Remarks by Director Iancu at the AIPLA Annual Meeting

Patent

In remarks today, USPTO Director Iancu has proposed the PTAB’s next step in reforming AIA Trials — giving the patent owner a six-week window following an institution decision to file a motion to amend. See below. 

October 25, 2018

As prepared for delivery

This is a new day for the USPTO and our Patent Trial and Appeals Board (PTAB). For we are now increasing balance, consistency and transparency, especially in post grant proceedings. And in doing so, we are increasing confidence in these important proceedings.

Since Congress passed the America Invents Act (AIA) in 2011, we have received more than 9,000 petitions and issued over 2,000 final written decisions. So, we now have broad experience in understanding the true benefits and true challenges of these proceedings.

Opinions on how post-grant proceedings have been conducted to date diverge widely. Some vigorously dislike them, arguing that they are unfair and tilt too much in favor of the petitioner. Indeed, some would like to see the system abolished entirely. Others love the system, believing it’s the best tool we have to correct errors, eliminate “bad patents,” and improve patent quality. In fact, some would like to see IPRs expanded to consider even more issues.

As the agency in charge of administering these proceedings, it is our duty to carefully weigh all these points of view, and everything in-between, and to bring balance to the current process. It is our duty to look at validity challenges holistically, and determine the overall best approach for the patent system as a whole.

The USPTO has carefully studied the past 6 years of these proceedings; we have discussed the issues with our stakeholders, including many of you in this room today; and we have listened to all who spoke up. And so now, in order to ensure balance, consistency and transparency, in order to increase confidence in the proceedings, and in order to make the patent system as a whole more effective, more efficient and more reliable, we took action.

To that end, we updated the Trial Practice Guide this past August, published two new Standard Operating Procedures for PTAB in September, and published a final rule on the claim construction standard in October. And in just a few days, we will formally publish a proposal for an updated claim amendment procedure in AIA trials.

All of which is what I mean when I say: It is a new day at the PTAB!

To start, our recent update to the Trial Practice Guide was the first since it was published in 2012. In the update, we outlined some non-exclusive factors regarding the institution decision, including considerations regarding follow-on petitions, the overall effect on the economy, the integrity of the patent system, and the like; added sur-replies for the patent owner; provided new guidance on the proper use of expert testimony, and procedures for oral hearings before the Board; and established a pre-hearing conference, which could help focus disputes and expedite resolution of issues.

Second, in an effort to further improve Board practices and transparency, we issued two revised Standard Operating Procedures, or SOPs.

The first SOP outlines the procedures the Board uses for assigning (or re-assigning) judges to cases. This SOP also clarifies that the PTAB will expand panels only in very limited circumstances, generally where consistency among multiple related cases is needed. And even then, the expansion must be done with the approval of the Director and advance notice to the parties.

The second SOP creates a Precedential Opinion Panel and governs precedential and informative decisions of the Board. This panel will mostly be convened to decide issues of exceptional importance that will set forth binding agency policy. Members of this panel are by default the USPTO Director, the Commissioner for Patents, and the Chief Judge, although in some circumstances this authority can be delegated to a pre-defined list of individuals for a particular case.

This panel will enable top agency management to address some of the thorniest issues that come to us, and to instill consistency throughout the agency. This will help ensure that the different groups within the agency speak, where appropriate, with one voice. We are, after all, one agency.

This SOP also outlines the requirements for designating, or de-designating, a decision as precedential or informative – to address concerns about consistent guidance for practice before the PTAB. This new designation procedure should help increase the number of precedential opinions issued by the PTAB.

To date, we have averaged only a handful of precedential opinions every year, an amount that seems far too low for the volume and importance of the cases we see. By comparison, the TTAB, on the trademarks side, designates significantly more precedential opinions, despite a much smaller docket. I am not suggesting that the PTAB should necessarily designate as many precedential decisions as the TTAB, but, to increase consistency at the PTAB, something more than the current mere handful seems in order. The designation process outlined in the new SOP should help in that regard.

Combined, these two SOPs increase transparency, promote consistency, and—I believe—will increase confidence in the process.

Third, on October 11, we published the final rule for claim construction in AIA proceedings before the PTAB. The same standard will now be applied in AIA Trials before the Board as in civil actions in district courts, and in proceedings at the International Trade Commission (ITC). Furthermore, any prior claim construction decision in a civil action or before the ITC will be considered by the Board, as long as it is introduced into the record on a timely basis. The new claim construction standard will apply to all petitions filed on or after November 13, 2018.

Looking at the patent system holistically, this is a critically important rule change.

For the sake of predictability and reliability, the boundaries of a patent should not depend on which forum happens to analyze it. People who want to invest in a patented technology, or who want to invent or design around one, should be able to determine, within reason, what that patent means. Objectively speaking, that meaning cannot, and should not, depend on the happenstance on which forum might review the patent, years after issuance. The rule change, therefore, increases the predictability of our patent system.

Likewise, using the same claim construction standard should improve efficiencies for everyone involved. Parties can develop a single set of claim construction arguments and can leverage the work already done in district court proceedings, or vice versa. Plus, one forum can consider the work previously done by another forum. The rule will therefore also improve consistency between proceedings.

After all, some 85 percent of patents contested at the PTAB are involved in parallel litigation. It seems self-evident that the same patent contested in different tribunals should have its meaning – its boundaries – determined using the same standard.

Now, as it turns out, the change from the Broadest Reasonable Interpretation to the Phillips construction has generated significant interest among our stakeholders. We have received about 375 public comments, and the rule change has been met with widespread support from industry, academics, individuals, and trade organizations, including the AIPLA.

A few, however, are not pleased with the change. Some of these groups have suggested that this change makes it easier to preserve what they call “low-quality patents.”

That’s curious, because all we did was to say that we will use the same standard currently used by district courts and the ITC, and that has been used in countless court proceedings for many years to date. Arguments that using the very same standard already used in federal courts preserves “low-quality patents” are, therefore, unconvincing. In other words, whatever a “low-quality” patent means, it cannot be that it is a patent that survives challenge based on a claim construction standard used in district court.

Put another way still: There is no reason for the USPTO to be using a claim construction standard in IPR that eliminates patents that would otherwise survive challenge in District Courts. Doing so is an example of what I have referred to as an over-correction that risks throwing out the baby with the bathwater.

Our filters need to be appropriately set. Aligning AIA proceedings at the PTAB with the district courts and the ITC brings balance, predictability and consistency to the patent system as a whole.

Finally, in the next few days, we will formally publish a notice seeking comments on a new claim amendment process for post grant proceedings.

I believe that the current amendment process in AIA proceedings is not working as intended. As noted just last year by the Federal Circuit in its lead Aqua Products decision: “Despite repeated recognition of the importance of the patent owner’s right to amend during IPR proceedings—by Congress, courts, and the PTO alike—patent owners largely have been prevented from amending claims in the context of IPRs.”

Indeed, claim amendments have been relatively rare – filed in less than 10 percent of AIA trials – and infrequently granted. Of the already small number of cases where the Board decided a motion to amend, the Board granted or granted in part only 10 percent of such motions. Some have suggested that parties have simply stopped even trying to amend the claims because they see the effort as largely futile.

But the AIA statute specifically provides for claim amendments in IPRs, so in order to fully implement the intent of the AIA, we must find a way to make this amendment process feasible and meaningful. In other words, it is important to ensure that post grant proceedings are not all-or-nothing. It is not in the interest of the patent system as a whole to invalidate a patent entirely if it actually describes patentable subject matter, and appropriately-scoped claims can be drafted.

Therefore, the amendment process should allow the patent owner a meaningful opportunity to draft narrower claims. And in order for the opportunity to amend to be truly meaningful, the patent owner needs input from the petitioner and the Board, so that appropriately-scoped claims can be drafted in light of the prior art and arguments presented.

The AIA statute itself requires a number of things with respect to claim amendments. For example: First, 35 U.S.C 316(d) requires that patent owners must have an opportunity to amend their claims during the proceeding itself. In fact, 35 U.S.C 318(a) requires the final written decision to address both the original and the amended claims. Thus, amendments must be available within the AIA trial itself.

Second, 35 U.S.C. 316(a)(11) states that AIA trials generally should conclude within 12 months from institution. Therefore, the amendment procedures should generally fit within the allotted 12 month window. Third, these are inter partes proceedings. Thus, the Petitioner must have a meaningful opportunity to participate.

And so, based on extensive analysis and consultation with a wide variety of stakeholders, we have developed a detailed solution that meets all of these requirements.

To achieve these goals, we propose a new amendment process that would involve a motion filed by the patent owner soon after institution, an opposition by the petitioner, a preliminary non-binding decision by the Board, and the opportunity for the patent owner to revise the amended claims in light of this preliminary decision.

Specifically: the patent owner will have a window of six weeks following an institution decision to file a motion to amend, if they so desire. The petitioner will then have six weeks to oppose.

After receiving both parties’ papers, one month after the opposition is due the Board will provide a preliminary non-binding decision on the proposed amended claims, similar in concept to the institution decision for the original claims. This preliminary decision would provide valuable insight to both parties regarding the merits of the motion to amend.

Then, the patent owner will have one further opportunity to revise the amended claims, and the petitioner will have a corresponding opportunity to oppose the revision. In the end, the Board will consider both the original claims and any amended claims at the hearing and in the final written decision.

Having the Board provide this extra feedback to the parties earlier in the case should lead to more narrowly-tailored and focused claim amendments, and potential earlier resolution of the issues. As I said, we will seek public comments before finalizing the new procedure. We want to ensure that the final amendment procedure takes into account all of your views.

And so, with the newly updated trial practice guide, the new standard operating procedures, the claim construction standard newly aligned with federal courts, and a robust new amendment process, it is indeed a new day at the PTAB!

I firmly believe that this combination brings more balance to the proceedings, and better aligns them with the original intent of the AIA legislation. . . .

 

Indian Tribes, States, and Sovereign Immunity before the PTAB

Patent

by Dennis Crouch

Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc., App. No. 18-1638 (Fed. Cir. 2018)

The Federal Circuit has denied the Mohawk Tribe’s petition for en banc rehearing on the issue of whether sovereign immunity may be asserted in inter partes review (IPR) proceedings.  Although the case focused on immunity of federally recognized Indian tribes, the Federal Circuit decision is broadly written to also include patents owned by individual states.  [Fed.Cir.St.Regis.Decision] A parallel case involving Minnesota is pending before the Federal Circuit. Regents of the Univ. of Minn. v. LSI Corp. Appeal No. 18-1559.  Of course, the states and tribes do not receive a lot of sympathy from private patent holders whose patents are subject to IPRs.

The St. Regis petition focused particularly on Federal Maritime Comm’n v. S.C. State Ports Auth., 535 U.S. 743 (2002) (“FMC”).  In FMC, the Supreme Court held that sovereign immunity applies to protect a state sovereign from having to defend itself in an administrative adjudicatory system involving adversarial private parties.  As the Supreme Court explained in SAS, IPR is a “procedure allow[ing] private parties to challenge previously issued patent claims in an adversarial process before the Patent Office that mimics civil litigation.” SAS Inst. Inc. v. Iancu, 138 S.Ct. 1348 (2018).

The closest prior Federal Circuit case on-point may well be VasCath, Inc. v. Curators of University of Missouri, 473 F.3d 1376 (Fed. Cir. 2007).  In that case, the court focused on whether interference proceedings trigger sovereign immunity.  In its Saint Regis decision, however, the court did not discuss or even cite to that prior determination.

The case is now set-up for a petition for writ of certiori from the St. Regis tribe.

The Scheme: Any post about this case is not complete without a discussion of how the tribe came to own these Allergan patents at issue here.  Basically, Allergan is paying the tribe to own these Restasis patents for the sole purpose of taking advantage of the Sovereign Immunity benefits.  This involved a reverse-payment: Allergan paid St. Regis to take ownership of patents and is paying an annual royalty for their continued participation in the scheme.

What next for RPX: Protecting its Members as a Real Party in Interest

Patent

by Dennis Crouch

In Applications in Internet Time v. RPX Corporation, the Federal Circuit send a PTAB decision of invalidity back down for reconsideration on the issue of whether the RPX IPR petition was time-barred under 35 U.S.C. § 315(b).  Section 315(b) sets up a one-year deadline for filing an IPR petition against a patent following an infringement complaint for the patent at issue served on either the “the petitioner, real party in interest, or privy of the petitioner.”

315(b) Patent Owner’s Action.— An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.

The particular factual problem for the patent challenger (RPX) stems from its setup as a member-driven patent-protection company.  Salesforce.com was previously charged with infringement of the patent at issue; since Salesforce.com is a member of RPX — then it seems likely that Salesforce.com is a “real party in interest” under the statute. For the Federal Circuit, the real-party-in-interest inquiry should be conducted “with an eye toward determining whether the nonparty is a clear beneficiary [of the IPR] that has a pre-existing, established relationship with the petitioner.”  Note here that the lawsuit against Salesforce.com is still pending — the Nevada district court has stayed the case pending outcome of the RPX IPR proceedings.

Rehearing en banc: Following the Federal Circuit’s decision, RPX requested en banc rehearing — that request has now been denied.

The court’s ruling creates real challenges to the business model of defensive patent groups such as RPX.  I expect that RPX will now petition for Supreme Court review and could become a companion case of the company’s already pending petition on the issue of when such a group has standing to appeal an adverse PTAB decision. RPX Corporation v. ChanBond LLC.

In its unsuccessful rehearing petition, RPX argued that the panel improperly expanded the meaning of real-party-in-interest because of its desire to protect patent holders against defensive patent groups.

En Banc Petition: What Evidence and Facts are Useful to the Eligibility Analysis

Patent

In their petition for en banc review, Nader and Kamran Asghari-Kamrani ask the Federal Circuit to come together to explain the facts (and the law) of patent eligibility under 35 U.S.C. § 101.  In particular, the new petition filed by Antigone Peyton raises two questions:

1. Is the threshold inquiry for patent eligibility under 35 U.S.C. § 101 a pure question of law without underlying factual issues relating to the question of whether the claims transform an abstract idea into a patent eligible application, including whether they are directed to improvements in computer technology or merely describe well-understood, routine, and conventional activities known in the industry (the Alice Step Two inquiry)?

2. Can a district court conclude, when considering a Rule 12(b)(6) motion, that a computer-based invention’s claims directed towards authenticating a user during an electronic transaction with an external entity by way of a central entity—using a digital identity and dynamic code—fail to recite an improvement in authentication technologies implemented on a computer network and merely recite well-understood, routine, and conventional activities without construing the claims or applying the patentee’s proposed construction, considering the patent’s teachings, or considering relevant fact evidence such as expert testimony on the nature of the invention and state of the art, prior art teachings, or industry practices?

[Read the petition: 2018-10-11 0069 Petition for en banc rehearing filed by Appellants Kamran Asghari-Kamrani and Nader Asghari-Kamrani]

The case at issue here stems from the CAFC’s affirmance of the lower court’s Rule 12(b)(6) dismissal — finding that the claims of U.S. Patent No. 8,266,432 are invalid as directed an abstract ideas.  The claims here are directed to a user authentication system that uses using a central computer to send a temporary dynamic code to a user and then validate the code when submitted by a third party (who is conducting a transaction with the user).

The patentee argues that the facts would show that its approach is an innovative implementation — but the district court dismissed the case without considering any submitted evidence. The district court issued its decision prior to Berkheimer and Aatrix.  However, on appeal, the Federal Circuit affirmed the dismissal without considering the impact of those decisions (R. 36 Judgment without Opinion).

Although the claims expressly and repeatedly require computer intervention, the district court noted that invention would still work for its purpose even without the computer technology.  That setup led the court to find the claims directed toward an abstract idea:

The claims are directed to the abstract idea of using a third party and a random, time-sensitive code to confirm the identity of a participant to a transaction. This formulation is admittedly verbose. It is verbose because the patent claims combine two abstract ideas: the use of a third party intermediary to confirm the identity of a participant to a transaction and the use of a temporary code to confirm the identity of a participant to a transaction. It is an obvious combination, and nothing about the combination removes the patent claims from the realm of the abstract.

Intra-Circuit Split: In its brief, the patentee highlights the current intra-circuit split among the Federal Circuit judges on the issue of when facts are relevant and important to the eligibility inquiry.

[The Berkheimer analysis] has been alternatively characterized by some members of the Court as an “unremarkable proposition” that
is consistent with the Court’s precedent, Aatrix, 890 F.3d at 1355 (Moore, J., concurring), and by others as “contrary to that well-established precedent” with “staggering” consequences, id. at 1362, 1365 (Reyna, J., dissenting). Other members of this Court have explicitly suggested that it should wait for help or guidance from Congress or the Supreme Court. Berkheimer (Lourie, J., concurring).

. . . This Court should join the USPTO’s current effort to roll up its sleeves and bring more certainty, predictability, and clarity to the Section 101 analysis.

It is unlikely that the court will take the bait with this case, but we shall see.

 

Claim 1 below:

1. A method for authenticating a user during an electronic transaction between the user and an external-entity, the method comprising:

receiving electronically a request for a dynamic code for the user by a computer associated with a central-entity during the transaction between the user and the external-entity;

generating by the central-entity during the transaction a dynamic code for the user in response to the request, wherein the dynamic code is valid for a predefined time and becomes invalid after being used;

providing by the computer associated with the central-entity said generated dynamic code to the user during the transaction;

receiving electronically by the central-entity a request for authenticating the user from a computer associated with the external-entity based on a user-specific information and the dynamic code as a digital identity included in the request which said dynamic code was received by the user during the transaction and was provided to the external-entity by the user during the transaction; and

authenticating by the central-entity the user and providing a result of the authenticating to the external-entity during the transaction if the digital identity is valid.

 

 

Patently-O Bits and Bytes by Juvan Bonni

Bits and Bytes, Patent

Recent Headlines in the IP World:

Commentary and Journal Articles:

New Job Postings on Patently-O:

The Impact of 101 on Patent Prosecution

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Guest Post By: Colleen Chien, Professor, Santa Clara University Law School

Over the last several years, the USPTO has continued to release high-quality data about the patent system. This is the first of a series of posts by Professor Chien based on insights developed from that data. (The accompanying Patently-O Law Journal Paper includes additional views and methodological notes, and links to queries for replication of the analysis by Chien and Jiun-Ying Wu, a 3L at Santa Clara Law. )

“Everything should be made as simple as possible,
but not simpler” — Albert Einstein

A few weeks ago, the USPTO Director Andrei Iancu announced progress on new guidance to clarify 101 subject matter eligibility by categorizing exceptions to the law. The new guidance will likely be welcomed by prominent groups in the IP community,[1] academia,[2] and the majority of commentators to the 2017 USPTO Patentable Subject Matter report[3] that have called for a overhaul of the Supreme Court’s “two-step test.” Behind these calls are at least two concerns, that the two-step test (1) has stripped protection from meritorious inventions, particularly in medical diagnostics, and (2) is too indeterminate to be implemented predictably. To Director Iancu’s laudable mission, to produce reliable, clear, and certain property rights through the patent system, 101 appears to pose a threat.

Last November, the USPTO released the Office Action Dataset, a treasure trove of data about 4.4 million office actions from 2008 through July 2017 related to 2.2 million unique patent applications. This release was made possible by the USPTO Digital Services & Big Data (DSBD) team in collaboration with the USPTO Office of the Chief Economist (OCE) and is one of a series of open patent data and tool releases since 2012 that have seeded well over a hundred of companies and laid the foundation for an in-depth, comprehensive understanding of the US patent system. The data on 101 is particularly rich in detail, breaking out 101 subject matter from other types of 101 rejections and coding references to Alice, Bilski, Mayo and Myriad.

With the help of Google’s BigQuery tool and public patents ecosystem[4] which made it possible to implement queries with ease, research assistant Jiun-Ying Wu and I looked over several months for evidence that the two-step test had transformed patent prosecution. We did not find it, because, as the PTO report notes, a relatively small share of office actions – 11% – actually contain 101 rejections.[5] However once we disaggregated the data into classes and subclasses[6] and created a grouping of the TC3600 art units responsible for examining software and business methods (art units 362X, 3661, 3664, 368X, 369X),[7] which we dub “36BM,”[8] borrowed a CPC-based identification strategy for Medical Diagnostic (“MedDx”) technologies,[9] and developed new metrics to track the footprint of 101 subject matter rejections, we could better see the overall impact of the two-step test on patent prosecution. (As a robustness check against the phenomenon of “TC3600 avoidance,” as described and explored in the accompanying Patenty-O Law Journal article, we regenerate this graph by CPC-delineated technology sector, which is harder to game than art unit, finding the decline in 101 more evenly spread).

Mayo v. Prometheus, decided in March 2012, and Alice v. CLS Bank, decided in June 2014, elicited the strongest reactions. The data suggest that an uptick in 101 subject matter rejections following these cases was acute and discernible among impacted art units as measured by two metrics: overall rejection rate and “the pre-abandonment rate” rate – among abandoned applications, the prevalence of 101 subject matter rejections within the last office action prior to abandonment.

Within impacted classes of TC3600 (“36BM”), represented by the top blue line, the 101 rejection rate grew from 25% to 81% in the month after the Alice decision, and has remained above 75% almost every month since then. (Fig 1) In the month of the last available data, among abandoned applications, the prevalence of 101 rejection subject matter rejections in the last office action was around 85%. (Fig 2)

Among medical diagnostic (“MedDx”) applications, represented by the top red line, the 101 rejection rate grew from 7% to 32% in the month after the Mayo decision and continued to climb to a high of 64% (Fig 1) and to 78% among final office actions just prior to abandonment (Figure 2). In the month of the last available data (from early 2017), the prevalence of subject matter 101 rejections among all office actions in applications in this field was 52% and among office actions before abandonment, was 62%. (Fig 2)

However, outside of these groupings and other impacted art units (see paper for longer list) the impact of 101 caselaw has been more muted. 101 rejections overall (depicted by the thick black line) have grown – rising from 8% in Feb 2012 to 15% in early 2017 (Fig.1) – but remain exceptional.

On balance, the data confirm that 101 is playing an increasingly important role in the examination of software and medical diagnostics patents. More than four years after the Alice decision, the role of subject matter does not appear to be receding, remaining an issue in a large share of cases not only at their outset but among applications that go abandoned through the last office action. That patentees cannot tell before they file whether or not their invention will be considered patent-eligible, and perceive that much depends not on the merits of the case but in what art unit the application is placed also presents a challenge to the goal of predictability in the patent system.

It is also the case that the vast majority of inventions examined by the office are not significantly impacted by 101. Even when an office action does address subject matter, rejections and amendments on 101 subject matter on the record are often cursory, in contrast with, for example, novelty and nonobviousness discussions.

What does the data teach us and what directions for policy might it suggest? I save this topic, as well as the impact of USPTO guidance on prosecution and some data issues left unexplored here, for the next post, as data gathering continues.

In the meantime the USPTO continues to move forward on revised examiner guidance. As it does, it may want to decide which metrics most matter – overall prevalence of 101, 101 in pre-abandonment phases, or others – and how it hopes the metrics might change as a result of its revised guidance. The USPTO should also consider keeping the office action data up-to-date — right now, high quality data stops around February 2017[10] without any plans to update it of which I’m aware (my subsequent FOIA request for updates was denied). That leaves a gap in our ability to monitor and understand the impact of various interventions as they change over time – certainly not a unique phenomena in the policy world – but one that is fixable by the USPTO with adequate resources. In the meantime, it is thanks to the USPTO’s data release that this and other analyses of the impact of the two-step test is even possible.

Thanks to Jonah Probell and Jennifer Johnson for comments on an earlier draft and Ian Wetherbee for checking the SQL queries used to generate the graphs. Comments welcome at cchien@scu.edu.

= = = = =

[1] The AIPLA has proposed a “clean break from the existing judicial exceptions to eligibility by creating a new framework with clearly defined statutory exceptions.”; the IPO has suggested replacing the Supreme Court’s prohibition on the patenting of abstract ideas, physical phenomena, and laws of nature with a new statutory clause, 101(b), to be entitled “Sole Exception to Subject Matter Patentability.”

[2] https://patentlyo.com/patent/2017/10/legislative-berkeley-workshop.html.

[3]  Patent Eligible Subject Matter: Report on Views and Recommendations From the Public, USPTO (Jul. 2017).

[4] Google Public Patents is a worldwide patent bibliographic database linked with other datasets described more fully in the accompanying Patently-O Law Journal article.

[5] Office Action Dataset at 2 (also mentioning that “101 rejections” include subject matter eligibility, statutory double patenting, utility, and inventorship rejections).

[6] Using Google Patents Public Data by IFI CLAIMS Patent Services and Google, used under CC BY 4.0, Patent Examination Data System by the USPTO, for public use, Patent Examination Research Dataset by the USPTO (Graham, S. Marco, A., and Miller, A. (2015) described in “The USPTO Patent Examination Research Dataset: A Window on the Process of Patent Examination”), for public use.

[7] As detailed in the accompanying PatentlyO Bar Journal paper, available at http://ssrn.com/abstract=3267742.

[8] We put the remainder of TC 3600 art units into the category “TC36 Other” however because many months contained insufficient data (of less than 50 office actions), we did not include it in the Figures.

[9] Coded using a patent classification code (CPC)-based methodology developed from Colleen Chien and Arti Rai, An Empirical Analysis of Diagnostic Patenting Post-Mayo, forthcoming (defining medical diagnostic inventions by use of any of the following CPC codes: C12Q1/6883; C12Q1/6886; G01N33/569; G01N33/571; G01N33/574; C12Q2600/106).

[10] The later months of 2017 have insufficient counts for research purposes.

Chien and Wu: Decoding Patentable Subject Matter

Journal, Patent

Professor Colleen Chien and Jiun Ying Wu are working their way through an analysis of millions of USPTO office actions.  In this Patently-O L.J. essay, the pair reports on how the PTO is examining applications for patentable subject matter.  The article documents “a spike in 101 rejections among select medical diagnostics and software/business method applications following the Alice and Mayo decisions.”  Although rejections rose within certain art units, the pair found little impact elsewhere.

Colleen Chien and Jiun-Ying Wu, Decoding Patentable Subject Matter, 2018 PatentlyO Patent Law Journal 1.

Prior Patently-O Patent L.J. Articles: (more…)

Modernizing Copyright Registration

Patent,

The US Copyright Office (a branch of the Library of Congress) has published a Federal Register notice seeking comments on ways to improve (“modernize”) its copyright registration system:

The U.S. Copyright Office is building a new registration system to meet the demands of the digital age. As the Office develops a new technological infrastructure for this system, it is considering several legal and policy changes to improve user experience, increase Office efficiency, and decrease processing times. The Office is seeking public comment to inform its decisions on how to improve the regulations and practices related to the registration of copyright claims.

Some of the intended improvements include: better application tracking; improved user interface for electronic deposits; improved messaging system; and allowing users to view a draft registration certificate before final submission. Public comments due by January 15, 2019.

View the notice: NOTICE AND REQUEST FOR COMMENTS

Upcoming Patent Law Practice Events with Profs. Crouch and Hricik

Patent

By Dennis Crouch

I’m looking forward to a few of upcoming IP Law events.  Next week, I’ll be joining several hundred IP attorneys at the AIPLA annual meeting in Washington DC.  I am the final speaker of the event — you guessed it Professional Responsibility & Ethics.  The talk will take a comparative-law approach — looking at how duties and responsibilities shift according to the forum (litigation, prosecution, AIA Trials).  My ethics talk follows a year-in-review panel with four all-star speakers:

  • Trademarks – Prof. Christine Haight Farley (American)
  • Patents – Prof. Mark Lemley (Stanford)
  • Trade Secrets – Prof. Elizabeth Rowe (Florida)
  • Copyrights – Meaghan Kent (Venable)
  • Ethics Prof. Dennis Crouch (Missouri)

Because I already follow patent issues so closely, I typically learn the most from non-patent panels.  I am particularly looking forward to hearing from Daniel Lee who is a deputy U.S. Trade Representative in charge of Innovation and Intellectual Property.

After that, I’ll be headed back to Chicago for the JMLS Annual IP Conference on Nov 2 where Judge Newman will give a keynote on how “The Future Is in Our Hands.”  Thanks to Prof. Daryl Lim for organizing this event.

Meanwhile, my co-blogger Prof. David Hricik (Patent Law Ethics) has several interesting upcoming events:

Jumping ahead to January — I’m headed to the final Colorado Bar Ass’n SkiCLE (it will likely continue in future years in some other form) January 2-6 2019 in Aspen/Snowmass.  Use code “FACULTYINSIDER” for $100 off.  See you on the slopes.

ABA Issues Opinion on Lawyers’ Obligations after Electronic Data Breach

Ethics, Patent

by David Hricik

ABA Formal Ethics Opinion 483 (Oct. 17, 2018) is here.  Like many ABA opinions, it provides a useful roadmap to the issues and how to respond to them (and, in this opinion, some good proactive advice).  The opinion addressed the narrow issue of a data breach which results in disclosure of, or destruction of, client confidences as opposed to “ransomware” attacks and the like, where access is denied but the data is not compromised, or access to data is otherwise inhibited or delayed.

The first take away is an obligation to “employ reasonable efforts to monitor” for unauthorized access to client confidences, whether at the office, through vendors, or otherwise.

The second is that the lawyer must act reasonably promptly to stop any breach and mitigate, or rectify, the consequences.  In this regard, the opinion suggests creating an “incident response plan with specific plans and procedures” to do so.

Third, the opinion states that the lawyer must determine what, with reasonable care, was compromised, deleted, or misappropriated.  And, again, it suggested these be part of the “incident response plan.”

Fourth, it stated that the lawyer who knows, or reasonably should know, a data breach has occurred “must evaluate the notice obligations.”  The contours of this turn on whether the data belonged to a current, or former, client.   With current clients, the ABA stated that there was an obligation to inform the current client if its data was breached. With former clients, the opinion stated it was “unwilling to require notice to a former client as a matter of legal ethics in the absence of a black letter provision requiring such notice.”  Then, however, it suggested that lawyers in their engagement letters reach agreement on how to deal with electronic files on termination of a representation, and to recognize that laws — not legal ethics — might require notification.

Finally, if notification is required, the ABA stated the client must be given sufficient information “to make an informed decision as to what to do next, if anything,” including the lawyer’s response to the breach.  And, again, the opinion reminds lawyers that a number of laws may require additional disclosure.

Although it does not address it, of course patent lawyers need to be aware of where — in the US or not — data is maintained for export restriction issues and to take reasonable care to protect confidential client information.  It’s a good opinion that provides a framework for lawyers to use.

Practice Note: Don’t Send Drugs to the Federal Circuit

Patent

In Schirripa v. US, the Federal Circuit recently issued an interesting order:

Appellant Jeffrey Nathan Schirripa submitted to the court 18 copies of his confidential petition for panel rehearing and rehearing en banc. Upon examination, Appellant affixed to each petition what appear to be samples of cannabinoids, which may be controlled substances possessed or mailed in violation of federal law.

IT IS ORDERED THAT:

The Clerk of Court is directed to transmit these 18 documents to the U.S. Marshals Service for appropriate disposition or alternate action within the purview of the U.S. Department of Justice.

[SchirripaOrder] In the underlying case, Schirripa asked the Court of Federal Claims to enjoin the US Government from enforcing the Controlled Substances Act against his actions.  The court dismissed that case and the dismissal was affirmed on appeal.  Good luck Mr. Schirripa, and don’t tip the judges.

The cannabis attachment was apparently intended to create subject matter jurisdiction in the case.  I don’t fully understand the Schirripa’s flow chart, but it appears to be a boot-strap version a catch-22 for the court — the type of argument that you might figure out while high.

Read the en banc brief. [SchirripaEnBancBrief]

Considering the Value of Patents in African Countries

Patent

The following is a guest post from South African patent attorney Ralph van Niekerk of Von Seidels

Like all IP rights, patents are territorial and if you want to stop a competitor from practicing an invention in a particular country, you need to have a patent there.

Given the global world we live in, successful inventions tend to be adopted widely and used in many countries. This is a fortunate position for patent holders, who can often protect their competitive global position by filing patents in only a few key countries in which patent rights are respected and enforceable.  If a competitor is not able to practice the invention in those markets, the feasibility of doing so in the rest of the world is limited.

For many patent holders, protecting their inventions internationally does not extend much beyond the IP5: China, the United States, Japan, South Korea and Europe. The following graph of patent applications at the top ten offices shows that patent filings drop off very quickly outside of the IP5:

Source: World Intellectual Property Indicators 2017, published by the World Intellectual Property Organization (WIPO)

Given the picture above, is there much value in having patents in other countries in the world? In particular, is there any real value in having patents in Africa, and especially in some of the smaller African countries?

As a South African patent attorney, I am frequently asked a version of this question by clients overseas. Since a patent is a right to exclude others from practicing the invention, I am quizzed as to what the patent litigation landscape is like in Africa and how easily a patent can be enforced against a competitor. Patent litigation in Africa is rare outside of South Africa, however, and objective measures of the strength of enforcement may not be available in many African countries.

But does the fact that a patent gives you the right to bring legal action against a competitor mean that the patent has no value to you unless you plan to enforce it? The answer is a resounding “no”. There are several good reasons to have a patent in African countries even if you never plan to enforce it there. I would go so far as to say that there are even good reasons to have a patent in a country in which enforcement options are limited to non-existent.

Royalty rates and exchange control

Many African countries have strict exchange control requirements that govern the flow of capital into and out of their economies. For a global company doing business in Africa, expatriating profits made from their African operations may not be a simple matter. Local officials may carefully scrutinise cross-border licence agreements and query the royalty rates charged.

Transfer pricing principles must be applied when supplies are made between related entities within a corporate group structure. In particular, when royalties are paid by a local subsidiary to a foreign parent company, the royalty charged must be aligned with what would be charged on an arms-length basis between unrelated parties.

A granted patent held by a parent company in a country of a local subsidiary can be powerful evidence that the technology being licensed is unique and justifies a higher royalty rate to be paid to the parent company. A local patent can be very useful in convincing exchange control authorities of this fact.

Tender processes

If the patented invention is one that will be used by government authorities, a local patent can help avoid what would otherwise be a competitive tender process.

I recently saw an example of this when the City of Cape Town asked my client for evidence that its water filtration system was patented. We provided details of the patent and the City issued my client with a letter confirming that they were the sole supplier of the system. The City did not go through the usual rigmarole of issuing a tender for competitive bids and this resulted in a valuable contract renewal for my client.

Local patents can therefore enable government contracts to be obtained more easily and on more favourable terms for products and services covered by the patent. To obtain single-supplier procurement and avoid an open tender, a patent may be very beneficial indeed.

Competition law liability (Antitrust)

While some countries in Africa may have weak enforcement of IP rights, the same is not true of their competition laws. African competition law regulators are effective in many countries and fines of up to 10% of a company’s turnover may be awarded. In South Africa, amendments to the Competition Act are in the pipeline that would see penalties increase to up to 25% of turnover for second offences.

A patent can justify commercial arrangements that would otherwise be anti-competitive. For example, tying arrangements are situations where a company agrees to supply a first product to another company, on condition that the other company also buy a second product from them. Such arrangements are usually seen as anti-competitive, but if both products are the subject of patent protection and are bundled as part of the same licence this will usually not be a problem. Similarly, boycotting a competitor by refusing to sell them a product may be anti-competitive unless the product is the subject of a local IP right in which case it is the supplier’s prerogative to whom to sell it. If a firm is dominant and has market power, charging an excessive price for a product or service or refusing to grant access to an “essential facility” may also be anti-competitive unless that product, service or facility is covered by an IP right.

South Africa’s Competition Act provides, in section 10(4), that, “A firm may apply to the Competition Commission to exempt from the application of this Chapter an agreement or practice, or category of agreements or practices, that relates to the exercise of intellectual property rights, including a right acquired or protected in terms of … the Patents Act”. An application for exemption under this provision is only available based on a local, South African patent. Similar considerations would apply in other African countries.

As a shield to potential competition law liability, patents in African countries can therefore be extremely valuable.

Tax benefits

Some African countries offer tax benefits to encourage local research and development. For example, section 11D of South Africa’s Income Tax Act provides an incentive for conducting R&D in South Africa. The incentive is by way of enhanced tax deductibility of up to 150% for qualifying expenditure incurred in respect of R&D. South African patents may be used to bolster an application made under section 11D, as the definition for R&D includes:

systematic investigative or experimental activities of which the result is uncertain for purpose of discovering non-obvious scientific/technical knowledge, or creating an invention, a registerable design, a computer program (as defined in the relevant IP legislation) or knowledge essential to the use of such invention, design or computer program; or developing or significantly improving any qualifying invention, design, computer program or knowledge if such development or improvement relates to any new or improved function or improvement of performance, reliability or quality. [My emphasis]

So for any patents that relate to developments that occurred at least partially in South Africa, having registered IP rights like patents helps demonstrate that the R&D activities fell within this definition. It is expected that other African countries will also adopt similar progressive measures in future to stimulate local R&D.

Conclusion

A narrow view of patents sees their function as only their ability to exclude competitors, so as to enable the patent owner to either exclusively practice the invention or license it to others.

This article has explored four other good reasons for having patents that may be even more valuable to a patent owner than the right to exclude. None of these reasons involves the quality of the local courts or available enforcement mechanisms, and should be taken into account when deciding where patent protection may be valuable.

Patently-O Bits and Bytes by Juvan Bonni

Patent

Recent Headlines in the IP World:

Source: WIPO

Commentary and Journal Articles:

New Job Postings on Patently-O:

USPTO to get Back its Fee Setting Authority

Patent

by Dennis Crouch

The SUCCESS Act (HR 6758) has now passed through both the House and Senate and will very likely be signed into law by President Donald Trump within the next couple of weeks.

The key aspect of the bill is extension of USPTO fee setting authority that ended in September 2018 (7 years after AIA enactment).  Under the new law, USPTO will retain authority to set its own fee structure until September 2026 (15 years from AIA enactment).

Section 10(i)(2) of the Leahy-Smith America Invents Act (Public Law 112–29; 125 Stat. 319; 35 U.S.C. 41 note) is amended by striking “7-year” and inserting “15-year”.

Under the law, the USPTO Director has authority to “set or adjust by rule any fee established, authorized, or charged under [either the Patent Act or the Trade Mark Act] for any services performed by or materials furnished by the Office.”  The one caveat is that the fee structure must be designed “only to recover the aggregate estimated costs to the Office for processing, activities, services, and materials relating to patents (in the case of patent fees) and trademarks (in the case of trademark fees), including administrative costs of the Office with respect to such patent or trademark fees (as the case may be).”

The “SUCCESS Act” portion of the legislation is an acronym for the “Study of Underrepresented Classes Chasing Engineering and Science Success Act of 2018” and begins with the following findings:

  1. Patents and other forms of intellectual property are important engines of innovation, invention, and economic growth.
  2. Many innovative small businesses, which create over 20 percent of the total number of new jobs created in the United States each year, depend on patent protections to commercialize new technologies.
  3. Universities and their industry partners also rely on patent protections to transfer innovative new technologies from the laboratory or classroom to commercial use.
  4. Recent studies have shown that there is a significant gap in the number of patents applied for and obtained by women and minorities.

In addition, the legislation includes the following “sense of Congress”:

It is the sense of Congress that the United States has the responsibility to work with the private sector to close the gap in the number of patents applied for and obtained by women and minorities to harness the maximum innovative potential and continue to promote United States leadership in the global economy.

The legislation does not actually do anything but does require the PTO Director along with the SBA Administrator to conduct a study that:

  1. Identifies publicly available data on the number of patents annually applied for and obtained by, and the benefits of increasing the number of patents applied for and obtained by women, minorities, and veterans and small businesses owned by women, minorities, and veterans; and
  2. provides legislative recommendations for how to— (A) promote the participation of women, minorities, and veterans in entrepreneurship activities; and (B) increase the number of women, minorities, and veterans who apply for and obtain patents.

Within 1 year, the PTO Director will provide a report to Congress on the results.

Music Modernization Act of 2018 Signed Into Law by President Trump

Patent

Guest Alert by Eric Moran.  Mr. Moran is a partner at McDonnell Boehnen Hulbert & Berghoff LLP and Chair of the firm’s Trademark, Unfair Competition, Advertising Law & Copyright Practice Group. (His office used to also be right next to mine at the firm).  This post was originally distributed via MBHB snippets. — DC

On October 11, 2018, President Donald Trump signed into law the Orrin G. Hatch–Bob Goodlatte Music Modernization Act (“the Act”), which will significantly modernize copyright law to account for the digital delivery of content. The bill, as updated and passed unanimously by the Senate and then the House, revises the Copyright Act (17 U.S.C. § 115) in several major ways.

Title I of the Act, “Musical Works Modernization Act,” streamlines mechanical royalties for digitally distributed music by allowing streaming services to pay a mechanical licensing collective (“MLC”) for a blanket license to stream copyrighted material. The MLC has a board of directors of 14 voting members and 3 non-voting members, with 10 voting members being representatives of music publishers, while 4 voting members being professional songwriters. The MLC is responsible for a number of activities under the Act, including:

  • the administration of blanket licenses;
  • the collection and distribution of royalties from digital music providers to songwriters and publishers;
  • the identification of copyrighted material embodied in sound recordings, locating the copyright owners of such material, and administration of a process by which copyright owners can claim such ownership; and
  • assisting with setting of royalty rates and terms.

Helpful to copyright holders, the Act provides a mechanism for royalty rates to be raised to reflect fair market rates and terms—to account for changes in the market. And helpful to streaming services, the Act protects streaming services from infringement lawsuits for past infringements.

Title II of the Act, “Classics Protection and Access Act,” attempts to provide owners of pre-1972 sound recordings with copyright protection. Before this Act, pre-1972 sound recordings were not covered under U.S. copyright law (owners instead needed to rely on state and/or common law for protection). This Act brings pre-1972 sound recordings partially within federal copyright law by (i) providing federal remedies for unauthorized use of pre-1972 sound recordings for 95 or more years after first publication (which time may be extended depending on the year of first publication), (ii) providing a statutory licensing scheme for some digital streaming services, and (iii) providing a means of lawful, fair use of such recordings.

Title III of the Act, “Allocation for Music Producers Act” or the “AMP Act,” provides a means by which music producers can receive a portion of royalties distributed under the statutory license provided under section 114 of the Copyright Act.

The full text of the Act can be found here.

 

PTAB: “Dwell Time” Ranking is “Internet-Centric” and Therefore Patent Eligible

Patent

In its pending Application No. 12/814,020, eBay is attempting to patent a list of listings ranked by “dwell time” — the “elapsed amount of time one or more users view a page describing the listing.”

The examiner originally rejected the claims as improperly directed toward an abstract idea.  On appeal, however, the PTAB has reversed finding that “dwell time” is a uniquely “internet-centric challenge” and the claimed solution is  “is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.” quoting DDR Holdings.  The PTAB particularly noted that “dwell time” is not merely “some business practice known from the pre-Internet world” that was claimed by simply saying “perform it on the Internet.”

[DwellTimePTABDecision]

Claim 18 below is representative.

18. A method comprising:

identifying a plurality of listings stored in a … database as search results;

determining, using a processor, a respective dwell time associated with each [listing], the dwell time based on an elapsed amount of time one or more users view a page describing the listing, and the dwell time associated with a likelihood of a transaction occurring with respect to the listing; and

ranking the listings … based at least in part on the respective dwell time ….

PROBLEM — Although there is probably a way to salvage this invention on eligibility grounds, the PTAB is clearly wrong that “DWELL TIME” is an internet specific phenom.  Apparently, none of these PTAB judges have worked in retail sales.

= = = =

I’ll note here that the chart above is described as follows: “FIG. 1 is a graph of a likelihood of a transaction occurring based on dwell time at a ‘view item’ page.”  This chart appears fairly problematic in this case if – as I suspect – the chart is actually a prophetic example – even though not identified as such.  Not a huge deal – except that the entire patent turns on the function of “dwell time.”  If I were prosecuting this patent, I would make sure the PTO is made aware of the source of data (or absence thereof) for forming this figure).

Patenting a Spreadsheet

Patent

This week’s decision in DET v. GOOGLE focuses on patent eligibility of a muti-sheet spreadsheet displayed with notebook tabs.  The case is reminiscent of a 2014 Patently-O post by Howard Skaist written in the still roiling wake of Alice and Mayo.  In his post, Skaist considered ways that the inventor of VisiCalc (Dan Bricklin) might have claimed the computerized spreadsheet he first created in 1979.

Alice Corp. and Patent Claiming: A Simple Example

Skaist’s claims (proposed as thought experiments):

1. A method comprising: implementing a spreadsheet on a computer.

2. A method comprising:

generating and displaying a matrix of cells comprising an electronic spreadsheet on a computer, said electronic spreadsheet to implement on said computer one or more user-specified mathematical operations in which one or more operands for said one or more user-specified mathematical operations are to be entered in particular cells of said matrix and results of performing said one or more user-specified mathematical operations on said one or more operands are to be displayed in other particular cells of said matrix; and

displaying on said computer, in said particular cells and in said particular other cells, after said one or more operands are entered, said one or more operands and said results of performing said one or more user-specified mathematical operations on said one or more operands, respectively.

3. The method of claim 1, wherein said results of performing said one or more user-specified mathematical operations on said one or more operands comprise one or more operands of one or more other user-specified mathematical operations either with or without displaying said one or more operands of said one or more other user-specified mathematical operations in cells of said matrix.

In some pre-Bilski writing, Dan Bricklin explained why he didn’t actually try to patent the spreadsheet.  His basic answer — the invention was made in the wake of Flook and pre-Diehr — software wasn’t patentable at the time.  “If I invented the spreadsheet today, of course I would file for a patent. That’s the law of the land…today.”