What is Your Experience with Patent Assertion Entities and Patent Licensing?

Patent,

One difficulty with studying patent enforcement is that so much of the action goes on behind closed doors and outside of court filings.

A colleague of mine is looking to interview a number of different participants for a research study on patent assertion entities. Specifically, the colleague is looking to talk to the following types of people:

  • Solo inventors or small firms that have sold their invention rights to a patent assertion entity;
  • Solo inventors or small firms that attempted to sell their invention rights to a manufacturing entity but failed;
  • Entities that previously were engaged in manufacturing but now primarily license their intellectual property portfolios; and
  • Entities that have licensed technology from a patent assertion entity that previously was a manufacturing entity (see #3 above)

If you fit within any of these categories and would be willing to answer a few questions, please e-mail your contact information to patentlawone@yahoo.com.

I have been assured that “interview data will remain confidential” and that “information gathered will be used strictly for academic research.” The researcher here has no affiliation to any party on either side of the current debates on patent assertion entities.

— Dennis

Intellectual Ventures and its 80,000 Patents

Patent

by Dennis Crouch

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

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

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

Supreme Court Action Today

Patent, , , , , ,

By Dennis Crouch

Supreme Court Action on 10/7/2013

Extraterritorial Application of US Patent Law: The Supreme Court has issued an invitation to the Solicitor General to file the Views of the Obama Administration (CVSG) in Maersk Drilling USA, Inc. v. Transocean Offshore Deepwater Drilling, Inc., Sct. No. 13-43 (2013). The focus of the case is location – and, what is meant by an “offer to sell . . . within the United States” under 35 U.S.C. § 271(a). The Federal Circuit held that the actual location of the offer is immaterial so long as the offer contemplated performance within the United States.

Subject Matter Eligibility: The Supreme Court has denied certiorari in the § 101 case challenging PerkinElmer’s patented “method for determining whether a pregnant woman is at an increased risk of having a fetus with Down’s syndrome.” Intema Ltd. v. PerkinElmer, Inc., Supreme Court No. 12-1372. The case with a much greater shot is Alice v. CLS Bank and perhaps its companion WildTangent v. Ultramcercial. Briefing of the petition continues in those cases.

False Marking: The Supreme Court has denied certiorari in PubPat’s False Marking case. PubPat had challenged the AIA’s retroactive rejection of non-competitor qui tam suits for false marking. Public Patent Foundation, Inc. v. McNeil-PPC, Inc., Sct. No. 13-161.

Prior Art Presumed Enabling: The Supreme Court has denied certiorari in the Finjan’s challenge to the PTO’s presumption that prior art is enabling. Finjan, Inc. v. U.S. Patent and Trademark Office, Sct. No. 12-1245.

= = = = =

Patent Cases Where Petition for Certiorari has been Filed:

Limelight v. Akamai, Sct. No. 12-786, is still pending at the Supreme Court and awaiting comments from the US Solicitor General (CVSG) before the court decides whether to grant the petition for writ of certiorari. The question presented in that case is whether indirect infringement (inducement) requires underlying direct infringement by a single actor. The Federal Circuit says “no.”

Hyundai Motor America, Inc. v. Clear with Computers, LLC, Sct. No. 13-296. This pending case is a follow-up to the Supreme Court’s 2011 decision in Microsoft v. i4i where the court held that invalidity defenses must be proven with clear and convincing evidence. That decision included a concurrence by Justice Breyer indicating that questions of law (such as obviousness) need not be proven with clear and convincing evidence. “The question presented is whether, following i4i, a district court may … instruct a jury to apply the heightened ‘clear and convincing’ standard not only to disputed factual aspects of an invalidity claim, but also to the legal aspects of such a claim – including the ultimate question of a patent’s invalidity?”

The petition for writ of certiorari in Sony v. 1st Media, Sct. No. 12-1086, is fully briefed but has not yet been decided. That case involves the extent of district court discretion in evaluating the equitable doctrine of patent unenforceability. The case largely challenges the strict requirements of Therasense.

In Fox Group, Inc. v. Cree, Inc., Sct. No. 12-1378, the asserted patent was found invalid under 35 U.S.C. § 102(g)(2) since the subject matter of the patent had previously been invented. The statute only works if the prior inventor did not abandon, suppress, or conceal the prior invention and here the prior inventor concealed how to make the invention, did not commercialize it, and did not apply for a patent. However, the prior inventor did disclose the fact of the invention and publicly offered some non-enabling clues to the invention. Although briefing is now complete, the Supreme Court took no action in this case yet.

Nautilus v. Biosig is pending at the Supreme Court and awaiting a response from Biosig. The case questions whether the “Insolubly Ambiguous” standard for indefiniteness is overly strict.

Another pending petition is Nokia v. v. International Trade Commission, Sct. No. 12-1352. The case focuses on patent enforcement entities and the “domestic industry” requirement for USITC jurisdiction.

Organic Seed Growers and Trade Ass’n v. Monsanto Co, Sct. No. 13-303, is also pending as a petition for writ of certiorari. The case argues that organic farmers have jurisdiction to challenge Monsanto’s GMO seed patents.

Saffran v. Johnson & Johnson, Sct. No. 13-405. In this case, the patentee essentially asks the Supreme Court to decide the issue before the en banc Federal Circuit in Lighting Ballast Control. I.e., “Whether the Federal Circuit should have given deference to the district court’s factual findings in construing the patent claims.” This petition is something of a place-holder to give the patentee time to see the outcome of Lighting Ballast.

Artesyn Technologies, Inc. v. SynQor, Inc., Sct No. 13-375. In this pending case, the losing defendant has asked that the Supreme Court tell the Federal Circuit to “Follow KSR” and also “Follow Global-Tech” rather than recreating the formal TSM test and allowing recklessness serve as proof of knowledge for induced infringement. In the similar pending petition of Arthrex, Inc. v. Smith & Nephew, Inc., Sct. No. 13-290, the petitioner asks for a further definition of “willful blindness” for inducement.

Power Integrations, Inc. v. Fairchild Semiconductor International, Inc., Sct. No. 13-269. This damages case focuses on when lost-sales outside of the US can be captured under US law. Here, the patentee argues that those sales should be accounted-for when they are “direct and foreseeable result of patent infringement inside the United States.” Briefing is ongoing at the petitions stage.

= = = = =

Patent cases where the Supreme Court has granted certiorari and will be hearing the case this term:

Medtronic Inc. v. Boston Scientific Corp., Sct. No. 12-1128 (Does a Declaratory Judgment plaintiff who is also an ongoing licensee of the patent have the burden of proving non-infringement?).

Highmark Inc. v. Allcare Health Mgmt. Sys., Sct. No. 12-1163 (When must deference be given to a lower court judgment regarding an exceptional case finding under §285?).

Octane Fitness, LLC v. Icon Health and Fitness, Inc., Sct. No. 12-1184 (What is the proper definition of an “exceptional case”?).

= = = = =

Hal Wegner follows these developments closely and his Top-Ten lists are available through the LAIPLA website: http://www.laipla.net/hal-wegners-top-ten-patent-cases/

Patent Law Federalism (Part II): Protecting the Free Speech Interest of Patent Owners to Conduct an Out-of-Court Patent Enforcement Campaign

Patent, ,

By Dennis Crouch

Activision TV v. Pinnacle Bancorp (D.Neb 2013)

In a second opinion in as many weeks, Federal Judge Bataillon (D.Neb.) has again ruled against the Nebraska State Attorney General and the state’s campaign against patent enforcement activities. [Link to Decision] Activision holds several patents that essentially cover the operation of a digital menu board with photographs. See U.S. Patent Nos. 8,330,613 and 7,369,058. And the company has sued a host of defendants and has sent out cease-and-desist letters to an even larger group, including some in Nebraska.

In response to those enforcement activities, the Nebraska Attorney General sent a letter to Activision’s litigation counsel ordering the firm to “immediately cease and desist the initiation of any and all new patent infringement enforcement efforts within the State of Nebraska pending the outcome of [the Attorney General] office’s investigation.”

In the first opinion, Judge Bataillon held that the firm could continue to represent Activision in Federal Court patent litigation by enjoining enforcement of that aspect of the Attorney General’s order. Following that order, Activision pressed on – asking the court to also enjoin the entire Attorney General order so that the firm could continue to pursue new out-of-court enforcement activities – such as contacting infringers and demanding that they pay for licenses. The Court has now sided with the patentee and against the Attorney General – finding that the restriction on enforcement activities likely operate as a prior-restraint on speech in violation of Activision (and its Attorneys) First Amendment rights of Free Speech and their Due Process rights.

The court finds the cease and desist order in this case is akin to a prior restraint. . . . The court finds Activision is likely to win on the merits as there is no claim or evidence to date of bad faith. Further, as there is no claim of bad faith, federal law governing these patents, including sending initial letters to businesses believed to violate a patent owned by Activision, is preempted by the federal government. Also, Activision has a First Amendment right to associate with counsel of its choosing without interference from the state of Nebraska. In addition, the cease and desist order operates in this case as a prior restraint on Activision’s speech and association rights. For these reasons, the court finds Activision is likely to win on the merits. . . .

The court is deeply concerned about the ability of the Attorney General to issue cease and desist orders, prior to the conclusion of the investigation, prior to any negative findings, prior to any hearings, and prior to permitting submission of documents and evidence by the Farney Daniels law firm. On the contrary, the Attorney General sent a request for information to Farney Daniels the same day it sent the cease and desist order, and gave Farney Daniels until August 18, 2013, to respond. Farney Daniels responded, and no further actions have been taken. The inability of Farney Daniels to submit such letters to businesses in Nebraska clearly infringes on the First Amendment rights of Activision to be represented by the counsel of their choice.

This opinion comes as a result of Activision’s motion for preliminary injunction (that has now been granted). Thus, the court found that the patentee was likely to win its case on the merits and that the Attorney General order was causing immediate irreparable harm. Under the laws of Appellate Procedure, the Attorney General has the right to immediately appeal this decision to the Court of Appeals to the Federal Circuit (where he would lose).

An important aspect of this decision is that it is not limited to patent law issues. Rather, the same First Amendment and Due Process claims here would apply any time the Attorney General issues a cease-and-desist order prior to conducting any investigation.

= = = = =

To be clear, the court did not shut-down the Attorney General’s investigation but instead found that it is improper for the Attorney General to compel silence without even conducting an investigation. “The court notes, there is no doubt the Attorney General generally has the power to investigate activity that it believes violates state law. . . . If … at some point during the investigation evidence supports a claim of bad faith, the Attorney General is free to revisit this preliminary injunction with the court.”

What is an Exceptional Case such that Court Should Award Attorney Fees?

Attorney Fees, Fee Shifting, Patent, , , ,

By Dennis Crouch

Earlier this week, I commented on the two attorney-fees cases pending before the US Supreme Court:

  • Octane Fitness, LLC v. ICON Health & Fitness, Inc., Docket No. 12-1184; and
  • Highmark Inc. v. Allcare Health Management Sys., Docket No. 121163.

Both cases stem from the same perspective that the “exceptional case” requirement for attorney fees is too narrowly construed by the courts and especially by the Federal Circuit. See 35 U.S.C. § 285.

I noted in the prior post that the predecessor of Section 285 was first enacted in a 1946 Patent bill. The 1946 law was substantially similar to the current law (enacted in 1952) with the major difference that the 1946 act expressly gave the court “discretion” to award attorney fees to the prevailing party while the 1952 act removed that “discretion” term and instead indicated that the fee may be awarded “in exceptional cases.”

The Senate Report associated with the 1946 statute indicates that the statute is not intended to make fee awards an “ordinary thing in patent suits” but instead to reserve such awards for “gross injustice.”

It is not contemplated that the recovery of attorney’s fees will become an ordinary thing in patent suits, but the discretion given the court in this respect, in addition to the present discretion to award triple damages, will discourage infringement of a patent by anyone thinking that all he would be required to pay if he loses the suit would be a royalty. The provision is also made general so as to enable the court to prevent a gross injustice to an alleged infringer.

S. Rep. No. 1503, 79th Cong., 2d Sess. (1946), reprinted in 1946 U.S. Code Cong. Serv. 1386, 1387.

When the 1952 act was passed, the House Committee Report briefly mentioned the “exceptional case” amendment to the statute – indicating that the phrase “‘in exceptional cases’ has been added as expressing the intention of the present statute as shown by its legislative history and as interpreted by the courts.”

In several cases, the Federal Circuit has considered the standard and, after some debate, decided in Eltech Systems Corp. v. PPG Industries, Inc., 903 F.2d 805 (Fed. Cir. 1990), that the exceptional case standard should be the same for both prevailing plaintiffs and for prevailing defendants – writing: “we now reach the question and determine that there is and should be no difference in the standards applicable to patentees and infringers who engage in bad faith litigation.” The Eltech Systems case was then cited positively by the Supreme Court in Fogerty v. Fantasy, 510 U.S. 517 (1994) as justification for a party-neutral approach to fee shifting in copyright cases.

We note that the federal fee-shifting statutes in the patent and trademark fields, which are more closely related to that of copyright, support a party-neutral approach. Those statutes contain language similar to that of [17 U.S.C.] § 505, with the added proviso that fees are only to be awarded in “exceptional cases.” 35 U.S.C. § 285 (patent) (“The court in exceptional cases may award reasonable attorney fees to the prevailing party”); 15 U.S.C. § 1117 (trademark) (same). Consistent with the party-neutral language, courts have generally awarded attorney’s fees in an evenhanded manner based on the same criteria. For patent, see, e.g., Eltech Systems Corp. v. PPG Industries, Inc., 903 F.2d 805, 811 (Fed. Cir. 1990) (“[T]here is and should be no difference in the standards applicable to patentees and infringers who engage in bad faith litigation”). For trademark, see, e.g., Motown Productions, Inc. v. Cacomm, Inc., 849 F.2d 781, 786 (2nd Cir. 1988) (exceptional circumstances include cases in which losing party prosecuted or defended action in bad faith); but see Scotch Whisky Assn. v. Majestic Distilling Co., 958 F.2d 594 (4th Cir.) (finding in the legislative history that prevailing defendants are to be treated more favorably than prevailing plaintiffs), cert. denied, 506 U.S. 862 (1992).

Fogerty at note 12.

Of course, the problem with a party-neutral approach is that it can only be applied at a certain high level of granularity or abstractness. Since patentees and accused infringers make systematically different argument and have systematically different strategies, the particular causes of exceptional case findings tends to be different. Thus, losing infringers most often pay fees based upon ongoing willful and reckless infringement while losing patentees most often pay fees for suing on patent obtained through inequitable conduct or for bringing baseless lawsuits. At that low level of granularity, the differences are such that it is difficult to compare whether a party-neutral approach is being applied.

Notes:

Thanks to John Pinkerton at Thompson & Knight for providing me with this legislative history from the 1946 Act.

Government Shutdown & Patent Law Practice

Patent,
  • Federal Courts (including the Federal Circuit) are continuing to operate on remaining budget surplus;
  • USPTO is continuing to Operate on Remaining Revenues, although the agency is taking cost cutting measures and the 18th Annual Independent Inventors Conference has been cancelled.
  • The FDA is largely closed and is not accepting filings that require FY2014 fees.
  • FTC is closed and has postponed its patent troll investigation until further notice; and
  • USITC has closed and is postponing its patent infringement investigations until further notice (all case deadlines are tolled).

 

Prior Art for Obviousness

Obviousness, Patent,

In re Winslow, 365 F.2d 1017 (C.C.P.A. 1966)

In the 1966 decision Judge Rich described the scope of prior art for §103 using the tableau framework:

We think the proper way to apply the 103 obviousness test to a case like this is to first picture the inventor as working in his shop with the prior art references — which he is presumed to know — hanging on the walls around him.

I wonder if today, the proper legal analysis would begin with a Google’s search engine that has indexed the prior art references?

Also, did the AIA eliminate the “pertinent art” requirement?

Supreme Court’s New Patent Cases

Patent, , , , , ,

By Dennis Crouch

The Supreme Court today granted writs of certiorari in two patent-related cases appealed from the Court of Appeals for the Federal Circuit and one copyright case out of the Ninth Circuit.

  • Octane Fitness, LLC v. ICON Health & Fitness, Inc., Docket No. 12-1184;
  • Highmark Inc. v. Allcare Health Management Sys., Docket No. 121163; and
  • Petrella v. MGM, Docket No. 12-1315.

The patent cases fit as a pair and both ask questions regarding the award of attorney fees to a prevailing party. In the US, each party to a litigation ordinarily pays its own attorney fees. Thus, although an accused infringer who successfully raises an invalidity defense will not pay damages to the patentee, that prevailing defendant will still need to pay its attorneys and experts for the thousands of hours spent defending the lawsuit. Likewise, a patentee who wins an infringement lawsuit generally takes a substantial portion of any award and turns it over to the attorneys and experts who turned the patent into cash.

Rule 11(c) of the Federal Rules of Civil Procedure offers sanctions for litigation abuses and indicates that reasonable attorney fees can serve as one form of sanctions. In addition, the section 285 of the Patent Act provides that a “court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285. The language of Section 285 was first included in the 1946 statutory revision of damage calculations. However, that rather than limiting the award to “exceptional cases” the 1946 statute provided that “[t]he court may in its discretion award reasonable attorney’s fees to the prevailing party.” I have not researched the legislative history behind this particular

In general, accused infringers who win patent cases have three particular complaints regarding the “exceptional case” limitation: (1) that the court has too narrowly interpreted the statute so that attorney fees are rarely awarded; (2) The second complaint is that fees are more likely to be awarded to a prevailing patentee (typically based upon willful infringement) than to a prevailing defendant despite Supreme Court precedent that suggests “prevailing plaintiffs and prevailing defendants are to be treated alike.” (quoting the Supreme Court copyright case of Fogerty v. Fantasy). (3) Finally, the parties complain that the Federal Circuit is too quick to overturn fee-awards rather than providing substantial deference to the district court judgment. I should point out here that – at this point – these arguments do not have strong empirical support.

Over the years, there has been substantial academic debate on the policy potential of a more rigorous loser-pay rule. The primary idea is that the loser-pays rule reduces speculative litigation and would “limit the tactical leverage gained by a party with a weak case threatening a defendant with costly litigation.” At the same time, the created-risk may also over-deter by also discouraging valid claims. As Jay Kesan explains, in general, the outcome of a balanced fee shifting regime is difficult to predict since parties who believe they have a strong case are more likely to sue (with the belief they will both compensatory recover damages and recoup attorney fees). “If both parties are pessimistic, settlement will likely occur under either system. However, if the plaintiff is optimistic, he is more likely to litigate because he will get a judgment without incurring costs.” Jay P. Kesan, Carrots and Sticks to Create a Better Patent System, 17 Berkeley Tech. L.J. 763 (2002). By making more at-stake in the lawsuit, we also likely shift the rate of appeal upward for cases that do not settle.

= = =

In Octane Fitness, the petition challenges the “rigid and exclusive” test that the Federal Circuit uses to determine whether a case is “exceptional.” A common theme of recent Supreme Court patent cases is a holding that challenged Federal Circuit rule is too rigid and should instead be more flexible. The second theme in recent Supreme Court patent cases is a holding that, when appropriate, patent law should fall in step with all other areas of law. The petition latches onto these theme and essential says “the Federal Circuit has done it again…” The particular question raised by Octane Fitness is as follows:

Whether the Federal Circuit’s promulgation of a rigid and exclusive two-part test for determining whether a case is “exceptional” under 35 U.S.C. § 285 improperly appropriates a district court’s discretionary authority to award attorney fees to prevailing accused infringers in contravention of statutory intent and this Court’s precedent, thereby raising the standard for accused infringers (but not patentees) to recoup fees and encouraging patent plaintiffs to bring spurious patent cases to cause competitive harm or coerce unwarranted settlements from defendants.

Icon rephrased as follows:

Patent infringement claims between industry competitors, ICON Health & Fitness, Inc. and Octane Fitness, LLC, were decided below on summary judgment. Both lower courts held that this case was not an “exceptional” patent case that would warrant the award of attorney fees to the prevailing party. Should this Court reverse the lower courts through judicial expansion of the attorney fee-shifting statute found in 35 U.S.C. § 285?

In the particular case, the district court conducted a Markman hearing and, based upon its claim construction, held that Octane’s products did not infringe Icon’s patent covering its elliptical exercise machine.

For its part, Octane writes that the “most compelling reason[] to grant certiorari …. [is that] the Federal Circuit’s current exceptional case standard is squarely in conflict with this Court’s holding in Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994) … Fogerty mandates that plaintiffs and defendants be treated alike under an analogous fee-shifting provision in the Copyright Act.” Of course, one problem with the even-handed mandate is that plaintiffs and defendants lose cases for different reasons. Within this framework, a party’s status actually does make some difference for fee-shifting. Findings of willful infringement, for instance, favor only patentees, while findings of inequitable conduct during patent prosecution favor only accused infringers. Either party can be awarded attorney’s fees based on the bad faith assertion of objectively baseless claims or other litigation misconduct.

In the background are a variety statutory proposals that would accomplish much of what Octane seeks. However, a Supreme Court decision in the case is likely to arrive before any Congressional action. See Congressing.

In Highmark, former Acting Solicitor General Neal Katyal (now at Hogan Lovells) has asked the Supreme Court to focus on whether the Federal Circuit must give deference to a lower court award of attorney-fees to a prevailing party.

The petition asks:

The Patent Act provides that A case is “exceptional” if it is objectively baseless and brought in bad faith. After living with this case for more than six years, the District Court found that it was objectively baseless and brought in bad faith, and it awarded fees. Over a strong dissent, a Federal Circuit panel reversed, holding that a district court’s objective baselessness determination is reviewed “without deference.” The Federal Circuit denied rehearing en banc by a vote of six to five. One of the two pointed dissents from that denial accurately observed that the decision below “deviates from precedent *** and establishes a review standard for exceptional case findings in patent cases that is squarely at odds with the highly deferential review adopted by every regional circuit and the Supreme Court in other areas of law.”

The question presented is: Whether a district court’s exceptional-case finding under 35 U.S.C. § 285, based on its judgment that a suit is objectively baseless, is entitled to deference.

Undoubtedly, the Supreme Court will reverse in Highmark and the reasons are well understood by the Federal Circuit judges. In all likelihood, a GVR without opinion would provide sufficient instruction to the Federal Circuit in this case. However, I suspect that we will see these two cases argued and decided in parallel with a roughly identical timeline. One important aspect of the Highmark case is the question of whether attorney fees can be awarded as a deterrent against other parties’ bad behavior.

The copyright case is Petrella v. MGM and focuses on the doctrine of laches as it applies to copyright enforcement – with a particular focus on what might be termed “rolling infringement.” The copyright holder in the case is Paula Petrella whose father Peter Petrella wrote two 1970s screenplays (one titled The Raging Bull) and a book about the life of boxer Jake LaMotta. A few years later(1980), Raging Bull became an Oscar winning movie. In 2009, Petrella sued MGM for copyright infringement. Now, both MGM and Petrella claim ownership over the copyrights being asserted and MGM claims that the movie does not infringe the Petrella copyrights. However, the focus of the case at the Supreme Court is whether the doctrine of laches can block a copyright holder from suing for a new act of infringement (such as distributing another copy of the movie).

Petrella presents the question as follows:

The Copyright Act expressly prescribes a three-year statute of limitations for civil copyright claims. 17 U.S.C. § 507(b). The three-year period accrues separately for each act of infringement, even if it is one of a continuing series of acts of infringement.

The federal courts of appeals have divided 3-2-1 over whether the nonstatutory defense of laches can bar a civil copyright suit brought within the express three-year statute of limitations. Three circuits forbid any application of laches or restrict the remedies to which it can apply. Two other circuits strongly disfavor laches and restrict it to exceptional circumstances. The Ninth Circuit not only does not restrict laches or the remedies to which it can apply, but has also adopted a presumption in favor of applying laches to continuing copyright infringements.

The question presented is: Whether the nonstatutory defense of laches is available without restriction to bar all remedies for civil copyright claims filed within the three-year statute of limitations prescribed by Congress, 17 U.S.C. § 507(b).

The case has obvious implications for patent law since patent law doctrine includes a similar non-statutory laches doctrine and six-year statute of limitations. It is possible that the Supreme Court will essentially eliminate the laches doctrine (but leave a claim of equitable estoppel).

It should be an interesting year in patent law.

Patent,

Under the AIA,

A person shall be entitled to a patent unless-(1) the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention; or (2) the claimed invention was described in a patent … or in [a published] application … [that] names another inventor and was effectively filed before the effective filing date of the claimed invention.

35 U.S.C. 102(a) (2013).

The USPTO is now examining patents under this new standard. I would love to see a real world example of this law being applied in a way shows the difference between our new filing-date focus and the old invention-date focus. crouchdd@missouri.edu

Licensee Underreporting

Patent,

By Dennis Crouch

One problem with royalty agreements is the annual fight over whether the licensee is paying full royalties to the licensor. In a recently released report, the technology-license auditors at Invotex say that there is good reason for a fight based upon their finding that "89% of audited licensees underreport and underpay royalties." According to their audits, a full 25% of licensees were paying less than half of what they should.

Now, one potential issue with this report is that Invotex has some amount of bias because the company primarily represents licensors willing to pay for an audit (and who have some suspicion of under-reporting). In addition, Invotex has a financial incentive to make audits appear larger. That said, the results found here are not surprising to me and attorneys should recognize that a licensor's role must be an active one.

Read the report here: http://invotex.com/perspectives/intellectual-property/13th-annual-invotex-royalty-compliance-report-89-audited

Bits & Bytes from Jonathan Hummel

Patent,

RECENTLY

#1. Patent Battle over Cash-Cow Cameras in St. Louis

American Traffic Solutions (ATS) is suing B&W Sensors for patent infringement on a patent that covers, “technology using photography to simultaneously clock multiple vehicles on a single roadway.” Largely known for manufacturing controversial red-light cameras (see story in Missouri Appeals Court). ATS says B&W has misrepresented its speed-camera services to potential customers by falsely claiming that ATS could not offer them. ATS also complains that B&W has brought negative local attention to speed cameras, damaging the potential market for ATS in the St. Louis area.

 

#2. Troubled Trolls Pen Letter to Congress Re Covered Business Method Expansion

Matt Levy, writing at Patent Progress, breaks down a letter sent last week by concerned NPEs. Last Friday, BSA (Business Software Alliance) and a number of companies sent a letter to Senate and House Judiciary Committee leadership. BSA puts forth the standard “hamper to innovation” argument against expanding covered from only those business method patents dealing with financial services to all business methods. The letter was delivered to Senate Judiciary Chairman Patrick Leahy (D-Vt.) and Ranking Member Chuck Grassley (R-Iowa), and House Judiciary Chairman Bob Goodlatte (R-Va.) and Ranking Member John Conyers, Jr., (D-Mich.).Read the letter here.

 

#3. Martha Stewart Embroiled in Patent Battle with LodSys

Timothy B. Lee, writing for The Switch, at the Washington Post, reports that NPEs have a new, very formidable enemy: Martha Stewart. In July, Lodsys sent Stewart's media empire letters warning her that four of its iPad apps infringed LodSys's patent. Lodsys demanded $5,000 for each of the four apps to license the patents. Rather than simply pay the fee to make LodSys go away, Martha Stewart Living Omnimedia filed suit in Wisconsin seeking declaration that it had not infringed.

 

#4. Police Intellectual Property Unit Makes First Arrests

The Guardian reports that a new police unit to tackle illegal downloads and counterfeit DVDs and CDs has carried out its first raids and arrested two men. The police intellectual property crime unit (PIPCU), which launched on Friday, is being run by City of London police and has government funding of £2.56m over two years.

 

PENDING

Apple Applies For a Patent on E-Book Signing Technology

Writing for PC Magazine, Stephanie Mlot, explains, "A digital tome would come embedded with a specific autograph page, or a 'hot spot' autograph widget area configured to receive autographs."  Adding, "Don't expect to see this e-autograph system added to iBooks anytime soon. Find the patent here.

 

UPCOMING

#1. Intellectual Property Symposium – 10/4 – University of Misosuri

Join us at the University of Missouri, School of Law for a discussion of the current issues facing Intellectual Property practice. Hosted by the school’s Center for Dispute Resolution, the Symposium will feature Greg Gorder, co-found of Intellectual Ventures giving the Keynote Address.

–http://law.missouri.edu/csdr/symposium/2013/

#2. Antitrust and Intellectual Property Conference  — 10/10 

-ABA Section of Intellectual Property

-Live/In-Person

#3. International Laws Governing Cross Border Discovery, Privilege, Confidentiality and Data — 10/16

-ABA Section of Intellectual Property

-Webinar/Teleconference

 

 

JOBS

IP Attorney – Law Firm – Lansing, Mich.

            –Fraser Trebilcock Davis & Dunlap, P.C., an established Lansing Law Firm, has an opportunity for an experienced IP Attorney.

            -Please send resume with cover letter to Thaddeus E. Morgan, 124 W. Allegan, Suite 1000, Lansing, MI 48933.

 

Technical Writer/Patent Agent – Law Firm – Charlotte, N.C.

            –Additon, Higgins, Pendleton & Ashe, a boutique intellectual property law firm based in Charlotte, North Carolina, is seeking an experienced technical writer or patent agent to immediately join the firm. The candidate should also have a degree in electrical engineering, computer engineering, or computer science. Admission to practice before the USPTO is a plus.

            -Please send your resume, writing samples, and cover letter to jobs@ahpapatent.com.

 

 

Related articles
Patent troll Lodsys demands $5,000 from Martha Stewart. That was a bad idea [GigaOM]
Patent trolls have a new enemy: Martha Stewart
Resolving IP Disputes: Calling for an Alternative Paradigm
FTC on Patent Trolls
Bits & Bytes from Jonathan Hummel

USPTO and Government Shutdown

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There is a potential of a substantial government shutdown on Tuesday, October 1 when the new fiscal year begins without moneys being appropriated.  The Patent Office has more control over its budget than some agencies and has a reserve fund that can be spent without further appropriations. So, for patent filers, the USPTO will remain open for business for at least a few weeks. A parallel fiscal hurdle is expected to hit October 19 when the US government’s debt load will to reach its self-imposed ceiling.  At that point, the PTO would likely be severely required to restrict spending.

FTC on Patent Trolls

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By Dennis Crouch

The Federal Trade Commission has decided to move forward with a full study of patent assertion by companies who are in the business of buying and then asserting patents. In FTC lingo, these are referred to “Patent Assertion Entities” or PAEs. From the agency:

PAEs are firms with a business model based primarily on purchasing patents and then attempting to generate revenue by asserting the intellectual property against persons who are already practicing the patented technologies. The FTC is conducting the study in order to further one of the agency’s key missions—to examine cutting-edge competition and consumer protection topics that may have a significant effect on the U.S. economy.

In addition to seeking voluntary information, the FTC proposes to use its subpoena power of to require the assertion entities to provide information to the agency and address the following questions:

  • How do PAEs organize their corporate legal structure, including parent and subsidiary entities?
  • What types of patents do PAEs hold, and how do they organize their holdings?
  • How do PAEs acquire patents, and how do they compensate prior patent owners?
  • How do PAEs engage in assertion activity (i.e. demand, litigation, and licensing behavior)?
  • What does assertion activity cost PAEs?; and
  • What do PAEs earn through assertion activity?

http://www.ftc.gov/opa/2013/09/paestudy.shtm

Federal Circuit: Intentional Abandonment Equals Unintentional Abandonment?

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Network Signatures v. State Farm (Fed. Cir. 2013)

Section 282 of the Patent Act lists the defenses to allegations of patent infringement. In recent years, the Federal Circuit has applied that statute somewhat strictly in finding that the section defines the complete list of defenses. In one case, the court held that the patent office's improper revival of an abandoned patent application could not justify fit as defense. See Aristocrat Technologies Australia v. International Game Technologies (IGT) (Fed. Cir. 2008) (erroneous revival not a cognizable defense under §282).

The present case also involves revival of an abandoned application. Trying a different tact, the defendant here (State Farm) argued that the patent is unenforceable because the patentee lied to the PTO regarding the "unintentional" nature of the abandonment. (Generally, abandoned patents and patent applications can only be revived if the abandonment was unintentional). The charge is inequitable conduct.

The patent at issue is owned by the US Government but currently exclusively licensed to the private company – Network Signatures. U.S. Patent No. 5,511,122. The patent issued in April 1996 and the second maintenance fee was due in October 2003. (7 ½ years after issuance). The PTO then gives patentees another six-months grace period to pay the fee. However, the Navy decided not to pay the fee because of there was no known "commercial interest" in the patent at that time. As a result, the patent was deemed abandoned and thus unenforceable in April 1996. Two weeks later, the predecessor of Network Signatures contacted the Navy IP folks to see whether it could license the patent. At that point, the patent suddenly became valuable and the Navy immediately requested that the PTO revive the patent based upon the "unintentional" abandonment of the application. Without requiring the submission of any evidence or explanation, the PTO granted the petition and revived the patent. Since obtaining the license, Network Signatures has filed almost 100 infringement lawsuits against a wide variety defendants. Now, I should mention here that the predecessor to Network Solutions had actually tried to contact the Navy prior to final expiration to express interest in the patent, but was not routed to the IP department until after the patent had been abandoned.

092613_1745_FederalCirc1

Neither the patent statute nor the regulatory rules "unintentional," but the MPEP indicates that "[a] delay resulting from a deliberately chosen course of action on the part of the applicant is not an 'unintentional' delay within the meaning of [the code]." MPEP 711. Seemingly addressing the particular situation at issue here, the MPEP indicates that "a change in circumstances that occurred subsequent to the abandonment of an application does not render 'unintentional' the delay resulting from a previous deliberate decision to permit an application to be abandoned." Id. On the other hand, a "mistake of fact" appears to be a justified "unintentional" reason.

After reviewing this evidence, the district court sided with the defendant and held (on summary judgment) the patent unenforceable due to inequitable conduct based upon the patentee's statements that the abandonment was unintentional. On appeal, however, the Federal Circuit has reversed – finding that the patentee's action does not constitute "material misrepresentation with intent to deceive."

Mr. Karasek's compliance with the standard PTO procedure for delayed payment, using the PTO form for delayed payment, does not provide clear and convincing evidence of withholding of material information with the intent to deceive the Director. On matters unrelated to the substantive criteria of patentability, but within the authority of the Director, "it is almost surely preferable for a reviewing court not to involve itself in the minutiae of Patent Office proceedings and to second-guess the Patent Office on procedural issues at every turn." Laerdal Med. Corp. v. Ambu, Inc., 877 F. Supp. 255, 259 (D. Md. 1995) (citation and internal quotation marks omitted).

Judge Newman penned the opinion that was joined by Judge Wallach with the result of a reversal. With the complete reversal, it appears that the majority opinion result is a summary judgment of no inequitable conduct.

Writing in Dissent, Judge Clevenger argued that the unintentionality statement made by the patentee was clearly material but that the question of intent should go to trial. For Judge Clevenger, the issue of materiality is clear: "If the PTO had known the true facts, I have no doubt whatsoever that Karasek's revival petition would have been denied." However, from Judge Clevenger's perspective, the issue of intent is still up in the air. In particular, whether the Karasek knew that the circumstances of the revival were, and made a deliberate decision to withhold them.

Responding to Judge Clevenger's position in a footnote, Judge Newman explained that we could not expect further explanation from the attorney regarding the unavaoidability of the abandonment because PTO rules and the revival official form only require a statement that the abandonment was unavoidable. In essence, because the standard practice is to not explain the reasons for abandonment that we should not blame the filer for failing to provide reasons.

PTO Post-Issuance Filings

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By Jason Rantanen

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

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

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

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

 

Monthly_se20130830

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

 

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

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

 

Monthly_preissuance20130830a

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

  

Amending the America Invents Act 2013

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By Dennis Crouch

One aspect of the Goodlatte discussion draft legislation is a series of “Improvements and Technical Corrections to the Leahy-Smith America Invents Act.” The AIA was passed in September 2011 and is gradually being fully implemented across the US patent system. The further changes here are fairly substantial, although buried within the proposed bill itself. The following post offers some explanation of the provisions with only a few comments on the policy implications.

1. REPEAL OF CIVIL ACTION TO OBTAIN A PATENT

For several years, the PTO has been pushing to weaken or eliminate the “civil action” option that is currently available to patent applicants who are refused a patent. The current system allows a patent applicant to file a federal lawsuit that asks a district court to order the PTO to issue a patent covering the claimed invention. The civil action approach allows for extensive presentation of evidence, live witness testimony, and an ultimate decision by a district court judge. And, since the civil action is not an “appeal” per se, substantial deference is not given to prior factual findings by the PTO (as long as the applicant presents its own evidence on point). The civil action approach is not widely used because of the expense of pursuing a district court claim. However, it has been a very successful approach for a number of patent applicants. Under the new provision, the only avenue for challenge an adverse PTO decision on the merits of an application would be through appeal to the Court of Appeals for the Federal Circuit.

2. POST GRANT REVIEW ESTOPPEL SUBSTANTIALLY NARROWED

The current estoppel rules of post-grant review indicate that a petitioner will be estopped from latter asserting in-court that the challenged patent “invalid on any ground that the petitioner raised or reasonably could have raised during that post-grant review.” The amendment would substantially narrow the estoppel to cover only grounds that the petitioner actually raised.

This change would result in Post-Grant review being much more of a parallel option rather than an alternative option to challenging patent validity.

3. CONSTRUING CLAIMS DURING POST-GRANT and INTER-PARTES REVIEW

The proposal would require that the claims under review be construed in the same way that they would be construed by a district court rather than using a “broadest reasonable construction.” The statute as written requires that the PTAB construe “each claim of the patent in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent.” However, that method is somewhat different than what has been ruled as the law by the Federal Circuit.

4. CODIFICATION OF DOUBLE PATENTING DOCTRINE

The statute would create a new statutory provision that is intended to codify the obviousness-type double patenting doctrine. This ensures that the doctrine is carried through into the AIA. I have not parsed through the new provision to see if it does what they say it does:

35 U.S.C. §106 that reads as follows:

A claimed invention of a patent issued under section 151 (referred to as the ‘first patent’) that is not prior art to a claimed invention of another patent (referred to as the ‘second patent’) shall be considered prior art to the claimed invention of the second patent for the purpose of determining the non-obviousness of the claimed invention of the second patent under section 103 if—

(1) the claimed invention of the first patent was effectively filed under section 102(d) on or before the effective filing date of the claimed invention of the second patent;

(2) either—

(A) the first patent and second patent name the same inventor; or

(B) the claimed invention of the first patent would constitute prior art to the claimed invention of the second patent under section 102(a)(2) if an exception under section 102(b)(2) did not apply and, if applicable, if the claimed invention of the first patent had not been effectively filed under section 102(d) on (but was effectively filed before) the effective filing date of the claimed invention of the second patent; and

(3) the patentee of the second patent has not disclaimed the rights to enforce the second patent independently from, and beyond the statutory term of, the first patent.

5. EXPANDING THE SCOPE OF COVERED_BUSINESS_METHOD REVIEWS

The AIA creates an option for third parties to attack patents on non-technological “covered business method” innovations through the use of a new post-grant review proceeding. Through the review program, third parties can raise any ground of invalidity and can use this approach to pre-AIA patents. The amended provision would appear to sweep-in virtually all software-type patent claims.

Under the changes, the 7-year sunset provision would be removed; the expansive definition of business methods found in SAP America, Inc. v. Versata Dev. Group, Inc., CBM2012-00001, 12 Paper 36 (January 9, 2013), would be codified; and the “non-technological” requirement would be clarified/expanded to make clear that a claim’s recitation of technological features does not make the claim technological “if it is readily apparent that the recited [technological] feature is anticipated by or obvious in light of the prior art.”

6. SHRINKING PATENT TERM ADJUSTMENT

The bill proposes a clear rule that no PTA can be awarded for any delays that occur following the filing of a Request for Continued Examination (RCE). This would reduce the patent term for a substantial portion of patents and the bill indicates that the recalculation would be retroactive against any patent application still pending at the time of enactment.

7. OVERTURNING OF GUNN V. MINTON

Although not a statutory change, the bill would make the “clarifying” statement that:

CLARIFICATION OF JURISDICTION.—Congress finds that the Federal interest in preventing inconsistent final judicial determinations as to the legal force or effect of the claims in a patent presents a substantial Federal issue that is important to the Federal system as a whole.

This provision has the potential of bringing patent malpractice claims back under Federal Court jurisprudence. And, to the extent that patent licenses depend upon the scope of a patent claim, licensee disputes would also be heard in Federal Courts.

Patent Reform 2013 – A Discussion Draft

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by Dennis Crouch

House Judiciary Chairman Bob Goodlatte has released a new version of a "discussion draft" of proposed legislation focusing attention on "abusive" litigation tactics. In a major way, the Bill is focused on making it more difficult for patentees to enforce their patents and is designed to put additional financial risk on patentees who lose in court. Members of both the House and Senate are looking for constituent input on this topic. Senator Leahy is also likely to distribute a draft bill within the next month or so.

[Download Goodlatte – Patent Discussion Draft]

1. Raising Pleading Requirements for Allegations of Patent Infringement

Under current Federal Circuit precedent, a patentee pleading patent infringement can file a bare-bones complaint that basically only indicates the patent at suit and the general activity by the defendant that leads to the infringement accusation. In Iqbal and Twombly, the Supreme Court generally raised the pleading standards and federal courts now require significantly more factual assertions in complaints than they did a few years ago. However, the Federal Circuit found that patent infringement complaints fall within an exception that allows less-informative pleadings so long as they comply with Form 18 of the FRCP. The court has applied the higher Iqbal standards to other pleadings such as defenses and counterclaims raised in an answer and especially focused on allegations of inequitable conduct.

The bare-bones approach of Form 18 leaves tremendous wiggle. And, patentees typically do not identify, for instance, (1) which claims of the patent are being asserted, or (2) what products or services of the defendant are allegedly infringing. The amendment would essentially tell patentees that patent infringement must be pled with particularity. And, at least the patentee must identify those two important elements listed above (if known). In addition, the proposal in its current form asks for a claim chart showing "where each element of each claim . . . is found within the accused instrumentality" and a description, "with detailed specificity, how the terms in each claim … correspond to the functionality of the accused instrumentality." The complaint would also be required to list all other cases where the patent has been asserted and identify whether the patents at issue are subject to any FRAND commitment.

One exemption that appears throughout the proposal is that these changes do not apply when an innovator drug company is suing a would-be generic manufacturer. Rather, throughout the proposal an exception is made for cases where the cause of action arises under 35 U.S.C. § 271(e)(2) (the typical statutory provision invoked in innovator-generic patent litigation).

Federal courts have been using a "notice pleading" system since the 1930's – requiring a "short and plain statement of the claim showing that the pleader is entitled to relief." FRCP 8. It would be interesting to see some pre-1938 complaints and consider whether the apocryphal tale that "fact pleading" was actually much more comprehensive. But the changes appear to move the patent world into the world of fact pleading. The idea behind notice pleading is to provide the accused with sufficient notice of the claim without unduly burdening the plaintiff or creating overly formalistic rules. However, for at least some cases, the current standard does not provide sufficient notice for an accused infringer to actually understand what the patentee is claiming. In addition to providing better notice, the proposed legislation would also significantly raise the burden of filing a patent infringement complaint.

The statute also requires that the Judicial Conference propose rules that would eliminate Form 18 as it stands and create a new form that complies with the new factual pleading described above.

How the courts will likely solve this problem before Congress takes action: The courts recognize that the current pleading standard is too low in patent cases (including a likely majority of Federal Circuit judges). To deal with this the court basically has two options: (1) amend Form 18 through the Judicial Conference procedures; or (2) decide that the court is not bound by Form 18.

2. Award Attorney Fees for Prevailing Parties – And Against All Interested Parties

The new bill creates a presumption in favor of attorney fees being awarded to the prevailing party. Unlike other proposals during the past couple of years, the discussion proposal here is not overtly biased against patent assertion. Rather, the attorney fee statute (§ 285) would require courts to award "reasonable fees and other expenses" to the prevailing party "unless the court finds that the position [of the losing party] was substantially justified or that special circumstances make an award unjust."

Now, in order to ensure that patent holding companies are able to pay as losing party, the provision allows for attorney fee recovery against "interested parties" that have been joined under new provision 299(d). Under 299(d), interested parties include assignees, anyone with a right to sue, anyone with a right to sublicense, and anyone with a direct financial interest in the patents. However, neither ordinary contingency fees attorneys nor equity owners of the patentee qualify for joinder despite their obvious financial interests.

3. Limit Discovery in Patent Cases.

For many reasons, patent lawsuits are hotly litigated and the discovery process is long+expensive. The discussion bill provides for particular limits on discovery prior to claim construction. Under the proposal, a court would be barred from allowing discovery prior to a claim construction decision (except for discovery necessary for claim construction).

In addition, the bill would require the judicial conference to propose a number of limits on discovery that have the potential of significantly changing the process of patent some litigation.

4. Additional Initial Disclosures for Public Release

Under current law, information on each patent lawsuit is sent to the USPTO and placed on public record there. The proposed legislation would extend that program by requiring the patentee in an infringement lawsuit to disclose (1) any assignees of the patent; (2) any entities with the right to enforce or sublicense the patent; (3) any entity with a financial interest in either the patent or the plaintiff; (4) the ultimate parent entity of any of the entities named.

In addition, the law would mandate updates of assignee information for all patents within 90-days of any change of assignee.

5. Exception for Customer Lawsuits that Allows for Stay of those Actions

Sometimes alleged infringement is simply based on the defendant's use of an infringing product. The proposed legislation would require a court to stay actions against such customers pending resolution of the case against the manufacturer. However, the grant of stay requires that the customer agrees that the court decisions in the manufacturer suit will become res judicata have preclusive affect against the customer.

6. Foreign Bankruptcy Effect on US Patent License

Business bankruptcy and reorganization is sometimes mind-bending. Bankruptcy trustees are generally authorized to choose whether to reject or enforce (assume) any of the contracts that were binding on the debtor at the time of bankruptcy filing. However, the Bankruptcy code significantly reduces that power when the contract involves the a license of the debtor's intellectual property rights. 35 U.S.C. §365(n). One issue that has arisen lately is the impact of foreign bankruptcy on the debtor's US intellectual property rights holdings. The proposed bill protect the creditor-licensees in those cases so that an IP owner's foreign bankruptcy cannot be used to unilaterally cancel one of its licensee's US IP rights. To be clear, 365(n) applies to US IP rights, but not Trademark rights or state-law rights other than trade secret rights.

Next Federal Circuit Judge: Todd Hughes

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The Senate has unanimously (98-0) confirmed Todd Hughes to the US Court of Appeals for the Federal Circuit. With Hughes on the bench, the Federal Circuit will now have a full-bench of twelve judges in addition to six judges with senior status. Although not a patent litigator, Hughes has apparently argued more cases at the Federal Circuit than any other attorney based upon his long career in the commercial litigation branch of the Department of Justice. No date has been announced for his swearing-in. However, Chief Judge Rader prefers to take action quickly and I expect that Judge Hughes will be hearing cases within the next few weeks.

Hughes is the first openly gay judge to be confirmed for any Federal appellate court. The 98-0 confirmation decision suggests that no senator has a principled reason for rejecting judicial candidates based upon their sexual orientation.

Congratulations Judge Hughes!

Patent Reform 2013

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Coming soon … “Anti-troll” bills in both the House and Senate that focus on transparency in patenting and litigation, attorney fees, reducing discovery costs, raising pleading requirements, and offering an outlet for lawsuits against the customers of infringing manufacturers.