Search Results for: "sas institute"

Bits & Bytes from Jonathan Hummel

Patent

RECENTLY 

#1. House Bill Would Exempt USPTO from Sequestration.

  • Tony Dutra at Bloomberg BNA reports a Bill has been introduced into the House that would exempt the USPTO from government cuts forced by sequestration. The Bill, and an accompanying letter signed by several Silicon Valley Congressman urgers Congress to exempt the USPTO because that Office is funded solely by fees paid with the applications it receives. The USPTO stands to lose about $150 million in funding.

#2. Judge's Facebook Friends not grounds for Recusal

  • Venkat Balasubramani at Eric Goldman's Technology & Marketing Law Blog reports on two cases that seek to answer the question whether or not Facebook "friendships" are grounds for Judicial recusal. The two opinions are further evidence of the way the social networking site is affecting the law in very basic ways by defining or redefining relationships.

#3. Library of Congress Logging Blawgs

#4. New Digital Rights Management Technology (& the Fictitious Lillian Virginia Mountweazel).

  • James Bridle at The Observer reports that Germany's Fraunhofer Institute recently revealed that it is working on a new digital rights management system, entitled SiDiM. Regular DRM involves making changes to the code of the media. The proposed SiDiM, however, make literal changes to the content of the media. For example, the word "unhealthy" would automatically change to "not healthy" and thus distinguish a plagiarist's work from a licensed work. Indeed, there is precedence for this: the "Mountweazel" is a made-up word inserted into a dictionary to catch unwary plagiarists, which originates in the fictitious Lillian Virginia Mountweazel who first appeared in the New Columbia Encyclopedia of 1975.

JOBS

Patent Search Attorney – Large Corporation – Evanston, Ill.

  • Cardinal Intellectual Property, an Intellectual Property Search and Services company, is seeking a Patent Search Attorney to work in its Evanston, Illinois office.

Patent Attorney / Agent – Law Firm – Fairfax, Va.

  • MG-IP Law, PLLC is accepting resumes for a Patent Attorney or Patent Agent with an electrical or computer science background and at least two years of experience. MG-IP is a growing top 40 IP firm located in the northern Virginia area and offers a flexible work environment.

UPCOMING EVENTS

Related articles

 

Bits & Bytes from Jonathan Hummel

Patent

RECENTLY 

#1. House Bill Would Exempt USPTO from Sequestration.

  • Tony Dutra at Bloomberg BNA reports a Bill has been
    introduced into the House that would exempt the USPTO
    from government cuts forced by sequestration. The Bill, and an
    accompanying letter signed by several Silicon Valley Congressman urgers
    Congress to exempt the USPTO because that Office is funded solely by fees
    paid with the applications it receives. The USPTO stands to lose about
    $150 million in funding.

#2. Judge's Facebook Friends not grounds for Recusal

  • Venkat
    Balasubramani     at Eric Goldman's Technology & Marketing Law Blog
    reports on two cases that seek to answer the question whether or not Facebook "friendships"
    are grounds for Judicial recusal. The two opinions are further evidence of
    the way the social networking site is affecting the law in very basic ways
    by defining or redefining relationships.

#3. Library
of Congress Logging Blawgs

#4. New Digital Rights Management
Technology (& the Fictitious Lillian Virginia Mountweazel).

  • James Bridle at The Observer reports that Germany's
    Fraunhofer Institute
    recently revealed that it is working on a new digital rights management
    system, entitled SiDiM.
    Regular DRM involves making changes to the code of the media. The proposed
    SiDiM, however, make literal changes to the content of the media. For
    example, the word "unhealthy" would automatically change to
    "not healthy" and thus distinguish a plagiarist's work from a
    licensed work. Indeed, there is precedence for this: the "Mountweazel"
    is a made-up word inserted into a dictionary to catch unwary
    plagiarists, which originates in the fictitious Lillian Virginia
    Mountweazel who first appeared in the New Columbia Encyclopedia
    of 1975.

JOBS

Patent Search Attorney – Large
Corporation – Evanston, Ill.

  • Cardinal Intellectual Property,
    an Intellectual Property Search and Services company, is seeking a Patent
    Search Attorney to work in its Evanston, Illinois office.

Patent Attorney / Agent – Law Firm –
Fairfax, Va.

  • MG-IP Law, PLLC is
    accepting resumes for a Patent Attorney or Patent Agent with an electrical
    or computer science background and at least two years of experience. MG-IP
    is a growing top 40 IP firm located in the northern Virginia area and
    offers a flexible work environment.

UPCOMING EVENTS

Related
articles

 

Guest Post on Using the Antitrust Laws to Police Patent Privateering

Patent, , , ,

Editorial by David A. Balto.  Mr. Balto is an antitrust attorney in Washington D.C. whose representations include high technology firms.  In addition to his practice, Mr. Balto was formerly a policy director of the Federal Trade Commission, attorney-adviser to Chairman Robert Pitofsky, and an antitrust lawyer at the U.S. Department of Justice.  He has also published research and authored scholarship for Google on technology policy topics.

Using the Antitrust Laws to Police Patent Privateering

By David Balto

In the ongoing debate over patent assertion entities, increased attention is being paid to “patent privateering”: the practice of operating firms transferring patents to non-practicing entities in order to bring patent litigation against their rivals. As I explained in a recent article:

“Privateering is the practice by which established operating companies arm trolls with patents and deploy them to engage in expensive, incessant litigation against competitors. This Trojan horse approach allows companies to accrue the benefits of the egregious troll conduct without incurring any of the risks. And more often than not it is used as a competitive weapon to try to raise costs and dampen competition from rival operating companies.”

Firms like Google, BlackBerry and Red Hat recently filed comments with the Federal Trade Commission and Department of Justice, explaining the substantial concerns that patent privateering raises from a competition perspective.

This begs the question: is there an antitrust solution to the privateering problem?

A recent article by Mark Popofsky and Michael Laufert provides a thoughtful roadmap on how the antitrust laws can be used to police privateering. It’s a must-read for businesses and policymakers concerned that patents are becoming strategic tools for anticompetitive conduct.

In the current patent ecosystem, large operating companies accumulate patents in part for defensive purposes.  Those companies are unwilling to use their patents in certain strategic fashions because they fear that the same will be done to them.  These patent portfolios help assure patent peace because they assure that any strategic conduct will be met with a similar response – so-called mutually assured destruction.

Popofsky and Laufert outline three concerns around privateering transfers to PAEs that upset that balance. Privateering lets operating companies evade “[mutual assured destruction] or reputational constraints to raising rivals’ costs” and “FRAND or other licensing commitments,” and provides a method for “strategic outsourcing to PAEs to hinder rivals.”  Essentially, privateering companies are use PAEs because they have the incentive and ability to engage in strategic conduct that is prevented by current market forces.

The article gives a prime example of these concerns: the well-reported patent transfer from Nokia and Microsoft to patent troll MOSAID. After the failure of Nokia’s open source Symbian mobile operating software, Nokia joined forces with Microsoft and adopted its Windows Phone 7 platform. Nokia had originally supported open source software and made numerous FRAND commitments, but these commitments became a hindrance when Android (open source) became Nokia’s chief competitor. Microsoft and Nokia orchestrated a transfer of 2,000 of Nokia’s patents, 1,200 of which were standards essential patents (SEPs) with FRAND commitments, to MOSAID for a nominal fee. As part of the deal MOSAID has to pay Microsoft and Nokia 2/3 of the patent royalties and meet strict “royalty protection provisions and milestone payments calculated to maximize . . . revenue.”

The MOSAID transfer exhibits all three of the anticompetitive concerns. MOSAID has the incentive and ability to engage in strategic patent litigation.  Nokia could not assert these 2,000 patents without breaking patent peace and risking counter-suits for patent infringement. MOSAID can use these patents without fear because MOSAID does not practice in the industry and immune to countersuits. The transfer also allows Nokia to evade a FRAND commitment not to charge more than 2% total royalty for all the wireless SEPs in Nokia's portfolio. MOSAID did not make this promise, and even if it honored Nokia's promise and only charged 2% for the 1,200 SEPs MOSAID received the total fees could still double for competitors.

Nokia later transferred portions of its SEP portfolio to patent trolls Sisvel and Vringo. These transfers could potentially quadruple the licensing cost of these SEPs. MOSAID also can’t collect royalties from “third parties implementing certain Microsoft software in their mobile devices.” However, MOSAID must meet revenue expectations or it risks activating a default provision in the transfer contract that would allow Nokia to take those patents back for only $10,000. This creates serious strategic interests for MOSAID to aggressively target Microsoft and Nokia’s rivals.

Fortunately, Popofsky and Laufert offer several ways to challenge these troubling transfers to patent trolls under the existing antitrust laws. This outsourcing of patent litigation might “form part of a scheme to maintain or obtain monopoly power” in violation of Section 2 of the Sherman Act which prohibits monopolization. A plaintiff would have to prove that transfers to patent trolls are a part of an exclusionary strategy to obtain or maintain monopoly power by raising rivals costs. The first part of the strategy is to create patent-holdup by making FRAND commitments to get patents into a standard and then evading those FRAND commitments through transfers to patent trolls. The second part of the strategy is to raise licensing fees by arming patent trolls that have no incentive to negotiate license rates because they have no risk of patent counter-suits or injury to their reputation. If proven, a private plaintiff could receive an award of treble damages and the government can secure injunctive relief.

The transfer can also be challenged under Section 7 of the Clayton Act which prevents mergers and acquisitions if they are likely to substantially lessen competition or tend to create a monopoly. Patent acquisitions can be challenged under Section 7.  The article notes that the Department of Justice has already used this power in 2011 to prevent Microsoft from acquiring Novell’s patents to which Microsoft already had a license. This agency action was made to prevent a transfer whose only logical purpose was to attack open source software. The government can continue to use its Section 7 power to block transfers to patent trolls and it can challenge these transfers before they inflict harm.

The Section 7 power should be fully explored.  The National Restaurant Association and Food Marketing Institute have suggested that the agencies need to increase their scrutiny of patent transfers to PAEs and they offer an important tool.  They suggest that the FTC and DOJ adopt regulations to make more of these transfers reportable under the Hart Scott Rodino Act. This would give the agencies far stronger tools to fully investigate and challenge these transfers.

The transfers could also be challenged as a restraint of trade under Section 1 of the Sherman Act. Michael Carrier has commented that the MOSAID transfer “could present a Section 1 concern similar to a pooling arrangement the Supreme Court declared per se illegal in Singer Manufacturing Co.” Transfers running afoul of Section 7 can also "be recast as violations of Sherman Act Section 1."

Finally, the FTC can also challenge transfers that seek to dodge FRAND and other commitments through Section 5 of the FTC Act. The FTC has already done this in a consent order with N-Data Solutions. The FTC Act gives the Federal Trade Commission the power to prevent "unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce."

The Popofsky/Laufert paper should be required reading for the regulators at the FTC and DOJ. Well conceived enforcement actions against transfers to trolls would be one of the most effective ways to deal with the growing privateering problem.

FCBA and Santa Clara Program on Advanced Complex Litigation

Patent

By Jason Rantanen

This year, the Federal Circuit Bar Asociation is sponsoring a series of programs on Advanced Complex Litigation. Next Friday, May 3, the FCBA and Santa Clara Law School's High Tech Law Institute will co-host the next segment of the series. Speakers and panelists include: Chief Judge Rader, Judges Whyte and Koh, Magistrate Judge Grewal, Erich Spangenberg (IP Nav), Alan Schoenbaum (Rackspace), Mary Coyne (Verizon), Courtland Reichmann (McKool) and others. In addition, professor Colleen Chien will present the
interim results of an on-going survey of in-house counsel.

Topics include:

• Discovery
• Case Management
• Focusing Disputes
• Multiple Party Litigation

Further details are available here: http://law.scu.edu/hightech/2013-advanced-complex-litigation-series.cfm . The last program of the series will take place in Newark on May 30. Details on the entire series are available here: http://www.fedcirbar.org/olc/pub/LVFC/cpages/misc/acl_series.jsp .

Guest Post: New USPTO Professional Conduct Rules Will Take Effect on May 3

Patent

Guest Post by Lisa Dolak, Angela S. Cooney Professor of Law at Syracuse University College of Law. Professor Dolak has written extensively on professional responsibility issues in the patent law context.

Effective May 3, 2013, the USPTO has adopted new professional conduct rules and has modified some existing rules governing the conduct of disciplinary investigations. The Final Rule is published in today's Federal Register. See Changes to Representation of Others Before The United States Patent and Trademark Office, 78 Fed. Reg. 20179 (April 3, 2013). As discussed in my previous post relating to the corresponding Notice of Proposed Rulemaking, the new professional conduct rules will replace the current ABA Model Code-based USPTO ethics rules with a version of the ABA Model Rules, versions of which have been adopted in 50 jurisdictions (49 states and the District of Columbia).

According to the USPTO, its goal is to "bring standards of ethical practice before the Office into closer conformity with the professional responsibility rules adopted by nearly all States and the District of Columbia, while addressing circumstances particular to practice before the Office." In addition to greater harmonization with state ethics rules, the USPTO indicates that practitioners will benefit from being able to reference interpretive sources applying the corresponding Model Rules, such as the Comments to the Model Rules and state bar opinions and disciplinary decisions (although it notes that "[s]uch decisions and opinions are not binding precedent relative to USPTO rules").

The USPTO reports that it received 19 responses commenting on the October 18, 2012 Notice of Proposed Rulemaking (some of which did not relate to the proposed changes), including "[m]any" that "supported the new rules and their alignment with State bar standards." Several comments related to new USPTO Rule 11.106(c), which expressly reinforces a practitioner's duty of disclosure, notwithstanding his or her confidentiality obligations ("A practitioner shall disclose to the Office information necessary to comply with applicable duty of disclosure provisions."). In particular, according to the Final Rule, "the comments raised concerns about the balance between the practitioner's duty to disclose information to the Office and the duty to protect confidential information of third parties, including that of other clients."

In response, the USPTO noted that ABA Model Rule 1.6 cmt. 12 (2012) states that "If. . . other law supersedes this Rule and requires disclosure, [Rule 1.6](b)(6) permits the lawyer to make such disclosures as are necessary to comply with the law." (Note, though, that the Comment also acknowledges that "[w]hether such [other] law supersedes Rule 1.6 is a question of law beyond the scope of these Rules."). The implication is that the applicable "other law" here is the practitioner's duty of disclosure. By analogy, the USPTO also cites to a North Carolina Ethics Opinion (N.C. Ethics Op. 2005-9 (2006)) for the proposition that a "lawyer for [a] public company may reveal confidential information about corporate misconduct to [the] SEC under [a] permissive-disclosure regulation authorized by [the] Sarbanes-Oxley Act, even if disclosure would otherwise be prohibited by [a] state's ethics rules." The USPTO also emphasizes that the primacy of the practitioner's disclosure obligation is "not a new requirement" (citing current 37 C.F.R. § 10.23(c)(10) and Manual of Examining Procedure, 8th Ed., Rev. 9 (Aug. 2012) Ch. 2000), and states that the express inclusion in new Rule 11.106(c) of the practitioner's obligation to comply with his or her disclosure obligations notwithstanding the duty of confidentiality "may be helpful in responding to any allegation of an ethical violation before a State bar in a situation where the practitioner engaged in particular conduct to comply with this USPTO Rule."

Regarding the possibility that the potential conflict between the duties of confidentiality and disclosure could lead to a prohibited "direct adversity" client conflict, the USPTO cited the client conflicts rules, which, it noted, "would generally prevent a practitioner from accepting clients who may have potentially adverse interests." Finally, it pointed to withdrawal as the ultimate solution ("[i]n certain situations a practitioner may seek to withdraw from representation under § 11.116 to avoid a conflict of interest"). Notably, the Final Rule includes this additional statement on withdrawal as a solution to the potential disclosure-confidentiality conflict:

Solely for the purposes of enforcement under 37 C.F.R. Part 11 (Representation of Others Before The United States Patent and Trademark Office), if a practitioner has a conflict of interest in a given matter, arising from a different client, timely withdrawal by the practitioner from the given matter would generally result in OED not seeking discipline for conflicts of interest under Part 11.

In response to other comments, the USPTO:

  • Declined to institute a mandatory CLE reporting requirement, notwithstanding the fact that patent agents are not subject to state bar CLE requirements.
  • Declined to designate a "default jurisdiction" that would provide a single body of case law for guidance, since the USPTO "is its own jurisdiction", and noted (again) that "State case law and opinions are not binding precedent on the" USPTO.
  • Declined to adopt ABA Model Rule 6.1 (Voluntary Pro Bono Publico Service) and ABA Model Rule 6.5 (Nonprofit and Court Annexed Limited Legal Services Program), citing the USPTO's Patent Ombudsman Program, its cooperation with local bar associations to develop a pro bono services "clearinghouse" operated by the Federal Circuit Bar Association, and the USPTO Law School Clinic Certification Pilot Program as examples of the USPTO's "broad[] support[] and encourage[ment of] pro bono services."
  • Adopted the suggestion that new Rule 11.108(e) be revised to include "proceedings before the Office" (and not just "pending or contemplated litigation"), "ensur[ing] that a practitioner may advance fees to prevent or remedy abandonment attributable to the practitioner."
  • Adopted the suggestion that proposed § 11.108(i)(3) (authorizing a practitioner to take an interest in a patent as part or all of his or her fee) be expanded to include an express authorization to (as part or all of a practitioner's fee) take an interest in a "patent or patent application."
  • Noted that although "a practitioner is prohibited from representing a client if the representation will be materially limited by the practitioner's own interests, unless the practitioner reasonably believes that the representation will not be adversely affected and the client provides informed consent," owning shares in "a diversified mutual fund [which includes stock in a company that competes with the practitioner's client] would ordinarily not be considered [taking] an interest adverse to a client under the USPTO Rules."
  • Adopted a suggestion that § 11.201, like ABA Model Rule 2.1, authorize a practitioner to "refer not only to law but to other considerations such as moral, economic, social and political factors that may be relevant to the client's situation" "[i]n rendering advice."
  • Clarified that § 11.305 (relating to prohibited ex parte communications with, e.g., judges, administrative patent and trademark judges, and "employee[s] or officer[s] of the Office") does not "prevent ex parte communication that is authorized by law, rule or court order, in an ex parte proceeding."
  • Adopted ABA Model Rule 3.6 as § 11.306 relating to trial publicity (except for the provisions relating to criminal cases).
  • Emphasized that the "duty to cooperate with the Office of Enrollment and Discipline" pursuant to § 11.801(b) (which does not appear in the Model Rules) is not a new requirement (having previously been housed in 37 C.F.R. § 10.131), and noted that "there are at least seven jurisdictions that adopted the ABA Model Rules and that have ethics rules regarding cooperating with the respective jurisdiction's disciplinary authority."
  • Affirmed its power to pursue reciprocal discipline against practitioners.

Note that the numbering of the new USPTO rules generally tracks the numbering of the corresponding ABA Model Rules. For example, USPTO Rule 11.107 parallels Model Rule 1.7, USPTO Rule 11.201 parallels ABA Model Rule 2.1, etc. The Final Rule notes that the USPTO has (thus far) decided not to adopt the substantive changes made to the ABA Model Rules in the latest (August 2012) ABA revision, as "most States have not yet done so," but that it "will continue to evaluate the ABA Model Rule changes and adopt them as appropriate."

Patent Conferences in Chicago

Patent

By Jason Rantanen

There are two terrific-looking conferences coming up in Chicago in early April.  On Thursday, April 11, Loyola University Chicago's Law Journal will be hosting "Patents, Innovation & Freedom to Use Ideas," and on Friday, April 12, the Illinois Institute of Technology Chicago-Kent College of Law will be hosting PatCon 3.  Headlining this year's PatCon is a debate about the patent system between Judge Posner and Richard Epstein.  Details on both conferences below.

Loyola Patent ConferenceLoyola University Chicago Law Journal's "Patents, Innovation, and Freedom to Use Ideas"
Thursday, April 11, 2013
PHILIP H. CORBOY LAW CENTER, POWER ROGERS & SMITH CEREMONIAL COURTROOM • 10th Floor
25 E. Pearson Street · Chicago, IL 60611

 Under the Constitution, the justification for a patent system—if there is one—is to advance the public welfare by promoting the progress of science. The Constitution authorizes a possible means to accomplish this goal by providing Congress the power to grant limited exclusive rights to those who sufficiently advance the public welfare through innovation. Our Conference will provide a forum for nationally recognized scholars and judges to discuss the trade-off between two interests of the public: the interest in development of new ideas and the interest in freedom to use ideas. The patent system is intended to serve the former, but imposes a cost on the latter. More specifically, the Conference will explore whether the added innovation achieved by the patent system justifies its cost to society, whether it operates within the Constitution’s requirements, and whether improvements can be made or if instead a different system, or no system at all, might be a better option.

More details here: www.luc.edu/law/lawjournalconference or download the brochure here:  Download Loyola Brochure. To register, email Jimmy Kritsas at lawjournalconference@luc.edu. 7.25 hours of CLE credit will be offered.

 


 PatCon3PatCon 3
April 12
IIT Chicago-Kent College of Law
565 West Adams Street
Chicago, Illinois 60661

Highlights include:

  • An address by Federal Circuit Judge Richard Linn;
  • A debate on the patent system between Seventh Circuit Judge Richard Posner and Prof. Richard Epstein (NYU and Chicago);
  • A plenary session featuring USPTO Chief Economist Alan Marco, Prof. Mark Lemley (Stanford), and Prof. David Abrams (Penn); and 
  • An industry panel with senior IP representatives from BP, AbbVie, Bridgestone, and RR Donnelley.  

For more details, download the flyer (here: Download PatCon3 Flyer) or visit the conference website at: http://www.kentlaw.iit.edu/academics/jd-program/certificate-programs/intellectual-property-law/patcon-3. 

CLE credit for attendance is expected.  You can register at:  https://www.kentlaw.edu/patcon/

Hope to see you at both!

Patent Trolls by the Numbers

Patent, ,

by Assistant Professor Colleen Chien, Santa Clara University Law School, colleenchien@gmail.com, @colleen_chien (Download PDF of this at SSRN)

Following President’s Obama remarks and reintroduction of the SHIELD Act, today the House Judiciary Committee Subcommittee on Courts, Intellectual Property and the Internet is holding hearings on litigation abuse by patent trolls (aka patent assertion entities or PAEs). Companies J.C. Penney, SAS, Cisco, Johnson & Johnson, & Adobe, are testifying. Part of the discussion may focus on patent troll metrics, on which I have previously reported. These statistics draw heavily upon proprietary research as well as my own analyses, so, in the interest of full disclosure, below are the numbers and what I know about them.  Some say that the time has come to act, not to further study the PAE phenomenon but I believe in both – that to craft interventions that are both narrowly tailored and actually will work requires a deep understanding and careful analysis.

(It bears mentioning as well that much also can be learned from related experiences  — indeed, litigation abuse is nothing new and in fact the Judiciary committee that is hosting today’s hearing held a hearing on litigation abuse in non-patent contexts yesterday. In the patent troll context, many interventions, like fee-shifting, improving patent quality control, special defenses, and maintenance fee tweaking have been suggested/tried before – in the recent past (early 2000s) as well as in the late 1800s, against both farming and railroad patent trolls and related contexts. FWIW, in my paper on the topic,  I discuss other fixes like court leadership, industry organizations, collective action, and bolstering protection of users based on what has worked in these settings.)

1. PAEs brought 62% of 2012 patent litigations

According to RPX Corporation PAEs initiated 62% of all patent litigation, or 2,921 of 4,701 suits in 2012. RPX is a publicly-traded company that provides solutions to troll threats for its member companies and has great data, principally maintained by Seth Besse.

        PAE Suits (2005-2012)

Credit: © RPX Corporation 2013

Data checks on RPX numbers:

  1. Patent Freedom reports 2,923 NPE lawsuits in 2012, as compared to RPX's 2,921 PAE lawsuits, using a slightly different definition.
  2. I compared about 1,000 of RPX's codings with my own, and reported the result in Appendix C of this paper: "The share of disagreements between the databases was 7%, with the net number of trolls varying by 4%."
  3. Robin Feldman, Sara Jeruss, and Joshua Walker found that about 40% of 2011 suits were brought by patent monetizers in their study for the GAO. See comparison at page 17.

Comparison to 2011: The share of suits brought by PAEs in 2012 grew from 2011. However, the AIA's misjonder rules, which curbed the troll tactic of naming multiple unrelated defendants in a single suit which had artificially deflated troll suit numbers, are responsible. Thus, the increase in the number of troll suits, post-AIA, is most likely an artifact of the AIA.

2. In 2012, PAEs Sued More Non-Tech Companies than Tech Companies

Though the PAE share may surprise some, patented technologies like software are the building blocks of modern commerce. "Low-tech" industries like funeral homes, advertising agencies, and retailers like JC Penny which is testifying today are all taking steps to protect themselves from troll demands. Though historically a "tech" problem, in 2012 PAEs sued more non-tech companies than tech companies, according to the analysis below by Patent Freedom, which provides market intelligence on patent trolls. Retailers are hit the hardest by non-tech PAE suits, followed by automotive like Ford, which has also testified against trolls, financial services, and consumer products. So expect a broadening of the coalition to deal with trolls especially as many in these sectors are likely being sued over their use rather than making of technology.

3. Individual Inventor v. Corporate PAE suits

Not all trolls are created alike. Individuals get injunctions, corporate trolls don't. (See my paper with Mark Lemley, at FIG 3.) The SHIELD act would force corporate losing trolls to pay, but not individuals. "Non-practicing entities" can also include universities and startups, which is why I created the term PAE to apply to businesses that assert patents as their primary business model – universities and startups don't, they are focused on commercializing or transferring technology. (As Justice Kennedy put it in his eBay concurrence, trolls are firms that "use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees.")

Based on data provided by RPX, 94% of 2012 suits brought by entities that don't practice were brought by corporate PAEs. Individual inventors were another 5% and the remaining 1% universities, based on data provided by RPX. However, PWC's excellent litigation report reports much higher "individual NPE" proportion – of 51% but for the 1995-2011 period and likely using a different methodology (the PWC university share is a bit higher). Because the SHIELD act turns on the individual vs. corporate distinction, it would be good to reconcile these numbers. 

The Distribution of 2012 NPE Suits by NPE Type (based on RPX data)

4. PAE defendants comprised 59% of all patent lit defendants

According to RPX Corporation, defendants to PAE suits represented 59% of 2012 patent litigation defendants, or 4,125 out of 6,934. (Patent Freedom counted 3,859 NPE defendants to RPX's 4,125).

    PAE Defendants (2005-2012)

Credit: © RPX Corporation 2013

Comparison to 2011: As the graph above shows, the absolute number of defendants named in PAE suits in 2011 shrank about 25% in 2012. However, that the relative share of troll defendants only declined by 4% (from 63% to 59%), supports that this trend reflects a general decline in new patent cases brought by practicing and non-practicing entities, rather than a fundamental shift away from the courts by PAEs.

The Success of the Misjoinder Rules

While the share of PAE defendants has not gone down significantly, I do believe, based on unreported analyses that I have performed, that trolls have changed their litigation tactics in at least one respect – they are less likely, because of the misjoinder rules, to name small defendants in lawsuits where they cannot be joined with other parties. In this way, the joinder rules can be said to be having their intended impact of making life harder for trolls. The small companies that actually are sued, however, are arguably worse off because they have fewer joint defense options. And even if they are not sued, many small defendants are receiving letters (see below).

5. 55% of Unique PAE defendants makes $10M or less

Based on my analysis of RPX's database, 55% of unique PAE defendants make $10M or less in revenue, and 66% make less than $100M a year. (previously I have erroneously reported the 55% number as associated with defendants making "less than $10M", it should be "$10M or less." Apologies for the error!). While small defendants have historically received less attention as troll targets, the patent woes of podcasters and small businesses that use scanners, not to mention bakeries (I love bread) have gotten recent attention.

Notes:

Because small companies are sued fewer times than large companies – e.g. Apple gets dozens of PAE demands whereas a small company may only get a handful – the number of total demands is more heavily skewed towards large companies than the unique defendant count. However, I believe 55% to be a conservative estimate because I calculated it based on actual revenue estimates in the RPX database provided by Dun & Bradstreet and commercial providers, and excluded from both the nominator and denominator companies for whom no revenue is reported. If, on the other hand, we assume that companies without coded revenue likely have limited revenue – an assumption other scholars have made– the share would grow. Longer discussion of methodological issues and approaches to filling in missing data here. Also of note, because of the success of the joinder rules in discouraging suits against individual small cos., the 55% number has likely declined in recent months.

6.At the ITC in 2012, PAE complainants brought about 35% of patent complaints and about half of patent respondents.

337 Patent Investigations & Respondents

2011

2012

New Patent Investigations

69

40

PAE Share

23%

30%

New Patent Defendants

226

184

PAE Share

43%

48%

My research assistants worked with me to code the complainants in these cases, using data provided by the ITC. As with district court defendant counts, total ITC investigations and defendants (called "respondents") declined in 2012 from 2011, by about 40% and 20%, respectively. However, the PAE share of investigations and respondents actually increased from 2011 to 2012, from 43% to 48%.

Data checks:

  1. Last summer, the ITC published a report called "Facts and Trends" that tracks NPEs. It reported a combined NPE share of 19% of investigations, and 41% of defendants in 2011, versus my PAE shares of 23% and 43%, respectively (see above). The ITC report also notes that ITC numbers tend to vary greatly from year to year, given their relatively small numbers of investigations, which I tend to agree with.
  2. Covington & Burling's Robert Fram and Ashley Miller, in an excellent unpublished paper The Rise of Non-Practicing Entity Litigation at the ITC: The State of the Law and Litigation Strategy (Jan. 5, 2011), tracked the percentage of companies relying on their licensing activities to show a domestic industry from 13% in 2000-2006 to 35% in the first 8 months of 2010). Based on an extension of their database they shared with me, the rate in 2011 (through Oct. 1) was 41%.

Legislative reform?: Members of the ITC bar and ex-ITC officials remain deeply skeptical of the efforts to reform the ITC legislatively that tech companies are pushing for. Last summer, I argued that the ITC's decision-making was evolving, and recommended revisiting its record in six months to a year. However, the fewer cases and exclusion orders that the ALJs have issued since then have meant a slower evolution of the ITC's law, despite more attention from government agencies and others.

While we wait, I still find it puzzling that entities like Acacia, Industrial Technology Research Institute of Taiwan, Beacon Navigation GmbH of Switzerland, and Intellectual Ventures would put up the considerable funds it takes to bring an ITC case when the ITC can't award the licensing revenues they seek, but only an exclusion order. The best I can tell is that this trend reflects a deeper dissatisfaction of patentholders with the consequences of eBay, rather than a desire to stop unfair importation, particularly since PAEs name domestic defendants more often than foreign ones (see Appendix A).

7. Some High Impact PAE Patents Fit the "Buy and Sue" Pattern

SHIELD has put more emphasis on the provenance of patents, with Joff Wild at IAM estimating that SHIELD might only cover one in four NPEs based on Patent Freedom Data. I really respect Joff's blog and magazine, and recommend it to anyone who is serious about understanding the monetizer perspective (though the magazine is expensive). However, I have a different view of the numbers, that because patent impact is heavily skewed, what matters are high impact patents– that is to say, if just Lodsys and Geotag were discouraged from bringing their suits, many people would have been happy. Through our analysis of "high impact" patents I asked Patent Freedom to put together for another analysis, we found that the nine out of ten were purchased before assertion, rather than owner-asserted.

10 High-Impact PAE Patent Campaigns: 9 out of litigated patents were bought, not owner-asserted

.

Also, I understand that the Patent Freedom folks have a different view of their own data than IAM so if you are interested follow them on Twitter:@PatentFreedom.

8. PAEs are Less Successful than Practicing Entities in Litigation

PWC's excellent annual litigation report is chock full of statistics about patent litigation and in particular, with respect to NPEs, that: they look to juries more (but the differences are declining), a higher median damage award and a lower than practicing company success rate (34% practicing co v.23% NPE ) that is declining (Chart 5B).

John Allison, Mark Lemley, and Josh Walker's paper documents that the "most litigated" (8x or more) NPE patents lose more than 90% of the time in court. Data provided by RPX found that such repeat litigants dominate PAE cases – 61% of defendants named in 2011-2012 were sued by a PAE who had brought the case 8+ times (see page 33).

9. Public PAEs

My research assistant and I have been working on profiling public company PAEs – those which derive a majority or significant revenue from asserting patents. Depending on how you slice it, we have found about 16 of them (ACTG, ASUR, DEMO: OTC, NSSI, OPTI, RMBS, VHC, WIN:TO, VRNG, PANL, DSS: NYSE Amex , WDDD: OTC, BB,PCO, PRKR, UPIP); a number of the stocks are very volatile and live and die by litigation outcomes – invest with caution.

10. What We Need to Understand Better: Demands , Users, the Differential Impact of Interventions

Litigations are only a tiny part of the story. While good data on patent demand letters is lacking, here are a few data points:

  • In my survey of startups, among companies that had received threats (N=79), in some cases many threats, less than a third had been sued. This survey is being redistributed to a larger and more representative sample which should yield better estimates when it is concluded.
  • In its RICO complaint against Innovatio, Cisco reported that over 8,000 letters had been sent, even though there were only 26 named defendants, a ratio of 276:1.

We also need to understand how many of these suits are user based ones – in my survey (N=79), 40% of respondents said the demand was based on a technology they were using, not making. Such suits seem hard to justify as anything but nuisance-based.

Some will say that the time has come to act, not to further study the PAE phenomenon but in order to craft interventions that are both narrowly tailored and actually will work requires careful analysis and learning from the past as many interventions like fee-shifting, patent quality control, and maintenance fee tweaking have been suggested/tried before, in related and different contexts — some of them even to trolls of the late 1800s, as detailed in my paper, which also suggests: bolstering protection of and staying cases against users, industry organizations, and collective action.)

11. What Really Counts

What really matters is not PAE litigation itself but the impact it has on businesses, innovation, and the economy, and in particular how these impacts are distributed and also the justice or injustice of the claims – that is why there is so much heat on the PAE issue –because people who are sued feel that had no ability to anticipate or avoid it. My research has documented the positive impacts of a liquid IP market, and that startups are selling to trolls and benefiting from that monetization. However, it also documents a significant emotional toll: people said demands have "invoked rage over the waste of time," made a target "very very angry," "ruined family friends" and caused "stress" and "ill-will generation [sic]": "it was agonizing to hand over all the money we had earned from a product we had invented and created ourselves to a firm that invents nothing and creates nothing. Our founder has since lost his house, car [sic] all his assets." As the numbers of impacted companies and industries continues to grow, don't be surprised if the ranks of those who support curbing most egregious litigation abuses – the practices of going after end-users, rather than manufacturers and extracting from small companies nuisance-based rather than value-based settlements – continues to swell as well.

= = = = =

Notes:

  • With thanks to my research assistants Aashish Karkhanis, Nicole Shanahan, Teri Karobonik, John Neal, and Coryn Millslagle and to RPX Corp., Patent Freedom, Gazelle Technologies, Robert Fram and Ashley Miller.
  • High impact patents discussed above include 7,222,078 (Lodsys), 7,346,472 (Bluespike), 5,937,402 (DataTern), 6,101,502 (Datatern), 5,930,474 (Geotag), 6,150,947 (Ogma), 5,223,844 (PJC Logistics), 6,185,590 (Project Paperless), 7,054,949 (Single Touch) 8,015,307 (Single Touch).

Get a New Patent Law Job: Recent Patent Law Job Postings

Patent

Here are a set of recently-posted patent law jobs posted to our Patently-O Job Board:

More jobs are being posted almost every day. We have two current sponsors on the Job Board site, including Eric Gould and Elysium Digital. Thanks for your support! – Dennis

AIA Technical Amendment Becomes Law

Patent, , , , ,

H.R. 6621, officially titled An Act To correct and improve certain provisions of the Leahy-Smith America Invents Act and title 35, United States Code was signed into law by President Obama on January 14, 2013 and, for the most part, the provisions of the law are now effective.

Here is the official summary:

  • Amends the Leahy-Smith America Invents Act (AIA) to make technical changes regarding the transitional program for covered business method patents and joinder of parties.
  • Applies, to any civil action commenced on or after enactment of this Act, the AIA's bar on using an accused infringer's failure to obtain the advice of counsel to prove that any infringement was willful or induced. (Currently, the bar would not take effect until one year after the AIA's enactment.)
  • Prohibits a nine-month waiting period for inter partes review from applying to issuances of first-to-invent patents ineligible for post-grant review. (Currently, the remaining first-to-invent patents to be issued prior to the effective date of the new first-to-file patent system have no avenue for review during the first nine months because they must wait nine months for inter parties review and are ineligible for post-grant review.)
  • Revises the filing deadline for inter partes review to be after the later of either: (1) nine months after the grant of a patent (currently, nine months after such grant or the issuance of a reissue patent), or (2) the termination date of any post-grant review.
  • Extends the time period for an applicant to file an inventor's oath or declaration, substitute statement, or recorded assignment until the date on which the issue fee for the patent is paid. (Current law permits a notice of allowance of a patent application only after such a filing.)
  • Makes provisions concerning travel expenses for employees of the U.S. Patent and Trademark Office (USPTO) and the payment of administrative judges effective as of September 16, 2011.
  • Modifies requirements and time periods for activities relating to patent term adjustments. Revises the patent extension period for certain international applications. Specifies that a civil action filed in the U.S. District Court for the Eastern District of Virginia is the exclusive remedy for challenging a USPTO decision on a request for reconsideration of a patent term adjustment determination.
  • Repeals a provision prohibiting the USPTO from accepting certain international applications designating the United States from anyone not qualified under specified application requirements.
  • Revises USPTO funding requirements to make all federal patent law fees available for expenses relating to patent processing and to permit patent and trademark fees to be used interchangeably to cover proportionate shares of the USPTO's administrative costs. (Currently, patent fees are used to cover administrative costs relating to patents while trademark fees are used to cover administrative costs relating to trademarks.)
  • Modifies requirements for applicants filing petitions to institute derivation proceedings and delineates the criteria applied to deem an application as an earlier application with respect to an invention relative to another application.
  • Sets forth authority for the Patent Trial and Appeal Board to conduct, and for courts to review appeals from, interference proceedings declared after enactment but before the effective date of certain AIA amendments replacing interference proceedings with derivation proceedings.
  • Modifies the original appointment terms for members of the Patent Public Advisory Committee and the Trademark Public Advisory Committee. Directs the Secretary of Commerce to designate, from among the appointed members, a Chair and Vice Chair of each committee.

Read the text:

  • http://www.gpo.gov/fdsys/pkg/BILLS-112hr6621enr/pdf/BILLS-112hr6621enr.pdf

Inter Partes Review: Winning by Losing

Patent, , , ,

By Dennis Crouch

Garmin v. Cuozzo, IPR2012–00026, (P.T.A.B. 2013) Download Notice-15

In what appears to be the first Inter Partes Revew petition decided on the merits, the USPTO Patent Trials and Appeal Board (PTAB) has granted Garmin's petition for inter partes review of only claims 10, 14, and 17 of US Patent 6,778,074 owned by Cuozzo Speed Technologies LLC.  [See UPDATE BELOW] This is a mixed opinion because Garmin had requested IPR of claims 1–20. Inter Partes Review is a spawn of the America Invents Act (AIA) and serves as a more robust and rapid version of inter partes reexamination. In order to grant an IPR petition, the USPTO must determine that the petition shows "a reasonable likelihood that the petitioner would prevail." Now that the petition has been granted, the PTAB will move forward with the trial to determine whether those three claims are valid. Under the statute, the PTAB's determination as to whether to institute a PGR cannot be appealed. 35 U.S.C. § 314.

Cuozo originally sued Garmin, Tom Tom and several automakers for patent infringement in a New Jersey federal court. That lawsuit is still in the early stages of discovery, but the basic allegation is that Garmin's navigation systems infringe the '074 claims that are directed toward the use of encoded speed limit indicators. 

For Garmin, this may be a case of winning-by-losing.  In its IPR petition, Garmin suggested that the PTO use the broad claim construction suggested by Couzo's infringement allegations for the claim requirement that a "speedometer" and a "colored display" be "integrally attached".

The Patent Owner has taken a very broad view of the meaning of the claims based upon the allegations set forth in its complaint against the products of the real parties in interest here. The "broadest reasonable construction" of the challenged claims must be consistent with the allegations set forth in Patent Owner's civil complaint. Petitioner submits, for the purposes of the IPR only, that the claim terms are presumed to take on their ordinary and customary meaning that the term would have to one of ordinary skill in the art in view of Patent Owner's civil complaint and the Specification of the '074 Patent.

The PTO rejected the notion that the patent owner's post-patent-issuance civil complaint has any bearing on the claim construction and also found that the claim scope suggested unduly broad.

Petitioner does not make known its construction of "integrally attached." Instead, Petitioner states that the term has to mean, in this proceeding, what the Patent Owner asserts it means in the infringement suits the Patent owner has filed against various parties including Petitioner. That argument is without merit. The meaning of claim terms is not governed by what the Patent Owner says they mean in filing an infringement suit based on the '074 Patent. There is no reason to assume that the Patent Owner's litigation position is correct. Litigation positions taken subsequent to issuance of the patent are unreliable. . . .

On this record, we construe "integrally attached" as applied to the colored display and the speedometer in the context of the disclosure … as meaning that the two elements are discrete parts physically joined together as a unit without each part losing its own separate identity. In the combined unit, the colored display is still the colored display and the speedometer is still the speedometer; each retains its own separate identity.

The PTAB went on to particularly find that a single display screen showing both the speedometer and colored display would not satisfy the integrally attached limitation as construed above.

The single electronic display screen of Aumayer showing both the image of a speedometer and a colored scale mark indicating the current speed limit does not meet the claim recitation "integrally attached" as applied to a speedometer and a colored display. There, the speedometer and the colored display are not discrete and separately recognizable parts that are "integrally attached" to each other. Rather, the liquid crystal display screen is itself a single component which performs the function of both the speedometer and colored display.

In the context of the inter partes review, the result is that the suggested references do not show the claims unpatentable. Garmin's gambit, however, is that the same narrow claim construction will carry-over to the litigation and result in a finding of non-infringement. Although the district court will not be bound by this construction, it is likely to be instructive and at least cognitively limiting to the New Jersey judge – especially since the PTO's interpretation is the 'broadest reasonable construction.'

UPDATE: It turns out that the PTAB has released at least one earlier petition decision – in IPR2012–00026 involving Microsoft’s challenge of ProxyConn’s Patent No. 6,757,717. In that decision, the PTAB granted the IPR for claims 1, 3, 10, and 22–24, but denied the petition to review claims 11, 12, and 14.

= = = = =

Under 35 U.S.C. § 316, the USPTO has one year from now to make a final determination in the case. The USPTO has scheduled for the trial to be complete in August 2013.

Moving Away from Beauty as a Factor in Design Patent Validity

Patent, , ,

Guest Post by Professor Andrew W. Torrance. This post is a shortened version of Professor Torrance’s recently published article titled Beauty Fades: An Experimental Study of Federal Court Design Patent Aesthetics, Journal of Intellectual Property, Volume 19, Issue 2 (2012) available at http://ssrn.com/abstract=2156943.

Introduction    

Courts are rarely asked to judge beauty. Such a subjective practice would normally be anathema to the ideal of objective legal standards. However, one area of federal law has a long tradition of explicitly requiring courts to make aesthetic decisions: the law of design. Examination of design patent law offers unique insight into how aesthetic considerations have been, and are currently, employed by courts to make legal decisions.

In the United States, patent law offers protection for inventions originating within diverse fields of endeavor. In addition to utility and plant patents, design patents represent a third category of patent rights, which are available to inventors of "any new, original and ornamental design for an article of manufacture . . . ." (35 U.S.C. §171). Since they were first made available in 1842, more than 630,000 design patents have issued in the United States. The very first design patent was issued to George Bruce in 1842 to protect a new "Type" font (U.S. Patent No. D1). Later design patents issued to protect such iconic designs as the Statue of Liberty (D11,023, granted to Auguste Bartholdi) and the Coca-Cola bottle (D48,160, granted to H. Samuelson). Over the past several years, design patents have enjoyed a resurgence in popularity, with applications to the United States Patent and Trademark Office increasing markedly (Steven L. Oberholtzer, The Basic Principles Of Intellectual Property Law 6, 2d ed. 2009).

Not unsurprisingly, many courts have interpreted U.S. design patent law to require an element of artistry. Although no such requirement was explicitly present in the original design patent statute, the Patent Act of August 29, 1842 (ch. 263, 5 Stat. 543), judicial interpretations of the ornamentality requirement often appeared to necessitate that designs possess features that were aesthetically pleasing to the human eye. In Blisscraft of Hollywood v. United Plastics Co., 294 F.2d 694, 696 (2d Cir. 1961), the court mandated that "[a patented design must] be the product of aesthetic skill and artistic conception." As recently as 1989, in dicta from Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 148, the U.S. Supreme Court echoed the view that, to be patentable, designs must be visually attractive, explaining that, "[t]o qualify for protection, a design must present an aesthetically pleasing appearance that is not dictated by function alone, and must satisfy the other criteria of patentability." Thus, the legal requirement that a design patent be "ornamental" was long interpreted to necessitate artistry or an aesthetically pleasing effect.

Roughly coincident with the creation of the Court of Appeals for the Federal Circuit ("CAFC") in 1982, design patent law doctrine appeared to change direction, as aesthetic considerations were deemphasized in deciding the validity of designs claimed in patents. This shift was decisively heralded a decade later, in Seiko Epson v. Nu-Kote International, 190 F.3d 1360, 1368 (1999), when the CAFC stated "the 'ornamental' requirement of the design statute means that the design must not be governed solely by function. . . ." So well accepted has the non-artistic interpretation of the law become that law firms now generally counsel their clients that aesthetic considerations hold little relevance for design patents. To illustrate how well accepted this principle is, consider the following statement about design patent law on page 7 of The Basic Principles of Intellectual Property Law (Second Edition, 2009), a primer of intellectual property law freely distributed to potential clients by the venerable law firm, Brinks Hofer Gilson & Lione: "There is no requirement that the design be artistic or pleasing to the eye." The trend away from aesthetic interpretations of the ornamentality requirement has brought U.S. design patent law closer to that in other jurisdictions, such as the European Union and Canada, where aesthetic considerations appear to play little role in determining the validity of design patents or registrations.

Experiment and Results

An experimental approach was used to test the hypothesis that aesthetic considerations in design patent law have, indeed, diminished over the last thirty years. All design patents from 1982 (that is, the creation of the CAFC) to 2010 in which a court made a final determination of validity or infringement were identified, and each design patent therein scored for validity and infringement. Then, in a controlled experiment, human subjects were asked to score the attractiveness of all the patented designs at issue in these cases.

The experimental results indicate that, at the beginning of the time period considered, patents claiming the least attractive designs were most likely to be found invalid, those claiming designs of intermediate attractiveness fared better in terms of validity, but were found to have been infringed relatively less often, and patents claiming the most attractive designs were most likely to be found both valid and infringed. In other words, aesthetically pleasing designs claimed in patents tended to fare better in court than did less attractive designs. However, the results also indicate that, while the attractiveness of patented designs found valid, whether infringed or not, has changed little since 1982, the average attractiveness of patented designs found invalid has risen markedly over time. In fact, in contradistinction to the situation early in the time period surveyed, the attractiveness of a design claimed in a patent has now become a poor predictor of judicial outcome. Design beauty appears to have ceased to be a useful predictor of judicial outcome in design patent litigation.

A few of the experimental results of this study are illustrated below. Complete results for all litigated design patents, by type of court (that is, all federal courts, federal district courts, and the CAFC), and litigation outcome (that is, validity, invalidity, infringement, and non-infringement) can be found in the full version the article, available as a free download at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2156943.

FIGURE 1 is a scatterplot graph that depicts the mean attractiveness of all design patents according to the year in which a court ruled on their validity or infringement. FIGURE 1 also shows the results of a linear regression of these data. The regression analysis shows very little change (y = 0.0132x – 21.511, R² = 0.0146) in the attractiveness of patented designs from 1982 to 2010.

FIGURE 2 is a scatterplot graph that depicts the mean attractiveness of all design patents found invalid by a court by year of court ruling. FIGURE 2 also shows the results of a linear regression of these data. The regression analysis shows a more substantial rise (y = 0.0495x – 93.82, R² = 0.2183) in the attractiveness of patented designs found invalid from 1982 to 2010.


Discussion

a. Overall stability in attractiveness

For most of the categories of outcome and types of courts considered there was little change in the measured attractiveness of patented designs from 1982 to 2010. These results apply to patented designs found to be (1) valid but not infringed and (2) both valid and infringed, and pertain to results from both federal district courts and the CAFC. These data show little evidence that the attractiveness of patented designs held valid (whether infringed or not) changed from 1982 to 2010 across most categories of outcome and types of court.

b. Rise in attractiveness of PATENTED designs HELD INVALID

The most striking pattern in the data involves patented designs finally found invalid by a court. The data indicate a marked rise in measured attractiveness of these patented designs from 1982 to 2010. This pattern is remarkably consistent whether considered across all federal courts (y = 0.0495x – 93.82, R² = 0.2183), in federal district courts (y = 0.0442x – 83.227, R² = 0.213), or in the CAFC (y = 0.0968x – 188.48, R² = 0.2363). These results roughly match an observed shift in design patent doctrine away from an aesthetics requirement occurring since the advent of the CAFC. From 1982 to 2010 courts became increasingly likely to find attractive patented designs invalid. By contrast, the data suggest that, during the early years of the time period studied, less aesthetically attractive patented designs were more likely to be found invalid while more aesthetically attractive patented designs were more likely to found valid. This trend away from aesthetics as a factor in invalidity is mirrored in both the doctrine and the data.

c. Policy implications

There may be policy advantages to dropping the requirement for aesthetics, chief among which may be improved consistency in making decisions about design patent validity. Judgments about attractiveness are inherently subjective, depending as they do on the personal aesthetic sensibilities of the judges who determine design patent validity. Relying, instead, on a more objective test of ornamentality, such as lack of functionality, is likely to lead to improved consistency in validity determinations, not only in court and at the USPTO, but also among design patent owners considering infringement litigation and defendants attempting to avoid such actions.

A second salutary implication for policy involves the harmonization of U.S. design patent law with standards of intellectual property law prevailing internationally. The weakening of the aesthetics requirement in its design patent law has moved the United States towards the design protection laws that predominate in most other jurisdictions, such as the European Union and Canada. Access to a similar test of design patent (or design registration) validity across jurisdictions may afford design patent owners advantages of efficiency, since determinations of validity in one jurisdiction would be more likely to hold true in others.

Conclusions

Coinciding approximately with the inception of the CAFC, design patent doctrine appears to have begun to shift away from an aesthetic interpretation of the statutory ornamentality requirement. In particular, the measured attractiveness of patented designs finally found invalid by courts has increased substantially over the last three decades. Both legal doctrine and experimental results agree that beauty appears to have faded as a requirement for design patent validity.

Andrew Torrance is a Professor at the University of Kansas School of Law, a Visiting Scholar at MIT Sloan School of Management, and a Research Fellow at the Gruter Institute.

Good Things Come in Threes? DOJ, FTC and EC Officials Wax Eloquent About FRAND

Patent, , , , ,

Guest Post By Professor Jorge L. Contreras

For years, developers of standards in the information and communications technology (ICT) sector have committed to license patents that are essential to those standards on terms that are "fair, reasonable and nondiscriminatory" (FRAND). This February, I summarized the reasons that these vague but somewhat reassuring commitments have become so prevalent in the industry. Since then, the litigation over FRAND commitments has only intensified. In April, I summarized the major pending lawsuits that revolve around allegations that FRAND commitments have been violated. One of these, Microsoft v. Motorola (W.D. Wash.) is scheduled to go to trial on this issue in November, and Judge Robart has suggested (some would say threatened) that he may define FRAND for the parties if they can't reach agreement before then.

Against this backdrop, regulators in the U.S. and Europe have actively pursued a FRAND clarification program of their own. As I noted in February, the U.S. Department of Justice (DOJ) appears to have persuaded Microsoft, Apple and Google to release a trio of "voluntary" statements describing their interpretations of FRAND. This public display occurred in connection with DOJ's review (and approval) of major patent acquisition transactions by each of these parties. The European Commission, which approved Google's acquisition of Motorola Mobility shortly thereafter, also exhibited a keen interest in Google's view of FRAND commitments.

Six months later, there has been another flurry of FRAND clarifications. This time, however, guidance is being offered not by companies, but by the regulators themselves (or, rather, by senior agency officials speaking "on the record" at public events). These include the following speeches by officials of the DOJ, FTC and EC:

  • Jon Leibowitz, Chairman of the FTC, at the Georgetown Global Antitrust Enforcement Symposium (September 19),
  • Joseph Wayland, Acting Asst. Attorney General in the Antitrust Division of DOJ, at the Fordham Competition Law Institute (September 21),
  • Joaquin Almunia, Vice President of the European Commission responsible for Competition Policy, also at Fordham (September 20),
  • Fiona Scott-Morton, DOJ Deputy Asst. Attorney General for Economic Analysis, at the National Academies of Science (NAS) Symposium on Management of Intellectual Property in Standard Setting Processes (October 3),
  • Howard Shelanski, Director of FTC Bureau of Economics, also at NAS (October 4), and
  • Renata Hesse, Deputy Attorney General in the Antitrust Division of DOJ at the International Telecommunications Union (ITU) Patent Roundtable (October 10)

It is no coincidence that these officials each came forward with comments regarding FRAND within a few weeks of each other. As suggested by Dr. Scott-Morton, this effort was at least loosely coordinated within the three agencies, each of which is actively involved in matters involving the licensing of patents essential to industry standards. For example, the FTC has initiated an investigation of Google/Motorola in relation to its FRAND licensing practices and submitted a public statement to the ITC in Microsoft's case against Motorola (now resolved), the EC has launched FRAND-related investigations of both Google/Motorola and Samsung, and the DOJ is reported to have opened an investigation into Samsung's practices in this area. But despite the clear desire by these three agencies to send a message to the industry regarding FRAND, the scope of that message is not entirely clear. Below is a brief summary of the FTC, DOJ and EC officials' statements regarding FRAND:

Injunctive Relief. If the agency viewpoints share on one thing, it is a strong aversion to injunctions that seek to block the use of a standard after a FRAND commitment has been made. However, even here the extent of agency accord is unclear. For example, Mr. Almunia declares that "the worst-case scenario is when a company willing to take a license for standard-essential patents is hit by an injunction" (Almunia, p.6), yet he does not indicate whether, or on what basis, such an injunction might be limited. The FTC's position on injunctive relief is more restrained, and Chairman Leibowitz only notes that such relief may be "in tension" with the FRAND commitment (Leibowitz, p.7). This statement is consistent with the FTC's earlier comments to the ITC, suggesting that if a patent holder has made a "reasonable royalty offer" that has subsequently been refused by an infringer, relief in the form of an exclusion order might be appropriate. The most steadfast opponent of injunctive relief in the face of a FRAND commitment appears to be DOJ, which tipped its hand back in February when it applauded Apple's and Microsoft's statements "that they will not seek to prevent or exclude rivals' products from the market", while viewing Google's more qualified commitment as "less clear". Mr. Wayland refers to these earlier statements (Wayland, p.7), and to his testimony before the Senate Committee on the Judiciary, which held hearings on ITC exclusion orders in September (Wayland, p. 10-11). With respect to ITC exclusion orders he echoes the FTC's position, which has generally disfavored injunctive relief for FRAND-committed patents due to the increased leverage that negotiating in the "shadow" of such an injunction can give to the patent holder (FTC 2011 Report, p.225-26). But like the FTC in its recent public comments to the ITC, he indicates some tolerance for such injunctions when a potential licensee has not negotiated reasonably or is beyond the reach of the U.S. courts (Wayland, p.10-11). However, it is FTC Chairman Leibowitz who makes the boldest statement regarding injunctive relief, suggesting not only that such relief should not be granted in the face of a FRAND commitment, but that even seeking such relief could amount to unfair competition under Section 5 of the FTC Act (Leibowitz, p. 9). He thus warns companies that violating their FRAND commitments could lead to enforcement actions by the agency.

Antitrust and Competition Law Claims. Several of the agency officials suggest that violation of FRAND commitments could, under certain circumstances, constitute violations of antitrust or competition law. Mr. Almunia, for example, while acknowledging that the recent smartphone patent wars are "primarily patent cases, not competition cases", goes on to suggest that "this state of belligerence may encourage a company to use its patents as weapons to harm legitimate competitors" (Almunia, p.5). Ms Hesse of DOJ notes the "risks to competition" that may arise from collaborative standards-setting and so-called "patent hold-up" (Hesse, p.5). And Mr. Wayland unambiguously states that "the [Antitrust] division is ready to enforce the antitrust laws against standard-setting activities that harm competition" (Wayland, p.8). Mr. Almunia likewise indicates that the EC is "willing to provide clarity to the market through our enforcement" (Almunia, p.6).

But perhaps the most interesting comments regarding antitrust remedies are Chairman Leibowitz's statements regarding the "unfair methods of competition" that may result from seeking an injunction in the face of a FRAND commitment (Leibowitz, p.9). As noted above, he suggests that such conduct may run afoul of Section 5 of the FTC Act "which, as all of us in this room understand, Congress intended to extend well beyond the reach of the antitrust laws" (Id.). Chairman Leibowitz thus hedges his bets: even if antitrust doctrines are not sufficient to prosecute FRAND violations, the agency has tools beyond antitrust that it may use to correct such behavior (an argument that, perhaps, arises from the FTC's 2008 reversal by the D.C. Circuit in its antitrust case against Rambus, Inc. for abuse of the standardization process).

Magnitude of FRAND Royalties. Not surprisingly, the agency representatives do not speak much about the complex question of the magnitude of FRAND royalty rates. Historically, the FTC has maintained that appropriate royalties for standards-essential patents should be based on the ex ante value of the patented technology prior to adoption of the standard (FTC 2011 Report, p.22-23). Obviously, determining such a royalty in hindsight can be challenging, and perhaps Judge Robart's upcoming judicial intervention in Seattle may shed light on how best to conduct this analysis. Another nettlesome question regarding the magnitude of FRAND royalties arises from the comparative value of the many different patents that may cover the same standard (sometimes ranging in the thousands). In this regard, Chairman Leibowitz offers an interesting observation, possibly alluding to the pending disputes over Motorola's proposed royalty: "When the allegedly infringing component is, say, only one of 15,000 patents used in a smart phone or a tablet, is it fair to demand two percent of the entire sales price? To ask that question is to answer it."

SDO-Based Solutions. Unlike the FTC and EC representatives, the DOJ officials strongly encourage SDOs to implement policies that are likely to alleviate some of the risks and uncertainty currently associated with FRAND commitments. Both Mr. Wayland and Ms. Hesse reflect favorably on DOJ's 2007/2008 Business Review Letters approving the "ex ante" licensing disclosure policies proposed by VITA and IEEE (Wayland, p.8-9, Hesse, p.7-8). Such policies permit (in the case of IEEE) and require (in the case of VITA) that patent holders disclose their "most restrictive" licensing terms (including royalty rates) before adoption of a standard. Ms. Hesse notes that "[w]e saw then, and continue to see now, the potential benefits to competition from the implementation of such an approach" (Hesse, p.8). In addition to ex ante licensing disclosure, Mr. Wayland, Ms. Hesse and Dr. Scott-Morgan of DOJ all suggest concrete steps that SDOs should consider in relation to FRAND (Wayland, p.9; Hesse p.9-10; Scott-Morgan, p.1-4). These are summarized below (based primarily on Ms. Hesse's presentation, which is the most detailed and occurred latest in time).

  1. Identify Excluded Patents. Identify patented technology that will not be offered on FRAND terms and "consciously determine" whether or not such technology should be included in a standard.
  2. Transfer. Ensure that FRAND licensing commitments bind subsequent purchasers of patents. (This requirement was also advocated by Microsoft, Apple and Google in their February statements).
  3. Cash-Only. Require that patent holders offer FRAND licenses on "cash-only" terms (presumably to eliminate (a) perceived abuses arising from "bundling" of non-essential patents with standards-essential patents, and (b) inherent barriers to entry for market entrants lacking their own patents to use as cross-licensing barter with other patent holders).
  4. Limit Injunctions. Limit participants' right to seek injunctions after a FRAND commitment has been made. (This limitation was also advocated by Microsoft, Apple and Google in their February statements).
  5. Arbitration. Set guidelines for FRAND royalty rates, or establish an arbitration or other mechanism for resolving disputes over the level of FRAND royalties.
  6. Accuracy of Disclosure. Ensure that disclosure of "essential" patents is accurate and not overly broad (only suggested by Hesse, p.10).

The "inherent ambiguity" of FRAND commitments (Hesse, p.6) undoubtedly requires clarification, either by the parties making such commitments or, lacking that, by courts and regulatory agencies. The recent statements by agency officials at the DOJ, FTC and EC represent a good first step toward such clarification. At this point, there appears to be a developing consensus among private industry and the agencies that FRAND commitments should "travel with the patents" after they are sold, and that injunctive relief should be limited after a FRAND commitment is made. In other areas, however, there does not appear to be a high degree of consensus among the agencies and additional work by all stakeholders (SDOs, patent holders, product vendors and regulators) will be required before a common understanding of FRAND is finally developed. I agree with the DOJ commenters that SDO-based solutions are the most likely avenues toward widespread alleviation of FRAND uncertainty, and have proposed a slightly different set of recommendations for SDO policy reform. Barring this, however, the decision will be left to the courts.

Inequitable Conduct: Federal Circuit Places another Nail in the Coffin

Patent, ,

By Dennis Crouch

1st Media v. Electronic Arts (Fed. Cir. 2012)

In a strong opinion, the Federal Circuit has rejected a district court holding of inequitable conduct in a failure-to-submit case. The appellate court held that the defendant had failed to prove that the failure to submit was a deliberate fraud on the PTO under the standard outlined in the court’s 2011 en banc Therasense decision.

Individuals sufficiently involved with the prosecution of a patent application bears a “duty of candor and good faith dealing with the [USPTO], which includes a duty to disclose to the Office all information known to that individual to be material to patentability.” 37 C.F.R. § 1.56 (Rule 56). This duty is particularly applied to each inventor named in the application and “each attorney or agent who prepares or prosecutes the application.” A patent attorney’s failure to comply with the duty of candor can lead to disciplinary hearings by the USPTO’s office of enrollment and discipline (OED) and, as a rule, the USPTO refuses to grant patents “on an application in connection with which fraud on the Office was practiced or attempted or the duty of disclosure was violated through bad faith or intentional misconduct.”

The fiercely adversarial litigation system in the US is comparably quite good at rooting out (and thus discouraging) fraud. Whenever a patent is being enforced, accused infringers scour the records and available evidence to look for any way failures to comply with Rule 56. When those failures rise to intentional and material misconduct, a court has the equitable power to hold the patent (and its patent family) unenforceable due to inequitable conduct in the prosecution of the application. Of course, attorney fraud is a serious charge, and even false claims create difficulties for the accused wrongdoer. As such, the courts have taken some steps toward limiting those types of claims. The two key recent cases on this point are Excergen and Therasense.

Excergen: The Federal Rules of Civil Procedure (FRCP) as interpreted by the Excergen decision, inequitable conduct may only be alleged as a defense if it can be pled with particularity (as opposed to other types of claims that may be pled much more generally).

Therasense: Under Therasense, inequitable conduct requires proof that the alleged wrongdoing was deliberately and knowingly wrong and that the result of the wrongdoing during patent prosecution impacted the issuance of the eventual patent and that each element be proven with clear and convincing evidence. In the failure-to-disclose situation, the court writes that a defendant must prove “that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it.”

In 1st Media, the asserted patent was part of a family of applications that had been filed in various countries around the world. Three references used to reject the foreign applications were never submitted for consideration by the US examiners. Nevada district court Judge Mahan considered this issue and found that both the patent attorney and the listed inventor were at fault for failing to submit the references and held the patent unenforceable.

On appeal, the Federal Circuit reversed – making clear (again) that in a failure-to-disclose situation, the defendant must prove that individuals with a Rule 56 duty “made a deliberate decision to withhold” the references. Further, that deliberate decision element must be proven with clear and convincing evidence and that proof cannot be inferred from the fact that the individuals had knowledge of the references and their materiality.

A court can no longer infer intent to deceive from non-disclosure of a reference solely because that reference was known and material. Moreover, a patentee need not offer any good faith explanation for his conduct unless and until an accused infringer has met his burden to prove an intent to deceive by clear and convincing evidence.

In the bench trial, Judge Mahan found the explanations given by the inventor and his patent attorney to lacking. On appeal, the Federal Circuit made clear that the burden is on the defendant to provide clear and convincing evidence.

The court provided a nice quite for patent attorneys:

Moreover, it is not enough to argue carelessness, lack of attention, poor docketing or cross-referencing, or anything else that might be considered negligent or even grossly negligent. To sustain a charge of inequitable conduct, clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference. Whatever one might conclude about Lewis’s and Sawyer’s conduct and interactions relating to the Bush reference, and the nature of Sawyer’s practice at the relevant time, the record does not support the inference that Lewis and Sawyer deliberately chose to withhold Bush.

Because one element of the inequitable conduct charge is missing, the court concluded that it cannot be proven. Of course, “carelessness, lack of attention, [or] poor docketing” will still lead to malpractice claims.

Notes:

  • In its opinion, the Federal Circuit foreclosed any possibility for the defendants to re-open their inequitable conduct charges for a rehearing. However, the judge has not yet determined validity. Thus, if the withheld references are truly material then we’ll see the jury hold the asserted claims obvious.
  • Beginning September 16, 2012, patentees will also be able to request a supplemental examination at the USPTO to ensure that any references that had been previously withheld do not impact patentability. However, if the USPTO finds that the previously withheld references create a major patentability question then the Office will institute a reexamination.
  • We now have a situation where inequitable conduct is quite difficult to prove – meaning that patent owners will rarely be harmed by a violation of the duty of candor and good faith dealing. Consequently, patent attorneys will faced increased pressure to push the boundaries.

The Proposed Unified Patent Court for Europe: conditio sine qua non for a Unitary Patent or unavailing venture into the unknown?

Patent,

The following is an invited guest post by William Bull. Mr. Bull is a researcher at the Maastricht European Private Law Institute (M-EPLI) at Maastricht University in the Netherlands

European countries have now almost reached agreement on the creation of a European Union patent with unitary effect and a 'Unified Patent Court' (UPC) to be established (primarily) in Paris in 2014 or so. The plan is to introduce a patent right valid throughout the territory of 25 of the 27 EU Member States (Italy and Spain remaining outside the process due to objections to the proposed linguistic regime) and, in tandem, a single patent court at European level with exclusive jurisdiction in infringement and revocation proceedings covering the same territory, in lieu of domestic courts. The UPC is to consist of two divisions; a Court of First Instance and a Court of Appeal. The former is to be further sub-divided into a Central Division (located in Paris, albeit itself with 'thematic branches' in London and Munich!) and additional regional and local divisions situated in various Member States.

It is by now de rigueur for any commentary on the European patent project to begin with a reminder of its protracted history. The idea of creating some form of common European patent system can be traced all the way back to the 1960s, and has been plagued by drawbacks and delays ever since. The most recent attempt to revive the project came in 2000 with a proposal for a Regulation on a Community Patent (following on from the Regulation establishing a Community Trade Mark (CTM) adopted some years earlier), and continued with an accompanying proposal for a Community Patent Court of 2003. The former would introduce a unitary patent right covering the entire European Union, while the latter would lead to the creation of a unified patent court with exclusive jurisdiction over both the new patent right and existing 'European' patents (that is, bundles of national patents) obtained under the European Patent Convention (EPC) system. Together, these proposals were to be the 'building blocks' for a future EU system, designed to overcome the difficulties posed by the need to acquire and litigate patent rights in different Member States.

Of course the European legislator is faced with this core dilemma in virtually any of the areas of law in which it has some competence to act, and European intellectual property law is by no means the only field where there have been lengthy deliberations over the need, form and likely success of measures seeking to instigate some 'harmonisation' of the law (in one way or another). The debate on the harmonisation of European private law (and particularly contract law) immediately springs to mind as an example, for this also began some decades ago, leading to the drafting of various academic principles, from the Principles of European Contract Law (PECL) in the course of the 80s and 90s, through the Draft Common Frame of Reference in the 2000s, and culminating in a proposal for a Common European Sales Law only last year. What makes the European patent project unique is the fact that it has focused on the introduction of an apposite pan-European court system as well as on matters of substantive law. The creation of a unified patent court for the EU is considered by many – not least the European Commission – to be a conditio sine qua non for the proper functioning of the proposed unitary patent. This is the case even though such a court would be unprecedented, and was not seen as necessary for either the CTM or the Community design introduced in 2002 (both of which are adjudicated upon by designated national courts collaborating with the Court of Justice of the EU (CJEU) via the general EU preliminary reference procedure). So it is the importance attached to this aspect of the patent debate that will readily come as a surprise to those operating in other areas of European law, including the sphere of European private law (EPL).

In spite of the many parallels that can be drawn between the debate on harmonisation of European IP law and that of private law more generally (not to mention other areas of EU law), however, there is a distinct lack of interaction among actors in the various subfields. This means that often similar arguments are used, but without benefiting from insights in the other field. It is therefore against this backdrop of academic fragmentation that we would encourage further comparison between the European harmonisation debate in areas such as patent law and contract law, as this should lead to lessons on what to encourage or to avoid in developing the two fields. In particular, since in EPL there has been hardly any discussion about the introduction of a European court in order to ensure uniform interpretation, we cannot help but wonder whether the significance of this issue in patent law is not overestimated. This is a particularly worthwhile question bearing in mind that if an alternative to the unified patent court could be found, this would greatly help the present political process, which now appears to be stuck on the issue of involvement of the CJEU.

In our view, there is nothing against splitting the two building blocks: in a paper that I wrote together with Jan Smits (available on SSRN) I argue that it may indeed be useful to introduce the unitary European patent, but I do not see the advantage of creating the proposed European patent court system, given a) the disadvantages of such a system and b) the possible alternative. First: the disadvantages of the proposed patent court system. From the perspective of end users, a rational patent litigation system depends on three main factors; expertise of the judges, the ability to make a speedy decision, and low costs. We doubt whether the new system would be able to provide these, certainly (but not only) in the short- to medium-term. Given that the regional and local divisions of the Unified Patent Court will be spread across Europe and necessarily composed of multi-national panels with the discretion to decide whether or not to bifurcate proceedings, it is difficult to see why the UPC as it is envisaged would fare much better against the obstacles to efficient litigation and uniform interpretation of differing levels of judicial expertise, patent cultures and language barriers. Second, a possible alternative to the now proposed unified patent court could consist of a competitive model of convergence of patent law. This model is based on the present European practice in which 50 to 70% of all patent cases in Europe end up before the courts of a very limited number of countries (and in particular before the German courts, of which the Düsseldorf district court is seen as market leading, dealing with more than 600 new infringement cases every year from all over Europe). The popularity of the German court system among European litigants apparently stems from its speed, high quality, commercial sense and the fact that the staying of an infringement procedure due to revocation is only rarely allowed.

In short, our point is that successful harmonisation of IP law may indeed be dependent on uniform interpretation of European rules, but this uniformity need not come from a common European court. It can also be provided by a national court, as long as individual claimants are allowed to choose the court of their liking. In fact, in the absence of any meaningful political compromise on a European court system in the last 40 years, such a market for patent litigation has already partly come to exist. Of course that is not to say that such an alternative is not without its own problems, but we believe that a competitive model of convergence has a lot of merit over the proposed European court system, which could easily prove to be an unavailing venture into the unknown.

* * * * *

These questions are discussed in detail in the working paper by Jan M. Smits and William Bull entitled 'European Harmonisation of Intellectual Property Law: Towards a Competitive Model and a Critique of the Proposed Unified Patent Court', available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2117835.

Copyright Claim Against Patent Firm Who Submits Copyrighted Article Withstands Rule 12(b)(6) Challenge

Ethics, ,

    I still don't quite know what to make of this. 

    Let's start by framing the issue in terms of ethics: a lawyer has an obligation to disclose material information to the USPTO under Rule 56 and TheraSense.  Sometimes, that may require disclosure, not just of a citation, but of an actual copy of an article or document.

    What if submitting a document is required, but doing so violates copyright law?

    In Am. Institute of Physics v. Schwegman Lundberg & Woessner, PA, __ F.Supp.2d __ (D. Minn. July 2, 2012), the alleged copyright holder sued the patent firm and contended that filing copies of copyrighted articles violated its copyright.  The defendant filed a Rule 12(b)(6) motion.  Much of the resulting decision is about pleading requirements post-Twombly, but part of the decision addressed whether "distribution" of the works had occurred:

Finally, Defendants argue that Plaintiffs have failed to adequately plead a public-distribution claim. One of the “bundle of rights” granted under the Copyright Act is the right to “distribute copies . . . of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending.” 17 U.S.C. § 106(3) (emphasis added). The Complaint alleges that Defendants “distribut[ed]” copies of their works “outside of Schwegman” (Compl. ¶ 18), but the only identified recipient of such “distribution” is the PTO. According to Defendants, the PTO is not “the public” under the Copyright Act and, hence, any claim based on their “distribution” to the PTO must fail. (Reply at 6-7.)….

There may be merit to this argument. Some courts have held that a limited distribution to a government agency does not constitute “publication” under the copyright laws….

The problem, however, is that Defendants only casually mentioned this issue in their opening brief, arguing in one sentence – in the midst of the Twombly argument, and without citation to any authority – that “Plaintiffs fail to allege that [the] . . . so-called distributions were made ‘to the public,’ and only public distributions fall within . . . Section 106(3).” (Def. Mem. at 5.) Not until their Reply did Defendants flesh out this argument (over nearly two pages), citing several cases ostensibly supporting it. By not squarely raising this issue in their opening memorandum, the Court believes Plaintiffs did not have an adequate opportunity to address it.  

Consequently, the district court denied the defendant's Rule 12(b)(6) motion — for now.

    So, this narrow band of conduct — submission to the Office — may not be unlawful conduct, but for now let's suppose it is. Obviously, a lawyer cannot engage in illegal conduct.  What does he do when faced with this problem?

    The first step may be to narrow the circumstances in which it arises:  if filing a copy is not required, don't file one.  This could of course cause some delays in prosecution, which may not be in the best interests of the client.  But lawyers obviously should avoid unlawful conduct, particularly conduct that could expose the lawyer to liability, and (I would think) the client to copyright liabilty under some sort of agency theory, at least.

    The second step would be to disclose.  There is no exception to Rule 56 that says material information need not be disclosed if it is subject to copyright.  Indeed, even trade secret information must be disclosed if material to patentability, as you know.

    The third step would be to hope that (a) courts find that disclosure is not distribution or (b) it is fair use in most instances.  I don't know much about copyright law, but my sense from what I do know and from the Schwegman opinion is that the former is likely, and the latter, though an affirmative defense, is also likely.  It will hardly reduce demand for scientific articles if you can find them in files in the USPTO if you're lucky enough to find it.

    I wonder about the other issues where I see copyrighted material copied, say in patent litigation. Discovery materials are not submitted to a court, but are distributed to private parties.  Later, if there's a trial, they are copied and one copy might be used as an exhibit and submitted to a court.  What about those? (I ask not rhetorically since, again, I don't know copyright.) 

 

Princeton Event: Patent Success or Failure? The America Invents Act and Beyond

Patent,

by Dennis Crouch

When listed as a potential survey response, Princeton University School of Law regularly ranks as a top-ten law school.  Although Princeton actually has no law school, the Ivy League university does have a set of world class thinkers in areas of public policy, political science, and political economics. Several years after I graduated from Princeton's School of Engineering, the University founded its Center for Information Technology Policy (CITP) with Professor Ed Felton as its leader.

On Friday, May 11, 2012 I'll be returning to by alma mater for a CITP conference on patent law and policy titled: Patent Success or Failure? The America Invents Act and Beyond.  Speakers include USPTO Director Kappos; CAFC Chief Judge Rader and former Chief Judge Michel;  Professors Arti Rai, Colleen Chien, Jason Schultz, and myself; Joe Matel from the Senate Judiciary Committee; Dan Ravicher from PubPat; and industry leaders from industry (IBM, Google, J&J) and practice.

The event is free and open to the public. Register here: https://citp.princeton.edu/event/patent-success-or-failure/

Notes:

  • Later this month, I'll be speaking at the 10th Annual Rocky Mountain IP & Tech Institute in Denver. Speakers there include 9th Circuit Chief Judge Alex Kozinski, Professors Lemley & Hricik, David Donoghue, Michael Smith, Chris Mirick (my brother-in-law) and many other excellent speakers. Register here: http://ip.annualcle.com/
  • In June & July I'll be presenting a series of lectures at UCL-London on changes to US Patent Law and how they integrate with UK & European practice. The Rt Hon Prof. Sir Robin Jacob is chairing the event.
    • June 18 – Changes to the way patents are prosecuted in the US under the AIA and other case law.
    • June 28 – New issues in US patent litigation; damages; settlement processes; and the rise of "international litigation." 
    • July 4 – A two-part session on (1) the new administrative structure for challenging US patents and the new scope of patentable subject matter.
    • You can register for one or more sessions here: http://ibil-us-patents.eventbrite.com/

Also in June, I'll be speaking at the 2012 IP Business Congress held at a resort/casino near Lisbon, Portugal. http://www.ipbusinesscongress.com/2012/About.aspx

The Frand Wars: Who’s on First?

Patent,

Guest Post by Jorge L. Contreras

Standards are powerful market tools that enable products and services offered by different vendors to interoperate: think WiFi, USB, and the pervasive 3G and 4G telecommunications standards. Yet once standards are widely adopted, markets can become "locked-in" and switching to a different technology can be prohibitively costly. Because patent holders have the potential to block others from deploying technology covered by their patents, the industry associations that develop standards ("standards development organizations" or "SDOs") often demand a trade-off from the companies that participate in standards-development: you can have a say in the technical direction of the standard, but in return you must license your patents that are essential to the standard on "fair, reasonable and non-discriminatory" (FRAND) terms.

Last month, I discussed a series of statements released by Apple, Microsoft and Google seeking to clarify how they interpret FRAND licensing commitments. Both the U.S. Department of Justice and the European Commission looked carefully at these interpretations in evaluating Google's $12 billion acquisition of Motorola Mobility, Apple's purchase of a number of Linux-related patents, and the $4.5 billion acquisition of Nortel's patent portfolio by a group including Microsoft, Apple, and RIM. The agencies concluded that these transactions did not present significant antitrust concerns, basing their reasoning in part on the interpretations of FRAND offered by Apple, Microsoft and Google.

Independently of these agency determinations, there continues to be significant disagreement among market participants over the meaning of FRAND. This disagreement arises both in reference to the level of royalties that should be considered "reasonable", and whether other tactics, such as seeking injunctive relief, are fair game when FRAND commitments have been made. Such disagreements have serious consequences because a commitment to grant a license on FRAND terms is not itself a license. A license to operate under a patent is not granted until the parties can agree on those "fair, reasonable and non-discriminatory" terms. So, if the parties can't agree on the terms of the FRAND license for a particular "standards-essential" patent, the frustrated licensee must either refrain from implementing the standard (and lose a significant market opportunity) or risk infringing the patent. The typical result: litigation.

To help get a handle on the current state of play in the courts, Table 1 offers a summary of some of the principal cases in which FRAND issues are currently being litigated in the U.S. and Europe. These disputes form only a part of the larger patent wars currently being waged across the smart phone industry. That wide-ranging litigation involves even more players and extends to patents that are not necessarily essential to the implementation of industry standards. But the more focused skirmishes over FRAND issues are important too, as some of the most basic technology needed to make mobile devices interoperate is covered by standards, and the terms on which "standards-essential" patents will be licensed will affect all players in the market, both large and small. Thus, while the scale, complexity and rapid pace of this litigation virtually guarantees that any summary will be incomplete and quickly outdated, I hope that it will be useful (at least temporarily) for those who want an overview of the current state of play regarding FRAND.

Table 1 – Current FRAND Litigation

Parties

Court

FRAND Issue(s)

Status

W.D. Wash

Royalty rate, injunctions

Summary judgment hearing scheduled May 2012, trial scheduled Nov. 2012.

 

Moto currently enjoined from enforcing German injunctions

European Comm'n

Injunctions, licensing conditions

EC investigation announced in Apr. 2012

N.D. Ill. & W.D. Wis.

Royalty rate

Ill. trial scheduled June 2012; Wis. trial scheduled Nov. 2012

S.D. Cal.

Defensive suspension, injunctions

Apple complaint filed Feb. 2012

N.D. Cal.

Injunctions, failure to disclose

Summary judgment motion scheduled for hearing May 2012; mediation pending

Netherlands – Hague

Injunctions

 

European Comm'n

Injunctions

EC investigation announced in Jan. 2012

Del. Ch.

ITC exclusion orders

Huawei complaint filed Oct. 2011

Microsoft v. Motorola (W.D.Wash, Case No. C10-1823-JLR): This case relates to Motorola patents covering the IEEE's 802.11 (WiFi) standards and the ISO/IEC's and ITU's H.264 video codec standards. In 2010, Motorola offered to license these patents to Microsoft at a proposed royalty of 2.25% of the end product (i.e., each Xbox 360, PC/laptop or smart phone implementing the standard). Microsoft did not take a license, sought declaratory relief that Motorola breached its FRAND obligations to the SDOs, and Motorola sued Microsoft for patent infringement. The crux of Microsoft's argument is that Motorola's license offer is inherently unreasonable because it is not tied to the value of Motorola's technical contribution and because it seeks to assess royalties on the price of a PC/laptop rather than Microsoft's contribution to that product (i.e., the Windows operating system). Microsoft has also contended that the absolute value of Motorola's royalty demand (about $4 billion, presumably across all product lines) is unreasonable and far exceeds the amounts that Microsoft pays to other holders of larger numbers of standards-essential patents. Motorola counters that its 2.25% royalty rate has been offered for many years and is well within industry norms (citing examples of royalty rates much higher than this). It also contends that Microsoft refused to negotiate in good faith, thereby repudiating its right to receive a FRAND license. In February, the District Court denied Microsoft's first motion for summary judgment, but each party has made additional motions for summary judgment relating to FRAND and breach of contract issues, which will be heard in May.

Last week, the court granted Microsoft a preliminary injunction and temporary restraining order preventing Motorola from enforcing injunctions enjoining the sale of Microsoft products in Germany, a matter on which the Mannheim Regional Court is scheduled to rule shortly. Microsoft has requested that the International Trade Commission (ITC) similarly postpone ruling on Motorola's infringement claims until the Washington court has had the opportunity to rule on the FRAND matter.

European Commission Investigations. On April 3, the European Commission (after receiving complaints from Microsoft and Apple) announced that it initiated an investigation to determine whether Motorola violated European competition law by failing to comply with its FRAND commitments to standard-setting organizations. In particular, the EC has stated that it will investigate whether Motorola's attempts to obtain injunctions on the basis of standards-essential patents, and the licensing terms that it has offered, amount to an abuse of dominant position in violation of Article 102 of the EU Treaty. In January, the EC opened a similar investigation of Samsung to determine whether its attempts to obtain injunctive relief in various European patent actions pending against Apple violated Samsung's FRAND commitments to ETSI and otherwise ran afoul of EC competition law. The EC has actively investigated FRAND compliance in the past, most notably the allegedly excessive royalty rates charged by Qualcomm on the CDMA and WCDMA wireless 3G communications standards. The Qualcomm investigation, which was initiated in October 2007, was closed in November 2009 after Qualcomm reached settlements with the original complainants in the case.

Apple v. Motorola (N.D. Ill, Case No. 1:11-cv-08540, transferred in part from W.D. Wis., Case No. 10-CV-00662-BBC). Apple and Motorola have been embroiled in patent litigation over smart phones and other products since late 2010. Not all of the patents at issue relate to standardized technology, but in a few critical cases standardization and FRAND issues are front and center. Most significant is the dispute playing out in the Northern District of Illinois before Judge Richard Posner, sitting by designation. In that case, Apple argues that Motorola should be equitably estopped from enforcing certain patents relating to the ETSI GSM/WCDMA and UMTS/3GPP standards. The gist of Apple's complaint appears to be that Motorola did not offer to license Apple on terms that were FRAND. Yet Motorola maintains that it did, beginning in 2007, offer to license its patents to Apple at its customary rate of 2.25%. The dispute, then, revolves around the issue whether this licensing offer complies with Motorola's FRAND obligations to ETSI and possibly other SDOs and, if not, what remedies are available to Apple. Trial is scheduled for June. Trial in Illinois is scheduled in June. It appears that some, but not all, of the FRAND-related claims in this case remain in the Wisconsin court, which is scheduled for trial in November.

Apple v. Motorola (S.D. Cal., Case No. 12CV0355 JLS BLM). Last year the Apple-Motorola patent litigation spread to Germany and Motorola obtained an injunction against the sale of certain Apple products (e.g., iPhones) from the Regional Court (Landesgericht) of Mannheim (the injunction was recently suspended by the Higher Regional Court (Oberlandesgericht) in Karlsruhe pending further proceedings). Among the many patents being asserted by Motorola are two that are essential to the GPRS standard developed at the European Telecommunications Standards Institute (ETSI). This February, Apple brought a declaratory judgment action against Motorola in the Southern District of California, alleging that Motorola violated its FRAND obligations to ETSI when it sought an injunction from the Mannheim court. Apple bases its FRAND claim on a license that Motorola previously granted to Qualcomm, the supplier of GPRS-based communication chips used in the iPhone. Based on the pleadings, it appears that under the Motorola-Qualcomm license Motorola covenants not to sue Qualcomm's customers (such as Apple) for using Qualcomm's GPRS-based chips. However, Motorola seems to have revoked Apple's immunity under the Qualcomm license, asserting that Apple's enforcement of different patents against Motorola triggered the "defensive suspension" provisions of that license. In the California suit Apple seems to claim that either Motorola's revocation of Apple's rights under the Qualcomm license, or its enforcement of patents against Apple in Germany, violates Motorola's FRAND obligations to ETSI. The case is still at an early stage, and Apple's FRAND-based arguments, as well as Motorola's defenses, will presumably be clarified in the future.

Apple v. Samsung (N.D. Cal. Civil Action No. 11-CV-01846-LHK). Apple is also involved in wide-ranging patent litigation with Samsung, maker of the Galaxy smart phone than runs Google's Android operating system. In the Northern District of California, Apple and Samsung are each asserting patents against each other. Apple has moved for partial summary judgment arguing that Samsung failed to disclose patents essential to the ETSI UMTS telecommunications standard used in the iPhone and iPad, that Apple is licensed under these patents pursuant to a cross-license between Samsung and Intel (the supplier of chipsets used in these Apple products), and that Samsung's FRAND commitments to ETSI prevent it from now seeking injunctive relief against Apple. Apple's FRAND argument is interesting, in that it relies on French law (which purportedly governs the ETSI IPR policy and declarations). Samsung counters that Apple only sought a FRAND license from Samsung after Apple initiated litigation, then rejected Samsung's FRAND license offer and "steadfastly refused to engage in meaningful FRAND negotiations" (Samsung's Opposition to Apple's Motion for Partial Summary Judgment, Apr. 2, 2012, at 11). The sum of these actions, according to Samsung, is that Samsung's FRAND obligations should no longer prevent it from seeking an injunction against Apple under these circumstances. A hearing on Apple's motion is scheduled for May, 2012. The case is particularly noteworthy, as it involves not only FRAND issues, but also allegations that Samsung violated ETSI's patent disclosure rules (thus rendering Samsung's patents unenforceable), allegations reminiscent of those made in Rambus v. Infineon, 318 F.3d 1081 (Fed. Cir. 2003), cert. denied, 124 S.Ct. 227 (2003), and Qualcomm v. Broadcom, 584 F.3d 1004 (Fed. Cir. 2008). This month, the parties agreed to submit at least part of the dispute to mediation.

Apple v. Samsung (District Court – Hague, Netherlands, Case numbers 400367 / HA ZA 11-2212, 400376 / HA ZA 11-2213 and 400385 / HA ZA 11-2215). In March, a district court in the Hague, Netherlands, denied Samsung's request for an injunction against Apple, basing its reasoning (according to news reports – I do not have access to an English translation of the decision) on Samsung's commitment to grant FRAND licenses. The court apparently found that because Apple was willing to negotiate in good faith, Samsung's request for an injunction against the sale of Apple products in the Netherlands would not be sustained.

Huawei v. InterDigital (Del. Ch., No. 6974). InterDigital Communications has asserted eight patents relating to 3G telecommunications standards against Huawei in the ITC, seeking an exclusion order against the importation of infringing Huawei products into the U.S. Huawei alleges in an action brought in the Delaware Chancery Court that InterDigital has breached its commitments to ETSI and 3GPP by seeking to enforce its patents against Huawei products without first offering to enter into a FRAND license. Because an exclusion order is the only remedy that the ITC is authorized to grant, Huawei seeks to have the ITC action dismissed on this basis, as well as the establishment of a FRAND royalty rate for InterDigital's 3G patents.

New/Old Patents

Patent

So far this year, the USPTO has issued only nine patents with filing dates of before June 8, 1995. That date represents an important turning point in patent law. Patents filed before that date have a term of 17–years from the issuance date. Later filed patents have a term of 20–years from the filing date.

Of the seven recent patents based upon old applications.  Barring a terminal disclaimer or failure to pay a maintenance fee, all of these will be in force until 2029 and all are based on a filing date of 1995 or before. 

More info:

  • Secrecy Orders: Pat. Nos. 8,119,959 (Flight control of missiles); 8,132,494 (Ballistic resistant composite article having improved matrix system); 8,111,581 (Monitoring system for a ship’s radiated noise) and 8,111,584 (method of detecting a submerged vessel in or near the wake of a ship).
  • Delay in considering whether to institute an interference: Pat. Nos. 8,102,419 (film-to-digital scanning algorithm) and 8,099,154 (therapeutic acoustic pressure wave generator).
  • Prosecution suspended while re-examining a family member application: Pat. No. 8,112,782 (based upon Personalized Media Communications family of patents).
  • Abandonment + Revival and examination of several hundred claims through including multiple amendments: Pat. No. 8,097,405 (Enzo Biochem patent).
  • Eight rejections + claim amendments: Pat. No. 8,101,149 (Claim 1 in full: “Purified cage molecules consisting of carbon atoms.” Owned by Mitsubishi). 

Note – I updated this on 3/15/2012 to correct for an error in my database that was identified by a US Patent Examiner.

Apart from those held under secrecy order, I suspect that there are now around 400 pre-URAA applications still pending at the USPTO.

Patent Infringement Litigation: Filings on the Rise

Patent,

031312_2012_PatentInfri1

Terry Ludlow of ChipWorks recently created a time-series chart showing the number of US patent lawsuits per quarter. I have reproduced the chart with permission. [LINK]

The headline here: More patent lawsuits are being filed now than ever – even more than in the heyday of the false-marking litigation. Just as a caution – the recent rise in the number of lawsuits does not actually mean that there is more patent litigation going one. Rather, a substantial portion of the increase in Q4 2011 is due to the new joinder rules that force a patent holder to file separate lawsuits against similar defendants rather than bundle them all into a single action.

Thus, as an example, last week the patent holding company NovelPoint Security filed 30+ separate patent infringement lawsuits in the Eastern District of Texas. In the past, NovelPoint might have instead pursued all of those actions within a single complaint.

* * * * *

The NovelPoint Security patents both include David C. Reardon of Springfield Illinois as the sole inventor. See U.S. Patents 6,212,635 and 5,434,562. Neither patent is listed as assigned within the USPTO assignment database. Reardon is an interesting character – he is an electrical engineer but is much better known as a pro-life / anti-abortion advocate. Reardon runs the Eliot Institute that he founded. The patents themselves focus on computer security systems using public/private key encryption and claim a 1997 priority date based upon a provisional patent application filed