Search Results for: "sas institute"

(Revised) Akin Gump Found to Have Breached Duty of Loyalty to Client: Important Lesson for Fee Agreements

Ethics

The opinion from the district court in the breach of fiduciary duty suit of SAS Institute, Inc. v Akin Gump Straus Hauer & Feld, LLP (W.D.N.C. Feb. 6, 2015),  is here.  This post discusses only part of the 55-page decision.

Beginning in 2006, AG began representing SAS in federal lobbying activities.  Six months later, it worked to get JuxtaComm, a patent monetization entity out of Canada, as a client.  JuxtaComm owned the ‘662 patent.

During the due diligence period on whether AG could take on JuxtaComm’s enforcement of the ‘662 patent, AG did due diligence, determining (a) who were participants in the market the ‘662 affected; (b) ran a conflicts checks; and (c] made a determination as to whether a good faith infringement claim could be brought.  In this regard, it hired an outside consultant, Precedia to do a patent study.

AG soon learned that (you guessed it) SAS was the largest target.  Learned that fact twice, as a matter of fact.  AG went so far as to learn the identity of specific SAS products that “may have been infringing” the ‘662 patent.  Thus, AG knew SAS was a current client; was the leader in this field; and made products that “potentially infringed” the ‘662.  (The district court noted that, in a later suit by JuxtaComm against SAS — in which AG did not participate — one of these products in fact was the subject of a claim by JuxtaComm.)

AG then told JuxtaComm that it believed SAS was an infringer!  (The court’s words: not “potential” or “theoretical” but “an infringer.”)

In the fee agreement, AG got $10m as an up-front retainer and would get 20% of all future proceeds AG secured.  The fee agreement carved out SAS (and others) from the scope of potential defendants that AG would sue.

But, the fee agreement went further. It stated that the litigation AG was bringing would be the “foundation and framework upon which JuxtaComm [could]” start enforcing the patents against other infringers.  In consideration of this work, the fee agreement also provided that AG would get 20% of the value received… (wait for it) even if AG was not involved in obtaining that value.

And..  what happens next is a little disturbing to me.  After its representation of SAS had ended, Akin Gump went ahead and represented the patentee against SAS.  SAS moved to disqualify.  In sworn testimony in that disqualification motion, Akin Gump lawyers apparently persuaded the court that they hadn’t targeted SAS before long after the representation had ended.  Here’s a quote from the district court decision denying the motion to disqualify:

JuxtaComm first contemplated suing SAS in the fall of 2009. Kiklis Declaration, Docket No. 163-1 at ¶20. Indeed, in its motion SAS argued that JuxtaComm’s pre-suit investigation and contemplation of suit occurred in the fall of 2009. Based on Kiklis’s declaration, the conflict arose in the fall of 2009.

The conflict between JuxtaComm and SAS arose in the fall of 2009, when JuxtaComm began contemplating bringing this suit. This was more than twelve months after Kiklis’s representation of SAS ended. Accordingly, the conflict did not arise while JuxtaComm and SAS were concurrent clients, and the rules for concurrent conflicts of interest do not apply.

Juxtacomm-Texas Software, LLC v. Axway (E.D. Tex. Nov. 29, 2010).  Apparently, the engagement letter — which showed this fact finding was, in my view, was wrong — was not provided to the court.  By successfully persuading the court that Akin Gump had not become adverse to SAS until after its representation of SAS had ended, Akin Gump was able to use the former client rules and, as a result, dodge disqualification.

Then what you’d expect to happen happened:  SAS sued Akin Gump for breaching its fiduciary duty to SAS.  At the bench trial, AG testified that, despite the provision in the fee agreement giving it 20% of all funds (and, apparently, despite the fact that it actually sued SAS for the patentee???), Akin Gump would “never have taken any money from SAS.”  But, AG also testified that that part of the fee agreement “mean exactly what they say, nothing more, nothing less.”

From this, the district court concluded that AG had taken a pecuniary interest adverse to SAS, in violation of D.C. Rule 1.8, which requires disclosure and consent under such circumstances. It also found that because AG hadn’t told SAS of this deal, SAS did not give informed consent for AG to continue to represent it in the lobbying efforts.

I’d be surprised if this is the last word on this one. If I’m not understanding the timeline, I’d appreciate Akin Gump correcting me, since it seems pretty straightforward what happened here.

I’ve seen a lot of contingent fee agreements over the years, and a lot them avoided this problem by carving out any monies the patentee receives from the firm’s clients.  I’m not sure that solves the problem — in fact, it probably doesn’t or might not depending on how smart the parties are.

They didn’t do that here… and they did more.

IEEE Amends its Patent (FRAND) Policy

Patent,

Guest Post by Professor Jorge L. Contreras

On February 8, the Board of Directors of the Institute of Electrical and Electronics Engineers (IEEE) voted to approve a set of amendments to the organization’s patent policy.  The changes largely relate to the commitment of IEEE members to license patents to users of IEEE standards on terms that are “fair, reasonable and nondiscriminatory” (FRAND).  As most readers are aware, these commitments have been the subject of recent litigation.  IEEE’s Wi-Fi standards alone have played prominent roles in Microsoft v. Motorola, Apple v. Motorola, In re. Innovatio and Ericsson v. D-Link, among others.  In most of these cases, there has been sharp disagreement over whether the patent holder complied with its FRAND obligations.  To decide these cases, judges and juries have been required to speculate regarding the scope and intent of these obligations, choosing between the divergent views advanced by the litigants and their experts.

Observers of these disputes have long wondered why standards-setting organizations (SSOs) like IEEE have not simply clarified these issues in their patent policies.  Doing so would eliminate much of the uncertainty and debate that currently characterizes disputes over FRAND compliance.  In fact, in a 2013 article, the chief economists of the U.S. Department of Justice, Federal Trade Commission and European Commission Directorate-General for Competition jointly urged SSOs to clarify issues surrounding FRAND in their patent policies.  Yet few SSOs, if any, did so.  Until now.

The IEEE amendments do several things.  Most notably they makes clear that IEEE members holding patents covering IEEE standards:

  • must offer to license those patents to all applicants requesting licenses, and cannot pick and choose among licensees,
  • may not seek, or threaten to seek, injunctions against potential licensees who are willing to negotiate for licenses,
  • may insist that licensees offer them reciprocal licenses under their own patents,
  • may arbitrate disputes over FRAND terms,
  • may charge a reasonable royalty that is based, among other things, on the value that the patented technology contributes to the smallest salable component of the overall product, and
  • should ensure that subsequent purchasers of these patents agree to abide by the same commitments.

Readers may recall that disputes regarding several of these issues have arisen in recent litigation. For example, myriad articles and briefs have debated whether or not a FRAND licensing commitment precludes a patent holder from seeking injunctive relief against an infringer who is willing to negotiate a license.  On one hand, committing to license one’s patents on FRAND (or any) terms implies that monetary compensation is acceptable to the patent holder, thus weighing heavily against the issuance of an injunction under the Supreme Court’s 4-factor test in eBay v. MercExchange (U.S. 2006).  However, patent holders have argued that FRAND commitments were never intended to eliminate one of the principal equitable remedies available to them should potential licensees be intransigent or unwilling to negotiate on reasonable terms.  Arguments have been made under antitrust, contract, estoppel and various other theories, all seeking to adduce the “intention” of the parties submitting to the FRAND commitment. Now, the speculation is over, at least for IEEE standards.  The SSO members have announced what their FRAND commitment means, and further dispute is unnecessary.  The same can be said for most of the other issues addressed by the IEEE amendments.  Such clarity can only help to reduce the uncertainty and litigation burden that has affected the standardization world over the last few years.

IEEE sought and obtained clearance for the amendments from the Department of Justice, which issued a favorable Business Review Letter on February 2.  Among other things, the DOJ concluded that the amendments have “the potential to benefit competition and consumers by facilitating licensing negotiations, mitigating hold up and royalty stacking, and promoting competition among technologies for inclusion in standards.”  Readers may recall that this is not the first DOJ Business Review Letter that the IEEE has obtained.  It 2007 it also sought clearance for a set of patent policy amendments that permitted patent holders to disclose maximum royalty rates prior to approval of a standard (so-called “ex ante” disclosure).  Though the DOJ approved these amendments as well, the procedures they introduced were not widely used by IEEE members.

The passage of the amendments within IEEE required a significant effort over a period of approximately two years.  As reported in the DOJ letter, the initial drafts generated 680 public comments.  The resulting document was narrowly approved by a 3-2 vote of the IEEE Standards Association’s (IEEE-SA) Patent Committee.  The IEEE-SA Standards Board approved it by a vote of 14-5, and the IEEE-SA Board of Governors, usually the final authority on standardization matters, voted 9-3 in favor of the amendments.  Nevertheless, opponents brought the amendments before the Board of Directors of the IEEE parent organization, which finally voted to approve the amendments on February 8.  In the weeks leading up to the final vote, both supporters and opponents of the amendments mustered support from industry and academia, resulting in numerous public statements and letters both pro and con the proposed amendments.

The vigorous pubic debate over the IEEE amendments highlights a rift in the standardization world between what I have termed patent-centric and product-centric firms.  The business models that these firms have adopted are different, yet they have co-existed for decades.  Some have predicted that important contributors will leave IEEE as a result of the recent amendments.  This may happen.  But more likely it will not.  Similarly dire predictions were made prior to the IEEE’s 2007 amendments, but the ill effects that were predicted never materialized.  In this author’s opinion, the IEEE’s policy amendments offer much-needed clarity to the murky world of FRAND commitments, and it is hoped that other SSOs will soon follow with clarifications of their own patent policies.

Patentee Loses First IPR Appeal on all Grounds

Patent, , , ,

by Dennis Crouch

The America Invents Act (AIA) was a major rewriting of U.S. patent law, but the statute includes a number of new provisions that need some amount of court interpretation.  Although the law is now 3 1/2 years old, cases involving the new provisions are only now reaching the courts.

The Federal Circuit’s decision of In re Cuozzo Speed Tech (Fed. Cir. 2015), is important as the first appeal of a written decision stemming from the new inter partes review proceedings.  Over 2000 IPR/CBM/PGR petitions have been filed during this time and so we can expect this to be the first appeal of many.  Garmin filed the IPR challenging Cuozzo’s navigation patent claims as obvious. See IPR 2012-00001; U.S. Patent No. 6,778,074.  The basic idea behind the invention is to link GPS navigators with a database of legal speed limits and provide driver colored speedometer warnings.

In its review, the Patent Trial and Appeal Board (PTAB) held trial and ruled that the challenged claims (10, 14, and 17) were unpatentable as obvious as compared to a set of prior art references.

On appeal, the Federal Circuit has affirmed with the following primary holdings:

  1. Under 35 U.S.C. 314(d), the Federal Circuit has no jurisdiction to consider whether the IPR was properly instituted. However, the court suggested that a mandamus action could potentially be available if the PTAB “clearly and indisputably exceeded its authority” in instituting an IPR.
  2. When conducting an IPR, the USPTO properly determined that claims-at-issue should be construed according to their broadest-reasonable-interpretation.  The appellate panel found that BRI is likely the correct standard and that regardless, the USPTO had been given substantial rulemaking authority in this area.
  3. Teva v. Sandoz altered the court’s approach to reviewing a PTO claim construction. In particular, under the new rule, factual conclusions concerning extrinsic evidence considered by the USPTO are reviewed for substantial evidence. However, because was no extrinsic evidence considered, this statement could be seen as mere dicta.
  4. The obviousness determination was appropriate and, in particular, the combination of references made sense because  “[a]pplying modern electronics to older mechanical devices has been commonplace in recent years.” quoting Leapfrog Enters., Inc. v. Fisher-Price, Inc., 485 F.3d 1157, 1161 (Fed. Cir. 2007). Further, it was fine for the PTO to rely upon prior art not identified in teh petition.
  5. Finally, the PTAB did not err in denying Cuozzo leave to amend its claims in a way that enlarged the scope of the patent – since the statute bars broadening amendments in IPRs. 35 U.S.C. 316(d)(3).

Writing in dissent, Judge Newman argued (1) that the claim construction in IPRs should be the same as that in district court; and (2) that the patent owner should be allowed to appeal PTAB decisions, including the decision to institute an IPR.

Lessons I’m Learning at the IPMI Conference: Change Blowing in the Wind?

Ethics

I’m attending, I think for the fourth year in a row, the International Performance Management Institute IP meeting.  It’s always at a nice place, and this year is no exception:  The Island Hotel in Newport Beach, California.  It’s also always attended by people who are high up (usually chief IP counsel) in high end organizations, like Dupont, AOL, Energizer, GlaxoSmithKline, IBM, and you name it.

Then there’s me.

First, the guy from the PTO says the new 101 guidelines are, they hope, out in a couple of weeks.  They won’t be “interim” guidelines any more, but they will be subject to improvement.

From industry, I’ve heard some things very different this year, consistently, and perhaps of interest to you.

First, several speakers said, given the mess that 101 is, that they are moving back toward trade secret protection.  That was true among several people who spoke, as well as just in my conversations, and it went across technologies — from bio onward.

Second, the role of IP in business is changing.  I am not sure I can fully explain what’s going on, but the use of patents as business, not litigation, tools appears to be a central and growing theme.  Each speaker again from whatever industry talked about this development.  The monetization — through licensing or otherwise — trend is hitting big time.

Third, trolls are the primary litigants, still.  My idea that 285 can be used to impose fees on the troll’s lawyers, as opposed to the asset-less troll, will be floated in full tomorrow, so I’ll let you know how that goes. Of course, when I talked to these big shots privately, they were “ooooooo.”

Finally, and it always hits me here, the disconnect between trial lawyers and clients, and between academia and both of them, is wide and deep.

Upcoming Events and Recent Job Postings

Patent
  • HOUSTON: November 5, 2014 – One night only. I will be delivering the University of Houston’s IPIL Annual Fall Lecture at the Four Seasons Hotel in Houston (Sponsored by the Katz Foundation). My talk will be on incentives (current and future) for patent clarity. [LINK]. Thank you to the University of Houston Law Center for hosting this event.
  • AUSTIN: November 6-7, 2014, I will be speaking at the Advanced Patent Law Institute along with Professors Golden (UT Austin), Lemley (Stanford), Wegner (formerly with GWU), and Hricik (Mercer); the Hon. Terry Rea and Randy Rader; Rob Sterne, et al.
  • NEW YORK CITY: November 6-7, 2014, the IP Dealmakers Forum [www.IPDealmakersForum.com] is looking to connect investors with IP monetization experts.  Jay Walker, founder of priceline.com will serve as keynote. Other speakers include dealmakers from Acacia, American Express, Cantor Fitgerald, Evercore, Fortress Investment Group, Interdigital, IP Navigation Group, Qualcomm, Marathon Patent Group, and Vringo . Patently-O readers get a $200 discount with code: PATO200.
  • SILICON VALLEY: December 3-5, 2014, IQPC’s Global Patent Strategies Summit [www.GlobalPatentSummit.com] will focus on patent strategies for litigation, prosecution and portfolio management.  Patently-O readers get a 25% discount with code: GPS_POBD.
  • VAIL: January 7-11, 2015, I will be part of the faculty for the Intellectual Property Program of the National CLE Conference in Vail, Colorado.  [www.CLEandSKI.com].  The Conference include eight different subject-matter tracts and obviously reserves substantial time for enjoying the Colorado Rocky Mountains. Patently-O readers get a $100 discount using the code: FACULTYINSIDER.
  • While you are clicking links, take time to visit the site Patently-O’s longtime sponsor: MBHB and also Juristat.

Job Postings from the past week on Patently-O Jobs:

 

Proving Non-Obviousness with Ex-Post Experimental Evidence?

Patent, , ,

by Dennis Crouch

The Federal Circuit has rejected BMS’s petition for en banc rehearing in its chemical compound obviousness case. However, four additional opinions either concurring or dissenting show that the court does not speak with one-mind on the issue. Obviousness is the central patentability doctrine and thus, even small modifications to the doctrine can have important systemic impacts. En Banc Denial Opinions.  The patent in question – if valid – is worth hundreds of millions of dollars and so we can expect a petition for writ of certiorari to the Supreme Court.

In Bristol-Myers Squibb Company v. Teva Pharmaceuticals USA, Inc., the Federal Circuit panel affirmed a lower court finding that BMS’s patent covering the Hep-B drug entecavir is invalid as obvious. Patent No. 5,206,244. Judge Chen drafted the original opinion that was signed by Chief Judge Prost and Judge Plager.  Prof Rantanen covered the original decision here.

The obviousness approach for newly invented chemical compounds typically involves identifying the closest analog compound (lead compound) and then determining whether it would have been obvious to create that new compound based upon the lead prior art.  Here, the basic holdings of the Federal Circuit were: (1) affirming that “those of ordinary skill in the art would have selected 2′-CDG, a carbocyclic analog, as a lead compound for further development efforts;” (2) affirming that the same PHOSITA would have been motivated to modify the lead compound; and (3) holding that the secondary indicia of non-obviousness were insufficient to transform the obviousness determination.

In its petition for rehearing, BMS presented two primary arguments:

  • That the court improperly refused to consider post-invention discoveries regarding the invention and prior art that showed significant differences between the two.  In particular, the appellate panel found it irrelevant that the lead-prior art compound is highly toxic to humans since – at the time of the invention – the compound was generally regarded as safe.
  • With regard to objective indicia of non-obviousness – that the court improperly separated the analysis on a property-by-property basis (finding each merely difference-in-degree) rather than looking at the alleged dramatic (difference-in-kind) impact of the drug when considered as a whole.

In his opinion discussed below, Judge Taranto sets the stage:

In short, the Bristol-Myers compound, which is a novel molecule, is dramatically different from the prior-art compound in providing practical human benefits: one provides such benefits, the other does not. But that difference was identified only after Bristol-Myers filed for its patent, because the prior-art compound, not having been tested in animals or humans, was not then known to be toxic.

A number of Amici supported the petition, including BIO, Pfizer, Eli Lilly, PhRMA, IPO, and Merck.

The basic issue here is that pharmaceutical companies regularly perform tests to compare their newly-invented drug treatment to the prior art in order to prove that the two are quite different.  However, as a general matter, those tests are performed after the invention and application is already on file.  The companies then have a major concern that this decision will deny the relevancy of those objective but ex post results.

The trouble for the patentee in this case is the statute — that expressly calls for considering what was known by PHOSITA at the time of the invention (pre-AIA; in future we the time is at the effective filing date of the patent application).  Under the statute it seems that post-filing information should only be relevant to showing what PHOSITA would have been thinking back at the critical date.

Although the entire court did not explain its reasons for denying the rehearing, Judges Dyk (joined by Judge Wallach) and Judge O’Malley wrote separate opinions concurring in the denial.

Judge Dyk:

This case presents a question of obviousness, in particular whether evidence postdating the invention can be used to establish unexpected results. The panel holds that it cannot be considered in the circumstances of this case. That position is correct. It is mandated by the statute, which provides that an invention is not patentable if it “would have been obvious before the effective filing date of the claimed invention to a person having ordinary skill in the art to which the claimed invention pertains.” 35 U.S.C. § 103 (emphasis added).

The patent applicant’s discovery of unexpected results at the time of the invention can help to establish that the invention would not have been obvious to another skilled person. But hindsight bias must be avoided in determining obviousness. And under longstanding Supreme Court authority, the pertinent knowledge is that possessed at
the time of the invention.

You will note that Judge Dyk cites the new-103 rather than pre-AIA 103(a), but that does not significantly change the point he is making here.

Judge O’Malley:

I write to assuage Bristol-Myers Squibb Co.’s (“BMS”) and the amici’s1 fears that this panel decision has rewritten the test for obviousness for pharmaceutical patents. In my view, the concerns expressed are unjustified and mischaracterize the opinion. This case does not forge new ground or set down immutable principles. It simply decides that, on the record before it, the district court did not err in finding the asserted claim of the ’244 Patent invalid as obvious. . . .

Our case law clearly allows the consideration of later discovered differences between the prior art and the invention. . . . These differences inform the obviousness analysis and thus can be considered when assessing what was understood by one of skill in the art at the time of the invention and what expectations may have been reasonable. . . . Like all evidence of objective indicia, the point of considering later-understood evidence regarding the properties
of the invention is to guard against hindsight bias by assessing claims of a motivation to combine as of the time of invention in light of later surprises or developments.

Judge Newman dissented from the denial with an opinion joined by Judges Lourie and Reyna.  Judge Newman, inter alia, walks through the lengthy list of cases that where ex post evidence was relied upon to prove non-obviousness and sees the panel decision here as a major departure.

Judge Taranto’s dissent basically argues that the panel decision was sloppy and, because it can be read in the extreme way suggested by the petitioner, that it should be modified.

Double Patenting when you have a Common Assignee but No Common Inventors

Patent,

This is a bit of an in-the-weeds question, even for Patently-O.

Because firms tend to operate within a certain market area and use a particular technological approach, it makes sense that a patentee may well create prior art that blocks future innovations. One solution offered by the law is the “common owner ship excption.”  In particular, the statutory definitions of prior art include the ‘common owner exception’ that excludes a right-owner’s prior-filed patent applications from the scope of prior art for later-filed applications so long as those prior applications were not published by the filing date of the later applications.

AIA Expansion of Exception: This is one area where the AIA reduced the scope of prior art. Namely, before the AIA the common owner exception excluded the prior applications only with regard to obviousness consideration (assuming different inventors). The AIA expands the exception to also exclude these prior-applications from anticipation consideration.  With this expansion, we might expect some increase in double patenting problems.

Double Patenting Common Assignee but No Common Inventors: My question relates to the statements in MPEP 804 that examiners should issue double-patenting rejections when two commonly-owned inventions claim the same subject matter even when there is no overlapping inventorship:

Claims in commonly owned applications of different inventive entities may be rejected on the ground of double patenting. This is in accordance with existing case law and prevents an organization from obtaining two or more patents with different expiration dates covering nearly identical subject matter. See In re Zickendraht, 319 F.2d 225, 138 USPQ 22 (CCPA 1963) (the doctrine is well established that claims in different applications need be more than merely different in form or content and that patentable distinction must exist to entitle applicants to a second patent) and In re Christensen, 330 F.2d 652 (CCPA 1964). . . .

[A rejection is proper even when] the reference … and the pending application are … by a different inventive entity and are commonly assigned even though there is no common inventor.

 

The problem with the MPEP here is that the cases cited are not on-point – i.e., they do not say anything about whether a double patenting rejection may persist when there are no inventors in common.  We know that statutory-double patenting is said to stem from 35 U.S.C. 101 and, likewise, we learned in AbbVie v. Kennedy Institute that obviousness-type-double-patenting also finds its roots in Section 101.  The problem with that approach is that Section 101 remains old-school and still focuses on “inventors” rather than applicants or owners.

My Question: What is the legal source of the MPEP’s declaration that a double patenting rejection is proper based upon common-ownership even when the two documents have no common inventor?  I suspect that there is a case on this, but I don’t know. 

Upcoming Events

Patent

I’m looking forward to a few upcoming events for patent law professionals:

  • HOUSTON: On the evening of November 5, 2014, I will be delivering the University of Houston’s IP IL Annual Fall Lecture at the Four Seasons Hotel in Houston (Sponsored by the Katz Foundation). My talk will be on incentives (current and future) for patent clarity. [LINK]. Thank you to the University of Houston Law Center for hosting this event.
  • AUSTIN: November 6-7, 2014, I will be down in Austin Texas participating in the annual Advanced Patent Law Institute with a talk titled Evidence Based Patent Law: Trends and Statistics, and What they Mean for Your Practice and your Patent Portfolio. [LINK]. Other speakers include Professors Golden (UT Austin), Lemley (Stanford), Wegner (formerly with GWU), and Hricik (Mercer); the Hon. Terry Rea and Randy Rader; Rob Sterne, et al.
  • WASHINGTON DC: Unfortunately, a great conference is also scheduled in DC for November 6-7, 2014 in Washington DC.  The Patents in Telecom conference, co-sponsored by University College of London (UCL) faculty of laws and GWU.  Excellent and varied set of international speakers including Qualcomm president Derek Aberly, AT&T Chief IP counsel Glenn Blumstein, and Sir Christopher Floyd, Lord Justice at the Court of Appeal of England and Wales. Patently-O readers get a 10% discount with code: patently-o-2014
  • WASHINGTON DC: On December 9, 2014, the IPO Education Foundation will be awarding its Distinguished IP Professional Award to Judge Richard Linn. Excellent choice and well deserved honor.  The IPO has more information on the award dinner and their reasons for choosing Judge Linn. Hugh Herr will also be named inventor of the year for his work on prosthetics.
  • VAIL: January 7-11, 2015, I will be in Vail, Colorado talking about patent law as part of the 32nd National CLE Confrence where they also happen to have “amazing skiing.” Conference co-chairs are Scott Alter (Baker Daniels) and David Bernstein (Debevoise & Plimpton ). [LINK]
  • NAPLES: February 7-10, 2015: Hal Wegner’s annual Patent Experts Conference in Naples (FL) at the Naples Beach Hotel.
  • USPTO: The USPTO’s AIA Roadshow continues with stops in Denver (Oct 2), Cupertino (Oct 7), and Atlanta (Oct 9). [LINK]
  • COPENHAGEN: A late entry to this list is the October 21 event at Aarhus University in Denmark focusing on the upcoming UNIFIED PATENT COURT in Europe. Judge Rader will deliver the keynote. I would be most interested in hearing the discussion of how the UPC may impact patent licensing, competition and enforcement. [Link]

We also have a set of new job postings on the Patently-O Job Board.

Upcoming Events

Patent

By Dennis Crouch

I’m looking forward to a few upcoming events for patent law professionals:

  • September 7-9, 2014, the Intellectual Property Owners Association (IPO) will hold its annual meeting in beautiful Vancouver BC. I’ll be there joining a panel discussing the impact of recent US Supreme Court patent cases. [LINK]. The IPO event again has a great line-up, including Professor Hricik, Nathan Myhrvold, and many more.
  • On the evening of November 5, 2014, I will be delivering the University of Houston’s IP IL Annual Fall Lecture at the Four Seasons Hotel in Houston (Sponsored by the Katz Foundation). My talk will be on incentives (current and future) for patent clarity. [LINK]. Thank you to the University of Houston Law Center for hosting this event.
  • November 6-7, 2014, I will be down in Austin Texas participating in the annual Advanced Patent Law Institute with a talk titled Evidence Based Patent Law: Trends and Statistics, and What they Mean for Your Practice and your Patent Portfolio. [LINK]. Other speakers include Professors Golden (UT Austin), Lemley (Stanford), Wegner (formerly with GWU), and Hricik (Mercer); the Hon. Terry Rea and Randy Rader; Rob Sterne, et al.
  • January 7-11, 2015, I will be in Vail, Colorado talking about patent law as part of the 32nd National CLE Confrence where they also happen to have “amazing skiing.” Conference co-chairs are Scott Alter (Baker Daniels) and David Bernstein (Debevoise & Plimpton ). [LINK]
  • February 7-10, 2015: Hal Wegner’s annual Patent Experts Conference in Naples (FL) at the Naples Beach Hotel.

I look forward to seeing you in person.

Bad Client Review on Avvo or Whatever? Think Twice Before Responding

Ethics

Here in Georgia they just affirmed disciplinary action against a lawyer who, among other things, revealed client confidences in responding to a client’s negative review on an Internet site.  The case is here.  There are quite a few of those.

I may have mentioned this before, but one thing that some lawyers are doing is:  having clients, on intake, assign copyright to any reviews to the lawyer; then, if a negative review is posted, they send a take-down notice to the site.  Voila.

Welcome to the 21st Century.

Update:  Professor Eric Goldman responded to an email I’d sent out to a bunch of IP Professors with the following, which he allowed me to share:

 

The SF Bar Association also issued an ethics opinion on lawyers responding to client reviews. http://www.sfbar.org/ethics/opinion_2014-1.aspx

Building on my work with Jason and the Berkeley students, I wrote a short article on how doctors should respond to patient reviews: http://www.forbes.com/sites/ericgoldman/2013/11/21/how-doctors-should-respond-to-negative-online-reviews/ Much of that discussion is extensible to client reviews of lawyers.
It would be highly inadvisable for lawyers to try the Medical Justice copyright-assignment-in-unwritten-reviews hack. The request basically sets up a conflict between the lawyer and the client at the relationship’s outset. After all, almost any independent lawyer would not advise the client to sign such an assignment.
There are also likely to be statutes limiting businesses’ ability to contractually restrict their customers’ reviews. California is currently considering AB2365 requiring any such restriction to be “knowing, voluntary and intelligent.” See my discussion about the bill (and its limitations) http://www.forbes.com/sites/ericgoldman/2014/04/30/california-moving-to-protect-consumer-reviews/ It would not surprise me if there’s a federal bill on this topic as well.
Eric.

Eric Goldman
Professor, Santa Clara University School of Law
Director, High Tech Law Institute
Email: egoldman@gmail.com
Personal website: http://www.ericgoldman.org
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Unpatentable: See Bilski, Mayo, Flook, and Benson

Patent, , , ,

By Dennis Crouch

The question of patentable subject matter is nominally grounded in the statute 35 U.S.C. § 101. That statute offers patent rights to anyone who “invents or discovers any new and useful process, machine, manufacture, or composition of matter.” However, very few section 101 cases actually refer to the statutory text. Rather, the focus is on the Supreme interpretative stance that the statute also prohibits patents on abstract ideas, products of nature, and natural phenomena. It is the definition of Abstract Idea that is at stake in Alice Corporation Pty. Ltd. v. CLS Bank Int’l. [TRANSCRIPT OF ORAL ARGUMENTS]

Alice Corp.’s patent covers a computerized escrow system and method that CLS Bank allegedly uses in the process of settling trillions of dollars in transactions each week. After Alice Corp., sued CLS Bank for infringement, CLS responsively argued that the patent claims are invalid as impermissibly encompassing an abstract idea.

In the background, the Supreme Court has decided three recent Section 101 cases: Bilski, Mayo, and Myriad. Arguing for CLS Bank, Mark Perry argued that these two cases determine the outcome here.

MR. PERRY: Bilski holds that a fundamental economic principle is an abstract idea and Mayo holds that running such a principle on a computer is, quote, “not a patentable application of that principle.” Those two propositions are sufficient to dispose of this case. If Bilski and Mayo stand, Alice’s patents fail.

Rather, to be patent eligible, CLS Bank argues, the computer implementation must offer a “technological solution.”

MR. PERRY: We know from Benson, the Court’s seminal computer implementation case, that if you can do it by head and hand, then the computer doesn’t add anything inventive within the meaning of the 101 exception. That is the holding of Benson. And the Court reiterated that in Mayo. Flook said exactly the same thing. If you can do it with pencil and paper, then the computer is not offering anything that the patent laws are or should be concerned with.

It is only where the method will not work without a computer, which is not these claims, and where the computer itself is doing something that the patent law is willing to protect.

Justice Ginsburg asked why – if it is such a simple case – why the Federal Circuit struggled so:

JUSTICE GINSBURG: The Federal Circuit in this case split in many ways, and it had our decisions to deal with. You said, given Bilski and Mayo, this is an easy case. What is the instruction that escaped a good number of judges on the Federal Circuit? How would you state the rule?

MR. PERRY: Your Honor, I think there’s a significant element to the Federal Circuit that disagrees with Mayo and has been resistant in applying it. Chief Judge former Chief Judge Michel filed a brief in this Court essentially saying Mayo is a life sciences case, You should limit it to that because if you apply it to everything else, then these patents are no good. Mayo we submit is a technology-neutral, Industry-neutral, exception-neutral framework that can be used to answer all of these questions.

We should note here, that, although CLS Bank sees the Mayo test as exception-neutral, the respondent was not asked to explain why the test was not applied the most recent Section 101 case of Myriad.

The reference to Mayo/Flook is important – with the notion that to be patent eligible there must be a technological innovation rather than discovery of an abstract idea followed by routine technological implementation of that idea. The result of the Mayo/Flook approach is that patent eligibility is temporally dependent. In particular, innovations that were once patent eligible will later be not eligible once the implementing-technology becomes well known. Mr. Perry explains:

JUSTICE SOTOMAYOR: How about email and just word processing programs?

MR. PERRY: At a point in time in the past, I think both of those would have been technological advances that were patentable. . . . Because they would have provided a technological solution to a then unmet problem. Today, reciting, and do it on a word processor is no different than and do it on a typewriter or and do it on a calculator.

The inventive contribution component, which uses specifically the language of conventional and routine and well understood, will evolve with technology. That’s why it’s different than the abstract idea component.

Mr. Phillips responds somewhat weakly that there must be “significant limitations on the extent to which novelty has to be built into 101.

There is some potential that the decision will be rather small – deciding that an escrow-settlement method is an abstract idea and that the routine addition of computers to facilitate the method does not alter that original conclusion. This result would essentially parallel the results of Bilski v. Kappos and would potentially add nothing of substance to the law. Many of the questions followed this line of thinking and Alice’s attorney, Carter Phillips, repeatedly worked to explain how the technological aspect of the invention is much more complex that has been commonly caricaturized. CLS Bank argued the opposite.

JUSTICE GINSBURG: On the abstract idea, you know that the Bilski case held that hedging qualified as an abstract idea. So how is intermediate settlement a less abstract than hedging?

MR. PHILLIPS: … What we claim is a very specific way of dealing with a problem that came into being in the early 1970s of how to try to eliminate the risk of nonsettlement in these very massive multiparty problems in which you need to deal with difficulties that exist at different time zones simultaneously and to do it with a computer so that you not only take them on chronologically, deal with them sequentially, based on the kind software analysis that the patent specifically describes by function.

And it goes even further than that, and does something that no escrow agent and no … settler that I know of. It actually blocks specific transactions that, in the shadow account, would violate the terms of the settlement that would ultimately be implemented.

. . . [This is an invention that] you cannot, absolutely cannot [implement this system without a computer], because it is so complex and so many interrelated parts.

. . . I believe that if you analyze the claims and you don’t caricature them and you don’t strip them out of the limitations that are embedded in there, this is not some kind of an abstract concept. This is not some kind it’s not an abstract idea..

JUSTICE KAGAN: There is something that you’ve patented that has that is not just simple use a third party to do a settlement. . . . And what is that, putting the computer aside?

MR. PHILLIPS: It is well and again, it’s difficult to do that because you absolutely need the computer in order to implement this. But the key to the invention is the notion of being able simultaneously, dealing with it on a chronological basis to stop transactions that will otherwise interfere with the ability to settle on time and under the appropriate circumstances. And the only way you can do that in a realtime basis when you’re dealing with a global economy is to use a computer. It is necessary to the efficacy of this. So in that sense, I can’t I can’t disaggregate it the way in some sense you’re suggesting. It seems to me it’s bound up with in it’s bounds up with the whole notion of is this an abstract concept. . . .

MR. PERRY: On the abstract idea, Justice Ginsburg, you asked Mr. Phillips what’s the difference between hedging and this claim. There is no difference. This is hedging. It is hedging against credit default rather than price fluctuation, but it is simply hedging. . . . Mr. Phillips suggests, well, we have multilateral transactions, global things, chronological, time zones and so forth. None of those are claimed, Your Honor. Those are all recited in specification. The claims read on a single transaction involving two parties.

JUSTICE SCALIA: Why isn’t it why isn’t doing it through a computer not enough? I mean, was the cotton gin not an invention because it just means you’re doing through a machine what people used to do by hand? It’s not an invention. It’s the same old, same old. Why is a computer any different in that respect?

MR. PHILLIPS: At one level I agree with you completely. There is no difference between them.

This Court has, however, said on more than a few occasions, albeit in dicta, that coming up with an idea and then say, use a computer, is not sufficient. And what I’m trying to suggest to you is we don’t fall within that dicta. Now, if you don’t accept the dicta and you say use a computer is fine, then I think we’re done.

MR. PERRY: Of course, a patent that describes sufficiently how a computer does a new and useful thing, whether it’s data compression or any other technological solution to a business problem, a social problem, or a technological problem, would be within the realm of the of the patent laws. That is what the patent laws have always been for. . . . Those algorithms, those inventions are undoubtedly technological. And if they are used in a trading platform or a hedging system or something else, that wouldn’t disable them [as patent eligible].

The bigger version of the decision would more particularly address software patenting. Here, Alice suggests that the case is very much about the ongoing viability of software patents:

JUSTICE KENNEDY: You understand the government to say no software patents.

MR. PHILLIPS: That’s the way I interpret the government’s the government’s brief.

However, both CLS Bank and the Government argue otherwise. Mr. Perry states “this will not affect software patents. . . . [Rather,] we are talking about a group of patents … that’s way out at the tail end of the distribution.” Likewise, the Solicitor General Verrilli argued that “it’s just not correct to say that our approach would make software patenting ineligible. [In our proposed test] any software patent that improves the functioning of the computer technology is eligible. Any software patent that improves that is used to improve another technology is eligible.” In thinking about the consequences for patentees who already hold patents that may become ineligible, Mr. Perry suggested that their problems are minimal because “the patent holder would have the opportunity to institute a reexamination proceeding or some sort of administration process to address that issue.”

Justice Breyer indicated the importance of creating a rule that works:

JUSTICE BREYER: There is a risk that you will take business in the United States or large segments and instead of having competition on price, service and better production methods, we’ll have competition on who has the best patent lawyer. . . . And if you go the other way and say never, then what you do is you rule out real inventions with computers. . . . [The amicus briefs provide] a number of suggestions as to how to go between Scylla and Charybdis. . . . I need to know what in your opinion is the best way of sailing between these two serious arms.

MR. PHILLIPS: Well, Justice Breyer, I guess I would suggest to you that you might want to deal with the problem you know as opposed to the problems you don’t know at this stage. I mean, we have had business method patents and software patents in existence for well over a decade and they’re obviously quite significant in number. And and we know what the system is we have. And Congress looked at that system, right, and didn’t say no to business methods patents, didn’t say no to software patents, instead said the solution to this problem is to get it out of the judicial process and create an administrative process, but leave the substantive standards intact.

So my suggestion to you would be follow that same advice, a liberal interpretation of 101 and not a caricature of the claims, analyze the claims as written, and therefore say that the solution is 102 and 103 and use the administrative process.

. . . . So on the one hand, you’ve got a problem that it seems to me Congress to some extent has said is okay and we’ve got a solution and that solution’s playing through. On the other hand, if this Court were to say much more categorically either that there’s no such thing as business method patents or adopt the Solicitor General’s interpretation, which is to say that there cannot be software unless the software somehow actually improves the computer, as opposed to software improving every other device or any other mechanism that might be out there.

What we know is that this would inherently declare and in one fell swoop hundreds of thousands of patents invalid, and the consequences of that it seems to me are utterly unknowable. And before the Court goes down that path, I would think it would think long and hard about whether isn’t that a judgment that Congress ought to make. And It seems to me in that sense you’re essentially where the Court was in Chakrabarty, where everybody was saying you’ve got to act in one way or the other or the world comes to an end, and the courts have said, we’ll apply 101 directly. . . .

MR. PERRY: That path between Scylla and Charybdis was charted in Bilski and Mayo. Bilski holds that a fundamental economic principle is an abstract idea and Mayo holds that running such a principle on a computer is, quote, “not a patentable application of that principle.” Those two propositions are sufficient to dispose of this case. If Bilski and Mayo stand, Alice’s patents fail.

The Government test is a bit difficult to fully discern and even General Verrili had some trouble explaining:

JUSTICE BREYER: I think you say a computer improvement that, in fact, leads to an improvement in harvesting cotton is an improvement through a computer of technology, so it qualifies. But then I think you were going to say, or I got this also from the brief, a computer improvement that leads to an improvement in the methods of selling bonds over the telephone is not an improvement in technology reached by the computer. Am I right about the distinction you’re making?

GENERAL VERRILLI: I don’t think there’s a yes or no answer to that question. [But,] that is generally the line we’re drawing.

JUSTICE GINSBURG: I have a question about how do you identify an abstract concept. A natural phenomenon, a mathematical formula, those are easy to identify, but there has been some confusion on what qualifies as an abstract concept.

GENERAL VERRILLI: We would define abstract an abstract concept as a claim that is not directed to a concrete innovation in technology, science, or the industrial arts. So it’s the it’s abstract in the sense that it is not a concrete innovation in the traditional realm of patent law.

Although seemingly not relevant to the present case, Alice took some pains to explain why their patent includes no software code:

MR. PHILLIPS: what we did here is what the Patent and Trademark Office encourages us to do and encourages all software patent writers to do, which is to identify the functions that you want to be provided for with the software and leave it then to the software writers, who I gather are, you know, quite capable of converting these functions into very specific code. . . .

It doesn’t actually, obviously, put in the code, but that’s what the PTO says don’t do. Don’t put in the code because nobody understands code, so but put in the functions, and we know and we know that someone skilled in the art will be able to put in the code. And if they aren’t, if they can’t do that, then it’s not enabled and that’s a 112 problem.

This discussion of functionality may foreshadow the upcoming Nautilus case. On that point, Justice Sotomayor asked whether Alice is “trying to revive the patenting of a function?” Mr. Phillips did not directly respond.

In the end, Alice Corp’s case of technological innovation is slight. Mr. Phillips agreed with Justice Kennedy that it would be “fairly easy” for a “second year college class in engineering” to draft the claimed software – giving the court additional fodder for rejecting this case merely with a string citation to Bilski, Flook, and Benson.

Upcoming Events of Interest

Patent
  • My former MBHB colleague Richard Carden is hosting a live Webinar on March 25, 2014 on privacy issues involved with big data with consideration of both US and international data privacy issues. Free to participate, but you must register in advance. [Link]
  • On March 20-21, the Florida Bar will be hosting its annual IP Symposium in Tampa with Chief Judge Rader, and William Covey along with a host of interesting speakers and events. A syllabus is here: http://flabizlaw.org/images/pdf/ip14.pdf.
  • Microsoft and the Hispanic National Bar Association are again co-sponsoring a summer IP Law Institute for up to twenty five Latino law students. Looks like a great event being held June 1-7. [Register by March 29, 2014]

Bits & Bytes from Jonathan Hummel

Patent,

RECENTLY

#1. Twitter’s Puny Patent Portfolio May Prove A Positive

Leading up Twitter’s IPO, market analysts are pointing to the relatively small number of patents held by the company as weakness. Jeff John Roberts, writing for GigaOM explains why Twitter’s slim patent portfolio might not be a weakness, but instead a sign of strength.

            -read Bloomberg’s countervailing story here.

 #2. Apple Touchscreen Patent Upheld in Reexamination

Steven Musil, writing for C|Net, reports that “after invalidating US Patent No. 7,479,949 last December, the USPTO issued a re-examination certificate (see article & examination certificate here) reaffirming all 20 claims included in the patent, according to a filing last month spotted by Foss Patents.”

#3. Jorge Contreras on Patent Pledges Outside Standards-Setting Organizations

Dan O'Connor, writing at Patent Progress, interviewed Jorge Contreras to discuss his new paper, “Patent Pledges,” covering FRAND commitments and a call for a new paradigm in standards-setting. Mr. Contreras is a professor at the Washington College of Law at American University and a contributor at Patent Progress. His research focuses primarily on the effects of intellectual property structures on the dissemination and production of technological innovation, with a focus on basic scientific research and technical standards development.

#4. Goodlatte’s Innovation Act

Both Dennis Crouch here at Patently-O, and our friend Andrew Williams  at PatentDocs, wrote about legislation proposed by Rep. Bob Goodlatte (R-Va), namely the “Innovation Act.” The bill is squarely aimed at Patent Trolls and allows for parties to discover who the ultimate owner of the patent or exclusive right actually is, rather than a shell corporation.

            -Read Dennis’ article here.

            -Read Andrew’s article here.

PENDING

#1. Samsung Files Patent on Competitor to Google Glass

Alex Colon, writing at GigaOM, reports that Samsung has filed a design patent in Korea that looks suspiciously similar to Google Glass. Apparently, the Samsung patent focuses more on the “sportiness” of the spectacles. “The patent shows that the glasses could come with built-in earphones, which would allow you to listen to music and answer calls while you’re wearing it.”

 

COOL TECH

#1. Unbreakable Chemical Locks

Lisa Zyga’s story at Phys.org explains how research performed by Professor Abraham Shanzer and his group at the Weizmann Institute of Science in Rehovot, Israel could lead to the first chemical lock that responds to multiple “passwords.”

            -read the article here.

 

UPCOMING

Whittier Law School IP Symposium

  • The Global Medicine Challenge: The Fine Line Between Incentivizing Innovation and Protecting Human Rights
    • The Keynote Speaker will be James Love, director of Knowledge Ecology International, and NGO dealing with issues involving Intellectual Property.
    • This event has been approved for 5.5 hours of CLE
    • View the Program Flyer here.

 

WIPO Events

 

JOBS

#1. Patent Associate – Law Firm – Rockford, Ill.

            –Reinhart Boerner Van Deuren s.c., is a full-service business-oriented law firm with offices in Chicago, Rockford, Denver, Phoenix, Milwaukee, Madison, and Waukesha with a national and international client base.

 

#2. Patent Attorney – Law Firm – Washington, D.C.

            –Morris & Kamlay LLP, an IP specialty firm in DC with a relaxed and flexible work environment, is looking for an experienced patent prosecutor.

 

#3. Patent Attorney – Law Firm – Melbourne, Australia

            –Phillips Ormonde Fitzpatrick is seeking a Patent Attorney to work in its Melbourne, Australia, offices.

Related articles
The Baby Boom of Patent Practitioners
AIA Shifts USPTO Focus from Inventors to Patent Owners
New Patent Legislation: Innovation Act of 2013
Samsung Proposes a Patent Pledge to Settle EC FRAND Investigation
Anti-'Patent Troll' Bill Introduced In Congress
Bits & Bytes from Jonathan Hummel
Patent Practitioners

Samsung Proposes a Patent Pledge to Settle EC FRAND Investigation

Patent

Guest post by Jorge L. Contreras.  Prof. Contreras is an Associate Professor of Law at American University Washington College of Law.

As part of the global smartphone litigation between Apple and Samsung, the European Commission has been investigating Samsung’s use of injunctive relief to address infringement of standards-essential patents (SEPs).  Last December, the Commission informed Samsung that its attempts to obtain injunctions against Apple based on SEPs covering the European Telecommunications Standardisation Institute's (ETSI) 3G UMTS mobile wireless standard constituted an abuse of dominant position under EU competition law.  One of the key elements in the claim against Samsung was that it sought injunctions after having committed to license its SEPs to implementers of the UMTS standards on fair, reasonable and non-discriminatory (FRAND) terms, a common requirement within the standards-development world. 

Last week the Commission announced  that it has received a preliminary settlement proposal from Samsung.  Under this proposal, Samsung would commit not to seek injunctions in Europe on the basis of SEPs covering a broad range of wireless telecommunications and networking standards (i.e., well beyond the UMTS standard at issue in the Apple case), so long as the alleged infringers agreed to comply with a specified process for determining appropriate FRAND royalty rates.  This process would include good faith negotiations for at least 12 months, followed by arbitration at the International Chamber of Commerce (ICC) or litigation in the English High Court.  Samsung’s commitment with respect to its SEPs would become the most recent in a growing number of public commitments being made voluntarily by patent holders to limit the enforcement of their patents covering standardized technologies.

For those following the smartphone wars, Samsung’s proposal should sound familiar, as it bears a striking resemblance to the terms on which Google settled an investigation by the U.S. Federal Trade Commission this summer.  The FTC’s investigation of Google’s subsidiary Motorola Mobility also focused on the use of SEPs to seek injunctive relief against implementers of industry standards, and was based on the potential anticompetitive impact of this behavior.  There are, however, several notable differences between the FTC’s Google settlement and what Samsung has proposed.  Some of these are summarized in Table 1 below:

Table 1

Comparison of Google and Samsung (Proposed) Injunction Settlement Terms

 

FTC-Google Order (Jul. 23, 2013)

Samsung Proposal to EC (Oct. 17, 2013)

 

 

 

Scope of Non-injunction commitment

Worldwide

European Economic Area (EEA)

Duration of Commitment

10 years

5 years

Standards covered

Any standard published by a standards-setting organization (SSO)

Mobile Device* standards published by SSOs

Mandatory negotiation period

6 months

12 months

Designated arbitral tribunals

AAA, JAMS, WIPO

ICC

Designated courts

Any tribunal worldwide

English High Court or EU Unified Patent Court

* Mobile devices include smartphones and tablet devices but exclude desktop, notebook, subnotebook and laptop computers.

As Table 1 indicates, Samsung’s proposal is (not surprisingly) a bit less burdensome than the terms that Google agreed with the FTC.  To wit, the proposed geographic coverage is narrower (the EEA rather than the whole world) and the duration is half as long (5 rather than 10 years).  Interestingly, however, Samsung has proposed a mandatory negotiation period, during with it would be required to negotiate FRAND terms with a potential licensee, that is twice as long as the period agreed by Google (12 versus 6 months).  As patent holders typically want to get to court as quickly as possible, it is not clear why Samsung has proposed a longer period, and this may simply be a function of private signaling made by the Commission.  Samsung’s choice of arbitral tribunals is also interesting, inasmuch as it designates the private International Chamber of Commerce (ICC) over the UN-chartered World Intellectual Property Organization (WIPO), which has actively been seeking to get into the SEP arbitration business.

Just as the FTC did prior to finalization of the Google settlement, the EC has solicited public comments on the proposed Samsung settlement.  The FTC received 25 submissions in response to its solicitation, and made several adjustments to the final Google order as a result.  The EC has allowed 30 days for the submission of comments (through Nov. 16, 2013) and it is likely that many of the same issues that were raised in the comments to the FTC will surface again.

For those who are generally interested in voluntary patent pledges like the one proposed by Samsung, the Program on Information Justice and Intellectual Property (PIJIP) at American University’s Washington College of Law has established a new public web resource listing and describing non-SDO patent commitments.  The site, which was launched last week, already includes 63 different non-SDO patent commitments covering thousands of patents.  These pledges have been made by industry leaders such as Google, Microsoft, Apple and Intel, as well as small entities and, should its proposal to the EC be accepted, Samsung.  We hope to continue to add information to this site, and invite the submission of additional non-SDO patent commitments by the public.

Intellectual Ventures and its 80,000 Patents

Patent

by Dennis Crouch

On Friday, Greg Gorder led a great discussion here at the University of Missouri School of Law as part of our symposium on Resolving IP Disputes. Gorder is a co-founder of the patent-law giant Intellectual Ventures. The focus of Gorder’s talk was on incremental invention and the “invention gap” associated with most products on the market. Intellectual Ventures basically defines this invention gap as the number of patents that a company is infringing when it makes or sells its products. The key figure that I walked away with was 80,000. Intellectual Ventures now owns over 80,000 patents and pending patent applications.

Later this week we should have video of the conference available for viewing.

While Mr. Gorder was speaking here at Mizzou, his company attorneys were busy filing a host of patent infringement lawsuits against the mobile carrier industry, including AT&T, Leap Wireless, Nextel, T-Mobile, and US Cellular. The patents in suit include U.S. Patent Nos. 6,640,248; 5,602,831; 6,023,783; 6,952,408; 6,370,153; 5,963,557; 8,310,993; 7,269,127; 7,848,353; 8,396,079; and 7,787,431. In typical aggregator form, the patents come from a diverse array of sources including Malibu Networks (a failed company with “promising technology” that “entered the market about two years too early”); Seiko (an ongoing company that wanted to monetize its invention surplus); California Institute of Technology (a large non-practicing entity); AirNet Communications; John Eng; IPWireless; Georgia Tech; and Neocific.

PTO Post-Issuance Filings

Patent, , ,

By Jason Rantanen

This afternoon my frequent collaborator Lee Petherbridge will be presenting Unenforceability (which we wrote with Polk Wagner) at the Houston Intellectual Property Law Association's annual IP Institute.  As we were talking about the presentation, our conversation turned to the subject of the AIA's impact on post-grant proceedings at the PTO (particularly supplemental examination).  I was able to assemble the following charts based on data from the PTO's website (specifically, from this page and this page).

Ex Parte ReexamInter Partes
Note that the inter partes review data points are my estimates based on graphical data from the PTO; practically speaking, however, any deviations from the "true" values are going to barely show up here due the scale of this graph. 

Unsurprisingly, there was a large jump in both ex parte and inter partes filings in Q4 of 2012.  These spikes corresponded with the approximately 5-fold fee increase for filing an ex parte reexamination request, and the transition to inter partes review coupled with a similarly high fee structure on September 16, 2012.  Since then, ex parte reexamination requests have remained low while inter partes review filings have been on the rise, eclipsing even pre-September 16 inter partes reexamination levels (for just the first two months of Q4 of FY 2013, there have already been more than 130, which constitutes more inter partes filings than any previous 3-month quarter except for Q4 2012). 

What about supplemental examination requests?  In the past I've expressed skepticism that supplemental examination will be a widely used mechanism.  To date, the actual filing data appears to have born that skepticism out: the PTO's supplemental examination final rules predicted about 1,430 requests anually; as of August 30, 2013 there were 40. 

 

Monthly_se20130830

Source: http://www.uspto.gov/aia_implementation/statistics.jsp

 

What surprised me the most about this data is that supplemental examination was widely believed to be the new path to ex parte reexamination for patent owners (i.e.: rather than file an ex parte reexamination request, just file a supplemental examination request), including by the PTO itself.  See 77 Fed. Reg. 48828, 48847 (Aug. 14, 2012) ("In view of the benefits to patent owners afforded by supplemental examination under 35 U.S.C. 257(c), the Office is estimating that all 110 requests for ex parte reexamination that would have been filed annually by patent owners will instead be filed as requests for supplemental examination.").  So  far, however, traditional ex parte reexamination requests are an order of magnitude greater than supplemental examination filings.  Of course, this can all change with time – inter partes post grant proceedings started off slow but now have eclipsed ex parte reexamination.

One last chart, again from the PTO's website: pre-issuance submissions are becoming a relatively common, although by no means ubiquitous, type of filing. 

 

Monthly_preissuance20130830a

Source: http://www.uspto.gov/aia_implementation/statistics.jsp

  

Working out the Kinks in Post-Issuance Reviews: Versata v. SAP

Patent, , , , , , , , ,

By Dennis Crouch

The Versata saga provides an important case history showing the power of the new post-grant review procedures before the USPTO and the Office’s seeming new power to operate without fear of judicial review. However, over the next year the Federal Circuit will have its opportunity to review the PTAB’s controversial decisions.

= = = = =

Versata’s hierarchical pricing engine software had strong sales in the mid 1990’s, that ended when SAP and others added the component to their product line – an extra add-on was no longer needed. SAP indicated that its software replaced the need for Versata’s add-on and actively discouraged customers from using Versata.

Versata’s In-Court Victories: Versata eventually sued SAP in 2007 and won a first jury verdict and then a second jury verdict (finding that SAP’s “patch” did not cure the infringement) with a $300 million + damage award. That final decision was later affirmed on appeal.

Petition for Post-Grant Review of Covered Business Method: Meanwhile, following the district court’s second finding of infringement (but prior conclusion of the aforementioned appeal), SAP filed a petition for Post Grant Review available to “Covered Business Methods” as part of the America Invents Act. SAP had clearly been anxious to use this approach and filed the PGR petition at its first opportunity on September 16, 2012 (the first day such petitions were allowed). CBM2012-0001.

If you remember, post-grant review (including CBM review) allows for challenge on “any ground that could be raised under paragraph (2) or (3) of section 282 (b) (relating to invalidity of the patent or any claim).” This has been interpreted by the PTO to include validity challenges raised under 35 U.S.C. § 101, 102, 103, or 112. But see Can a Third Party Challenge Section 101 Subject Matter Eligibility in the USPTO’s new Post-Grant Review Procedure?

SAP’s petition challenged the patent claims as (1) directed toward unpatentable subject matter under §101; (2) lacking written description; (3) indefinite; and anticipated.

USPTO Grants Petition for Post Grant Review: In a January 2013 order, the USPTO’s Patent Trial & Appeal Board (PTAB) granted the petition after finding that the challenged claims are “more likely than not unpatentable.” In particular, the PTAB allowed the challenge to move forward on the Section 101 and 102 grounds.

The PTAB made two additional important rulings:

What is a Covered Business Method?: First, the Board ruled that the ‘350 patent claims qualified as covered-business-methods because the claims are directed to a method for the “management of a financial product or service” and are not “technological inventions.” The PTO’s working definition of “technological” is rather unhelpful in that it simply asks whether the claim recites a new “technological feature” or “solves a technical problem using a technical solution.” Relevant claims of the patent (U.S. Patent No. 6,553,350) are shown below (claims 17 and 26). And, you will note that the method claim 17 does not recite any steps that could not be done with pencil and paper.

Issue Preclusion / Collateral Estoppel Does Not Apply: The ordinary rule in federal courts is that preclusion applies following final judgment by a district court. The fact that an appeal is pending does not impact the finality of the district court judgment unless & until the appellate court takes some action. In Pharmacia, the Federal Circuit wrote that the “vast weight of case law” supports the notion that a judgment should be given its full preclusive effect even when an appeal is pending. Pharmacia & Upjohn Co. v. Mylan Pharm., 170 F.3d 1373 (Fed. Cir. 1999). Here, Versata argued that the PTO should follow that general rule and since SAP already had a full and fair opportunity to challenge the patent validity and had lost its federal lawsuit resulting in final judgment. The PTAB rejected Versata’s argument finding instead that it would would not respect any final judgment subject to a pending appeal to the Federal Circuit.

As the final judgment in the related Versata v. SAP litigation is currently on appeal to the Federal Circuit, we hold that the district court’s judgment is not sufficiently firm to be accorded conclusive effect for purposes of 37 C.F.R. 42.302 as it is still subject to reversal or amendment.

On this issue, it is interesting to note that the appeal brief filed by SAP did not challenge district court’s validity finding. Thus, although the district court decision in general could have been rejected on appeal (it wasn’t), there was simple no chance even in January 2013 that the appellate panel was going to opine on patent validity issues.

At this point, in January 2013, the PTAB was beginning its review of the ‘350 patent’s validity and, in parallel the Federal Circuit was considering SAP’s appeal that focused on noninfringement and remedy arguments.

No Challenge to PTO Decision to Grant Post-Issuance Review Petition: Versata also opened a third-front – filing suit in Virginia district court to overturn the PTO’s decision to grant the post-issuance review petition. In a recent decision, the Virginia court rejected that request in Versata Development v. Rea (as Director of USPTO) and SAP AG, 2013 WL 4014649 (E.D. Va. 2013) (no subject matter jurisdiction). The AIA indicates that the PTO’s determination of whether or not to institute post-grant proceedings are “final and nonappealable.” 35 U.S.C. 324. Versata argued that “nonappealable” in the statute should be seen as merely limiting direct appeals to the Federal Circuit and that its request for review was akin to a “civil action” under 35 U.S.C. 145 and not an “appeal.” Bolstering that argument is the language of 35 U.S.C. 329 and 141 that define appeal in post-issuance proceedings as appeals to the Federal Circuit. However, the district court rejected Versata’s argument and held that the court lacked jurisdiction under the statute and that, in any case, the decision to grant the review was only an interlocutory decision. It is unclear, but Versata may appeal this decision soon. [As an aside, the language of the district court opinion suggests that petition is denied

Federal Circuit Decision (Largely) Affirms Lower Court: The next event in this long saga came in May 2013 when the Federal Circuit affirmed the district court’s determination of infringement and the damages award. The only modification of the judgment was to ask the lower court to be more particular in injoining infringement without injoining sales of SAP products in general.

PTAB Final Judgment: The following month in June 2013, the PTAB came out with its final ruling holding that the patent claims are invalid under 35 U.S.C. §101 as unpatentably abstract. This decision obviously temporally follows both the district court decision and that of the Federal Circuit. Yet, the PTAB found itself to differ on both claim construction and validity.

In particular, the PTAB determined that it would apply the “broadest reasonable interpretation” (BRI) standard to claim construction during post-issuance proceedings even though the terms had already been construed by the district court in a final judgment. The PTO’s rational is that (1) it is not bound by the district court judgment since “appeals from this proceeding are exclusively the Federal Circuit rather than to district courts” and that (2) the patentee’s ability to amend claims during review suggests that BRI should apply.

In the 101 analysis, the panel found that the claimed method of determining a price using product group hierarchies was a “disembodied concept” capable of being performed mentally, on paper, or on a general purpose computer. The PTO final judgment did not substantially revisit the issues of preclusion or whether the PTO has standing to challenge the patent under Section 101.

At the PTAB, the current status is that the Board is considering a rehearing request by Versata with the primary new focus being on the Federal Circuit’s Ultramercial decision. Versata again raised the contention that §101 is not a permissible ground for post grant review. Versata writes “Because § 101 is not a condition for patentability, much less specified as such as required by 35 U.S.C. § 282(b)(2), it is not reviewable in a post-grant review (or CBM review).”

All these issues are likely to come to a head as the case is appealed to the Federal Circuit over the next year.

= = = = =

Claims at Issue:

17. A method for determining a price of a product offered to a purchasing organization comprising: arranging a hierarchy of organizational groups comprising a plurality of branches such that an organizational group below a higher organizational group in each of the branches is a subset of the higher organizational group; arranging a hierarchy of product groups comprising a plurality of branches such that a product group below a higher product group in each of the branches in a subset of the higher product group; storing pricing information in a data source, wherein the pricing information is associated, with (i) a pricing type, (ii) the organizational groups, and (iii) the product groups; retrieving applicable pricing information corresponding to the product, the purchasing organization, each product group above the product group in each branch of the hierarchy of product groups in which the product is a member, and each organizational group above the purchasing organization in each branch of the hierarchy of organizational groups in which the purchasing organization is a member; sorting the pricing information according to the pricing types, the product, the purchasing organization, the hierarchy of product groups, and the hierarchy of organizational groups; eliminating any of the pricing information that is less restrictive; and determining the product price using the sorted pricing information.

26. A computer readable storage media comprising: computer instructions to implement the method of claim 17.

Failing to Use Post-Grant Review as a Bully Club

Patent, , , ,

by Dennis Crouch

Inter Partes Review of U.S. Patent No. 7,582,051 (Heart Failure Technologies,LLC v. CardioKinetix, Inc.) (P.T.A.B. IPR 2013-00183)

In early 2013, Akin Gump attorney Sanford Warren sent an interesting letter to the medical device start-up company CardioKinetix on behalf of Akin Gump's clients Heart Failure Technologies. Heart Failure is a non-practicing entity looking to license its U.S. Patent No. 7,485,088. Oddly, Heart Failure did not threaten to sue CardioKinetix but rather threatened to file an inter partes review against one or more of the company's unrelated patents. Warren wrote: "If we have not received a substantive response by [1:00pm Central Time on December 21, 2012], we will file an inter partes review petition against one or more of CardioKinetix's patents on [December 21]." File Attachment: AkinGumpThreatLetter.pdf (1481 KB). Heart Failure eventually did file the IPR against CardioKinetix's U.S. Patent 7,582,051 – alleging that two of the claims were invalid as obvious based upon a combination of three prior art references.

At the outset, the Patent Trial and Appeal Board (PTAB) must determine whether to grant or deny a petition for inter partes review. Here, the PTAB denied the petition – finding that "the record … does not demonstrate that there is a reasonable likelihood that Petitioner would prevail with respect to at least one challenged claim. We consequently deny the petition and decline to institute an inter partes review of the '051 patent." File Attachment: PTABDecision.pdf (438 KB).

The decision is somewhat interesting – the basic failure of the petition was that the petitioner gave no reason why someone of skill in the art would combine the elements taught by the various references (other than the fact that they all relate to heart treatments).

The fact that [the three prior art references] all concern human heart repair is not in itself sufficient rationale for making the combination. Many heart repair devices exist. That fact alone would not make it obvious to combine their features. Petitioner must show some reason why a person of ordinary skill in the art would have thought to combine particular available elements of knowledge, as evidenced by the prior art, to reach the claimed invention. See KSR Int'l Co. v. Teleflex, Inc., 550 U.S. 398, 418 (2007). This, the Petitioner has not done. That the references relied upon all relate to human heart repair does not amount to "some articulated reasoning with some rational underpinning to support the legal conclusion of obviousness." See id. (internal quotations omitted).

At this point, Heart Failure can ask the Board to review its decision. However, under 35 U.S.C. §314, the decision is "nonappealable."

I corresponded with CardioKinetix outside counsel Rick Shoop (ShayGlen) who indicated that the defense was fairly inexpensive (compared with patent litigation) at roughly three times more costly than filing an ex parte appeal to the PTAB.  

* Note –  A reader asked if I meant to use “bully club” or instead the more common “billy club.”  My intent here was to focus on the potential for bullying and so I thought the term fit.  

Bits & Bytes from Jonathan Hummel

Patent

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