SCT: False Claims Act Actions Based Upon Fraudulently Obtained Patent Rights

by Dennis Crouch

This post walks through a new petition for writ of certiorari involving claims that Valeant Pharma defrauded the U.S. government by using fraudulently obtained patent rights prop up its drug prices. [Read the Petition]

The False Claims Act (FCA), originally enacted in 1863 to combat contractor fraud during the Civil War, imposes civil liability on anyone who “knowingly presents” a “fraudulent claim for payment” to the federal government. 31 U.S.C. § 3729(a)(1)(A). The Act allows private citizens, known as “relators,” to bring qui tam actions on the government’s behalf against those who have defrauded the government. If successful, relators can recover up to 30 percent of the damages. 31 U.S.C. §§ 3730(b)(4), (d)(2).

To prevent opportunistic lawsuits, however, Congress has sought to strike a “balance between encouraging private persons to root out fraud and stifling parasitic lawsuits” (more…)

Patent Reform: Innovation Act of 2015

by Dennis Crouch

On February 5, 2015, Rep. Goodlatte reintroduced his patent reform bill: the Innovation Act.  Co-sponsors already include the bipartisan group of Reps. Defazio, Issa, Nadler, Smith, Lofgren, Chabot, Eschoo, Forbees, Pierlusi, Chaffetz, Jeffries, Marino, Farenthold, Holding, Johnson, Huffman, Honda, and Larsen.

Read the Bill: Innovation Act 2015

The bill as introduced includes the following provisions:

  • Heightened Pleading Requirements: Significant raising of the pleading requirement for patent cases.  A patent holder filing an infringement lawsuit – at the time of filing – would need to include a set of infringement charts showing how each limitation of each asserted claim in each asserted patent is found within each accused product or instrumentality.  However, the plaintiff would not be required to complete the entire chart if the infringement is not readily available after a reasonable amount of pre-filing due diligence.  Form 18 would also be eliminated.  Pharmaceutical companies filing infringement actions under 271(e)(2) wouldn’t need to comply.  The approach here raises some separation of powers concerns (ordering the Judicial Conference to act). The Judicial Conference has also already moved to eliminate Form 18 in a way that would implicitly increase pleading requirements. Those changes are expected to take-effect December 2015.  However, the Judicial Conference changes do not go nearly as far as the legislative proposal here.
  • Presumption of Attorney Fees:  Under the new law, a court would be required to award attorney fees and “other expenses” to the prevailing party unless a judge “finds that the position and conduct of the nonprevailing [was] reasonably justified in law and fact or that special circumstances (such as severe economic hardship to a named inventor) make an award unjust.  This flips the current rule where attorney fees are only available in “exceptional cases” and instead replaces it with a roughshod version of the “English Rule.”  In cases where the patentee is undercapitalized, the law would allow the court to pierce the corporate veil and make investors and other ‘interested parties’ pay the attorney fee award.  Unlike the English system, the proposal here does not place any limits on the potential fee award other than it be “reasonable.”  In my view, an improvement upon this would be to set reasonableness early-on based upon an estimation of the case value.
  • IPR Claim Construction: Rejecting the Federal Circuit’s recent Cuozzo decision, the Bill would require the USPTO to construe claims in post-issuance reviews (IPR/PGR/CBM) in the same manner as would be done by a district court and “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.”  And, if a court has already construed the claim then the PTO must “consider such claim construction.”  This particular change is one that favors patentees.
  • Discovery Limits:  The bill would limit discovery in litigation until after a claim construction ruling (if one is necessary for the case).  For cases where claim construction is dispositive, this ruling has the potential of reducing costs. It also will create further pressure on courts to conduct early claim construction decisions.   At the same time, the approach seems to increase the likelihood that a court will separate the claim construction decision from its summary judgment decision (which would likely require further discovery) except, perhaps in cases involving definiteness under Section 112(b).  Additionally, discovery of non “core” documents would also be severely limited, and anyone asking for discovery would need to first either (a) post a bond sufficient to cover the expected costs of additional discovery or (b) be a large enough company.
  • Willful Infringement:  Willful infringement can lead to treble damages, but the Bill would limit the applicability of pre-suit demand letters for proving willfulness unless  the demand letter identifies: (1) the patent in question; (2) the ultimate parent entity that owns the patent; (3) the accused products; and (4) how the product infringes at least one claim of the patent.
  • Transparency of Ownership: In any lawsuit, the patent owner must disclose “the ultimate parent entity” of any assignee of the patent. Further, the patentee will be under an ongoing duty to update the USPTO of any change in ownership, including ultimate parent entity within 90-days of any change. Failure to keep-up the information results in no enhanced damages or attorney fees for the patentee in litigation and an award of attorney fees to the defendant who spent money researching the actual ownership information.
  • Stay of Customer Suits: In limited cases, the courts will stay customer lawsuits when the manufacturer of the accused product steps up to challenge the patent.
  • Foreign Bankruptcy: The bill would stop the practice of a bankruptcy executor canceling US IP licenses in foreign bankruptcies.  This is already barred for U.S. bankruptcies under 365(n) of the Bankruptcy code.
  • Codifying Double Patenting: The bill would codify a double patenting regime that would seemingly replace the obvousness-type double patenting system developed by the courts. The proposal would particularly allow prior filings by overlapping inventors to count as prior art unless a terminal disclaimer is filed.

The Debate Over the PREVAIL Act in PTAB Patent Reform

by Dennis Crouch

On Nov 8, the US Senate Judiciary IP Subcommittee held a key hearing on the PREVAIL ACT – The “Promoting and Respecting Economically Vital American Innovation Leadership Act.” PREVAIL is a bipartisan proposal from Senators Coons (D-DE) and Tillis (R-NC) who are looking to strengthen the power of patents. The proposal here is directed toward AIA trials — generally attempting to make it more difficult to invalidate patent claims via IPR.  Key provisions include:

  • Imposing standing requirements to restrict who can file AIA patent challenges.
  • Requiring “clear and convincing” evidentiary standard for invalidating claims.
  • Broadening estoppel. Challengers must either challenge 102/103 invalidity via PTAB or court, not both (only on prior patents or printed publication grounds).
  • Limiting repeat challenges of the same patent.
  • Adding additional transparency and safeguards.

Senator Coons opened the hearing, laying out his views on the need for patent reform. He argued that the current system allows large corporations to “weaponize” the PTAB to invalidate patents held by small inventors and startups.

The witnesses were Lamar Smith, former House Judiciary Chair and namesake of the Leahy-Smith America Invents Act (now at Akin Gump); Joe Matal, former interim PTO Director (and until recently at Haynes & Boone), Joe Kiani, Founder and CEO of the medical device company Masimo, and Michelle Armond, partner at Armond Wilson.

Smith and Kiani testified strongly in favor of the PREVAIL Act while Matal and Armond provided support for IPRs largely in their current iteration, although allowing for limited changes.

Any legislation needs a good personal compelling story.  Joe Kiani provided that here.  Kiani testified that his pulse oximetry technology was copied and patents challenged once he proved that the technology worked. Masimo spent over $13 million defending patents at the PTAB that withstood pre-AIA scrutiny. Kiani argued the AIA’s intent was an efficient second look at patents, not reflexive, duplicative challenges by “opportunistic” big companies to invalidate smaller entities’ rights. Predictable property rights drive investment and innovation, and Kiani endorsed PREVAIL’s reforms for providing more certainty and reducing PTAB abuse. He concluded with a statement that action is needed, otherwise “the United States will continue to cede technological supremacy to China.”

Mr. Smith testified that the PTAB has strayed from its original purpose as an alternative to litigation. He said it has become a tool for infringers to undermine valid patents. He endorsed the PREVAIL Act’s reforms as preserving strong patent rights while still allowing for challenges to bad patents.

Smith similarly testified that IPR proceedings have strayed from their original purposes and have now become an additional tool for “litigation gamesmanship.” Smith endorsed the proposed legislation as supporting smaller companies and individuals against “well-resourced corporations.”  “[I]f we lose sight of creating a system that truly rewards investment in innovation, we are really hurting ourselves.”

Matal testified that PTAB proceedings have proven to be timely, cost-effective, and produce accurate patentability results. He cited a study finding the PTAB is affirmed on appeal much more often than district courts due to judges’ technical expertise. Matal argued PREVAIL’s restrictions on PTAB reviews are contrary to the public interest. He opposed limits on serial challenges, saying they could entrench bad examiner decisions. He argued PREVAIL’s standing requirement would prevent beneficial challenges. Matal concluded the PTAB provides reliable review American manufacturers need, saying recent cases like VLSI v. Intel show billions in damages can be awarded on invalid patents absent PTAB access.

Finally, Armond testified that PTAB proceedings have transformed patent litigation over the past decade.  She suggested that PREVAIL’s early forum choice requirement and aligned evidentiary standard could advance the goals of efficiency and certainty. However, Armond opposed limits on PTAB access, saying strong patents come from quality examination rather than less scrutiny. She suggested a better area for reforms is to ensure examiner resources and technical training.

The divided views expressed at the hearing reflect the reality that passage of the PREVAIL Act in its current form is unlikely this Congress. While Chairman Coons and Ranking Member Tillis aim for bipartisan patent litigation reform, these issues have entrenched stakeholders on both sides — making any major movement in Congress unlikely.

Patent Abuse Reduction Act of 2013 (S.1013)

By Dennis Crouch

If it exists, the patent heat in Congress right now is focused on “curbing abusive patent litigation.” A variety of bills have been introduced, including the SHIELD Act that would introduce a one-way fee shifting system that would require losing plaintiffs to pay the attorney fees of successful defendants. H.R. 845. The Bill also requires that the patentee plaintiff (or DJ Defendant) post a bond early in the lawsuit to ensure that the fees will be paid. Under its current structure, the bill is limited to cases where (1) the party asserting the patent is not the original inventor or original assignee; (2) the party asserting the patent is not exploiting the patent “through production or sale of an item covered by the patent” and (3) the party asserting the patent is not a University or the US Government. If the patentee meets any one of those prongs then they escape the fee shifting. At the conclusion of the case if the patentee loses then the court must award the prevailing party “full costs … including reasonable attorney’s fees.”

Senator Cornyn this week introduced another bill – the Patent Abuse Reduction Act of 2013 (S.1013). According to Cornyn’s press release, the bill “would require plaintiffs to disclose the substance of their claim and reveal their identities when they file their lawsuit; allow defendants to hale into court interested parties; bring fairness to the discovery process; and shift responsibility for the cost of litigation to the losing party.”

Transparency In Enforcement: S.1013 proposes that the initial complaint must also “the identity of any person with a direct financial interest in the outcome of the action, including a right to receive proceeds, or any fixed or variable portion thereof; and a description of any agreement or other legal basis for [the] financial interest.”

Presumption of Attorney Fees: As with the SHIELD Act, S.1013 would more readily shift attorney fees. This time, however, the fees would be balanced and awarded to the prevailing parties regardless of whether that be a plaintiff or defendant. However, no attorney fees would be awarded when the non-prevailing party’s “position and conduct … were objectively reasonable and substantially justified” or where the exceptional circumstances make the award unjust. If the patent plaintiff cannot pay the attorney fees, the bill would allow for those fees to be paid by others with an interest in the litigation. Defendants would also be permitted to join interested parties into the litigation.

Heightened Pleading Requirements: S.1013 proposes that a complaint must draw a link between particular asserted patent claims and any accused products if such a link “is known.” In addition, the bill would require a complaint to include “detailed specificity” as to “how the terms in each asserted claim[s] … correspond to the functionality of the accused instrumentality.” The Bill would also require the Supreme Court to review model complaint Form 18 to ensure that it conforms with the law.

Discovery After Claim Construction: S.1013 proposes to limit discovery until after claim construction has been complete.

Additional Major Limits on Discovery: Perhaps the most dramatic changes proposed in the bill would be statutory limits on discovery and a cost-shifting regime.

It will be interesting to see how these develop moving forward.

Patent Reform 2013: Demand Letter Transparency Act of 2013

By Dennis Crouch

In many ways, a patent infringement demand letter is akin to a debt collection action. And, we know that debt collection is highly regulated under both Federal and State consumer protection laws. The current mood in Congress and amongst the state attorneys general is that patent demand letters should also be regulated to control their negative impact on the marketplace. The particular focus is on patentees who threaten litigation against the users of off-the-shelf technology (such as WiFi technology or Flat-Panel Screens) with little or no due diligence or pre-threat investigations. In some cases, patentees are threating litigation with no intention of actually filing suit and are hoping to use the high cost of patent litigation to drive settlement value rather than the underlying value of the patented invention.

Senators Leahy and Lee have proposed the Patent Transparency and Improvements Act (PTIA) of 2013 (S. 1720) as a quite weak form of regulation that would only address the most egregious cases of threats that operate as an unfair competition.

Now, Representatives Jared Polis (D-Co) and Tom Marino (R-Pa) have proposed their own legislation that would have more teeth. See the Demand Letter Transparency Act of 2013 (H.R.3540).  Download HR3540

H.R. 3540 includes a number of interesting features:

  • Any demand letter must include:
    • A listing of each claim being asserted and a listing of each accused device;
    • If indirect infringement is claimed, an explanation of the underlying direct infringement;
    • A description of the principle business of the party alleging infringement;
    • A list of other cases and review proceedings where the patent was asserted;
    • Identifying of any licensing term or pricing commitments associated with the asserted patent.
    • A listing of all people who have a direct financial interest in the outcome of the action, and a description of the agreements providing the legal basis for these financial interests; and
    • A statement to the recipient that 'You are not required to respond to this letter by law.'
  • A 20-demand-level threshold that raises heightened requirements, including the submission of demand information regarding the demands to the USPTO that will then be publicly available. (i.e., once a patentee sends out 20 demand letters, then it must begin complying with certain reporting requirements).
  • Failure to abide by the demand letter requirements would result in abandonment of the patent; other financial penalties; and also action by the FTC.
  • Under the statute, a demand letter is defined broadly as any "written communication directed to an unaffiliated third party stating or indicating, directly or indirectly, that the intended recipient or anyone affiliated with that recipient is or may be infringing a patent, or may bear liability or owe compensation to another because of such patent."

While the Leahy-Lee proposal is likely under-inclusive, H.R. 3540 is over-inclusive and would serve as a trap for unwary business leaders looking to license their company's technology. Two tweaks would bring focus: (1) only apply the demand letter requirements to instances where more than 20-demand letters have been sent-out; and (2) narrow the definition of demand letters so that some amount of written technology license negotiations can occur without raising the threat of abandonment (perhaps this could be done through some sort of safe-harbor).

Bayh-Dole Act is Not a “Patent Law” Sufficient to Create CAFC Jurisdiction

ScreenShot065WARF v. Xenon Pharmaceuticals (Fed. Cir. 2007) (nonprecedential opinion).

In 2006, WARF won a $1 million verdict in a breach of contract case against Xenon. Although contracts are normally issues of state law, WARF’s original complaint also raised technology transfer issues under the Bayh-Dole Act. (35 U.S.C. §§ 200, et seq.).

On appeal, the CAFC found that it lacked subject matter jurisdiction over the appeal because it did not arise under the patent laws. In this vein, the court first concludes that Bayh-Dole’s inclusion in Title 35 does not necessarily indicate that it is a “patent law.” Rather, the general rule is that contract or licensing disputes do not implicate patent laws unless they require some determination of patent issues such as validity or infringement.

“[M]ere inclusion in Title 35 of the United States Code does not make a statute a patent law under which a claim may arise. At its heart, the Bayh-Dole Act concerns government funding agreements – contracts in the language of 35 U.S.C. § 201 – an area that is outside our section 1295(a) jurisdiction.”

Of course, if Title 35 contains non-patent laws, it makes sense that there may also be patent laws not found in Title 35.

Even if Bayh-Dole was a “patent law,” the appellate panel found that it would still not have jurisdiction over the case because the provisions of Bayh-Dole (1) did not create WARF’s cause of action and (2) are not necessary to determine any other rights of relief.

Case transferred to the Seventh Circuit Court of Appeals.

The Strong Patent Act of 2015 from Senator Coons

by Dennis Crouch

Senator Coons is expected to introduce his competing patent reform bill into the Senate this week under the title Strong Patents Act.  As the name suggests, these provisions here tend to strongly favor patent holders.  With his usual understated tone, Herb Wamsley writes that Coons’ bill “will differ substantially from Rep. GOODLATTE’s bill H.R. 9.”  In the current political state, this provision has no hope of being enacted. However, I suspect that supporters of provision see it as having strong gridlock-creating potential.

The following is a fairly high-level review of the particular proposals as well as a link to the text of the bill.

[STRONG Patents Act of 2015]

Provisions related to PGR/IPR/Reexams: 

Claim Construction during Post-Issuance Review Proceedings shall be according to the “ordinary and customary meaning” and in the same way that a court would construe the claim in an action to invalidate a patent.  This provision would have the beneficial impact of better-linking the parallel court and PTO proceedings.  The provision would also make it more difficult for the PTAB to invalidate patents because the claims would no longer be given their broadest reasonable interpretation.

Amendments to the Claims during Post-Issuance Review Proceedings will be allowed if “reasonable.”

Presumption of Validity will Apply to patents being challenged in post-issuance review proceedings such that unpatentability of a previously issued claim would require clear and convincing evidence.

Standing to File Post-Issuance Review Proceedings will be limited to only entities charged with infringement.

In Response to a Post-Issuance Review Petition, the patentee will be allowed to submit supporting evidence.

Separating the Two Steps of Post-Issuance Review Proceedings: Under the proposed law, a PTAB judge who participates in the decision to grant a PGR/IPR petition will not then be allowed to decide the merits of the case.

Blocking Anonymous Petitions: The proposed law would allow the patentee to discover the real party in interest associated with the filing of either a reexamination or an PGR/IPR petition.

A One Year Deadline will be instituted for filing requests for ex part reexamination triggered by service of a complaint alleging infringement.

Civil Procedure:

Form 18 is to be eliminated.

USPTO Funding:

Fees collected by the USPTO will be made available to the Director until expended including past each fiscal year.

Infringement:

The Punitive Damages Provision would be amended to allow the court “in its discretion” to treble damages “upon determining, by a preponderance of the evidence, that the infringement was willful or in bad faith.”

Inducement of Infringement becomes a cause of action as outlined by the Federal Circuit in Akamai. This would effectively overrule the Supreme Court’s decision in the case.

Universities:

The provision would fix a seeming gap in the current micro-entity status requirements that don’t actually allow universities to claim micro-entity status (for a 75% fee reduction) but instead only those with a duty to assign rights to the university.

Rogue and Opaque Demand Letters:

The new law would specify that certain bad-faith demand letters are unlawful under the FTC Act and the FTC would have power to enforce the law with a maximum penalty of $5 million.

= = = = =

 

Guest Post by Prof. Contreras: How the ‘Patent Eligibility Restoration Act’ Would Harm American Businesses and Endanger Global Health by Reintroducing ‘Pathogen Patents’

Guest Post by Professor Jorge L. Contreras

The Patent Eligibility Restoration Act should be modified to prevent the reintroduction of patents on naturally-occurring genomic sequences that are isolated and purified in the lab, a change that will enable international pathogen research to continue while interfering little with private incentives to develop new biomedical technologies.

The Patent Eligibility Restoration Act of 2022 (PERA), introduced by Senator Thom Tillis (R-NC) in August 2022, is designed, among other things, to abrogate the Supreme Court’s patent eligibility decisions in Bilski, Mayo, Myriad and Alice. While Congressional action may be useful to clarify the confusing landscape of patent eligibility that has followed from these decisions, particularly in areas such as medical diagnostics, software and business methods, one piece of the eligibility puzzle that the Supreme Court got right, and which should not be changed, is Myriad’s holding that naturally occurring genomic sequences are ineligible for patent protection, even when “isolated and purified.”

In my book, The Genome Defense: Inside the Epic Legal Battle Over Who Owns Your DNA (New York: Algonquin, 2021), I discuss the Myriad case at length, focusing on its implications for human health and access to care.  Like many others, I am concerned that PERA would make newly identified human genetic variants with significant health implications (e.g., this and this) patentable again, potentially removing them from the broad competitive market and placing them in the hands of the first research team that chances to identify them (a task that is, today, largely serendipitous and requires little innovative skill). I have previously discussed these concerns here. In this post, however, I focus on a different and less-discussed issue: the risk that non-human pathogenic genomic sequences (i.e., from viruses and bacteria) will be patented by non-U.S. institutions and used to delay the development of lifesaving diagnostics, vaccines and therapeutics.

When Patents Held Up Pathogen Research

Prior to the Myriad decision, research groups around the world were able to obtain patents on newly identified pathogen genomic sequences, including those of the H5N1 influenza strain and the SARS and MERS coronaviruses. As I discuss in this new article, these patents led to disputes and delays in research on the diseases and effective countermeasures. After Myriad, however, research groups appear to have stopped seeking patents on new pathogenic agents, as shown by the global experience with the Ebola and Zika outbreaks, leading to greater global cooperation and rapid responses by public health agencies and private developers of diagnostics, vaccines and therapeutics.

SARS-CoV-2:  the Benefits of Patent-Free Pathogens

The genomic sequence of SARS-CoV-2 (the virus responsible for COVID-19) was first identified in early January 2020 by a team of researchers in China. On January 5, they uploaded the sequence to the publicly accessible GenBank database. Within days, diagnostic tests for the virus had been developed and a few months later, new vaccines against COVID-19 were being tested. As I have written previously, the unavailability of patents on genomic sequences, and the rapid uploading of the SARS-CoV-2 sequence to public databases, enabled researchers around the world to study the viral genome without fear of patent infringement and without the need to negotiate complex patent licensing agreements and pay royalties to the first researchers to determine its sequence. This open and unencumbered global research environment enabled scientists to identify and trace the spread of multiple pathogenic variants around the world, to understand the biological mechanisms of the virus, and to develop vaccines, diagnostics and therapeutics, all in record time.

PERA and U.S. Competitiveness

Senator Tillis, when introducing PERA, explained that a major goal of the bill is to enhance “the economic and global competitiveness of the United States”. He faults judicial decisions like that in Myriad for “undermining American innovation and allowing foreign adversaries like China to overtake us in key technology innovations.” Likewise, supporters of the draft legislation have enthusiastically proclaimed that it will “rev the US innovation engine once again”, warning that “[e]conomic growth, job creation, global competitiveness, public health and national security are all at risk until Congress repairs the law of patent eligibility that the Supreme Court has distorted.”

Yet, ironically, at least in the case of pathogenic sequences, PERA would work largely to benefit institutions in China and elsewhere, and could have adverse consequences for U.S. businesses and global public health.

Pathogens Usually Emerge, and are Sequenced, Outside the United States

Most serious pathogenic outbreaks result from the transmission of disease agents from animals to humans. These outbreaks originate in regions characterized by extensive animal husbandry, live animal markets, hunting or habitat loss. Within these parameters, the particular locale of a future outbreak is unpredictable. Recent infectious disease outbreaks have been traced, respectively, to China (SARS and H5N1), Saudi Arabia (MERS), Zaire and Congo (Ebola), Uganda and Brazil (Zika).

Likewise, once a pathogenic outbreak has entered human populations, the locations where its variants will emerge is also unpredictable. For example, the major variants of SARS-CoV-2  were first documented in China (original strain), the United Kingdom (alpha), South Africa (beta, omicron), Brazil (gamma), India (delta), Peru (lambda) and Botswana (omicron).

Today, genomic sequencing equipment is widely available at a modest cost. Researchers in 2021 estimated that the cost of sequencing a SARS-CoV-2 genome (only 1/100,000 the size of the human genome) is approximately $120, bringing it well within the reach of researchers in countries such as Gambia, which had, by mid-2021, sequenced more SARS-CoV-2 genomes than Germany.

It is also worth noting that countries, including the United States, that are parties to the World Trade Organization (WTO) Agreement on Trade Related Aspects of Intellectual Property (TRIPS) must give “national treatment” to applicants from all other member states. Thus, researchers from any TRIPS member country may apply for a U.S. patent and will be afforded the same rights as applicants from the United States. Indeed, for the past several years, most U.S. patents have been issued to non-U.S. applicants. In 2021, for example, of approximately 374,000 issued U.S. patents, nearly 200,000 (roughly 53%) were issued to foreign entities. This situation is not unique to the United States and is simply indicative of today’s global technology markets.

The combination of unpredictable sites of pathogenic emergence, inexpensive genome sequencing and national treatment under TRIPS suggests that if U.S. patents become available for pathogenic sequences, the parties most likely to obtain these patents will originate outside of the United States in countries that are likely sites of disease emergence. It is doubtful that allowing pathogen patenting would result in more patents being issued to U.S. applicants. Rather, U.S. and other companies that wished to develop diagnostics, vaccines and other technologies dependent on those sequences would either be excluded from the market or required to pay unpredictable prices for a license to operate under those patents.

Countries That Are Willing to Hold-Up Research

In recent years, certain foreign governments have shown themselves willing to hold-up international disease research and response efforts in order to gain concessions and advantages for themselves under the banner of “access and benefit sharing” (ABS). The most prominent example of this tactic occurred in 2006-07, when the government of Indonesia refused to share samples of the H5N1 influenza virus strain with the World Health Organization until it obtained commitments regarding access to any resulting biomedical products. Similar tactics were adopted by other countries during the MERS, Ebola and Zika outbreaks, as documented here.

If countries are willing to hold-up international research and disease response in order to secure ABS benefits for themselves, then they are also likely to use patents to extract further concessions from the international community. Demands for ABS concessions are not necessarily unjustified in view of past exploitation of local resources by foreign firms in developing countries. Yet even if justified, these barriers to the international response to emergent disease outbreaks can negatively impact global health. Reintroducing pathogen patenting will give countries where diseases emerge yet another tool to hold-up critical international research and development to the detriment of all.

Patents are not Necessary to Incentivize Pathogen Sequencing

One of the principal functions of the patent system is to provide financial incentives for innovators to develop new technologies. Yet, this rationale does not support the issuance of patents claiming pathogen sequences. The identification of new pathogens during emergent disease outbreaks is rarely undertaken by private industry. Rather, this function is usually carried out by public health agencies and academic laboratories, typically in the locale of the outbreak, and which are supported by public funds. Thus, unlike the development of vaccines and therapeutics, the financial incentives offered by patent exclusivity are not necessary to incentivize these early stage research efforts.

There Are Ample Patentable Innovations Relating to Disease Response and Containment Beyond Pathogen Sequences

It is also unnecessary to patent underlying pathogenic sequences in order to protect novel and innovative technologies such as diagnostics, vaccines and therapeutics. A 2012 WIPO study identified more than 50,000 patents and published patent applications across 57 countries that claimed the active ingredients of pneumonia, typhoid and influenza vaccines, most without claiming the underlying pathogen. Even more opportunities for innovation exist with respect to therapeutics, which can adopt a broad range of approaches to combating infection. For example, Regeneron filed more than 100 patent applications around the world on its Ebola drug Inmazeb, though the viral sequence was freely available on GenBank.

The broad availability of patents for innovation around pathogenic disease outbreaks is amply demonstrated by the COVID-19 pandemic. Despite the absence of patents claiming the SARS-CoV-2 sequence or its many variants, the research institutions and private firms that developed COVID-19 diagnostics and vaccines obtained numerous patents on the innovative aspects of their products. For example, one 2020 study found that, with respect to mRNA vaccine technology alone, 56 different entities ranging from large pharmaceutical companies to small and medium-sized entities held a total of 119 different patent families. Perhaps the most convincing evidence that sizeable numbers of patents have issued in this space is the expanding universe of patent litigation among mRNA vaccine manufacturers, now dubbed the “COVID-19 Patent Wars”. All of these examples demonstrate that COVID-19 technology innovations, vaccines in particular, have been amply protected without the need for patents on naturally occurring pathogenic sequences.

But is this Threat Real?

An argument that may be made against the need to limit further pathogen patents is that the ability of patent holders to enforce their patents, especially during global health crises, is limited by law.  For example, in the United States, a patent holder cannot obtain a permanent injunction preventing an infringer from practicing a patented invention unless it demonstrates that the public interest would not be disserved by the entry of the injunction.  Likewise, the International Trade Commission, when assessing the appropriateness of an exclusion order barring the importation of infringing goods into the United States, must take into account “the effect of such exclusion upon the public health and welfare.”  These limitations have greatly reduced (but not entirely eliminated) the number of injunctions and exclusion orders issued with respect to medical and health-related technologies.

These limitations suggest that, at least in the United States, the existence of patents claiming pathogenic sequences might not represent a significant threat to pathogen research or biomedical product development. However, the existence of patents on these basic research tools, no matter what the likelihood of eventual litigation outcomes, can chill research, impose delays and prompt the payment of unwarranted fees. Moreover, even meritless claims are costly to fend off in court and impose some level of risk on defendants, particularly in the U.S. where fee shifting is rare.  Thus, while various litigation doctrines may tend to lessen the threat of pathogen patents in the U.S., that threat is not eliminated entirely and may still represent a significant cost and deterrent to firms engaged in research and development of pathogen-based biomedical products.

Don’t Let PERA Potentially Hold Up Research Efforts

For the reasons outlined above, PERA should be modified to ensure that naturally occurring genomic sequences – even once isolated – remain ineligible subject matter for patent protection. Preventing the reintroduction of pathogen patents will enable international pathogen research to advance rapidly while interfering little with private incentives to develop innovative new biomedical technologies. In contrast, opening the door to pathogen patents arguably will provide opportunities for individual countries where outbreaks emerge to hold up international research efforts for their own benefit, causing delays and barriers to the development of lifesaving diagnostics, vaccines and drugs.

Patent Reform Act of 2010: An Overview

The Senate has revived interest in the patent reform act with a substitute bill entitled the “Patent Reform Act of 2010.” The new bill is very similar to its predecessor, the Patent Reform Act of 2009.

First-To-File: The proposed reform would largely eliminate US’s unique first-to-invent priority system. The bigger deal is that the proposal would eliminate the one-year grace period unless the inventor was the “first-discloser.” A “derivation” proceeding would replace interferences.

False Marking: The proposed reform would eliminate the right of “any person” to file a false marking claim. Rather, those claims would be limited to individuals who have “suffered a competitive injury.” This change would apply to eliminate standing of already-filed cases.

Damages: The damages revision is no longer as major. Under the proposed revision, a court would be required to “identify the methodologies and factors that are relevant to the determination of damages, and the court or jury, shall consider only those methodologies and factors relevant to making such determination.” The parties would also be required to “state, in writing and with particularity, the methodologies and factors the parties propose for instruction to the jury in determining damages … specifying the relevant underlying legal and factual bases for their assertions.” The provision would also provide a right for summary judgment on damages if one party’s contentions lack evidentiary basis and only the approved-of methodologies would be allowed in court. It is already the law that the jury may only consider relevant information – this approach looks to primarily create a greater likelihood for appeal. The provision generally creates a better situation for accused infringers, but it does not necessarily limit damage awards.

Trial: Right to split trial into segments infringement & validity; damages; willfulness. This approach tends to favor defendants.

Willful Infringement: Spell out that the enhanced damages are for “willful infringement” that is at least objectively reckless by clear and convincing evidence. (current statute reads “the court may increase the damages up to three times the amount found or assessed.”). The statute would make clear that “knowledge alone” is not sufficient for a finding of willful infringement and that any “close case” should be decided against willfulness.

Post-Grant Review: The statute would provide for a whole new system of post-grant reviews that would be handled directly by the patent appeals board. [I will write more on this later]. The proposal also calls for a new “supplemental examination” to ensure that the patentee has fulfilled the duty of disclosure.

Pre-Issuance Submissions of Prior Art by Third Parties: These would be allowed.

Litigation Venue: Cases should be transferred to venues that are “clearly more convenient.”

Fee Setting Authority: The USPTO would be given authority to adjust its fees so long as the fees are “in the aggregate set to recover the estimated cost to the Office for processing, activities, services and materials relating to patents and trademarks, respectively.”

Federal Circuit Judicial Residency: Judges for the Federal Circuit would no longer be required to live in the DC area.

Micro-Entity: A new type of entity defined as a “micro entity” that has fewer than 5 patent applications that would qualify for even further reduced fees.

Best Mode Requirement: The best mode requirement would remain as part of the law. However, failure to fulfill the best mode requirement would no longer be an invalidity defense nor could it serve as a basis for holding a patent unenforceable.

Canadian Patent Act Amendment Opens A Narrow Window Of Time To Revive Applications And Patents That Lapsed For Incorrect Payment Of Fees

Several years ago, in Dutch Industries Ltd. v. Canada [link], the Canadian Federal Court of Appeals ruled that an irrevocable loss of patent rights could result if, at any time, a government patent fee payment was erroneously made at the small entity rate.  This decision resulted in the immediate lapse of numerous Canadian patents and patent applications

 

In response to this onerous decision, the Canadian Patent Act was recently revised to create a time-limited window to make catch-up fee payments in those Canadian patents and patent applications that irrevocably lapsed as a result of the Dutch Industries Ltd. decision. New section 78.6 of the Canadian Patent Act will come into force on February 1, 2006.  The new section recognizes the legitimacy of previously made corrective “top up” fee payments.  More importantly, the new section provides a one-time only twelve month window during which any incorrectly made small entity payment case be corrected by paying the difference between the relevant large and small entity fee at the relevant time.  A corrective payment must be accompanied by information about (i) the day on which the underpayment was made; (ii) the service or proceeding in which the fee was paid; and (iii) the patent or application in which the fee was paid.

 

Practice Suggestion

 

A small entity in Canada is a corporation with 50 employees or less.  This number is quite low.  So it is quite possible that the change from small to large entity status in Canada might go unnoticed.  Also the difference between large and small entity fees is generally quite small.  Many Canadian Associates, therefore, recommend always paying the large entity fee regardless of the applicant’s status in order to avoid the possibility that a patent or application might irrevocably lapse as a result of paying the incorrect fee.

NOTE: This post comes from the files of Blair Hughes.  Blair is a partner at MBHB LLP and has extensive experience in protecting patent rights, in both the U.S. and abroad.

Link:

  • From Sander Gelsing: As a result of Bill C-29, and to assist one in determining whether a corrective payment needs to be made, the Canadian patent office recently made Fee Payment Histories available through our patent database (see: http://www.gelsing.ca/blog/?p=128 ).

Sarnoff: The Patent Act’s Mention of Business Method Patents Does Not Mean that Section 101 Should Extend to Cover Business Methods

Section 273 of the Patent Act mentions the possibility of a patent covering “a method of doing or conducting business.” Part of Bilski’s petition for certiorari relies on that section as an argument that Congress intended for Section 101 to cover business methods. That argument is a red herring — The Federal Circuit's Bilski decision did not eliminate business method patents. Rather, the decision only requires that any claimed process meet the machine-or-transformation test.

In his Federal Circuit amicus brief, professor Joshua Sarnoff wholly rejected the implication that Section 273 proves that Congress intended the Patent Act to extend coverage to novel business methods. He argues as follows:

Sarnoff: … [T]he State Street Bank decision did not motivate the enactment of Section 273’s prior user rights provision. Rather, it motivated restriction of that provision to business methods from an earlier and broader proposal.[2] Congress did not approve of this Court’s decision, but focused on business methods because it felt that the strongest fairness arguments for a prior user defense existed in regard to the newly patentable subject matter.[3] As stated by Senator Schumer, Section 273 “should be viewed as just the first step in defining the appropriate limits and boundaries of the State Street decision…. I believe that it is time for Congress to take a closer look at the potentially broad and, perhaps, adverse consequences of the State Street decision.”[4]

Ratification should not be found here, given that Congress did not amend Section 101 or otherwise specifically address patent eligibility.[5] Instead, Congress created only an isolated change to the law that responded to specific concerns raised by this Court’s changed interpretation of Section 101. See, e.g., Alexander v. Sandoval, 532 U.S. 275, 292 (2001) (“when, as here, Congress has not comprehensively revised a statutory scheme but has made only isolated amendments, we have spoken more bluntly: ‘It is “impossible to assert with any degree of assurance that congressional failure to act represents” affirmative congressional approval of the Court's statutory interpretation.’”) (citations omitted). Similarly, ratification should not be found here, given that the State Street Bank holding was a significant change to the law and conflicted with binding Supreme Court precedent. See, e.g., Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164, 185 (1994) (ratification is implied when Congress “reenact[s] statutory language that has been given a consistent judicial construction”).[6] Had Congress thought that adopting a new defense to liability might affect subsequent interpretation of Section 101, it could have expressed its intent either to alter or to preserve earlier law – as it did with regard to Sections 102 and 103. See 35 U.S.C. § 273(b)(9) (2000).[7]

Moreover, ratification of the “useful, concrete, and tangible result” test as applied in State Street Bank would pose serious constitutional concerns by authorizing patents for claims reflecting only insignificant post-solution activity. The test would thereby encroach on permissible public uses of categorically excluded public domain information, potentially extending protection beyond any inventive concept properly attributable to the applicant and retarding rather than promoting sequential innovation. It would require patents for non-technological inventive concepts, extending protection to activities that may not be within the useful arts (however broadly or narrowly that category is construed).

Given the reasonable alternative interpretation discussed above, this Court should not construe Section 273 to have ratified the “useful, concrete, and tangible result” test as applied in State Street Bank. See, e.g., Gomez v. United States, 490 U.S. 858, 864 (1989) (describing “settled policy to avoid an interpretation of a federal statute that engenders constitutional issues if a reasonable alternative interpretation poses no constitutional question”); Ashwander v. Tennessee Valley Auth., 297 U.S. 288, 346-48 (Brandeis, J., concurring) (establishing the policy). Finding such ratification would force the Court to decide whether Section 101 (at least since 1999) is constitutional. Cf. Richardson v. United States, 526 U.S. 813, 820 (1999) (“We have no reason to believe that Congress intended to come close to, or to test, those constitutional limits when it wrote this statute”). Without ratification, the binding Diehr-Flook precedent remains the law and avoids any such constitutional concerns.


[1] See, e.g., H.R. Rep. 106-464, 121 (1999) (Conf. Rep.) (“business methods and processes, many of which until recently were thought not to be patentable”); id. at 122 (the “1998 opinion … in State Street Bank … which held that methods of doing business are patentable, has added urgency to the issue.… [T]housands of methods and processes used internally are now being patented.”). See also H.R. Rep. 106-287, 45-46 (1999) (“many businesses … thought secrecy was the only protection available,” and such methods “previously had been thought to be unpatentable”); Cong. Rec. E1789 (Aug. 5, 1999) (speech of Rep. Coble) (same); Cong. Rec. S13259 (Oct. 27, 1999) (statement of Sen. Hatch) (same).

[2] See, e.g., Cong. Rec. H6944 (Aug. 3, 1999) (statement of Rep. Rohrbacher). Cf. H.R. Rep. 106-464, 121 (noting importance of the “earlier-invention defense” to “any business that relies on innovative business processes and methods”).

[3] See, e.g., Cong. Rec. S14836 (Nov. 18, 1999) (statement of Sen. Schumer) (the “decision has raised questions about what types of business methods may now be eligible for patent protection…. It has created doubt regarding whether or not particular business methods … might now suddenly become subject to new claims under the patent law.”); Cong. Rec. H6947 (Aug. 3, 1999) (statement of Rep. Manzullo) (Congress “felt that those who kept their business practices secret had an equitable cause not to be stopped by someone who subsequently reinvented the method”). Congress limited the defense to business methods because it believed that the law had been changed only in regard to such methods. See id.

[4] Cong. Rec. S14836 (Nov. 18, 1999) (statement of Sen. Schumer)

[5] Congress expressly acknowledged that State Street Bank altered the law in regard both to “the business method exception” and to “the essential question of whether the invention produced a ‘useful, concrete, and tangible result.’” H.R. Rep. 106-464, 122.   However, Congress did not approve of that result. Rather, it noted only that the new defense applied to systems as well as to processes. See id. at 123.

[6] Cf. Food and Drug Admin. v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 157 (2000) (finding effective ratification from enactment of a specific set of separate regulatory provisions, at a time when the agency’s interpretation had historic “consistency”); Brown v. Gardner, 513 U.S. 115, 121 (1994) (“‘[w]here the law is plain, subsequent reenactment does not constitute an adoption of a previous administrative construction.’”) (citation omitted); Fogerty v. Fantasy, 510 U.S. 517, 532 (1994) (rejecting effective ratification and noting that “this is hardly the sort of uniform construction that Congress might have endorsed.”).

[7] See also H.R. Rep. 106-464, 124-25; H.R. Rep. 106-287, 49.

Sarnoff: Derivation and Prior Art Problems with the New Patent Act

In a new Patently-O Patent Law Journal essay, Professor Joshua Sarnoff (DePaul) highlights a set of important problems in the Leahy-Smith America Invents Act. The essay, titled Derivation and Prior Art Problems with the New Patent Act focuses primarily on the elimination of 35 U.S.C. § 102(f) and its implications regarding the patentability of material that was either wholly or partially derived from another source.

Legislation sometimes is enacted that obviously requires either immediate revision or creative administrative and judicial interpretation.  The new Leahy-Smith America Invents Act’s derivation and prior art provisions fall in that category.  Whether or not the move from a first-to-invent to a first-inventor-to-file system is viewed as good policy and as authorized by the Constitution, the particular changes made to the prior art provisions may not prevent or invalidate patents on inventions derived from others, i.e., when the applicant has obtained knowledge of an invention from another, original inventor and then files for a patent on the same or a similar invention.  In particular, obvious inventions made with unauthorized derived knowledge will now be patentable, given the elimination of prior art section § 102(f).  Absent creative interpretations by the U.S. Patent and Trademark Office (PTO) and the courts, the new derivation proceedings will not prevent a first filer from obtaining a patent even if the first filer’s invention is merely an obvious extension of information derived from another.  Further, the new act adds a narrow and poorly understood category of prior art that may generate years of needless litigation to re-settle the currently well-understood boundaries of the public domain.  I discuss these problems in detail below.

There is some hope that Congress and the Administration will take Professor Sarnoff’s concerns to heart.

Joshua D. Sarnoff, Derivation and Prior Art Problems with the New Patent Act, 2011 Patently-O Patent Law Journal 12 (sarnoff.2011.derivation).

An Overview of Proposed Changes in the ‘Patent Eligibility Restoration Act of 2023’

by Dennis Crouch

Senators Tillis and Coons have released their “Patent Eligibility Restoration Act of 2023” designed to overturn the Supreme Court case of Mayo and Alice Corp.  The impact here is to return eligibility doctrine back to the mid 2000s when almost any useful advance was likely patent eligible.

Here are some key points:

1. Elimination of Judicial Exceptions: The Act proposes to eliminate all judicial exceptions to patent eligibility. “Under this Act, and the amendments made by this Act, the state of the law shall be as follows: (A) All judicial exceptions to patent eligibility are eliminated.”

2. Statutory Ineligibility Categories: The Act specifies that that the following are not eligible: (A) mathematical formulas that are not part of an invention; (B) processes that a human could practically perform that are “substantially economic, financial, business, social, cultural, or artistic” even if the process itself requires a machine; (C)  mental processes performed solely in the human mind or processes that occur in nature wholly independent and prior to any human activity; (D) unmodified human genes (“as that gene exists in the human body”); and (E) unmodified natural material (“as that material exists in nature”)

3. Claims as a Whole: When determining eligibility, the tribunal must consider the claims as a whole without discounting or disregarding any claim element and without regard to its novelty or conventionality.

Read the proposal here.

Whether the Court should overrule its precedents recognizing the “abstract idea” exception to patent eligibility under the Patent Act of 1952.

Trading Technologies International, Inc. v. IBG LLC, SCT Docket No. 19-353 (Supreme Court 2019)

Before writing this post, I note that while in practice (2003-2007) I represented Trading Technologies and filed a number of infringement lawsuits asserting infringement of patents related to those at issue here. Although I no longer represent Trading Technologies, I continue to be bound by duties owed to a former client.  – Dennis Crouch 

The patented inventions at issue are used by professional stock-market traders buying and selling in a dynamic electronic marketplace.  The patents generally relate to user interfaces (UIs) designed to improve accuracy and speed of offers and bids while also dynamically displaying market-depth (pending offers/bids at higher/lower prices).  U.S. Patents 7,904,374, 7,212,999, and 7,533,056.  These inventions do not make the computer itself run faster or improve the computer’s internal processing or signalling. Rather, the improvement is seated in user interaction.  In its decision, the Federal Circuit characterized the improvement as “focused on improving the trader, not the functioning of the computer.”  And, according to the court, such improvements were effectively non-technological abstract ideas.  “We conclude that the claims are directed to the abstract idea of graphing bids and offers to assist a trader to make an order.”

In its petition for writ of certiorari, Trading Technologies challenges the Federal Circuit’s conclusion that an inventive concept cannot lie in the improved user-functionality and also directly challenges the Supreme Court’s Alice Corp. decision and its progeny. (Note that on the first-point, the Federal Circuit has an inconsistent set of opinions).

Question presented:

In Alice Corp. Pty. Ltd. v. CLS Bank International, 573 U.S. 208 (2014), the Court declined once again to define the scope of the “abstract idea” exception to patent eligibility created by this Court. It did, however, assume that claims that “purport to improve the functioning of the computer itself” would be patent eligible. Here, a panel of the Federal Circuit held, in conflict with other panel decisions, that computer-implemented inventions providing useful functionality to users, but without improving the basic functions of the computer itself in a manner akin to improved hardware, are directed to abstract ideas and therefore patent ineligible.

Accordingly, the questions presented are:

1. Whether computer-implemented inventions that provide useful user functionality but do not improve the basic functions of the computer itself are categorically ineligible for patent protection.

2. Whether the Court should overrule its precedents recognizing the “abstract idea” exception to patent eligibility under the Patent Act of 1952.

Trading Technologies Petition.  On question two – it is important to note that the Supreme Court has identified eligibility as a question of statutory interpretation — but has not directly confronted whether the Patent Act of 1952 rejected or modified the abstract idea test.

Reviewing the Patent Eligibility Restoration Act of 2022

by Dennis Crouch

Section 101 has some magic to it.  The short provision has remained essentially unchanged since it was originally handwritten in the 1700s and signed into law by President George Washington.

Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.

35 U.S.C. 101.  But the courts have taken the general provision and given it substantial meaning beyond the text.

Senator Tillis has introduced legislation that would re-write Section 101 — taking back authority from the courts and detailing the scope of eligibility as broadly extending to technology-based innovation.  Because the Supreme Court’s interpretation of Section 101 is largely atextual, the proposed amendment does not change the core text cited above. Rather, the Bill adds detail in the form of “eligibility exclusions” and notes that the broad provisions of Section 101 are subject “only to” the statutory exclusions.”  In his press release, Senator Tillis indicates that the proposal “is the product of almost four years of consensus driven stakeholder conversations from all interested parties.”

Unfortunately, due to a series of Supreme Court decisions, patent eligibility law in the United States has become confused, constricted, and unclear in recent years. This has led to inconsistent case decisions, uncertainty in innovation and investment communities, and unpredictable business outcomes. This has resulted in a wide range of well-documented negative impacts.

Tillis.  The Bill does not include a statement about whether its impact would be retroactive to apply to already issued patents and pending applications.  If it is retroactive, the legislation would have an immediate impact on many thousands of of patents and pending applications.

The Bill lists four particular eligibility exclusions that would be codified within a new Section 101(b)(1).  In particular, the statute would deny patent protection “for any of the following, if claimed as such:”

(A) A mathematical formula, apart from a useful invention or discovery.

(B) A process that— (i) is a non-technological economic, financial, business, social, cultural, or artistic process; (ii) is a mental process performed solely in the human mind; or (iii) occurs in nature wholly independent of, and prior to, any human activity.

(C) An unmodified human gene, as that gene exists in the human body.

(D) An unmodified natural material, as that material exists in nature.

These four exclusions are the only exceptions to Section 101’s broad text. The provision goes on with additional “CONDITIONS” that endeavor to ensure that the exclusions are narrowly read:

(2) CONDITIONS.—

(A) CERTAIN PROCESSES.—Notwithstanding paragraph (1)(B)(i), a person may obtain a patent for a claimed invention that is a process described in such provision if that process is embodied in a machine or manufacture, unless that machine or manufacture is recited in a patent claim without integrating, beyond merely storing and executing, the steps of the
process that the machine or manufacture perform.

‘(B) HUMAN GENES AND NATURAL MATERIALS. … a human gene or natural material that is isolated, purified, enriched, or otherwise altered by human activity, or that is otherwise employed in a useful invention or discovery, shall not be considered to be unmodified [i.e., is patentable].

The Bill would also add a process for determining whether or not an invention is eligible.

(c) ELIGIBILITY.—

(1) IN GENERAL.—In determining whether, under this section, a claimed invention is eligible for a patent, eligibility shall be determined—

(A) by considering the claimed invention as a whole and without discounting or disregarding any claim element; and

(B) without regard to—(i) the manner in which the claimed invention was made; (ii) whether a claim element is known, conventional, routine, or naturally occurring; (iii) the state of the applicable art, as of the date on which the claimed invention is invented; or (iv) any other consideration in section 102, 103, or 112.

The proposed amendment makes clear that invalidity via eligibility is still potentially available via motion to dismiss.

Finally, the provision also modifies and adds definitions to Section 100 of the Patent Act:

 (b) [Amended] The term “process” means process, art or method, and includes a new use, application, or method of manufacture of a known or naturally occurring process, machine, manufacture, composition of matter, or material.

(k) [New] The term ‘useful’ means, with respect to an invention or discovery, that the invention or discovery has a specific and practical utility from the perspective of a person of ordinary skill in the art to which the invention or discovery pertains.

Read the legislation yourself here.

Patent Reform: Patent Act of 2005

ReformOn Wednesday, June 8, 2005, Congressman Lamar Smith (R-TX) introduced the Patent Reform Act of 2005. (H.R. 2795). This proposed legislation includes sweeping reforms to fundamental aspects of the U.S. patent laws and procedures, including:

  • Change to a first-to-file system (including elimination of the 1-year grace period for certain third party public disclosure);
  • Elimination of the best mode requirement;
  • Changes to the duty of candor (violations will be adjudged by the PTO rather than in Federal Court);
  • Damages to be limited to the inventive contribution rather than calculated on the selling price of an entire product;
  • Limitations on damages for willfulness;
  • Adding a factor of “fairness”to the determination of whether to enter an injunction;
  • Automatic stay of injunctions for appeals;
  • Limits on scope of continuation applications (to be made by PTO); and
  • Introduction of a post-grant opposition procedure and submission of prior art by third parties, etc.
Although some of the provisions in the proposed legislation are toned-down from the discussion draft distributed this spring, this version still has something to offend almost every interest. Congressman Smith has called the bill “without question, the most comprehensive change to U.S. patent law since Congress passed the 1952 Patent Act.”
 
The reform is currently enjoying bipartisan support — The nine cosponsors include five Democrats.
Rep Berman, Howard L. [CA-28] – 6/8/2005
Rep Boucher, Rick [VA-9] – 6/8/2005
Rep Cannon, Chris [UT-3] – 6/8/2005
Rep Coble, Howard [NC-6] – 6/8/2005
Rep Conyers, John, Jr. [MI-14] – 6/8/2005
Rep Goodlatte, Bob [VA-6] – 6/8/2005
Rep Issa, Darrell E. [CA-49] – 6/8/2005
Rep Lofgren, Zoe [CA-16] – 6/8/2005
Rep Schiff, Adam B. [CA-29] – 6/8/2005
Resources:

Patent Office Asks Congress to Amend Patent Act to Create Better Options for Post-Grant Review and Inter Partes Reexaminations

Under the American Inventors Protection Act (AIPA), the Patent Office is required to submit a report to Congress evaluating the success of the newly enacted inter partes reexamination proceedings.  Today, the PTO released its Report to Congress on Inter Partes Reexamination [PDF].

Over the past several years, the buzz surrounding inter partes reexamination has increased.  However, the report notes that the growth of such re-exams has been slow.  For example, only 27 inter partes reexaminations were filed in 2004.

Based upon a review of the statute and comments from interested parties, the USPTO released a set of recommendations for amending the Patent Act in order to improve inter partes reexamination.  The PTO points to three areas that need improvement:

  • Clarifying the inter partes reexamination estoppel provisions.
  • Permitting the requester of an inter partes reexamination additional opportunities to provide input as to Office actions.
  • Extending the requester’s statutory for comment (currently 30 days) after the patent owner responds to an Office action, or to permit the USPTO Director to set the period for comment by rule.

In addition, the Patent Office noted that their Post-Grant Review proposal offers “a comprehensive and desirable way to address patentability issues after a patent has been awarded.”  Generally, the proposed Post-Grant Review would provide a more comprehensive review model and allow a more adversarial review presided over by USPTO administrative patent judges. The Review would include closely controlled discovery and cross-examination upon the challenger’s presenting sufficient grounds that one or more of the patent claims are unpatentable.

Proposed Amendment to Section 271 of the Patent Act

Last week, I wrote the Federal Circuit should re-hear the BlackBerry Case (RIM v. NTP).  Today, I propose a simple legislative change to move the debate concerning extra-territorial application of U.S. Patent laws to the legislature.

Section 271(a) of the patent act currently provides a definition of infringement.

Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.

Generally, in order show that a patent is infringed, the plaintiff must prove that the defendant (or his agent) performed each element of the claimed invention.  In this case, RIM was found liable for infringement for using a patented method.  However, as the diagram shows, RIM performs an element of its infringing activity in Canada. 

From my point of view, RIM should not be held liable for patent infringement because a portion of the patented method was performed on foreign soil, and the statute requires that the use take place within the united states.  The Court, however, read an exception into the statute — that internationally performed elements of the invention did not defeat an infringement charge so long as the "control and beneficial use" of the infringing system was within the United States. 

Rather than legislating from the bench, I would propose the following draft amendment that incorporates the rule created by the court in RIM. 

Proposed Amendment to 35 U.S.C. Section 271(j): Whoever without authority uses any patented invention, under the control and beneficial use of persons within the United States, shall be liable as an infringer so long as the preponderance of components of the invention are within the United States.

Does anyone have anything against my proposed legislation?

Update I: I have received several excellent comments on the proposed legislation. 

(i) A major issue is the "preponderance" language that requires a preponderance of components to be located within the United States.  This arises from the RIM v. NTP case where the court, in finding infringement, included as a factor that only one or two of the components of RIM’s system were located outside of the United States.  Preponderance is a little vague and subject to too much interpretation — so we need a better word.

(ii) Initially, I only included the "use" of a patented invention within the statute.  However, a reader asked that this be extended to include making and selling.  I agree that these actions should be included as well.

(iii) A colleague pointed out that the statute should be more clearly written to indicate that it is the patented invention that is under the control and beneficial use of persons in the U.S. 

Here is a new version of the Revised Amendment:

Revised Proposed Amendment to 35 U.S.C. Section 271(j): Whoever without authority makes, uses or sells any patented invention, where the patented invention is under the control and beneficial use of persons within the United States, shall be liable as an infringer so long as the clear majority of components of the invention are within the United States.

Update II:

CE Petit added more comments.  Rather than looking at the number of "components" of an invention he suggests looking at the number of elements of a given claim.  "This is particularly relevant when some or all of a claim concerns a process or an intangible. Since ‘elements of claims’ are parseable as a matter of law by the court."

Petit’s version III of the Proposed Amendment to 35 U.S.C. Section 271(j) looks like this:

New Revised Proposed Amendment to 35 U.S.C. Section 271(j): Whoever without authority makes, uses, or sells any patented invention, where the invention is under the control and beneficial use of persons within the United States, shall be liable as an infringer so long as the clear majority of the elements of an otherwise infringed claim of the invention are within the United States.

I wonder what our blogging legislative guru has to say on this issue?

Update III: A couple of clients contacted me directly with more ideas and edits for the proposed legislation.  Our newly edited version is here, with changes underlined

271(j): Whoever without authority makes, uses, or sells any patented invention, where the invention is under the control and beneficial use of entities or persons within the United States, shall be liable as an infringer so long as either (i) at least one key claimed element is within the United States or (ii) at least one key claimed step takes place within the United States.
271(j) Definitions: A Key Claimed Element or Step is one that if missing, makes the invention inoperable, or that makes the claim patentable in view of cited prior art.

Let me know if you think that we should include other changes.  Either leave a comment below or e-mail me (crouch@mbhb.com).

Update IV: The real trick here is, as Ken Hobday correctly pointed out, eliminating the potential for a company to set up computer servers in some foreign land, practicing claimed methods using those servers, and then simply providing a point of access through the internet to U.S. customers.  Any proposed legislation should be carefully examined to ensure that we capture this type of activity as infringement of U.S. patents. I’m not sure that the draft proposal is there yet.

Update V: Matt Buchanan made the point that we may be getting off-track.  He has a solution that is directly related to the "extra-territorial server farm" problem.

Matt’s Proposal — 271(j): Whoever without authority makes, uses, or sells any patented invention by providing persons located in the United States electronic access to a process performed by an extraterritorial computer shall be liable as an infringer notwithstanding the extraterritorial location of the computer so long as the provision of electronic access and the performance of the process is required by the claim at issue.

Patent Act of 2015 [Updated]

The Senate Judiciary Committee approved the Patent Act of 2015 (Protecting American Talent and Entrepreneurship Act) as amended by the Manager’s Amendment as well as additions from Senators Feinstein and Cornyn.  The vote was 16-4 with only Senators Cruz, Vitter, Durbin, and Coons voting Nay. Yeas include Senators Grassley, Hatch, Sessions, Graham, Cornyn, Lee, Flake, Perdue, Tillis, Leahy, Feinstein, Schumer, Whitehouse, Klobuchar, Franken, and Blumenthal.

We can expect a few more amendments before being passed in the Senate.  Notably, there is continued debate over whether to alter the statute to force the PTO to more liberally allow claim amendments during post-grant proceedings.

[Update] In the original version of this post, I mistakenly wrote that universities are pushing to have their patents excluded from post grant proceedings.  That was in error, the move rather is from the pharma and life science tech sector to exclude patents “that are subject to the Hatch-Waxman Act and Biologics Price Competition and Innovation Act (BPCIA) processes.” [Link to Grassley Statement]

 

Patent Law Treaties Implementation Act of 2012

By Dennis Crouch

It appears that the Patent Law Treaties Implementation Act of 2012 will soon become law. The U.S. Senate passed the bill earlier this year (S. 3486) by a unanimous vote and this morning the House passed the identical version in a voice vote. President Obama is expected to sign the bill into law within the next two weeks.

The Bill provides the domestic legislation required to implement both: (1) The Hague Agreement Concerning International Registration of Industrial Designs ("Hague Agreement") and (2) The Patent Law Treaty ("PLT"). Both treaties were ratified by the Senate in 2007.

In discussing the pending bill last week, I wrote that the USPTO has lobbied for passage of this bill and provided the original draft legislation. 

On the industrial design front,  substantive elements of the changed law include (1) an extension of the design patent term by an additional year with the resulting term being fifteen years from issuance; (2) allowing applicants to include up to 100 different design inventions within a single international design application; and (3) creation of provisional rights as of the publication date of the international application. About 45 countries, including virtually all of Europe have signed-on to the Hague Agreement (Geneva Act).

A major change with regard to the patent law treaty is that the law would now allow for revival of unintentionally abandoned international applications.