his request for this extraordinary relief.”  Slip Op. at 2.

Missing Decisions and the Federal Circuit

By Jason Rantanen

Last week the Federal Circuit issued two interesting orders in appeals from the USPTO.   In the first, In re Zhu (Appeal No. 2021-1761), Sept. 13, 2021, the Federal Circuit vacated the decision of the PTAB and remanded the case to the PTO “for reconsideration of whether the claims are directed to an improvement in computer functionality, especially in light of this court’s recent case law.”  (internal quotations and brackets removed).  The context of this, according to Tiffany Hu, was the Federal Circuit’s 2020 Uniloc v. LG ruling together with the PTO’s own request for a remand “to permit further proceedings” – i.e: this was a patent eligible subject matter issue that the PTO decided to take another look at while the appeal was pending.

The second, In re Boloro (Appeal nos. 2019-2349, -2351, -2353), Sept. 16, 2021, was an order by the Federal Circuit remanding the case to allow Bolero to request Director rehearing of the final written decisions in light of the Supreme Court’s decision in United States v. Arthrex, Inc., 141 S.Ct. 1970 (2021).   The Federal Circuit had previously issued an order remanding the case for assignment to a different panel, its earlier remedy for the Constitutional appointments issue with patent judges.  As Andrew Karpan recently wrote, this order extends the effects of Arthrex to ex parte appeals.

On their own, neither of these orders are that notable.  They are nonprecedential orders that contain little more explanatory reasoning than a summary affirmance under Rule 36.  On the other hand, they were enough for Law360 authors to write about.

What’s more interesting is that neither was posted to the Federal Circuit’s website.  They’re only available in PACER.  This is not itself all that unusual.  Historically, dispositive orders like these would vanish into the ether – becoming what Merritt McAlister recently characterized as Missing Decisions.  They are never published in reporters, including the Federal Appendix, and aren’t in the major research databases.  Indeed, I didn’t find either of these decisions in Westlaw or Lexis when I searched yesterday afternoon.  Yet, they are judicial decisions, and in an age where lawyers, judges and scholars have come to think that all law (or at least, all appellate decisions) is easily accessible, they highlight that it’s not.

In a forthcoming essay response to Professor McAlister’s Missing Decisions, I examine the one federal appellate court that for technical reasons McAlister didn’t  include: the Federal Circuit.  What I find is that the Federal Circuit is quite good about putting its opinions and Rule 36 summary affirmances on its website.  But there are also a lot of missing decisions, which are concentrated in certain areas.  This is concerning if our frame of reference for judicial decisionmaking is defined by what’s readily available on court websites and commercial legal databases.

Here are my main findings:

  • Based on a comparison of docketed appeals filed between 2008 and 2018 to decisions posted to the Federal Circuit’s website, 45% of docketed appeals are decided in an opinion released on the court’s website, 17% are decided in a Rule 36 summary affirmance released on the court’s website, and the remaining 37% have neither an opinion nor Rule 36 available on the court’s website.
  • The number of documents released by the court on its website are about the same as the number of documents available in the big commercial legal databases (Westlaw, Lexis & Bloomberg).  This may be because, as McAlister describes, these sites tend to pull directly from the same pool that is posted to the court’s website or just collect directly from the court’s website.
  • Taking a closer look at appeals filed in 2015, of the 497 docketed appeals without a terminating document available on the court’s website (31% of the total), a large portion involved voluntary dismissals by the appellant (303) or the parties jointly or dismissal for failure to prosecute (72).  However, there were a moderate number of appeals dismissed for lack of appellate jurisdiction (31), transferred (23), and even decided by a merits order (16).  None of these were released on the court’s website and when I looked for some of them in Westlaw and Lexis, they weren’t there either.  All were designated as “nonprecedential.”

The bottom line is that when it comes to substantive merits decisions and decisions designated by the court as “precedential,” almost all of these appear to be on the court’s website.  But there’s a host of other nonprecedential decisions–many dealing with jurisdictional issues–that aren’t.  There are also decisions in petitions for writs of mandamus, which the court currently appears to mostly be releasing on its website although that hasn’t always been the case.

Given all this, my recommendation parallels that of McAlister: the Federal Circuit should release all dispositive orders on its website, not just decisions labeled as “opinions” or summary affirmances under Rule 36.  This would be consistent with both its practice of releasing Rule 36 summary affirmances (which contain less judicial reasoning than most of the dispositive orders that it doesn’t release) and the overall goal of judicial transparency about decisions.  And for those who think that having access through PACER alone is enough, Prof. McAlister and others have described in depth why that’s not the case.

There’s more in the essay itself, which also contains links to the data I used archived on the Harvard Dataverse.    Here’s a link to the preprint of the essay: Missing Decisions and the Federal Circuit.

Thanks to Dmitry Karshtedt for calling these two Law360 articles to my attention.  And here are copies of In re Zhu and In re Boloro that I pulled from PACER.

Comments on this post are closed.

Guest Post by Prof. Contreras: HTC v. Ericsson – Ladies and Gentlemen, The Fifth Circuit Doesn’t Know What FRAND Means Either

Guest Post by Prof. Jorge Contreras of the University of Utah S.J. Quinney School of Law.  Disclosure statement: in 2019, the author served as an expert for HTC in an unrelated, non-U.S. case.

In August 31, 2021, the Court of Appeals for the Fifth Circuit ruled in HTC Corp. v. Telefonaktiebolaget LM Ericsson, 2021 U.S. App. LEXIS 26250, __ F.4th __ (Fed. Cir. 2021), affirming the judgment of the District Court for the Eastern District of Texas, 2019 U.S. Dist. LEXIS 170087 (E.D. Tex. 2019).  The decision is significant as it is the first by the Fifth Circuit to address the licensing of standards-essential patents and the meaning of “fair, reasonable and nondiscriminatory” (FRAND) licensing terms, adding to the growing body of jurisprudence already issued by the Third, Ninth and Federal Circuits in this area.  It is also significant because the court addresses several issues that have become increasingly important in standards-related litigation including (1) the apportionment of value among components of a multi-component product, (2) the proper choice of law for FRAND disputes, and (3) the interpretation of the “nondiscrimination” prong of the FRAND commitment.  These issues all arose in connection with HTC’s challenge to District Judge Rodney Gilstrap’s jury instructions regarding FRAND. His vague charge appears to reflect the general uncertainty in this area, not only of the Texas district court, but of the entire judicial system. One can almost hear the weariness permeating the final sentence of Judge Gilstrap’s charge to an admittedly perplexed jury: “Ladies and gentlemen, there is no fixed or required methodology for setting or calculating the terms of a FRAND license rate.”

Background

Though it was never a household name in the U.S., HTC — founded in Taiwan in 1997 — was an early smartphone pioneer.  In 2005 HTC released the world’s first Windows 3G smartphone (the clamshell HTC Universal) and followed in 2008 with the first smartphone running Google’s Android operating system (branded as the T-Mobile G1).  Most significantly, HTC was the developer and manufacturer of Google’s Nexus One Android phone, which was released in 2010.

The 2/3/4/5G wireless communication standards published by the European Telecommunications Standards Institute (ETSI) are incorporated into almost all smartphones (and many other devices) that have been sold over the past two decades.  These standards are covered by tens of thousands of patents around the world (standards-essential patents or SEPs), a respectable number of which are held by Swedish equipment manufacturer Ericsson.  Most standards-development organizations (SDOs) today recognize the potential leverage that the holders of SEPs may hold over manufacturers of standardized products. FRAND licensing commitments are designed to alleviate the risk that SEP holders will prevent broad adoption of a standard by asserting their patents against manufacturers of standardized products. As explained by the Fifth Circuit, “To combat the potential for anticompetitive behavior, standard setting organizations require standard-essential patent holders to commit to licensing their patents on … FRAND terms” (slip op. p. 4). Thus, under ETSI’s intellectual property policy, which dates back to 1993, Ericsson and other holders of patents that cover ETSI’s standards agree to grant manufacturers licenses on FRAND terms.

Ericsson and HTC entered into three such licensing agreements in 2003, 2008 and 2014. Under the 2014 agreement, HTC paid Ericsson a lump sum of $75 million for a 2-year license to use Ericsson’s 2/3/4G SEPs. In 2016, HTC and Ericsson began negotiations to renew the license. Ericsson proposed a rate of $2.50 per 4G device, which was based on the lump sum paid by HTC in 2014 divided by the number of phones sold by HTC over the license period. HTC did not accept this offer and instead conducted an assessment of the value of Ericsson’s SEPs. It made a counteroffer of $0.10 per device in March 2017.  Negotiations stalled, and in April, HTC brought an action in the Eastern District of Texas seeking a declaration that Ericsson had breached its obligation to offer HTC a license on FRAND terms.

The trial focused largely on the proper method for determining a FRAND royalty for Ericsson’s SEPs.  Because the actual FRAND royalty or royalty range in a given case is generally viewed as a question of fact, the case was tried a jury, and each party submitted a set of draft jury instructions to the court. As summarized by the Fifth Circuit, “HTC proposed highly detailed instructions to help the jury interpret FRAND, but Ericsson objected to most of these instructions and proposed a more general FRAND instruction. The district court considered the two proposals, but ultimately gave the following instruction to the jury: ‘Whether or not a license is FRAND will depend upon the totality of the particular facts and circumstances existing during the negotiations and leading up to the license. Ladies and gentlemen, there is no fixed or required methodology for setting or calculating the terms of a FRAND license rate.’ (slip op. at 6). The jury returned a verdict “finding that HTC had not proven that Ericsson had breached its FRAND duties and that both parties had breached their obligations to negotiate in good faith.” (slip op. at 9]. On the basis of the jury verdict, Ericsson moved for declaratory judgment that, in its dealings with HTC, it complied with its FRAND obligations.  The court granted Ericsson’s motion.

HTC appealed the district court’s ruling on three grounds:  it failed to adopt three of HTC’s proposed jury instructions, it incorrectly concluded that Ericsson’s licensing offer complied with its FRAND commitment, and it improperly excluded expert testimony as hearsay.  The Fifth Circuit, in an opinion authored by Judge Jennifer Walker Elrod, affirmed the lower court’s ruling on all three grounds.  Judge Stephen A. Higginson entered a separate concurring opinion, arguing that the district court erred by omitting HTC’s apportionment jury instruction, but this omission did not rise to the level of reversible error.

Apportionment

In patent infringement cases, it is well-established that a patentee’s damages should reflect only the value of the patented features of an infringing product. Thus, in assessing damages, courts routinely “apportion” the infringer’s profits between the infringing and noninfringing features of its product. See Garretson v. Clark, 111 U.S. 120, 121 (1884).  Accordingly, HTC argued that the district court erred by failing to give the jury specific instructions on apportionment.

However, this case did not sound in patent infringement, but in breach of contract.  As my co-authors and I have previously observed (see p. 162), it is a peculiar coincidence of U.S. law that both the statutory measure for patent damages under 35 USC § 284 and the FRAND commitment call for the imposition of a “reasonable” royalty.  For this reason, several U.S. courts that have calculated FRAND royalty rates (see, e.g., Ericsson v. D-Link (Fed. Cir. 2014), Microsoft v. Motorola (9th Cir. 2015); and Commonwealth Sci. & Indus. Research Org. (CSIRO) v. Cisco (Fed. Cir. 2015)) have looked to traditional methodologies for determining reasonable royalty patent damages, including the 15-factor Georgia-Pacific framework.  But while this methodology may be useful by analogy, it is not strictly required, as the damages flowing from a breach of the contractual FRAND commitment must, by their nature, be determined under applicable principles of contract law.  As the Fifth Circuit explains, “while the Federal Circuit’s patent law methodology can serve as guidance in contract cases on questions of patent valuation … it does not explicitly govern the interpretation of contractual terms, even terms that are intertwined with patent law” (slip op. at *15).  As such, the Fifth Circuit in this case held that the district court’s omission of a specific jury instruction on apportionment – a patent law doctrine – was not error.

Judge Higginson disagreed.  Citing D-Link and CSIRO, he observed the Federal Circuit’s “unmistakable command that a jury assessing patent value must be instructed on apportionment” and that “the failure to instruct a jury on proper apportionment is error when the jury is asked to assess patent value” (slip op. at *29-30, Higginson, J., concurring). And while he acknowledges that the instant case concerns breach of contract rather than patent infringement, he argues that the Federal Circuit’s precedent regarding apportionment is instructive “because a jury assessing patent infringement damages undertakes the same task of assessing whether an offered rate is FRAND” (citing Realtek Semiconductor, Corp. v. LSI Corp. (N.D. Cal., 2014) (slip op. at *30).  Moreover, Judge Higginson points out that both HTC and Ericsson, as well as the United States as amicus curiae, requested jury instructions on apportionment.  For all of these reasons, he concludes that the district court erred by omitting an instruction on apportionment.

Whether or not the district court erred, none of the Fifth Circuit judges felt that the omission of a specific apportionment instruction constituted reversible error because HTC had the opportunity to, and did, discuss apportionment during its closing argument before the jury.  This observation raises interesting questions regarding the basis on which juries are expected to make decisions in complex cases.  During trials that often last for weeks, the members of the jury hear hours upon hours of conflicting expert testimony and argumentation.  Under Rule 51 of the Federal Rules of Civil Procedure, a trial judge must instruct the jury regarding the substantive law governing the verdict. Its instructions are intended to distill the legal standards that the jury must apply during its deliberations.  Given that members of the jury are not permitted to take notes or make recordings during trial, they must rely heavily on these court-sanctioned instructions.  And contrary to the Fifth Circuit’s holding, it does seem problematic for a court to omit instructions that are germane to the jury’s deliberations concerning an area of law as complex as FRAND royalty determinations.  In such cases, irrespective of what courts and commentators believe the law to be, the results of cases on the ground depend heavily on the instructions given to the jury (we discuss the importance of jury instructions, especially model jury instructions, in FRAND cases in Jorge L. Contreras & Michael A. Eixenberger, Model Jury Instructions for Reasonable Royalty Patent Damages, 57 Jurimetrics J. 1 (2016) (“if … increasingly complex damages calculations are to remain in the hands of the jury, it is now more essential than ever that the instructions given to jurors be as clear, accurate, and understandable as possible.”)

 The French Connection

In considering HTC’s proposed jury instruction on apportionment, Judge Elrod also concluded that the proposed instruction was inaccurate because it summarized U.S. patent law with no reference to French contract law.  ETSI was formed in France in 1988 and approved its first patent policy in 1993.  That policy, and all subsequent ETSI policies, state that they are governed by the laws of France.  Judge Elrod observed that “HTC’s proposed jury instructions are based on United States patent law. HTC did not even attempt to justify its proposed instructions under French contract law or to argue that French contract law and United States patent law are equivalent” (slip op. *14).

This last point is particularly interesting.  In chastising HTC for failing to argue the equivalency of U.S. and French law, Judge Elrod refers to Apple v. Motorola, 886 F. Supp. 2d 1061, 1081 (W.D. Wis. 2012), in which a U.S. district court seemingly concluded, without any specific references, that there are no material differences between the laws of France and Wisconsin when it comes to interpreting a company’s FRAND commitment (discussed here at p.8).  In my experience that conclusion is widely ridiculed by European lawyers, and rightly so.  Yet Judge Elrod seems to imply that merely making a conclusory statement about the equivalency of French and U.S. law ought to suffice, or at least overcome one hurdle to the acceptance of a jury instruction grounded in principles of U.S. law.

 

Nondiscrimination

HTC also argued that the district court should have instructed the jury with respect to the nondiscrimination prong of Ericsson’s FRAND commitment.  HTC’s proposed jury instruction reads as follows (Appellant’s Opening Brief, p. 40):

The non-discrimination requirement of FRAND requires an SEP holder to provide similar licensing terms to licensees that are similarly situated. The financial terms do not have to be precisely identical, because the difference might be explained by other offsetting adjustments in other terms in the license. But, at a minimum, if the difference in terms creates a competitive disadvantage for a prospective licensee, then the offered royalty terms are discriminatory. Discrimination may exist even if preferential treatment is accorded to only one or a few companies.

The non-discrimination prong of FRAND serves to level the playing field among competitors, and to foster entry and innovation from new market participants, by prohibiting preferential treatment that imposes different costs to different competitors. Thus, for purposes of the non-discrimination prong of FRAND, licensees are “similarly situated” if they compete for the purchase or sale of a product or service. It would defeat the purpose of FRAND if a licensor could draw a distinction between entrenched and emerging firms.

To my eye, this is an accurate statement of the law and the general understanding of the nondiscrimination requirement under FRAND (see Jorge L. Contreras & Anne Layne-Farrar, Non-Discrimination and FRAND Commitments in Cambridge Handbook of Technical Standardization Law: Competition, Antitrust, and Patents, Ch. 12 (Jorge L. Contreras, ed., 2017)).  This formulation is also consistent with the most extensive analysis to-date of FRAND nondiscrimination by a U.S. district court (TCL v. Ericsson, 2017 U.S. Dist. LEXIS 214003 (C.D. Cal. 2017), rev’d on other grounds, 943 F.3d 1360 (Fed. Cir. 2019)).

Yet Judge Elrod writes that “HTC’s proposed instruction would transform the non-discrimination element of FRAND into a most-favored-licensee approach, which would require Ericsson to provide identical licensing terms to all prospective licensees” (slip op. *16). This statement is plainly incorrect.  The first sentence of HTC’s proposed jury instruction, which mirrors the model instruction published by the Federal Circuit Bar Association in 2020 and cited by the court (slip op. *17 n.3), refers to “similar licensing terms [for] licensees that are similarly situated”, not identical licensing terms for all prospective licensees.  HTC further clarifies that “The financial terms do not have to be precisely identical.” In explaining the meaning of “similarly situated”, HTC follows the reasoning of the district court in TCL, stating that a distinction should not be drawn between “entrenched and emerging firms”.  None of this suggests that all licensees should pay identical royalties.

Moreover, the parties clearly disputed at trial whether various “comparable” licensees identified by Ericsson were “similarly situated” to HTC (“HTC further argued that Ericsson’s licenses with companies like Apple, Samsung, and Huawei were much more favorable, but Ericsson presented additional evidence indicating that those companies were not similarly situated to HTC due to a variety of factors” (slip op. *22)). Thus, both parties appear to acknowledge the relevance of the “similarly situated” test for nondiscrimination, making it all the more puzzling why the district court and the Fifth Circuit found HTC’s proposed jury instruction on this point to be inaccurate.

Conclusion

Regrettably, the Fifth Circuit’s decision in HTC v. Ericsson does little to clarify the scope or nature of FRAND commitments for standards-essential patents.  Rather, by diverging from the guidance of the Federal Circuit in terms of the apportionment of value among patented and unpatented products, and misinterpreting the scope of the nondiscrimination prong of the FRAND commitment, the Fifth Circuit has substantially muddied the already turgid waters of this increasingly important area of law.  Unfortunately, Judge Gilstrap was right when he told the jury in Texas, “Ladies and gentlemen, there is no fixed or required methodology for setting or calculating the terms of a FRAND license rate.”  It might be helpful to the industry, however, if there were.

Utility Patents Granted per Calendar Year, 1840-2020

By Jason Rantanen

I’m getting ready to teach my Fall 2021 Patent Law class, and that means doing an updated patent grant graph.  This year’s version shows U.S. utility patents granted per year from 1840-2020:

Data for 2021 isn’t included in the table, but as of July 31, 2021, the authority file contains 195,480 patents.  If the pace remains the same, that would predict about 335,000 patents granted this calendar year–around 10%  [correction: 6% – 356k minus 335k is 21k, not 31k] lower than 2020 (356,640 granted patents).  Looking at the spreadsheets on the Patents Dashboard, it looks like filings are a smidgen lower, but the real difference is the number of allowances: as of the end of June, 2020, the PTO had issued 278k allowances for UPR’s that fiscal year, while as of the end of June, 2021, it had issued 249k allowances for FY 2021.

Methodology:

I used the 2021-07-31 Patent Grant Authority file, parsed it by date, and tabulated the number of A1, B1 and B2 kind code records by year.  (For those who might be confused by the use of A1, the authority file uses A1 to indicate pre-2001 utility patent grants).  I included patents that are marked as Withdrawn.  This graph uses calendar years (Jan. 1 – Dec. 31) instead of fiscal years (Oct 1 to Sept. 30).  UPR stands for “utility, plant, reissue.”

Guest Post: DABUS Gains Traction: South Africa Becomes First Country to Recognize AI-Invented Patent

Guest Post by Meshandren Naidoo and Dr. Christian E. Mammen

A world first – South Africa recently made headlines by granting a patent for ‘a food container based on fractal geometry’ to a non-human inventor, namely an artificial intelligence (AI) machine called DABUS.

Over the past three years, the AI algorithm DABUS (short for Device for the Autonomous Bootstrapping of Unified Sentience) and its team of supporting humans, including Dr. Stephen Thaler and Prof. Ryan Abbott, have made headlines around the world as they sought patent protection for a fractal-inspired beverage container (shown below) that they contend was invented by DABUS.

Notably, their application has been denied by the United States Patent and Trademark Office (USPTO), the United Kingdom Intellectual Property Office (UKIPO), and the European Patent Office (EPO).  The grounds for rejection have included a mix of procedural formalities, formal legal requirements, and theoretical objections.  The procedural formalities and formal legal requirements, which have been equally important to the theoretical questions in these decisions, are sometimes overlooked in the popular media.  They include such issues as whether (and how) Dr. Thaler obtained authorization from DABUS to file the patent application, and whether the patent statutes include a requirement that inventors be human.  Each of these three jurisdictions found sufficient reasons in these formalities to reject DABUS’ patent applications.  In addition, the EPO focused on the broader question of legal personhood: namely, that a number of other rights and obligations are attendant upon being an inventor, and unlike humans, an AI lacks the legal personhood to discharge those obligations and exercise those rights.  The UK courts reasoned similarly, noting that an AI lacks the capacity to hold property, and therefore could not have authorized Dr. Thaler to act on its behalf.  The USPTO emphasized that under US law invention requires “conception” followed by reduction to practice, and reasoned that “conception” requires a theory of mind that is simply not established to be present in an AI.

Critics of those decisions have emphasized the role of patenting as a part of national industrial policy, and in particular the role of patent grants in encouraging innovation.  With increasingly capable AI algorithms, the argument provides, the ability to innovate is shifting from an exclusively human domain to one that includes the algorithms, and modern industrial policy needs to encourage and reward that shift.

These same factors appear to have come into play in the South African decision, though to a clearly different outcome.

The pitfalls of formal examination in South Africa

In July 2021, South Africa’s patent office, the Companies and Intellectual Property Commission (CIPC), granted the South African DABUS patent application, which was published in the South African Patent Journal. Unlike the USPTO, UKIPO and EPO, the CIPC does not conduct a more thorough interrogation of patent applications, known as substantive search and examination (SSE).  Instead, all that is required in a formal examination (also known as a registration-based system) is for the application forms and fees to be in order with the specification documents attached. If these affairs are in order, the patent will summarily be granted by the CIPC. This, along with the lack of information provided by the CIPC post-grant has led to criticism directed towards its non-examining nature. This limited review for compliance with the procedural formalities appears to have reached a different outcome than the USPTO, UKIPO and EPO, finding that Dr. Thaler is empowered to apply on behalf of DABUS. No further information has thus far been given by the CIPC relating to the grant. It should be noted however that the ongoing patent reform in South Africa provides for training and infrastructure upgrades to accommodate a shift towards implementing SSE.

Does substantive South African patent law preclude AI inventorship?

The South African Patent Act 57 of 1978 (Patent Act) does not define an ‘inventor’ hence it is arguable that the Patent Act could, or should, be interpreted to include AI. However, the Patent Act presents some challenges in doing so such as, inter alia, the requirement for the provision of names and addresses of inventors—the EPO cited a similar requirement in denying DABUS’ application. If the reasoning of the USPTO is followed, a further challenge to the DABUS patent in South Africa would be the ‘first and true inventor test’. Like the ‘conception’ test in American patent law – the object of the test is to determine the identity of the ‘devisor’ of the invention. With that said, it is open for the South African legal system to determine if the test, which was originally crystallised in South African law in 1902[1] (with not much development taking place between then and now) is a bar to AI inventorship. Whilst case law[2] which explains the test also refer to pronouns such as ‘he’ or ‘she’, South Africa could diverge from the USPTO and employ a more purposive approach to its interpretation (which is the Constitutionally recognised manner of interpretation) as opposed to a more textual one.[3] This statutory interpretation method would include broader considerations in the process such as (1) advantages posed by AI inventorship; (2) policy directives; (3) the fact that AI inventorship was unlikely to have been considered during the period when the test was originally developed and; (4) the object of the test is to determine the identity of the deviser of the invention in the event of disputes and the like – not to preclude other non-human entities from innovating.

Was granting the patent a mistake?

At first glance, it may appear that the DABUS patent was erroneously granted by the CIPC. Although there has been a shift towards digitization, the CIPC has struggled extensively in the past with infrastructure and administrative issues. But it may be premature to conclude that the granting was erroneous. The post-apartheid government foresaw the challenges associated with the exclusion of a large portion of citizens from economic participation, and central to the solution was science, technology, and innovation. This culminated in the White Paper on Science and Technology in 1996. Soon after, came many other strategic policies aimed at placing South Africa and its citizens in a stronger position. In 2019, the Presidential Commission on the Fourth Industrial Revolution and an updated White Paper on Science and technology was published – both of which highlighted the need for a technology-orientated approach to solving socio-economic issues.

Unfortunately, innovation (noted in the 2019 White Paper on Science, Technology, and Innovation) as measured in products produced and patent output from South African applicants in the country and in other jurisdictions via the Patent Cooperation Treaty (PCT) has remained ‘relatively flat’. Adding to this was policymakers’ concerns of ‘the brain drain’ – the emigration of skilled persons in search of better opportunities and environments.

In April 2021, a call for public comments on the proposed National Data and Cloud Policy in terms of the Electronic Communications Act 36 of 2005 highlighted three main points: (1) the South African Government aims to create an AI institute to assist with reformation; (2) the intention of this is to encourage investment in, and exploration of, AI as a means to achieve sustainable development goals and economic growth; and (3) AI is viewed as a solution to some of the capacity issues facing South Africa.

Thus, as a matter of national industrial policy, it is entirely possible that the grant of DABUS’ patent is fully consistent with the emphases on broad access, digital innovation, and support of science and technology generally.

An opportunity for South Africa?

Given that South Africa is currently undergoing major patent reform, South Africa’s policymakers may find that it would be prudent to capitalise on any presented advantages. Support for, and recognition of, AI inventorship could make South Africa an attractive option for investment and innovation and may also cause these systems to be viewed as a sustainable form of innovation. The path forward for South Africa is uncertain, but there are opportunities in recognising AI as an inventor that could aid in achieving the national policy goals. In doing so, South Africa may champion the Fourth Industrial Revolution and signal leadership to other countries. Indeed, in just the few days since the South African DABUS patent was granted, the Australian Federal Court appears to have followed suit, overturning a rejection of DABUS’ application by that country’s patent office and finding that recognizing AI inventorship would be “consistent with promoting innovation.”[4]

[1] Hay v African Gold Recovery Co 1902 TS 232 p 233.

[2] University of Southampton’s Applications [2006] RPC 567 (CA) paras 22–25.

[3] Bertie Van Zyl (Pty) Ltd v Minister for Safety and Security 2010 (2) SA 181 (CC) para 21.

[4] Josh Taylor, “I’m sorry Dave I’m afraid I invented that: Australian court finds AI systems can be recognised under patent law,” The Guardian (July 30, 2021) (https://www.theguardian.com/technology/2021/jul/30/im-sorry-dave-im-afraid-i-invented-that-australian-court-finds-ai-systems-can-be-recognised-under-patent-law)

Mr Meshandren Naidoo is a Ph.D Fellow at the University of KwaZulu-Natal (South Africa) and member of the African Health and Research Flagship. His areas of interest are AI technology, intellectual property, business strategy, and bioethics.  His Ph.D involves looking at the challenges posed by AI technology to South African patent law and what the potential solutions may be.

Dr. Christian E. Mammen is an IP litigation partner with Womble Bond Dickinson in Palo Alto, CA.  He has practiced in San Francisco and Silicon Valley for over 20 years, and has held visiting faculty positions at a number of universities, including Oxford University, UC Berkeley Law School, and UC Hastings College of the Law.  He has written and spoken extensively on AI and patent law, including “AI and IP: Are Creativity and Inventorship Inherently Human Activities,” 14 FIU L. Rev. 275 (2020).

The authors confirmed  they did not receive compensation for this article and that they do not represent any clients that might be impacted by the article or the underlying decisions.  The views expressed by them in this article are solely their own.

Guest Post by Prof. Contreras: Shepardizing Patents

Shepardizing Patents, a guest post by Professor Jorge L. Contreras

 A Patent Information Experiment

On Saturday, June 12, I did a little experiment to see what information I could find about patents that I knew to have been challenged.  I first searched for U.S. Patent No. 7,446,338, issued in 2008 to Casio for a “Display Panel.”  As expected, the official USPTO Patent Full-Text and Image Database provided me with the text of the patent document and a link to its PDF image.  The USPTO’s new PatentsView interface gave me a bit more information, mostly about forward citations of the patent, including a spiffy world map locating the citations geographically.  Google Patents indicates when a patent has expired or is scheduled to expire and displays a timeline of litigation involving the patent. The ’338 patent was subject to litigation in the Western and Eastern Districts of Texas and at the Patent Trial and Appeal Board (PTAB).  Clicking on these entries took me to a database run by Unified Patents, which lists docket entries in these matters and is accessible via a free sign-up. But to see the Complaint in one of the West Texas matters, Unified Patents redirected me to a database operated by MaxVal-IP, which, on the day I searched, gave me the dreaded error “404- File or directory not found.”  I then moved on to PTAB action IPR2020-00320, filed on Dec. 18, 2019.  The Unified docket showed the IPR as terminated following a Mar. 12, 2021 settlement between Apple and the patent owner (now a company called Solas OLED) and allowed me to access the Termination Order.  But when I searched Lex Machina, the paid IP litigation analysis engine now owned by LexisNexis, I found that Samsung, one of the IPR plaintiffs, continued the IPR action after Apple settled, and that on June 6, the PTAB issued a Final Written Decision finding all challenged claims (1-3 and 5-13) to be unpatentable (the patent has a total of 22 claims).

When I searched for U.S. Pat. No. 5,710,001, one of Myriad Genetics’ BRCA1 gene patents issued in 1998, several claims of which were invalidated in Assn. for Molecular Pathology v. Myriad Genetics, 569 U.S. 576 (2013), Google Patents displayed the initiation of the earlier district court litigation on its timeline, but the link took me to the paid Darts-IP database run by Clarivate, to which I don’t have access. Lex Machina only includes data about district court cases, but did correctly report that the District Court found all challenged claims of the Myriad patent to be invalid. The LexisNexis TotalPatent One service, which also allows patent searches, added information about patent families, fee status, assignees and, not surprisingly, links to judicial decisions and dockets.

And when I searched for U.S. Pat. No. 10,533,994, one of the fluidic system patents originally assigned to Theranos and asserted in 2020 against the maker of a COVID-19 diagnostic test, I found no indication that the founders of Theranos were under federal indictment for fraud, that they never developed the patented device, or that the current owner of the patent, Fortress Investments, had publicly pledged to license it royalty-free to anyone offering COVID-19 tests.

 

Contextual Patent Information

All of the information about a patent beyond its four corners – the validity status of its claims, whether it has been pledged to the public, licensed, made available for licensing, abandoned, declared essential to a technical standard, declared unenforceable for inequitable conduct and much more – is what Professor Colleen Chien has termed “contextual” patent information (Contextualizing Patent Disclosure, 69 Vand. L. Rev. 1849 (2016)).  This type of information can be extremely useful to innovators, researchers, litigants, businesses and other members of the public.  As Professor Chien writes, “contextual information can … signal which inventions are important from an economic point of view, are unimportant from a risk management perspective (insofar as they are expired or pledged to defensive uses), and may be the subject of broader technology and know-how transfers” (p. 1854).

Some contextual information, to the extent that it has been properly reported by the patent holder, is already relatively easy to find – this includes patent assignment records (through USPTO Patent Assignment Search and TotalPatent One), government interest statements (through the USPTO’s Patent View system), and maintenance/expiration data (through Google Patents and TotalPatent One).  This is a good start.

But as my informal Saturday morning experiment illustrates, contextual information is not always readily accessible or consistent, and even in the best case it is spread across a variety of public and private data sources (even the USPTO could do a better job of consolidating available information about a patent into a single record).  Thus, there is significant room for improvement.

 

The Genius of Shepard’s

I am pretty sure that every law student in the United States still learns to use the venerable Shepard’s citation system.  Those of us who were educated during the Bronze Age and earlier know Shepard’s as a set of ponderous, maroon-bound volumes that were last seen as set pieces for Harry Potter.  Today’s law students recognize Shepard’s as a component of the ubiquitous LexisNexis legal search engine.  But its basic function has remained the same.  Look up a judicial decision and Shepard’s will tell you, using simple color-coded icons (red stop sign, yellow triangle, green diamond, etc.) whether the case has been overruled, upheld, questioned and/or cited.  (For a fascinating history of Shepard’s and legal citation indices in general, see Patti Ogden, Mastering the Lawless Science of Our Law: A Story of Legal Citation Indexes, 85 L. Libr. J. 1 (1993)).

Source: http://lexisnexis.custhelp.com/app/answers/answer_view/a_id/1088155/~/shepards-signals-and-analysis

 

Shepard’s for Patents?

Trademark issues aside, there is no reason that Shepard’s (or a variation thereof – maybe using yellow moons, orange stars, pink hearts and green clovers?) can’t be adapted for patents.  The concept is simple.  The record for every U.S. patent could include a set of regularly-updated signals conveying key contextual information for that patent.  As with cases, the signals themselves would not convey detailed information, but would indicate that the interested reader should seek additional information (preferably through a hyperlink within the signal itself).

The implementation of such a system would admittedly require substantial up-front work, but several organizations including LexisNexis/Shepard’s/Lex Machina, Google and the USPTO, or some combination thereof, would be well-situated to undertake such a project.

If implemented, here are some of the contextual information categories that would be useful for such a patent signaling system:[1]

Invalidity – have some or all of the patent claims been disclaimed as invalid under 35 U.S.C. §§ 253(a) or 288, or challenged or invalidated by the PTAB or a court, or have claims survived challenges in litigation?  The appealability/finality of these determinations could be indicated, as could the ground for invalidity (e.g., 101, 102, 103, 112).

Enforceability – has the patent been rendered, or challenged as, unenforceable for other reasons, such as inequitable conduct, patent misuse or standards deception?

Licenses – has the patent been licensed on an exclusive or non-exclusive basis?  While many licenses are not publicly disclosed, licenses that are material to the business of publicly-traded companies are accessible through the Securities and Exchange Commission’s EDGAR database.  Other licenses can become available through litigation discovery, freedom of information requests and other means (see discussion here).

Available for licensing – is the patent holder willing to consider granting licenses to third parties, as shown in the USPTO’s recent Patents 4 Partnerships platform (discussed in a prior Patently-O post by Chien).

Pledges and Dedications to the Public – has the patent been pledged by its owner for public use (see, e.g., the Open COVID Pledge, which I discuss at length here, subjected to a binding “covenant not to sue” (as was the trademark in Already, LLC v. Nike, Inc., 568 U.S. 85 (2013)), or dedicated to the public under 35 U.S.C. § 253(b)?  There is currently no centralized repository for information regarding such commitments (see my proposal for creating a registry of pledges here), though various academic and nonprofit organizations maintain informal lists.

Standards Declarations – has the patent been declared essential to a technical standard?  If so, the patent holder may have committed to license it on royalty-free or fair, reasonable and non-discriminatory (FRAND) terms.  While some SDOs have searchable public databases of declared essential patents (e.g., ETSI and IETF), and some academic projects have consolidated some of this information, it is not generally linked to individual patent records.

***

In a world where patents play an increasingly important role in the technology development and innovation landscape, it is critical that reliable information about the status and history of patents be made available to the public.  The USPTO has made a public commitment to the “discoverability, accessibility, and usability of public patent and trademark data”, and as such it can help to collect, organize and display contextual patent data in a simple and user-friendly fashion. A uniform “Shepardization” system for patents, which clearly flags issues for potential licensees, defendants and innovators and alerts the public to the potential investment and threat value of individual patents, would help to make the markets in which patents exist more transparent and efficient.

[1] Chien, p. 1877, Table 2, offers a comprehensive taxonomy of many types of contextual patent information that exist, though not all of these lend themselves to the simple signaling system suggested here and some (such as assignment, maintenance, expiration and government interest status) are already be available in a relatively (though not perfect) format.

Guest Post by Prof. Dmitry Karshtedt: Nonobviousness and Time

Dmitry Karshtedt is an Associate Professor of Law at GW Law whose work I’ve followed for years.  Below he introduces the core idea underlying his new article on nonobviousness forthcoming in the Iowa Law Review.  -Jason

Nonobviousness and Time
Dmitry Karshtedt

Over the years, courts and commentators have said many thoughtful things about secondary considerations evidence and its role in the law of § 103, and reasonable minds have expressed significant disagreement about the value of this evidence. Consider, for example, the Federal Circuit’s fractured en banc Apple v. Samsung decision in 2016 and the never-ending debate over whether secondary considerations are best treated as rebuttal evidence to a prima facie case of obviousness based on the prior art, or whether all obviousness evidence should be analyzed holistically and at once.

My take is different: the whole primary/secondary categorization is unhelpful, especially in litigation and during post-issuance PTAB review. Let’s take one illustration. Commercial success and the skepticism of experts are both classified as “secondary considerations,” while teaching away is usually considered to be a part of the primary inquiry. However, skepticism has much more in common with teaching away, which directly tells us that the claimed invention would have been challenging to come up with, than with commercial success, which represents a market response to the invention that may indicate nonobviousness only indirectly. So what is the point of these evidentiary silos?

My answer is that there is no point. In Nonobviousness: Before and After, forthcoming in Iowa Law Review, I examine the different types of evidence used in the obviousness analysis and conclude that the primary/secondary framework does not make sense or have a strong precedential basis. The framework comes from throwaway language in Graham v. John Deere, in which the Supreme Court was grasping for some kind of a label for non-prior art evidence in § 103 cases. It has no grounding in established pre-Graham obviousness (and “invention”) precedent—which, for example, repeatedly supported the proposition that evidence like failure of others can be highly probative of validity. And it is inconsistent with KSR v. Teleflex, which sang a veritable paean to non-prior art evidence (e.g., market pressure and design need) in rejecting the Federal Circuit’s “blinkered focus on individual documents”—as the court acknowledged in one post-KSR opinion. Yet despite its lack of a coherent normative or precedential basis, classification as primary or secondary is well-entrenched and matters a lot in practice because the label can lead to arbitrary bolstering or discounting of certain evidence. On the one hand, the “secondary” scarlet letter can lead courts to ignore good evidence like failure of others, harming the patentee’s case. On the other hand, a boost from the “primary” label can sometimes cause courts to overvalue evidence like unexpected results in favor of the patentee.

I propose a better approach to structuring § 103 analysis based on the timing of the evidence. Under my approach, the filing date provides a useful default dividing line between different kinds of obviousness evidence: rather than categorizing obviousness evidence as primary or secondary, we should instead view the evidence as ex ante or ex post. With this framing, we can see precisely why skepticism has more in common with teaching away than with commercial success: skepticism and teaching away reflect the pre-filing state of the art and thus speak directly to a PHOSITA’s lack of motivation or reasonable expectation of success to pursue the invention at issue, while commercial success is (usually) a post-filing response to the invention and thus constitutes only indirect evidence of nonobviousness. The readers of this blog are very familiar with the concept of nexus—in the sense that a proponent of objective indicia evidence must establish a link between that evidence and the technical merit of the invention as claimed.  My article’s proposal extends this concept to timing in that the party relying on ex post evidence must demonstrate a connection between that evidence and the elements of motivation and reasonable expectation of success at the time of filing. With ex ante evidence, however, temporal nexus is not an issue.

In my scheme, commercial success has more in common with evidence like copying or licensing than with the skepticism of experts and failure of others, which is classic ex ante evidence. And unexpected results, which the Federal Circuit has had great trouble fitting into Graham’s silos (some cases characterize that evidence as primary while others, as secondary), are instead divided into ex ante and ex post unexpected results.  As I show in the article, there is (pre-Graham) Supreme Court precedent supporting this general scheme and even some modern cases sometimes (almost) get it right. However, there is too much confusion in the case law to sustain a consistent approach, suggesting the need for an explicit adoption of the proposed ex ante/ex post framework. The tables below illustrate the key moves (indicated in italics), and the article explains why the proposed scheme will help decision-makers determine the relevance and weight of various nonobviousness evidence with greater accuracy.

 

Table 1. Graham’s Primary-Secondary Framework

Primary Evidence Secondary Evidence
Content of the prior art and the differences between it and the claimed invention  

Commercial success

Prior art teachings “toward” or “away” from the claimed invention  

Failure of others

Comparison of the properties of the claimed invention with those of the prior art, including unexpected results (?)[1]  

Long-felt need

Expert skepticism
Copying of the claimed invention, licensing, and other forms of industry acquiescence
Industry praise (or disbelief)
Simultaneous invention
Unexpected results (?)

 

 

Table 2. Proposed Time-Based Scheme

Ex ante evidence
(relating to state of the art facing a PHOSITA at time of filing)
Ex post evidence
(in reaction to or during further development of the invention)
 

Content of the prior art and the differences between it and the claimed invention

 

Commercial success

Prior art teachings “toward” or away” from the claimed invention, as well as market pressure and design need Copying of the claimed invention, licensing, and other forms of industry acquiescence
Comparison of the properties of the prior art with those of the claimed invention, including unexpected results, if discovered before filing Comparison of the properties of the prior art with those of the claimed invention, including unexpected results, if discovered after filing
Failure of others Industry praise (or disbelief)
Long-felt need
Expert skepticism
Simultaneous invention

        [1].     Question marks next to “unexpected results” reflect their inconsistent classification

Read the draft article here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3820851

Studying Nonobviousness

By Jason Rantanen

There are lots of quantitative studies of patent litigation appellate court decisions, going all the way back to P.J. Federico’s 1956 article Adjudicated Patents in the Journal of the Patent and Trademark Office Society.  One of the big limitations of these studies, though, is that there hasn’t really been any work done to examine how replicable their observations are – even for variables as seemingly simple as whether the court affirmed or reversed on a particular issue, or reached a particular outcome, such as whether a patent’s claims was obvious.  New studies compare their aggregate results to previous studies, but not the actual data themselves–even when studying the same set of cases.

In an article forthcoming in the Hastings Law Journal, Abigail Matthews, Lindsay Kriz and I set out to do exactly that: to examine the amount of agreement between two studies on nonobviousness around the time of KSR v. Teleflex, one that I did that was published in 2013 and one that was recently published by Judge Ryan Holte and Prof. Ted Sichelman.

Our reliability assessment reveals a complex picture.  Somewhat reassuringly, the results from the two studies are largely consistent for decisions from the same time period.  Surprisingly, however, fewer than 2/3rds of the decisions analyzed in both studies were the same—even when limited to the identical time period and using the same criteria.  Within that set of cases, however, the core data coding was largely identical, with a few notable exceptions.  Specifically, we find differences in the coding for procedural postures and in some coding related to judicial reasoning.

In addition, since the period covered by those two studies ended several years ago, we also updated the dataset through the end of 2019.  Here are some highlights from our findings:

  • The number of Federal Circuit decisions in appeals arising from the district courts that involved a § 103 issue peaked between 2010 and 2015, and in recent years has declined to half of that peak.
  • The percentage of Federal Circuit decisions with an outcome of “obvious” in appeals arising from the district courts remained high between 2006 and 2014, but since 2015 the number of “obvious” outcomes has fallen dramatically.
  • The Federal Circuit continues to affirm district courts on the issue of obviousness at a high rate (around 80% of the time since 2013), and—in contrast with the immediate post-KSR period studied Holte & Sichelman (2019) and Rantanen (2013)—since 2013, affirmances have been equally high for district court outcomes of “nonobvious.”
  • The number of grants of summary judgment involving § 103 that were reviewed by the Federal Circuit in its decisions has fallen substantially in recent years. Nearly all § 103 decisions arising from the district court that were reviewed by the Federal Circuit between 2016 and 2019 involved a bench or jury trial.

In the paper we talk about some possible explanations for this decline, including two obvious causes: the rise of inter partes review and patent eligible subject matter issues.  You can read the full preprint on SSRN here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3818466.  I’m hoping to have the data posted within the next few weeks.

New PatentlyO Law Journal Article: Covid-19 Pandemic’s Impact on the U.S. Patent System Through November 2020

New PatentlyO Law Journal article by Nicholas Shine.  Mr. Shine is  a J.D. Candidate 2021, BSEE, is a 3L student at the University of Denver, Sturm College of Law. This essay was conducted as a directed research project under the supervision of Professor Bernard Chao.  – Jason

The Covid-19 pandemic has had and continues to have a major impact on people and countries across the globe.  The pandemic has not only affected people, it has affected many facets of life including the economy.  The United States government has passed two measures in an effort to address the issues Covid has introduced.  The Coronavirus Aid, Relief, and Economic Security (CARES) Act provided $2.2 trillion in economic stimulus. Both the CARES Act and the United States Patent and Trademark Office (USPTO) have provided relief to stakeholders with regard to patents and applications.

This essay examines patent abandonment rates and application rates to determine if they can shed light on how the Covid-19 pandemic affected innovation.  While the results show temporary perturbations, the pandemic has had minimal effect on overall trends.  This may suggest that abandonment rates and application rates may be surprisingly resistant to economic downturns or that the measurements are simply not good proxies for innovation.  Part II of this paper describes the data available from the USPTO and the methods used to work with the data. Part III examines the data as well as offer theories about the results obtained from the data.

Disclosure statement: This essay was conducted as a directed research project under the supervision of Professor Bernard Chao.  Nick Shine has been employed part-time as a law clerk at Polsinelli’s Denver office.   He has no conflicts that he is aware of, and the study required no funds.

Read: Nicholas Shine, Covid-19 Pandemic’s Impact on the U.S. Patent System Through November 2020, 2021 PatentlyO Law Journal 27 (2021) (Shine.2021.COVID-19Impact)

Prior Patently-O Patent L.J. Articles:

  • Thomas F. Cotter, Is Global FRAND Litigation Spinning Out of Control, 2021 PatentlyO Law Journal 1 (2021) (Cotter.2021.GlobalFRANDLitigation)
  • Colleen V. Chien, Nicholas Halkowski, Maria He, and Rodney Swartz, Parsing the Impact of Alice and the PEG, 2020 Patently-O Law Journal 20 (2020) (Chien.2020.ImpactOfAlice)
  • Paul R. Michel and John T. Battaglia, eBay, the Right to Exclude, and the Two Classes of Patent Owners, 2020 Patently-O Law Journal 11 (2020) (Michel.2020.RightToExclude)
  • Thomas F. Cotter, Two Errors in the Ninth Circuit’s Qualcomm Opinion, 2020 Patently-O Patent Law Journal 1 (2020). (Cotter.2020.TwoErrors.pdf)
  • Jasper L. Tran & J. Sean Benevento, Alice at Five, 2019 PatentlyO L.J. 25 (2019) (Tran.2019.AliceatFive.pdf)
  • Bernard Chao, Implementing Apportionment, 2019 PatentlyO L.J. 20 (Chao.2019.ImplementingApportionment)
  • Jeremy C. Doerre, Is There Any Need to Resort to a § 101 Exception for Prior Art Ideas?, 2019 PatentlyO L.J. 10. (2019.Doerre.AnyNeed)
  • Colleen V. Chien, Piloting Applicant-Initiated 101 Deferral Through A Randomized Controlled Trial, 2019 Patently-O Patent Law Journal 1. (2019.Chien.DeferringPSM)
  • David A. Boundy, Agency Bad Guidance Practices at the Patent and Trademark Office: a Billion Dollar Problem, 2018 Patently-O Patent Law Journal 20. (Boundy.2018.BadGuidance)
  • Colleen Chien and Jiun-Ying Wu, Decoding Patentable Subject Matter, 2018 PatentlyO Patent Law Journal 1.
  • Paul M. Janicke, Patent Venue: Half Christmas Pie, And Half Crow, 2017 Patently-O Patent Law Journal 13. (Janicke.2017.ChristmasPie.pdf)
  • Paul M. Janicke, The Imminent Outpouring from the Eastern District of Texas, 2017 Patently-O Patent Law Journal 1 (2017) (Janicke.2017.Venue)
  • Mark A. Lemley, Erik Oliver, Kent Richardson, James Yoon, & Michael Costa, Patent Purchases and Litigation Outcomes, 2016 Patently-O Patent Law Journal 15 (Lemley.2016.PatentMarket)
  • Bernard Chao and Amy Mapes, An Early Look at Mayo’s Impact on Personalized Medicine, 2016 Patently-O Patent Law Journal 10 (Chao.2016.PersonalizedMedicine)
  • James E. Daily, An Empirical Analysis of Some Proponents and Opponents of Patent Reform, 2016 Patently-O Patent Law Journal 1. (Daily.2016.Professors)
  • Tristan Gray–Le Coz and Charles Duan, Apply It to the USPTO: Review of the Implementation of Alice v. CLS Bank in Patent Examination, 2014 Patently-O Patent Law Journal 1. (GrayLeCozDuan)
  • Robert L. Stoll, Maintaining Post-Grant Review Estoppel in the America Invents Act: A Call for Legislative Restraint, 2012 Patently-O Patent Law Journal 1 (Stoll.2012.estoppel.pdf)
  • Paul Morgan, The Ambiguity in Section 102(a)(1) of the Leahy-Smith America Invents Act, 2011 Patently-O Patent Law Journal 29.  (Morgan.2011.AIAAmbiguities)
  • Joshua D. Sarnoff, Derivation and Prior Art Problems with the New Patent Act, 2011 Patently-O Patent Law Journal 12 (sarnoff.2011.derivation.pdf)
  • Bernard Chao, Not So Confidential: A Call for Restraint in Sealing Court Records, 2011 Patently-O Patent Patent Law Journal 6 (chao.sealedrecords.pdf)
  • Benjamin Levi and Rodney R. Sweetland, The Federal Trade Commission’s (FTC) Recommendations to the International Trade Commission (ITC):  Unsound, Unmeasured, and Unauthoritative, 2011 Patently-O Patent Law Journal 1 (levi.ftcunsound.pdf)
  • Kevin Emerson Collins, An Initial Comment on King Pharmaceuticals: The Printed Matter Doctrine as a Structural Doctrine and Its Implications for Prometheus Laboratories, 2010 Patently-O Patent Law Journal 111 (Collins.KingPharma.pdf)
  • Robert A. Matthews, Jr., When Multiple Plaintiffs/Relators Sue for the Same Act of Patent False Marking, 2010 Patently-O Patent Law Journal 95 (matthews.falsemarking.pdf)
  • Kristen Osenga, The Patent Office’s Fast Track Will Not Take Us in the Right Direction, 2010 Patently-O Patent L.J. 89 (Osenga.pdf)
  • Peter S. Menell,  The International Trade Commission’s Section 337 Authority, 2010 Patently-O Patent L.J. 79
  • Donald S. Chisum, Written Description of the Invention: Ariad (2010) and the Overlooked Invention Priority Principle, 2010 Patently‐O Patent L.J. 72
  • Kevin Collins, An Initial Comment on Ariad: Written Description and the Baseline of Patent Protection for After-Arising Technology, 2010 Patently-O Patent L.J. 24
  • Etan Chatlynne, Investigating Patent Law’s Presumption of Validity—An Empirical Analysis, 2010 Patently-O Patent L.J. 37
  • Michael Kasdan and Joseph Casino, Federal Courts Closely Scrutinizing and Slashing Patent Damage Awards, 2010 Patently-O Patent L.J. 24 (Kasdan.Casino.Damages)
  • Dennis Crouch, Broadening Federal Circuit Jurisprudence: Moving Beyond Federal Circuit Patent Cases, 2010 Patently-O Patent L.J. 19 (2010)
  • Edward Reines and Nathan Greenblatt, Interlocutory Appeals of Claim Construction in the Patent Reform Act of 2009, Part II, 2010 Patently‐O Patent L.J. 7  (2010) (Reines.2010)
  • Gregory P. Landis & Loria B. Yeadon, Selecting the Next Nominee for the Federal Circuit: Patently Obvious to Consider Diversity, 2010 Patently-O Patent L.J. 1 (2010) (Nominee Diversity)
  • Paul Cole, Patentability of Computer Software As Such, 2008 Patently-O Patent L.J. 1. (Cole.pdf)
  • John F. Duffy, The Death of Google’s Patents, 2008 Patently O-Pat. L.J. ___ (googlepatents101.pdf)
  • Mark R. Patterson, Reestablishing the Doctrine of Patent Exhaustion, 2007 Patently-O Patent L.J. 38
  • Arti K. Rai, The GSK Case: An Administrative Perspective, 2007 Patently-O Patent L.J. 36
  • Joshua D. Sarnoff, BIO v. DC and the New Need to Eliminate Federal Patent Law Preemption of State and Local Price and Product Regulation, 2007 Patently-O Patent L.J. 30 (Download Sarnoff.BIO.pdf)
  • John F. Duffy, Are Administrative Patent Judges Unconstitutional?, 2007 Patently-O Patent L.J. 21. (Duffy.BPAI.pdf)
  • Joseph Casino and Michael Kasdan, In re Seagate Technology: Willfulness and Waiver, a Summary and a Proposal, 2007 Patently-O Patent L.J. 1 (Casino-Seagate)

Guest Post by Alan Cox: The Damages Testimony in VLSI Technologies v. Intel

Alan Cox is an economist with over thirty years’ experience testifying in Antitrust and Intellectual Property matters. He holds a Ph.D. in Economic Analysis and Policy from the Haas School of Business at the University of California at Berkeley.  He is an Affiliated Consultant at NERA Economic Consulting.  In this guest post he provides his observations of the damages testimony in VLSI Technologies v. Intel. As noted in the letter from Professor Chao that Dennis posted earlier, key filings in this case are not publicly accessible (nor are the transcripts). – Jason

Introduction

VLSI Technologies sued Intel for the alleged infringement of several patents.  At trial VLSI asserted two patents: 7,523,373 (“the ‘373 Patent”), and 7,725,759 (“the ‘759 Patent”).  VLSI asserted that the technology described in these patents was incorporated into 987 million Intel microprocessors of various models.  On March 2, a jury in the Western District of Texas awarded VLSI $2.18 billion in damages for Intel’s pre-trial use of the patents.

The court allowed the public to listen to public portions of the trial by telephone.  This article describes aspects of the testimony and attorney statements on damages as logged in contemporaneous notes.

The damages testimony in this trial is interesting for several reasons, including Plaintiff’s presentation of a regression analysis as the basis of its damages claim.  Regression analysis is a sophisticated quantitative technique that is widely used in the academic literature, in making business decisions and in many areas of litigation, though it is seldom presented in patent trials.  The data necessary to undertake regression analysis is generally unavailable in patent matters.  As is often the case in the application of complicated statistical methods, the results can vary with inputs, underlying assumptions, data availability and other factors.  While Intel did address possible problems or partiality in the application of the methodology, the defendant’s core attack on the regression analysis was its repeated assertion that the method has never been undertaken in the real-world process of licensing patents.

By way of additional background, it appears that ownership of the patents had changed hands at least twice as the result either of mergers or as part of a sale of the patents themselves, including the sale to VLSI.  These transactions indicated a much lower value for the patents than was claimed by VLSI and awarded by the jury.  The patented technology had been originally assigned to Freescale, an integrated circuit manufacturer spun off from Motorola, later purchased by another semiconductor manufacturer, NXP.  Freescale was the owner of the patents at the time that Intel first allegedly infringed them.  Finally, as Intel pointed out at trial, VLSI is a non-practicing entity that undertakes no research nor production and has two employees.

VLSI’s Regression Analysis

A regression is a statistical analysis that is used to estimate the impact of several variables on another variable.  One use of the method, hedonic regression, measures the impact of product attributes on the price of that product.  For example, hedonic regressions have been used to determine how prices of automobiles vary with changes in horsepower, gas mileage, brand, and other attributes.  Hedonic regressions provide ratios that measure the amount by which prices will change with a change in one of these attributes.  For example, such a ratio may be the percentage by which the price of a car increases with a percentage increase in horsepower.

In this case, VLSI’s affirmative damages case was presented by a Ph.D. economist, Ryan Sullivan.  He applied regression analysis to estimate the impact of different attributes of Intel microprocessors on the price of those microprocessors.  Most important was his estimate of the response of price to changes in microprocessor speed.  His regression result indicated that a one percent increase in microprocessor speed increased the price of an Intel microprocessor by 0.764 percent, holding all other attributes of the microprocessor constant.

There was little discussion of the regression analysis at trial since VLSI clearly wanted to focus on demonstrating how the regression resulted in a large damage number and Intel did little to challenge the implementation of the methodology.  In cross examining Dr. Sullivan, Intel’s attorneys did, however, challenge VLSI’s expert about his inclusion of some potential explanatory variables and the exclusion of others.  Some of VLSI’s expert’s responses indicated that Intel may have had some effective points of attack of VLSI’s implementation of the regression methodology had it chosen to pursue them.

Calculating Damages from Regression Results

Next, VLSI’s damages expert used his regression results to calculate the total value that Intel purportedly received for the use of the two patents.  For this he relied on VLSI’s technical experts who had testified that the ‘373 patent decreased microprocessor power consumption by 5.45 percent and that the ‘759 patent increased microprocessor performance by 1.11 percent.  He also relied on a crucial assertion by VLSI’s technology experts that a one percent improvement in power consumption or a one percent increase in performance could be “valued as” a one percent increase in speed.  Using those asserted equivalencies in the value of microprocessor speed, power consumption and performance, VLSI’s damages expert calculated the value of the benefit of the patented technology by multiplying these percentage improvements in power consumption and performance by the percentage increases in price attributable to increases in speed.  Finally, he multiplied the resulting percentage increase in revenue by the total revenue that Intel had earned on the accused products.

This calculation can be restated concisely in summary mathematical form.  VLSI’s damages expert undertook the following calculations:

Intel’s Increase in Revenue due to its use of the ’373 Patent =

Price-Speed Ratio X % Reduced Power Use X $Accused Product Sales =

0.764 X 5.45% X $Accused Product Sales

 

Intel’s Increase in Revenue due to its use of the ’759 Patent =

Price-Speed Ratio X % Increased Performance X $Accused Product Sales =

0.764 X 1.11% X $Accused Product Sales

VLSI’s damages expert testified that there would be no increase in direct manufacturing costs from utilizing the patented technology and only a very small increase in selling and marketing costs.  Since there were no incremental costs to subtract from the additional revenue allegedly earned from using the patented technology, the increase in profits was equal to the claimed increase in revenues.

The Outcome of the Hypothetical Negotiation

The next step was to determine how Intel and VLSI would share these benefits in a hypothetical negotiation, the fictional event that takes place on the eve of first infringement during which the litigants are imagined to reach agreement on a royalty.  It is often customary to discuss the negotiating process over the sharing of benefits as being shaped by the relative bargaining power of the parties at the hypothetical negotiation.  VLSI’s damages expert instead undertook an unusual calculation.  He first calculated what he claimed was Intel’s contribution to the commercial success of its microprocessors.  He then subtracted the amount of Intel’s contribution from his estimate of Intel’s increase in profits due to its use of VLSI’s patents.

To implement this division, VLSI’s damages expert started by claiming that Intel’s contribution to its success in generating the patent-related additional profit could be measured as the sum of certain costs divided by its total revenue.  The reasoning that justified this approach was that these costs were incurred in the development and marketing of Intel chips.  More specifically, he took the sum of Intel’s Selling and Marketing Costs (S&M); its General and Administrative Costs (G&A); and its Research and Development Costs (R&D) and then divided that sum by Intel’s total revenue.  That is:

Intel’s Proportional Contribution = (S&M + G&A + R&D) / Intel’s Total Revenue

The result, 20.7 percent, was deemed to be Intel’s share of the estimated increase in profits that it earned from incorporating the patented technology into its microprocessors.  The remaining 79.3 percent was, therefore, attributable to VLSI.

The asserted outcome of the hypothetical negotiation was then simply the result of multiplying 79.3 percent by the increase in Intel profits, described above.  VLSI’s damages expert estimated the amount of money that a reasonable royalty would have generated before trial, a figure presumably close to the over $2 billion awarded by the jury.  VLSI’s damages expert claimed that Intel would have been willing to pay such a royalty because it faced strong competition and needed the competitive edge that the patented technology provided to maintain its market position.

The presentation of damages as a single payment for past infringement did create a potential problem for VLSI.  During the trial, Intel asserted that VLSI’s expert had not presented a per unit royalty in his pre-trial disclosure and should not be allowed to present a per unit royalty in court.  A ruling in Intel’s favor may have made future royalties unavailable.  As it happened the court ruled in VLSI’s favor on this point.

VLSI’s Anticipation of Defendant’s Critiques

In its direct testimony on damages, VLSI addressed several additional critiques that had been raised by Intel in pretrial filings, reports or deposition testimony.  First, VLSI’s damages expert was asked in his direct testimony about Intel’s claim that VLSI and its experts had not identified any comparable real-world licenses that resulted in payments as high as those that he was claiming to be reasonable; that is, in the hundreds of millions or billions of dollars.  They also asked him about the much lower patent values implied from the purchase of Freescale and the sale of the patents to VLSI, mentioned above.

VLSI’s damages expert responded that none of those real-world licenses and sales were analogous to the hypothetical license in this case.  He asserted that licensors in real-world licensing negotiations do not have comprehensive knowledge of the importance of the patents that are under negotiation.  Similarly, purchasers of the ‘373 and the ‘759 patents would not have known of the value of the patents to Intel or even the extent of the use of the patented technologies.  Any of the earlier transactions involving the patents would not, he claimed, have incorporated Intel’s expectations and experience of the benefits of using the technology.  VLSI frequently claimed through this and other witnesses that only Intel would have understood the value of the patented technology that it was exploiting.

VLSI’s damages expert characterized the hypothetical negotiation, by contrast, as one in which both side’s “cards were facing up.”   Consequently, the licensor, Freescale, would have been fully informed of everything that Intel knew about the usefulness and value of the licensor’s technology.  VLSI appeared to claim that the information that was available to Freescale in the up-facing cards included information about sales, profits and other outcomes after the date of the hypothetical negotiation.  VLSI’s damages expert indicated that the royalty rates found in Intel’s purported real-world comparable licenses were analogous to what Tom Brady was paid as a rookie before he had demonstrated his abilities as a quarterback in a professional football league.  According to VLSI, what was relevant at the time of the hypothetical negotiation was equivalent to what Tom Brady was paid during the peak of his career, not on what was known about him before his rookie year.  The use of the analogy appears to indicate that VLSI viewed the hypothetical negotiation as being informed by events and outcomes that took place after Intel’s earliest infringement, sometimes rationalized by reference to the “Book of Wisdom.”

He was also asked about the evidence that the technology was not used by any other company other than Intel, not even by Freescale and NXP, the semiconductor manufacturers who had previously owned the patents.  He described that point as merely a “red herring” since use by the patent owner was not the only determinant of the value of the patents.  As a basis for this point, he cited the Georgia-Pacific factors that call for consideration of the extent to which the infringer has made profitable use of the invention.

Damages-Related Testimony from Other VLSI Witnesses

Before the Plaintiff’s damages expert was called, a VLSI technical witness presented the results of a “patent scoring” exercise undertaken by Innography, an IP management firm.  According to Innography’s scoring, the two patents at trial were in the top 10 percent of patent value.  VLSI’s introduction of this result may contradict its key point that only Intel had sufficient information to have some understanding of the value of the technology since Innography could presumably only make such a claim from public data.

Defense Response on Damages

Intel had apparently provided expert reports on damages from at least three expert witnesses.  These included: a Professor of Operations, Information, and Decisions at Wharton with a Ph.D. in Management from MIT; a CPA with extensive experience as an IP damages expert; and an electrical engineer with 20 years of experience as a licensing executive with IBM.  VLSI moved to have the CPA’s “cumulative” opinions excluded as being redundant and “an improper attempt to bolster” the opinions of Intel’s other damages experts.  Whatever the court’s ruling on this and other motions to exclude, Intel called only the former licensing executive, Hanc Huston, to rebut VLSI’s damages expert.

Most of Intel’s damages testimony was not available on the public telephone feed because it involved confidential information primarily related to the comparable licenses that he had identified.  Intel’s damages expert brought up the point that the patented technology had not been used by any of the assignees of the patents and that VLSI had not identified anyone else who had used the technology.  He asserted that, in his experience, such lack of use of a patent was indicative of its low value and would have driven down the royalty paid on a licensed patent.  He also testified that he had never heard of hedonic regression being used in patent licensing negotiations.

He also disagreed with VLSI’s assertion that only Intel had the information necessary to comprehend the extremely high value of the patented technology.  He pointed out that the patent itself was public knowledge and that VLSI and others could have reverse engineered Intel to understand the extent that its technology was being used.

After discussing 18 licenses that he had determined were comparable, VLSI’s damages expert concluded that a reasonable royalty for Intel’s use of the technology described in the two patents totaled $2.2 million.

On cross-examination, Intel’s damages expert was asked about a policy at IBM to license patents for a one percent royalty per patent up to a maximum royalty of five percent.  VLSI pointed out, in cross and in closing, that a one percent per patent royalty was more than the amount that VLSI was asking in damages.  He was also asked about specific licenses and settlements between IBM that involved payments in the hundreds of millions of dollars.

The Testimony of VLSI’s Rebuttal Damages Expert

The final witness on damages was Mark Chandler, the president of another IP management firm, who was called to rebut Intel’s damages testimony.  He criticized Intel’s damages expert as relying on the “indirect evidence” of royalty rates from purportedly comparable licenses as opposed to the evidence of Intel’s success with the accused products.  He also repeated the claim made by VLSI’s affirmative damages expert that none of the previous transactions were indicative of the outcome of the hypothetical negotiation.  Those transactions, he asserted, could not have taken into account the value of the technology to Intel.  He further criticized Intel’s expert’s process for identifying ostensibly comparable licenses, indicating that his method was based on technical considerations without consideration of the commercial value of the licensed patents or any other economic considerations.

This expert also indicated that Intel’s damages expert had calculated per patent royalty rates by merely dividing the reported royalty in his purportedly comparable licenses by the number of patents being licensed.  Such an average, he testified, fails to take into account the range of values of the licensed patents.  He further testified that Intel’s expert had “cherry-picked” from among over 300 licenses that were part of the record in this case, ignoring licenses that resulted in payments of hundreds of millions of dollars with at least one being over a billion dollars.

This expert also claimed that Intel had ignored “direct evidence” of the value of the patents, the value of the use that Intel had made of the patents and the additional profits allegedly derived therefrom.  He repeated the claim that, unlike in the real world, in the hypothetical negotiation the parties would be “playing with their cards up” and have full knowledge of the value of the patents to each other.

Conclusion

The trial in VLSI Technologies provided not only a dramatic outcome but useful insights in the presentation and rebuttal of a damages case.  Interested observers can look forward to further motions, orders and appeals that should provide additional information about the technology and the appropriateness of the award.

Disclosure: I have no involvement with any of the parties or the law firms at this time. I have had no involvement in this litigation. I have never worked with VLSI. I have worked on at least one litigated matter with Wilmer Hale. I have consulted for Intel twice and testified for them once over my entire career but, to repeat, have no involvement with Intel at this time.

What do you call it? For almost two-thirds of you, it’s the “specification”

By Jason Rantanen

First of all, I’m overwhelmed by the survey responses on § 112(a) – thanks to everyone who responded to this short survey.  You’re terrific.

As of this afternoon, over 800 readers had responded to the question about how you refer to the part of the patent application that is required by 35 U.S.C. § 112(a).  The graph below shows the distribution of responses. (n=720)

When asked “What term do you use most often to refer to the part of the patent or patent application that is required by 35 U.S.C. § 112(a)?,” sixty-three percent of respondents answered “specification,” while another twenty-four percent answered “written description.”  A notable minority (9%) said “detailed description.”  There were also some write-ins, although most of them were either “Spec” or “Disclosure”

Results were consistent for patent attorneys and agents, but none of the litigators who responded used anything other than “specification” or “written description,” while 50% of the examiners who responded used “specification.” (with the caveat that examiners and litigators are a smaller n).

In addition, after results started coming in I had some concern that the initial question was ambiguous, so modified the survey to give a random set of respondents the following question instead.  Responses were similar to the first question, with a bit lower rate for “specification” (58%) and a bit higher rate for “technical description” (11%) for this version of the question.

(n=115)  (I probably should have asked this question at the outset; hindsight looms large.)

Here’s the overall distribution of respondents:

  • Patent attorney: 68%
  • Patent agent: 11%
  • Litigator: 10%
  • Examiner: 5%
  • Other categories: 6%

Finally, here’s the “patent law” definition of  “specification” from Webster’s New International Dictionary of the English Language, Unabridged, Second Edition, published in 1957:

Specification

5. Patent Law. A written description of the invention or discovery and of the manner and process of making, constructing, compounding, and using the same, concluding with a specific and distinct claim or claims of the part, improvement, or combination which the applicant regards as his discovery or invention, this latter part being often called the claim.  When the term specification is used alone it includes the claim.

Thanks to the University of Iowa College of Law law library for pulling the definition from the 1957 edition of Webster’s for me. Also, note that response choices other than “Other” were presented in a random order to avoid any order bias.

What do you call it?

By Jason Rantanen

What do you call the part of the patent or application that is required by 35 U.S.C. § 112(a)?   The world would love to hear your responses.  Here’s a two-question survey that will take  about 10 seconds to complete.  If there’s a reasonably large number of responses, I’ll post the results later this week.

Link to survey.

 

 

 

Guest Post: The Open Source Hardware Association’s Perspective on GSK v. Teva

Guest Post by Michael Weinberg, Executive Director of the Engelberg Center on Innovation Law & Policy at NYU Law and the Board President of the Open Source Hardware Association (OSHWA) and David Wechsler, a 3L at NYU Law.

To the Open Source Hardware (OSHW) community, the Federal Circuit’s October opinion in the ongoing appeal of GlaxoSmithKline LLC v. Teva (“GSK”), No. 2018-1976 (Fed. Cir.) was a wolf in wolf’s clothing. Some language in the panel majority’s opinion suggested an expansion of induced infringement liability to transform mere statements of equivalence made on promotional materials into triggers for liability. This language came dangerously close to swallowing an industry extolled for democratizing science and helping the United States overcome its PPE shortage in the heart of the COVID-19 outbreak. The Federal Circuit’s subsequent choice to vacate its initial opinion and re-hear the case signals that crisis may have been averted, but the close call was a reminder of the uphill battle open design faces despite the significant public benefits it creates. We cannot predict exactly what the Federal Circuit’s new opinion will look like, but as advocates for the OSHW community, we hope the panel treads carefully.

I. The Importance of Open-Source Hardware to Innovation

Open source hardware is a physical item whose source files have been shared with the world and can be freely copied or modified. By enabling anyone to study, modify, distribute, make, and sell the design or hardware, open source hardware allows the sharing of knowledge and encourages innovation through the open exchange of designs. In contrast to proprietary hardware, any relevant documentation related to open source hardware is licensed for individuals to openly participate in the design and development of the hardware, or to replicate and manufacture the hardware devices. By making it easier to begin engineering from a prior design, open source design quickens invention and commercialization of new technologies.

The benefits of open source hardware were on vivid display last year, as the demand for PPE skyrocketed amid the COVID-19 outbreak and caused a “chronic shortage” of supply. Relying on open-source hardware and design, thousands of individuals met this moment of need with ingenuity. To name a few inspiring examples

Open source hardware facilitated this process by disseminating the designs for novel reusable PPE publicly, which not only enabled DIY enthusiasts to collaboratively iterate and manufacture designs for safe equipment at a low cost, but also solved local shortages in equipment. The response to COVID has exposed manufacturing and distribution as primary logistical challenges to disaster response, yet the use of open design to create PPE highlights how distributed manufacturing and supply chains—enabled by openness—can overcome logistical hurdles. Harnessing the power of open design to respond to global crises didn’t begin with the pandemic. Glia Project, for example, has responded to a need for stethoscopes and tourniquets among doctors in the Gaza Strip by sharing 3-D printable open source designs for these devices since 2018.

Beyond providing society with useful tools in responding to crises, open source hardware also has the higher order capacity to democratize science. Research equipment made with open source design is cheaper for scientists to acquire or build on their own, as well as modify to match local conditions, thus lowering the cost barrier to scientific research across the globe. The OSHW community believes that technological capacity should not depend on where one is born; open source hardware therefore offers a promising vision of the future by allowing scientific education in the poorest parts of the world to move past theoretical discussions and into practical applications.

II. GSK v. Teva: The Original Decision

Contrary to popular belief, legal education does not begin with learning the concepts of offer and acceptance in contracts, negligence in torts, or even well-pleaded complaints in Civil Procedure. No, legal education begins during recess period, when one friend (Charlie) encourages another friend (Skyler) to throw the only kickball over the school fence. When caught in the act, Skyler points the finger at Charlie’s encouragement, and the teacher must engage in a fact-finding mission to determine Charlie’s culpability. Depending on how actively Charlie encouraged Skyler, Charlie too may be spending Saturday morning in detention.

The doctrine of inducement infringement in intellectual property law is no different. 35 U.S.C. § 271(b) states “whoever actively induces infringement of a patent shall be liable as an infringer.” Traditionally, § 271(b) has been interpreted as requiring more than mere knowledge: plaintiffs must show active steps taken by the defendant that encouraged direct infringement. See, e.g., Takeda Pharm. U.S.A., Inc. v. West-Ward Pharm. Corp., 785 F.3d 625, 631 (Fed Cir. 2015) (“Merely describing an infringing mode is not the same as recommending, encouraging, or promoting an infringing use, or suggesting that an infringing use ‘should’ be performed.”) (cleaned up). To further the recess analogy, Charlie might be in trouble for imploring Skyler to throw the ball over the fence, but probably avoids culpability by merely explaining how to throw a ball so high as to clear the fence.

The ongoing pharma case GSK v. Teva—chronicled by PatentlyO here and here—has the potential to expand inducement liability to encompass far more than just “active encouragement.” But doing so would threaten the OSHW community, which would have deleterious downstream effects on innovation, crisis response, and the democratization of science.

The panel majority’s original opinion found Teva liable for inducing infringement of GSK’s patent on Coreg to treat congestive heart failure (“CHF”). Relevant to the OSHW community, GSK’s patents on Coreg and its non-CHF-related uses had already expired. Nevertheless, relying heavily (as Judge Prost points out in dissent) on evidence that Teva’s promotional materials referred to its generic tablets as “AB rated” equivalents of the Coreg tablets, Teva was found liable for inducing infringement despite only instructing patients and doctors to use its product for off-patent (i.e., non-CHF) uses.

The panel majority seemed to assume that doctors and pateints would combine the “AB rating” with instructions GSK (not Teva!) provided on how to use Coreg to treat CHF in finding Teva liable for inducement infringement. The panel majority’s reasoning indicates that a distributor of an unpatented product used for unpatented uses A and B could still be held liable if the product was also capable of being used for patented use C.  This would be true even if the distributor of the product made no mention of use C in advertising or educational materials. This broad language lessens patent holders’ burden of proving inducement and could create liability for wholly innocent OSHW developers whose statements of equivalence relate to off-patented uses entirely sepearate from and uninterested in the patented uses.

Statements of equivalence are a far cry from the traditional active encouragement test, spelling bad news for Charlie, our fearless recess ringleader, and potentially worse for designers of open source hardware. Would an open source hardware developer be subject to liability by simply promoting their product as structurally equivalent to a brand-name product, despite not encouraging, mentioning, or even being aware of a specific infringing use? The original panel majority’s focus on Teva’s AB rating suggests that it might be. But then how would the public benefit from the innovation and utility that flow from these cheaper and more accessible alternatives?

Further, the OSHW community would be burdened with administrative costs associated with monitoring which unpatented designs have patented uses. The OSHW community might also fall victim to an avalanche of new patent infringement claims from patent trolls.

The original GSK opinion was not only unduly broad, but also worryingly vague. What type of knowledge and marketing, for example, is sufficient to trigger liability under the panel majority’s rubric (“the provider of an identical product knows of and markets the same product for intended direct infringing activity”)? Without a clear statement on what type of promotional activity triggers inducement liability, open source developers, many of which are too small to afford sophisticated legal departments, will either have their activities chilled or expose themselves to liability. The confused expansion of inducement doctrine contained in the Federal Circuit’s October opinion could have been the death knell of a highly useful emerging industry.

Part III: GSK v. Teva: The Future

 Thankfully, the panel rehearing (which took place on February 23rd) may signal that the panel will decide the GSK case on clearer and—we hope—narrower grounds that do not inhibit the progress of the OSHW community. One way a new opinion could do so is by clarifying that mere statements of structural, chemical, or therapeutic equivalence are insufficient to create inducement liability. The panel can and should reaffirm that inducement can only be established through evidence of active steps taken by the defendant that encouraged direct infringement. Doing so would properly protect incentives to innovate without prohibiting the public from off-patent uses of the same: a win-win for innovators everywhere.

As we hope to have made clear, the open source hardware community spurs innovation and supports the public interest by reducing the cost of scientific research and increasing manufacturing capabilities. Any good intellectual property regime means to serve these interests.

 

Disclosure Statement: Michael Weinberg is the Executive Director of the Engelberg Center on Innovation Law & Policy at NYU Law and the Board President of the Open Source Hardware Association (OSHWA). David Wechsler is a 3L at NYU Law and a participant in NYU’s Technology Law & Policy Clinic, which represents OSHWA.

 

Patent Claims as Elements rather than Boundaries

By Jason Rantanen

I teach Introduction to Intellectual Property Law every spring semester, an experience that often causes me to reflect on some of the fundamental premises of intellectual property law in a way that advanced courses don’t necessarily always invite.  When you’re deep in the nuances of the effective date provision for post-AIA § 102, it’s easy to lose sight of some of the big questions.  This post is one of a few half-baked ideas from that return-to-basics reflection.

***

I grew up steeped in the world of property law.  My father’s law office was in rural New York, and his core practice involved representing farmers, villages, and small businesses on land transactions, estate planning, and probate matters.  Some of my first memories are of photocopying property abstracts: voluminous documents that contained the transaction history for a property, often going back a hundred years or more.  We’d copy these abstracts and then affix the new deed or mortgage associated with the transaction.  Later, I learned to type up property descriptions for deeds, writing out the metes and bounds of the land being transferred.  These descriptions  used points and lines to articulate the land for which the property rights applied.

For me, the language of patent claims as boundaries resonated early and easily.  After all, patent cases routinely refer to claims in boundary-like terms.  One example is the likening of claims to “metes and bounds,” as Judge Rich did in footnote 5 of In re Vamco Machine and Tool, Inc., 752 F.2d 1564, 1577 (Fed. Cir. 1985).

The function of claims is (a) to point out what the invention is in such a way as to distinguish it from what was previously known, i.e., from the prior art; and (b) to define the scope of protection afforded by the patent. In both of those aspects, claims are not technical descriptions of the disclosed inventions but are legal documents like the descriptions of lands by metes and bounds in a deed which define the area conveyed but do not describe the land.

Another example is this passage from Judge Michel’s opinion  in Halliburton Energy Services, Inc. v. M-I LLC, 514 F.3d 1244, 1249 (Fed. Cir. 2008):

Because claims delineate the patentee’s right to exclude, the patent statute requires that the scope of the claims be sufficiently definite to inform the public of the bounds of the protected invention, i.e., what subject matter is covered by the exclusive rights of the patent. Otherwise, competitors cannot avoid infringement, defeating the public notice function of patent claims.

Patent law scholarship, too, treats patent claims as if they are boundary-setting.  Books and articles refer to modern claiming practice as “peripheral claiming”– language that implies an area that is within and that which is without.  Even those scholars who have critiqued the idea of peripheral claiming nonetheless visualize patent claims as defining an area: signposts instead of fenceposts.  The idea is still that there is a zone set by the patent claim.

And yet, the more I’ve litigated, studied, and taught about patents, the more I’ve realized that conceptualizing patent claims as defining an area is fundamentally wrong.  Patent claims are not boundaries, and it’s confusing to those who are trying to grasp patent law when we talk about them that way.  There is no area that is “encompassed” within patent claims.  Patent claims don’t define a “boundary.”  And they are quite unlike the metes and bounds of a deed description.  Even if one could plot the components of a patent claim in some n-dimensional space, it would still not define a closed form.  Conceptualizing patent claims as if they define some “area” of technology isn’t how they actually work. One cannot draw a line from one claim element to another, except in the sense that claim elements can interrelate with one another–but that, too, is really just another element, albeit one that is implicit from the semantic structure of the claim rather than explicit in its words.

So how should patent claims be conceptualized, if not as establishing a boundary?  My first answer goes back to how litigants and courts often actually approach them: as discrete legal elements akin to the elements of any other legal claim.  The limitations in patent claims aren’t like the boundaries defined in a deed; instead, they are like the elements of a tort.  Each of these elements must be met in order for the claim to be infringed, invalidated, or adequately supported by the disclosure.

Consider, for example, patent law’s novelty requirement.  In order for a prior art reference to anticipate a patent claim, each and every element of the claim must be present in the prior art reference.  Or the analysis for infringement: for there to be infringement, each and every element of the claim must be present in the accused product or process, either literally or as an equivalent.  In both cases, patent claims are treated as if they are a series of elements–not as boundary lines that are crossed or not.  They are, in the words of Nolo’s Plain-English Law Dictionary, “the component parts of a legal claim.”

In the end, despite my initial attraction to the language of real property to describe patent claims, I’ve come to realize that this rhetorical device–enshrined in patent law judicial opinions and used in briefs and legal scholarship–is both misleading and wrong.  Patent claims are not boundaries, and we should stop referring to them that way.  Instead, they are elements in their legal sense: sets of individual legal requirements that must each be proven to achieve a particular legal status.

Perhaps this is so obvious that it doesn’t need to be said.  And yet, for those who are learning patent law for the first time, it is hardly obvious – particularly when the opinions that we read talk about patent claims in boundary-like terms.

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Thoughtful, non-repetitive comments welcome.  Comments that I think are crud or junk, in my subjective opinion, will be deleted without further notice or comment.

 

Duke Law Conference – Constitutional Principals: Administrative Adjudication and Arthrex

Jason Rantanen

In United States v. Arthrex, Inc., the Supreme Court will consider the application of the Appointments Clause to Patent Trial and Appeal Board judges–specifically, whether PTAB judges are principal officers who must be appointed by the President and confirmed by the Senate, and whether the proper remedy is to sever their statutory removal protections.

To address these issues, The Center for Innovation Policy at Duke Law and the Duke Law Program in Public Law will host a Zoom discussion on Friday, February 12, noon to 1:30 p.m. Commentators will include the Honorable Timothy B. Dyk and renowned academics whose scholarship has focused on the key patent, administrative, and constitutional issues.  Below are the details.

February 12, 2021
12:00 noon – 1:30 p.m.
Virtual [
Register here]

12:00 noon–12:45 p.m. | Panel I: IP and Innovation Policy
The Honorable Timothy Dyk
Professor John Duffy
Professor Melissa Wasserman
Moderator: Professor Arti Rai

12:45 p.m.–1:30 p.m. | Panel II: Administrative and Constitutional Law
Professor Michael Asimow
Professor Jennifer Mascott
Professor Nina Mendelson
Professor Christopher Walker
Moderator: Professor Stuart Benjamin

Contact Balfour Smith (bsmith@law.duke.edu) or Kelli Raker (kelli.raker@law.duke.edu) for more information.

 

 

New PatentlyO Law Journal Essay: Is Global FRAND Litigation Spinning Out of Control?

New PatentlyO Patent Law Journal article by Thomas F. Cotter, Taft Stettinius & Hollister Professor of Law, University of Minnesota Law School, and Innovators Network Foundation Intellectual Property Fellow.  Professor Cotter is also the author of the Comparative Patent Remedies blog

Abstract:  It has often been observed that, while patent rights are territorial in scope, commerce is global and, increasingly, interconnected.  Indeed, with the advent of 5G and the Internet of Things (IoT), technical standards soon will enable not only devices such as smartphones and tablets, but also automobiles, medical devices, and even home appliances to receive and transmit data within and across national borders.  To achieve these ends, firms participate in standard-setting organizations (SSOs) to hammer out the technical standards that enable communication and interoperability among devices.  Moreover, because the implementation of these standards requires the use of many different, typically proprietary, technologies, SSOs generally encourage or require their members both to declare their ownership of patents that may be essential to the practice of the relevant standard, and to commit to licensing these standard-essential patents (SEPs) on fair, reasonable and nondiscriminatory (FRAND) terms.  The FRAND commitments themselves, in turn, often are interpreted as binding contracts for the benefit of third parties (that is, for the benefit of implementers).  In principle, these requirements work to ensure both that implementers are able to access essential technologies, and that owners are fairly compensated for their inventive contributions. 

Two problems nevertheless can impede the smooth working of such a system.  The first is that SSO rules typically do not define the term “FRAND,” for a variety of reasons.  Disputes over the meaning of FRAND therefore are inevitable.  The second is that, because patents are territorial, courts often have been reluctant to adjudicate foreign patent rights.  This understanding of patent rights, however, might appear, to some observers at least, to collide with commercial realities, when parties are unable to reach agreement and opt for adjudication by national courts.  Current responses to these problems are likely to prove unsatisfactory for both owners and implementers; a comprehensive solution nonetheless remains, for now, elusive.

Read: Thomas F. Cotter, Is Global FRAND Litigation Spinning Out of Control, 2021 PatentlyO Law Journal 1 (2021) (Cotter.2021.GlobalFRANDLitigation)

Prior Patently-O Patent L.J. Articles:

  • Colleen V. Chien, Nicholas Halkowski, Maria He, and Rodney Swartz, Parsing the Impact of Alice and the PEG, 2020 Patently-O Law Journal 20 (2020) (Chien.2020.ImpactOfAlice)
  • Paul R. Michel and John T. Battaglia, eBay, the Right to Exclude, and the Two Classes of Patent Owners, 2020 Patently-O Law Journal 11 (2020) (Michel.2020.RightToExclude)
  • Thomas F. Cotter, Two Errors in the Ninth Circuit’s Qualcomm Opinion, 2020 Patently-O Patent Law Journal 1 (2020). (Cotter.2020.TwoErrors.pdf)
  • Jasper L. Tran & J. Sean Benevento, Alice at Five, 2019 PatentlyO L.J. 25 (2019) (Tran.2019.AliceatFive.pdf)
  • Bernard Chao, Implementing Apportionment, 2019 PatentlyO L.J. 20 (Chao.2019.ImplementingApportionment)
  • Jeremy C. Doerre, Is There Any Need to Resort to a § 101 Exception for Prior Art Ideas?, 2019 PatentlyO L.J. 10. (2019.Doerre.AnyNeed)
  • Colleen V. Chien, Piloting Applicant-Initiated 101 Deferral Through A Randomized Controlled Trial, 2019 Patently-O Patent Law Journal 1. (2019.Chien.DeferringPSM)
  • David A. Boundy, Agency Bad Guidance Practices at the Patent and Trademark Office: a Billion Dollar Problem, 2018 Patently-O Patent Law Journal 20. (Boundy.2018.BadGuidance)
  • Colleen Chien and Jiun-Ying Wu, Decoding Patentable Subject Matter, 2018 PatentlyO Patent Law Journal 1.
  • Paul M. Janicke, Patent Venue: Half Christmas Pie, And Half Crow, 2017 Patently-O Patent Law Journal 13. (Janicke.2017.ChristmasPie.pdf)
  • Paul M. Janicke, The Imminent Outpouring from the Eastern District of Texas, 2017 Patently-O Patent Law Journal 1 (2017) (Janicke.2017.Venue)
  • Mark A. Lemley, Erik Oliver, Kent Richardson, James Yoon, & Michael Costa, Patent Purchases and Litigation Outcomes, 2016 Patently-O Patent Law Journal 15 (Lemley.2016.PatentMarket)
  • Bernard Chao and Amy Mapes, An Early Look at Mayo’s Impact on Personalized Medicine, 2016 Patently-O Patent Law Journal 10 (Chao.2016.PersonalizedMedicine)
  • James E. Daily, An Empirical Analysis of Some Proponents and Opponents of Patent Reform, 2016 Patently-O Patent Law Journal 1. (Daily.2016.Professors)
  • Tristan Gray–Le Coz and Charles Duan, Apply It to the USPTO: Review of the Implementation of Alice v. CLS Bank in Patent Examination, 2014 Patently-O Patent Law Journal 1. (GrayLeCozDuan)
  • Robert L. Stoll, Maintaining Post-Grant Review Estoppel in the America Invents Act: A Call for Legislative Restraint, 2012 Patently-O Patent Law Journal 1 (Stoll.2012.estoppel.pdf)
  • Paul Morgan, The Ambiguity in Section 102(a)(1) of the Leahy-Smith America Invents Act, 2011 Patently-O Patent Law Journal 29.  (Morgan.2011.AIAAmbiguities)
  • Joshua D. Sarnoff, Derivation and Prior Art Problems with the New Patent Act, 2011 Patently-O Patent Law Journal 12 (sarnoff.2011.derivation.pdf)
  • Bernard Chao, Not So Confidential: A Call for Restraint in Sealing Court Records, 2011 Patently-O Patent Patent Law Journal 6 (chao.sealedrecords.pdf)
  • Benjamin Levi and Rodney R. Sweetland, The Federal Trade Commission’s (FTC) Recommendations to the International Trade Commission (ITC):  Unsound, Unmeasured, and Unauthoritative, 2011 Patently-O Patent Law Journal 1 (levi.ftcunsound.pdf)
  • Kevin Emerson Collins, An Initial Comment on King Pharmaceuticals: The Printed Matter Doctrine as a Structural Doctrine and Its Implications for Prometheus Laboratories, 2010 Patently-O Patent Law Journal 111 (Collins.KingPharma.pdf)
  • Robert A. Matthews, Jr., When Multiple Plaintiffs/Relators Sue for the Same Act of Patent False Marking, 2010 Patently-O Patent Law Journal 95 (matthews.falsemarking.pdf)
  • Kristen Osenga, The Patent Office’s Fast Track Will Not Take Us in the Right Direction, 2010 Patently-O Patent L.J. 89 (Osenga.pdf)
  • Peter S. Menell,  The International Trade Commission’s Section 337 Authority, 2010 Patently-O Patent L.J. 79
  • Donald S. Chisum, Written Description of the Invention: Ariad (2010) and the Overlooked Invention Priority Principle, 2010 Patently‐O Patent L.J. 72
  • Kevin Collins, An Initial Comment on Ariad: Written Description and the Baseline of Patent Protection for After-Arising Technology, 2010 Patently-O Patent L.J. 24
  • Etan Chatlynne, Investigating Patent Law’s Presumption of Validity—An Empirical Analysis, 2010 Patently-O Patent L.J. 37
  • Michael Kasdan and Joseph Casino, Federal Courts Closely Scrutinizing and Slashing Patent Damage Awards, 2010 Patently-O Patent L.J. 24 (Kasdan.Casino.Damages)
  • Dennis Crouch, Broadening Federal Circuit Jurisprudence: Moving Beyond Federal Circuit Patent Cases, 2010 Patently-O Patent L.J. 19 (2010)
  • Edward Reines and Nathan Greenblatt, Interlocutory Appeals of Claim Construction in the Patent Reform Act of 2009, Part II, 2010 Patently‐O Patent L.J. 7  (2010) (Reines.2010)
  • Gregory P. Landis & Loria B. Yeadon, Selecting the Next Nominee for the Federal Circuit: Patently Obvious to Consider Diversity, 2010 Patently-O Patent L.J. 1 (2010) (Nominee Diversity)
  • Paul Cole, Patentability of Computer Software As Such, 2008 Patently-O Patent L.J. 1. (Cole.pdf)
  • John F. Duffy, The Death of Google’s Patents, 2008 Patently O-Pat. L.J. ___ (googlepatents101.pdf)
  • Mark R. Patterson, Reestablishing the Doctrine of Patent Exhaustion, 2007 Patently-O Patent L.J. 38
  • Arti K. Rai, The GSK Case: An Administrative Perspective, 2007 Patently-O Patent L.J. 36
  • Joshua D. Sarnoff, BIO v. DC and the New Need to Eliminate Federal Patent Law Preemption of State and Local Price and Product Regulation, 2007 Patently-O Patent L.J. 30 (Download Sarnoff.BIO.pdf)
  • John F. Duffy, Are Administrative Patent Judges Unconstitutional?, 2007 Patently-O Patent L.J. 21. (Duffy.BPAI.pdf)
  • Joseph Casino and Michael Kasdan, In re Seagate Technology: Willfulness and Waiver, a Summary and a Proposal, 2007 Patently-O Patent L.J. 1 (Casino-Seagate)

Federal Circuit Statistics – 2020 edition

By Jason Rantanen

This post uses data from the Compendium of Federal Circuit Decisions to provide a quick statistical overview of the Federal Circuit’s decisions this year, particularly in appeals arising from the district courts and USPTO.

Decisions by origin

Figure 1 shows the total number of Federal Circuit opinions and Rule 36 summary affirmances by origin.  The increase in decisions in appeals from the USPTO (orange) over the past decade is clearly visible, although last year there was a slight decline.  Decisions in appeals arising from the USPTO dropped about 17% (254 in 2019 versus 2010 in 2020), while decisions in appeals arising from the district courts increased slightly (182 in 2019 versus 199 in 2020).  Overall, the Federal Circuit’s docket is a lot more patent-heavy today than it was in 2010.  The court is issuing more decisions as well.

Figure 1

Decline in Rule 36 Summary Affirmances

Figures 2 and 3 show the number of written opinions and Rule 36 summary affirmances in appeals arising from the district courts and USPTO.  Both figures show a decrease in the number of Rule 36 summary affirmances and increase in written opinions in 2020.  This change is especially dramatic in decisions arising from the USPTO.

Figure 2

Figure 3

In addition, as figures 4 and 5 show, the increase in written opinions has primarily come in the form of more nonprecedential opinions.  The number of nonprecedential written opinions in appeals from both the district courts and USPTO have increased while the number of precedential decisions has remained about the same or declined.

Figure 4

Figure 5

Despite the decrease in Rule 36 summary affirmances, the court’s overall affirmance rate measured by decision (i.: the outcome of a given opinion or Rule 36 affirmance) remained about the same in 2020.  As Figure 6 shows, over the last ten years the Federal Circuit fully affirmed about 70% of its decisions arising from the district courts and affirmed at least in part about 80% of the time.  Similarly, as Figure 7 shows, the court has full affirmed the USPTO around 80% of the time and affirmed at least in part about 90%.  This data is inconsistent with the hypothesis that the Federal Circuit is issuing fewer Rule 36 summary affirmances because it is reversing less often.

Figure 6

Figure 7

My takeaway is that the Federal Circuit judges are writing more nonprecedential opinions instead of issuing Rule 36 summary affirmances.  Hopefully this will provide some additional information for parties on the court’s reasoning when it affirms.

As always, the data for this post (and much more data) is available via the Compendium of Federal Circuit Decisions website.  In calculating the affirmance rate I did not include decisions coded as “dismissed” or “other.”  Thanks to my research assistants for their work coding Federal Circuit decisions, particularly Lindsay Kriz who did the lions share of the coding for 2020 decisions.

The USPTO Patent Litigation Dataset: Open Source, Extensive Docket and Patent Number Data

Guest Post by Prof. Ted Sichelman, University of San Diego School of Law

Many online services provide district court patent litigation dockets, documents, and associated patent numbers. However, none of these services offer comprehensive, hand-coded patent numbers and case types, plus full dockets and key documents (complaints, summary judgments, verdicts), downloadable in bulk at no charge and with no license restrictions.

After more than three years of extensive automated and manual review of patent dockets, the USPTO’s Office of the Chief Economist —in conjunction with researchers from the University of San Diego’s Center for IP Law & Markets (myself) and Northwestern Law School (David L. Schwartz)—have completed that very goal, expanding upon the patent litigation dataset the USPTO had released in 2015.

Currently, the dataset (available here) includes:

  • Dockets: The complete docket for every lawsuit filed in district courts tagged as a patent action in PACER (and many other patent cases tagged under non-patent PACER codes) from the first patent case logged in PACER through the end of 2016 (over 80,000 case dockets).
  • Attorneys & Parties: Full lists of parties by type (e.g., plaintiff, defendant, intervener, etc.) and their attorneys, with full contact information for the attorneys gathered from public records.
  • Patent Numbers: Comprehensive, hand-coded patent numbers by a team over 30 law students from all electronically available complaints in PACER in cases filed from 2003 through the end of 2016.
    • Based on testing against several of the leading commercial services, plus publicly available data from the Stanford NPE Litigation Database, the dataset’s patent number information is substantially more complete and accurate than any of these services (which often use automated methods for determining patents-in-suit).
  • Case Types: Every case in PACER filed from 2003 through the end of 2016 is identified with one of 15 fine-grained case types, including patent infringement (non-declaratory judgement [DJ]), DJ on non-infringement and invalidity, DJ on non-infringement only, DJ on invalidity only, false marking, inventorship, malpractice, regulatory challenge, and others.

In the next few months, the USPTO will make available:

  • Documents: Initial complaints, summary judgment orders, and verdicts (bench and jury) that are electronically available for all patent cases in PACER filed from 2003 through the end of 2016.

The data is downloadable only in bulk and is not searchable at the USPTO website. However, it is relatively straightforward to download and search the patent number, case type, and attorney data, in Microsoft Excel or other database and statistical packages.

Importantly, there are no licensing restrictions whatsoever on the use of the data, and the research team and USPTO expect that commercial and non-commercial services will add the information to their search interfaces in the coming year. Additionally, the research team is hoping to update all of the data for patent cases filed through the end of 2020 sometime next year. Further down the road, we hope to code cases for outcomes and add appeals by supplementing Jason Rantanen’s comprehensive Compendium of Federal Circuit Decisions with full dockets and key documents.

In examining litigation trends, many researchers across the academic, public, and private sectors have used proprietary datasets, which generally could not be disclosed to other researchers for study replication and testing. Hopefully, academics and others will now use the USPTO’s fully open dataset for studies on the U.S. patent litigation system to allow for meaningful review of empirical studies.

Documentation on the database is available here and at the USPTO webpage. Anyone interested in using the data is also welcome to contact me (tsichelman@sandiego.edu) with technical and other questions.

Guest post: Advancing Inclusive Innovation and Entrepreneurship through the Patent System

By Colleen V. Chien, Professor of Law; and  Jonathan CollinsZachary J. Daly , and Rodney Swartz, PhD, all third-year JD students; all at Santa Clara University School of Law. This post is fourth in a series about insights developed based on data released by the USPTO.

“To truly advance innovation and human progress, we must all work to broaden the innovation community and make sure everyone knows that they, too, can change the world through the power of a single idea.”

– June 17, 2020 USPTO Director Andre Iancu

As we wait for a life-saving COVID vaccine, each new day reminds us of the inequalities that the pandemic has laid bare. 30% of public school children lack internet or a computer at home, making school reopenings an urgent priority. Black and brown people, are dying at a much higher rate from Covid due to a complex set of factors, and are at higher risk of lacking access to prescription drugs because of cost.

Though only one part of the larger innovation ecosystem, the patent system has an important role to play in advancing inclusive innovation. Below we build on the USPTO’s recent leadership and the AIA’s recent inclusionary policies (regional offices, pro se/bono supports, fee discounts) to provide a few ideas: being a beacon for the innovation needs of underrepresented populations, addressing the patent grant gap experienced by small inventors, diversifying inventorship by diversifying the patent bar, and developing and reporting innovation equity metrics. These ideas draw upon the paper by one of us, Inequalities, Innovation, and Patents and earlier work, and the ongoing efforts at the USPTO to “broaden the innovation community.”

Be a Beacon for the Unique Innovation Needs of Underrepresented People and for Tech Transfer 

Historically, innovation for underrepresented and underresourced groups has been underfunded. For example, Senator and VP candidate Kamala Harris recently introduced a bill to fund research on uterine fibroids, which, though receiving scant research attention, disproportionately impacts African-American women at a rate of 80% over their lifetimes. Closing the broadband access gap will require innovative technology solutions to deal with the “last mile” problems that face rural and underserved populations. The USPTO can use its powers to accelerate innovation to meet the unique needs of underrepresented and underresourced groups, including, as was done in the context of the Cancer Moonshot initiative, identifying relevant patents and applications and combining patent data with external data sources for example from agencies like the National Institutes of Health and Food and Drug Administration. These efforts bring connect patented inventions to “upstream funding and R&D as well as downstream commercialization efforts.” To speed COVID innovation, the agency has taken a number of other steps including deferring or waiving fees, prioritizing examination, and launching a platform to facilitate connections between patent holders and licensees. These capacities could be directed to priority equity areas, which are positioned to benefit especially when private and public funding is at stake.

Expand Equality of Opportunity by Addressing the “Patenting Grant Gap”

When startups and innovation entrants patent, good outcomes often follow: first-time patenting is associated with investment, hiring, and economic mobility. But in many cases, the applications submitted by small entity inventors don’t actually turn into patents. Using open government data helpfully made available by the USPTO Open Data Portal (beta) we find, as documented in Fig. 1 below from the paper, that small entities are less likely to succeed when they apply for patents: by our estimate, applications filed 10 years ago have turned into patents 73% of the time vs. 51% for small/micro entities, a 40%+ difference.

Others including work by former USPTO Chief Economist Alan Marco, have reached similar conclusions. Empirical studies have also found that inventors with female sounding names, or who are represented by law firms that are less familiar to patent examiners are less likely to get patents on their applications than their counterparts. (source: Colleen Chien,  Inequalities, Innovation, and Patents)

The difference in allowance rates may be due to any of a variety of factors, for example, a higher abandonment rate or differences in the types of patents sought. The possibility of implicit bias – based on inventor, or firm name – is also worth investigating further; the USPTO isn’t the only federal agency where the possibility of bias has been documented. But no matter the reason, ungranted applications to underrepresented groups present not only potential equity problems for society but also economic problems for the agency: applications that never mature into patents don’t generate issuance and maintenance fees.

One solution may be to try to improve the quality of underlying applications. As previously documented using PTO office action data, the applications of discounted entities are much more likely to have 112 rejections, and in particular 112(b) rejections. (Fig. 5A) A lack of “applicant readiness,” as described by examiners, may be one culprit. (source: Colleen Chien,  Rigorous Policy Pilots the USPTO Could Try (2019))

A promising approach as discussed previously by one of us would be to democratize access to drafting tools and aids, which are often used by sophisticated applicants to, for example, check the correspondence between claim terms and the specification. Using error correction technology to level the playing field in government filings, through public and private action, is precedented. Improved application quality advances the shared goal of compact prosecution, and to that end it is encouraging to see that the Office of Patent Quality Assurance, in their ongoing work to improve applicant readiness, is reportedly working to “identify opportunities for IT to assist with quality enhancements early in the process.” Such efforts could go a long way to address both the equity and economic challenges described above. We encourage continued investigation and prioritization of public and private efforts to address the “patent grant gap” in support of broader inventorship and participation in innovation.

Diversifying Inventorship by Diversifying the Patent Bar 

As argued in the paper, patenting is a social activity that depends on social connections -“who you know and who you can call upon.” But access to patent talent is uneven – Sara Blakely, the founder of Spanx, has reported that she could not find a single female patent attorney in the state of Georgia to file the patent upon which she built her billion-dollar undergarments empire. To sit for the patent bar generally requires a science, technology, or engineering degree. But because of their underrepresentation among STEM, engineering, and computer science graduates, women, Black and Hispanic people are disproportionately excluded from participation.  The technical degree requirement particularly disadvantages those with design experience but not engineering degrees, who are often women, and who might otherwise want to prosecute design patents over fashion or industrial design, Christopher Buccafusco and Jeanne Curtis have noted. Relaxing the technical degree requirement would enable diversification of the patent bar, in support of diversifying inventorship and entrepreneurship.

Develop and Prioritizing Innovation Equity Metrics and What Works

While each year the number of new patent grants is announced, perhaps the patent statistic that has catalyzed the most action recently is the USPTO’s groundbreaking Progress and Potential series of reports which, for the first time, officially documented that only 12-13% of American inventors are women, and Director Iancu’s leadership and his staff on the issue. This report has prompted conferences and toolkits, and spurred companies to revisit their patent programs and pipelines. As additional resources are invested into making innovation more inclusive, “innovation equity metrics” that take advantage of the granularity, quality, and regularity of patent data, and that track, for example “inventor entry” and “concentration” and the geographic distribution of patents, as demonstrated in the paper, are worth investing in. Improved data collection, for example, of race and veteran status data, and federation and coordination with other datasets, for example held by the Small Business Administration, or in connection with the Small Business Innovation Research program, and Census could go a long way. Doing so would allow for more regular reporting and analysis of the overall health of the innovation ecosystem, which, by a few measures appears to be waning: as described in the paper, patenting by new entrants is down while the concentration of patent holdings is up. Surveys of underrepresented inventors, and what have been enablers and blockers, can also lend inform the development of policies of inclusion.

Conclusion

Though only one part of the larger innovation ecosystem, the patent system’s long-standing commitment to a diversity of inventors and equal opportunity position it well to answer the call of the current moment, for greater inclusion in innovation. We encourage readers with concrete ideas about how to advance inclusion in innovation, through the patent or other governmental levers, to submit them to the DayOneProject, which is collecting ideas for action for the next administration. For more, also check out the recent Brookings Report on Broadening Innovation by Michigan State Prof. Lisa Cook, a leading economist (see, e.g. the NPR Planet Money podcast, Patent Racism, about her work).

The authors represent that they are not being paid to take a position in this post nor do they have any conflicts of interest in the subject matter discussed in this post.  Comments have been disabled at the authors’ request. 

Guest Post: Patent Prosecution Trends Following the Patent Eligibility (101) and 112 Guidelines

By: Colleen V. Chien, Professor of Law; Nicholas Halkowski, first-year associate at Wilson Sonsini and 2020 JD grad; Maria He, Masters Graduate of the Masters in Business Analytics Program at Leavey Business School, and Rodney Swartz, PhD, patent agent, Intellectual Property Associate at SRI International, and third-year JD student; all at Santa Clara University and writing in their personal capacity. This post is the third in a series about insights developed based on data released by the USPTO.

Almost two years have passed since the USPTO issued its January 2019 Patent Eligibility Guidance (PEG). As the prospect of near-term Supreme Court or Congressional action on Section 101 remains murky, it is worth taking stock of patent prosecution and application trends following the PEG, and also, the Office’s accompanying Guidance on Section 112. In this post, we report on quarterly trends in office actions and filings before and after the PEG. We build on earlier analyses reported in PatentlyO and the USPTO Office of Chief Economist’s own report from earlier this year, Adjusting to Alice, which found that the PEG was followed by decreases in both the likelihood of receiving a rejection and the uncertainty in patent examination.

It is thanks to the exciting continued releases of patent data from the Patent Office, collectively as part of the Open Data Portal (in beta), that we can follow these trends in an attempt to understand the impact of policy. We encourage the USPTO to continue providing data and improving its coverage and quality, providing the only source of data that the courts and policymakers can turn to on the prosecution impacts of their work, as well as research and patent data startups. As to the office action and appeals data, discontinuities and quality issues in currently available datasets presented challenges to our analysis, which we overcame by developing a number of computational approaches. The accompanying PatentlyO Bar Journal Article, Parsing the Impact of Alice and the PEG, (hereinafter referred to as “Article”), has the details and code we used, as well as a summary of the supporting analyses described below.

We find, following the PEG:

1. Decline in 101 Subject Matter Rejections and Stabilization of Appeals: The prevalence of 101 subject matter rejections declined by 37% after the PEG with absolute declines most dramatic among “software” applications as previously defined. (Fig. 1) Ex parte appeal decisions addressing 101 subject matter appeared to stem their rise. (Article 1A)

2. No Discernable Increase in 112 Rejections: The 112 Guidance issued by the Patent Office in January 2019 described the use of 112(a), (b), and (f) to address functional claims in computer-implemented inventions. Following the 112 Guidance, we did not discern an increase in the examiner’s application of 112 rejections, in general (Fig. 2) or at the subsection level, except in the case of 112(f) rejections as applied to “software” applications which have increased steadily since the USPTO’s February 2014 Executive Action on Claim Clarity and Federal Circuit’s June 2015 Williamson decision, both directed to functional claiming, from 2.7% in 1Q14 to 7.6% in 4Q19. (See Article 2A)

3. Leaving Small Entities Behind Through Forum Shopping?: Some applicants have responded to elevated 101 rejection rates by using analytic tools to draft their claims in order to “forum shop” out of Alice-impacted art units. Though the use of these tools is not observable, it is plausible that their cost puts them out of reach of small and micro entities, and might, as a result, lead to a greater concentration of discounted applications in these art units. However, when we looked at the data, we found that the share of applications by discounted entities over time had not increased but rather, has stayed relatively steady among applications filed from 2010 to 2018. (See Article Fig. 3)

4. No Noticeable Decline in “Medical Diagnostic” or “Software” Applications following Alice or Mayo: One limitation of focusing solely on rejection rates is that they do not capture applications “never filed” due to the changes in law or policy. To gauge whether or not there was an “Alice” or “Mayo” “effect” on the number of applications, we looked for declines, in absolute and relative terms, among medical diagnostic and software technology applications, as previously defined, but found no such declines. (See Article Fig.4) Although the PEG came out more than 18 months ago, we do not yet have a complete picture of application trends following the PEG, so cannot rule out that it was followed by increases in filings.

5. More Unique Words in Issued Patent Claims post Alice: Another limitation of focusing on examiner behavior is that it does not take into account changes in applicant behavior and the dynamic there between. With the help of Rocky Berndsen, Peter Glaser, and William Gvoth of Harrity and Harrity, we looked at the number of words included in patents filed after Alice. Applying a “differences in differences” approach, we found that the number of unique words in “software” patents relative to a baseline doubled from 10 additional to 20 additional words, consistent with the hypothesis that the Alice decision led to the addition of claim details. (See Article Fig. 5) As patents filed after the PEG are granted, it will be worth seeing whether or not outcomes along this metric have changed.

Conclusion

The data indicate that, following the PEG, the prevalence of 101 subject matter rejections, and likely frustration associated with same, declined. At the same time, we did not find that 112 rejections increased noticeably to take their place, or that caselaw or the PEG resulted in sustained diminished filings. While we are not able to report on the impact of the PEG on filings and application “quality” (words and details), due to time effects, fortunately, the USPTO’s data releases should seed continued study and analysis of the impact of it and future guidance and court decisions.

The authors represent that they are not being paid to take a position in this post nor do they have any conflicts of interest in the subject matter discussed in this post.