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New BPAI Final Rules

Patent

by Dennis Crouch

There are now 25,000 ex parte cases pending resolution before the Board of Patent Appeals and Interferences. For the most part, cases being decided today are appeals from final rejections mailed back in 2008 – at a time when the backlog was 80% less than today. And, as the chart below demonstrates, the backlog continues to grow at an alarming pace. Today, the USPTO published a new set of final rules of practice regarding ex parte patent appeals before the Board. The new rules do not directly address the backlog, but do refer to "streamlining" as an important purpose of the rules. As an aside, the recently published FY2011 USPTO Performance Report also fails to mention the BPAI backlog.

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New Rules: The newly published rules are designed to "streamline" practice before the Board of Patent Appeals and Interferences (BPAI) and only apply to ex parte patent appeals. As published, the rules will become effective in on January 21, 2011. The PTO had previously published a similar final that never went into effect and that is now formally withdrawn.

Changes include:

  • Jurisdiction: The Board will take jurisdiction over appeals automatically upon either the filing of the reply brief or expiration of the reply briefing filing deadline. Examiners will no longer be required to acknowledge the filing of a reply brief before the Board claims jurisdiction. (Historically, awaiting examiner acknowledgement took an average of 55 days).
  • Petitions During Appeal: Under the new rule, any petition (or information disclosure statement) filed while the Board possesses jurisdiction over the proceeding will be held in abeyance until the Board's jurisdiction ends and will not be considered "of record" in the appeal. The primary exception to this is with regard to a petition seeking review of an examiner's failure to designate a rejection in the answer as a new ground of rejection prior to filing a reply brief. In that case, the applicant can await the petition decision and thereby avoid having to file a request for extension of time in which to file the reply brief.
  • New Grounds of Rejection: The rules clarify that an argument in the examiner's answer that uses evidence that was not relied upon in the office action will be considered a new ground of rejection. In addition, a rejection will be considered a "new grounds" when the "basic thrust" of the rejection as presented in the examiner's answer or the Board's decision is different than that presented in the office action. However, an examiner or Board's use of certain extrinsic evidence such as dictionaries will not, according to the new rules, automatically result in a new ground of rejection. The rules also include a loosening of the requirements on requests for re-hearing so that an applicant can present new arguments in a request for rehearing that respond to the merits of a new ground of rejection and allows the applicant to request rehearing for the purposes of arguing that the Board's decision contains an undesignated new ground of rejection.
  • Removal of Briefing Requirements: Removal of several briefing requirements, including statements of the status of claims, the status of amendments, and the grounds of rejection to be reviewed on appeal as well as an evidence appendix or a related proceedings appendix.
  • Claims Being Appealed: The new rule will require the Board to presume that the applicant is appealing all rejected claims.

Claim Construction in the Abstract

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By Dennis Crouch

Typhoon Touch Tech. v. Dell, Lenovo, Toshiba, Fujitsu, Sand Dune Ventures, Panasonic, Apple, HTC, and Palm (Fed. Cir. 2011)

Touch screen technology has taken-off as an important element of consumer electronics. Typhoon’s US Patent Nos. 5,379,057 and 5,675,362 cover various embodiments of a “portable keyboardless computer system” with a “touch-sensitive screen.”

Typhoon appealed an E.D. Texas ruling that its patents were invalid and not infringed. The appeal focused on the claim construction that served as the basis for both invalidity and non-infringement. The appellate decision is notable for the detached process that the court used to consider claims elements at issue. The opinion never discussed the crux of the invention or its contribution to the art and instead simply looked to the disputed claim terms and the relation of those terms in the specification (as required by Phillips v. AWH).

This week, I participated in a roundtable discussion at Yale Law School sponsored by the Kauffman foundation and by Yale’s Information Society Project (ISP). A substantial amount of the discussion focused on problems stemming from our current claim construction process and our ongoing focus on claim language as opposed to invention or its contribution to the art.

For patent attorneys prosecuting patents, the claims are often seen as equivalent to the invention. The new patent act supports that definition by shifting focus away from the invention and instead onto the “claimed invention.” Thus, the new § 102(a)(1) asks whether “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.” The new statute’s sole focus on invention as claimed is largely just a codification of fairly well accepted Federal Circuit precedent without much thought of the consequences. Of course, broad subject matter eligibility described in State Street Bank and the TSM test for obviousness were, until quite recently, well accepted Federal Circuit precedents as well. In the past few years, the Supreme Court rolled-back the clock on those issues – returning focus to pre-1982 case law. For “invention” however, the new statute appears to lock-in the claimed-invention as the ongoing focus of patent law.

Judge Kimberly Moore highlighted this issue in her recent dissent from the court’s denial of en banc rehearing of Retractable Technologies, Inc. v. Becton, Dickinson and Company (Fed. Cir. 2011). In that opinion, Judge Moore noted that the approach of the panel decision in Retractable is evident of a major divide amongst Federal Circuit judges as to whether the inventor’s contribution to the art – “what the inventor actually invented” – should be considered in the claim construction process.

This week, my patent law students each argued a mock-Markman hearing – revisiting the facts of Nystrom v. Trex and arguing over whether Ron Nystrom’s claimed decking “board” should be limited to cover only to wood cut from a log. That litigation was interesting because it involved five different court decisions on the proper construction of the term. The final appellate decision narrowed the term’s meaning in a way that allowed Trex’s composite planking to avoid infringement.

Claim construction has become a fundamental aspect of every patent case – even to the extent that Section 101 patentable subject matter decisions turn on the meaning bestowed upon particular claim terms. For patent attorneys, all of this focus on claim meaning puts more pressure on the drafting of the claims and the specification. The sad thing about Nystrom’s patent is that he would have easily won the case if the patent attorney who drafted the application had thrown-in language indicating that a “board” could be made of various materials, not just wood cut from a log. This counterfactual conclusion is sad for Nystrom as the inventor, but it is also sad that such a major weight is placed on non-inventive boilerplate language. In my mind, the importance of claim construction should push the USPTO to do a better job of ensuring that the terms of issued patents are well defined.

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The Typhoon decision is also notable in the way that the court narrowly interpreted functional claim limitations. As background, Typhoon’s claim was directed to a “computer” that included various elements including a “memory for storing [a] data collection application.” Typhoon argued its claimed invention only required that the memory be capable of storing the data collection application. However, the District Court Judge Davis and Federal Circuit agreed that the proper construction required that memory actually be used for storing the data collection application. In so holding, the courts looked to the specification and found that the described embodiments all had memories that actually included the application rather than just the capability.

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Finally, the court looked at Typhoon’s “Means for cross-referencing” limitation. The district court held that limitation invalid as indefinite under 35 U.S.C. § 112 because the specification did not include an algorithm adequate to provide sufficient structure for the means-plus-function limitation, citing Aristocrat Technologies Australia PTY Ltd. v. International Game Technology, 521 F.3d 1328, 1334 (Fed Cir. 2008). On appeal, the Federal Circuit rejected that conclusion – finding that the specification did disclose a cross-referencing algorithm in plain language in the text of the specification. The court went on to write that “computer code is not required to be included in the patent specification.” Rather, what is required is disclosure so that one of ordinary skill in the art would recognize the structure as linked to the claimed function.

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  • Judge Newman wrote the court opinion and was joined by Chief Judge Rader and Judge Prost;
  • The Appellant-Patentee is represented on appeal by Charles Wolfe (Blank Rome);
  • Ed Reines (Weil Gotshal) and Joe Re (Knobbe) were co-lead-counsel for all the appellee-defendants. Briefs were also signed by attorneys at K&L Gates, Baker Botts, Amster Rothstein, Perkins Coie, Covington & Burling, and Malloy & Malloy, as well as Eric Albritton from the Albritton firm.

Book Review: Introduction to Patent Law for Non-Lawyers

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NotSoObviousby Dennis Crouch

Jeff Schox recently sent me a copy of his new book on patent law: Not So Obvious: An Introduction to Patent Law and Strategy. Schox uses the $39 paperback for the patent class he teaches to Stanford engineering students. The book is written in plain language and is clearly designed to be read by engineers wanting a first-cut understanding of the patent system and its purpose. In addition to patentability and infringement, the book also includes a nice chapter on inventorship and ownership rights. 

In the past, I have often recommended the "Patent it Yourself " book by David Pressman to inventors and others wanting to better understand the process. The problem with Pressman's book is that it has become so lengthy (596 pages) that it is no longer an easy resource for those more casually involved in the system.  Schox book likely fills that gap. (PIY is still a great resource for those more deeply involved in prosecution.)

Do others have recommendations of patent law resources for inventors who want to better understand the system without actually becoming patent agents? 

No Litigation Estoppel until All Appeals Exhausted in Inter Partes Reexamination

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Bettcher Industries v. Bunzl USA (Fed. Cir. 2011)

by Dennis Crouch

For one summer during college, I worked in a meat packing plant. In one hand, I wielded a power-operated knife while the other, gloved in chain-mail, held thawing pork-bellies. This case involves litigation over a hand-held rotary blade used in the commercial food processing industries. As is now common, after Bettcher filed its infringement lawsuit, Bunzl, the defendant, requested the patent undergo inter partes reexamination at the USPTO. Bunzl asserted the same prior art in both its reexamination request and in its invalidity defense before the district court.

The issue on appeal is the timing of the estoppel provision associated with inter partes reexamination under 35 U.S.C. § 315(c). Under the statute,

"[a] third-party requester whose request for an inter partes reexamination results in a[ reexamination] order … is estopped from asserting at a later time, in any civil action [related to patent law] … the invalidity of any claim finally determined to be valid and patentable on any ground which the third-party requester raised or could have raised during the inter partes reexamination proceedings.

As I read the statute, a reexamination requester is blocked from making particular invalidity arguments in court if certain conditions are met. These conditions include: (1) a final determination that the reexamined claim is valid; and (2) a finding that the invalidity argument is based on grounds that were or could-have-been raised by the requester during the inter partes reexamination.

In the case at hand, the USPTO had granted Bunzl's reexamination request, but the reexamination examiner had rejected Bunzl's position and issued a right-to-appeal-notice to Bunzl. Bunzl appealed to the BPAI, and recently lost the appeal, but had now requested rehearing by the Board. If Bunzl loses at the BPAI, it has a right to further appeal the reexamination to the Court of Appeals for the Federal Circuit.

In summary, at this point, the USPTO Examiner has made a "final" decisions that the claim is valid, and the BPAI has made a "final" decision that the claim is valid. However, Bunzl still has a right to appeal. The question from those facts is whether the claim is "finally determined to be valid" under the statute.

Deciding the issue, the Federal Circuit held that a claim is not "finally determined to be valid" under Section 315 until all appeals are exhausted.

[T]his court agrees with Bunzl that the estoppel provision of § 315 is triggered not when examination is completed but only after all appeal rights have been exhausted.

On remand, the district court will need to determine whether a new trial is necessitated by the additional prior art made available by the lack of estoppel.

Judge Reyna dissented – arguing that the estoppel issue is moot because the claim is anticipated as a matter of law.

The plain meaning of the claim language of the '325 patent reads on Bettcher's own prior art products, which include all of the structural features required by the claims, and which possess the capability of satisfying the functional or intended use limitations.

. . . .

No reasonable jury could conclude that the claims of the '325 patent were novel over the pre-1998 blades because none of the dispositive facts were disputed and the law is clear. I would reverse the district court and enter judgment as a matter of law of anticipation.

In reaching his outcome, Judge Reyna is finding that, as a matter of law, the wrong conclusion was reached by the trial jury, the district court judge, the original patent examiner, the reexamination examiner, the BPAI, and the other two judges on the court.

Comments by Crouch: This case is in tension with the recent Federal Circuit decision of Marine Polymer Tech. v. Hemcon, Inc. In that case, the court held that non-final arguments made during reexamination created intervening rights that relieved an accused infringer from liability, and that the intervening rights were created at the point of the arguments even though the reexamination was ongoing.

New Patent Regime Signed into Law

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Patent2011021This morning, President Obama signed the Leahy-Smith Patent Reform Act — enacting it into law. The provisions of the new law have a variety of effective dates.  Some changes to the law happen immediately and the increased patent office fees will be instituted on September 26, 2011.  Other changes will not be implemented until 2012 and 2013. These include the revised post-grant opposition procedures and the rewriting of the rules of novelty and nonobviousness.

Flowchart Insuficient Structure to Define Sofware Means-Plus-Function Limitation

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In re Aoyama (Fed. Cir. 2011)

Aoyama’s pending application claims a supply chain management system with two elements: “an order controller system” and “a warehouse system.” According to the claim, the order controller generates “transfer data” using “reverse logistic means” and the warehouse receives the transfer data.  The Examiner identified U.S. Patent Application Pub. 2001/0034673 (“Yang”) as fully anticipating and that rejection was affirmed by the Board of Patent Appeals and Interferences (“Board”).

On appeal to the Court of Appeals for the Federal Circuit, a split panel agreed that the claims lacked merit but found them impermissibly indefinite rather than anticipated.

The key to the decision focuses on the means-plus-function “reverse logistic means” limitation. 

Means-plus-function (MPF) claims are deceptive. MPF claims appear to be broadly drafted and without any structural limitations. However, the patent act requires that the actual scope of MPF claims be limited to structures disclosed within their specifications. 35 U.S.C. 112 p6. The court has also repeatedly held that an MPF limitation is considered impermissibly indefinite if the specification does not contain any structure that performs the claimed function.

Here, the claimed “reverse logistic means” generate “transfer data.”  Aoyama pointed to a flow-chart (Figure 8) as providing the necessary structure.  (Shown below).   In reviewing the flow-chart, however, the Federal Circuit could not identify sufficient structure.  In particular, the court noted that the flow-chart identified a number of results, but did not identify any way that “a computer could be programmed to produce the results described in the boxes.”  Quoting both the Examiner and the Board, the Court wrote  that Figure 8 only “presents several results to be obtained, without describing how to achieve those results, and certainly not how to generate transfer data.”

Patent2011017

Importantly, the question of means-plus-function structure is much like that of written description. It does not matter whether one skilled in the art would be able to create a structure to perform the claimed function. Rather, the focus is on whether such structures were disclosed in the specification.

Because the means-plus-function limitation lacked sufficient disclosure of an accompanying structure and are therefore unpatenable.

In dissent, Judge Newman argued (1) that the federal circuit improperly raised the issue of indefiniteness and (2) that the figure and accompanying text should be considered sufficient structural disclosure.

Patent Reform Passes

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H.R. 1249, the Leahy-Smith America Invents Act, passed the House today with broad bipartisan support. The Senate passed its version of the bill (S. 23) on March 8th by a vote of 95 to 5.

The House and Senate will now conference to attempt to work out differences between the bills and then a final vote on a compromise bill will have to take place (likely in the Senate). The final version will include a first-to-file regime but will not likely provide the USPTO with any guarantee of full funding.  

The litigation involving the interpretation of the many new provisions of the Bill will occupy Patently-O posts for at least the next decade.

Dir. Kappos Brings in New Chief Judge: James D. Smith

Patent

The USPTO has announced a new Chief Administrative Patent Judge to lead the Board of Patent Appeals and Interferences (BPAI). James Donald Smith will be leaving his role as Chief IP Counsel for Baxter International to take on the difficult task of shoring up the important section of the Office. Smith is expected to begin serving as Chief Judge on May 8, 2011 and is replacing Michael Fleming who stepped down in 2010 and Jay Moore who has been the Acting Chief Judge for the past several months.

The BPAI is struggling with a caseload that has grown dramatically over the past several years and a backlog of over 20,000 pending appeals. In addition a large and growing number of hotly contested inter partes reexaminations are reaching the Board and creating a heavy workload. These proceedings increasingly involve high profile patents involved in parallel infringement litigation. In many cases, courts stay litigation pending outcome of the reexamination and are looking to the USPTO for accurate and timely conclusions. The Board’s profile and its workload would likely both increase under the patent reform measures now pending in Congress.

Mr. Smith has a long background in patent law. He is currently the Associate General and Chief Intellectual Property Counsel of Baxter International. He previously clerked for former Federal Circuit Chief Judge Paul Michel, served in private practice as a patent attorney at Arnold White & Durkee and Dewey Ballantine (now Dewey Le Boeuf). He also spent time at Nokia (Director of IP Licensing), Lexmark (Chief IP Counsel) and Emory University School of Law (Dean of Students and Professor).

Mr. Smith has been a registered patent attorney since 1988. He graduated from Duke University (J.D.) and the University of Maryland at College Park (B.S.E.E.).

The upper management of the USPTO is now solidly in the hands of patent law professionals with extensive experience in corporate patent law and management practice. This includes Director David Kappos (20+ years at IBM); Deputy Director Theresa Stanek Rea (25 years law firm practice); BPAI Chief Judge James D. Smith (20+ years in law firm and corporate practice); and Administrator for Policy and External Affairs Albert Tramposch (years in law firm practice followed by governmental work). Two exceptions to this “rule” are the Patent Commissioner Robert Stoll and Deputy Commissioner Peggy Focarino. Both Stoll and Focarino started their patent careers as examiners and have been at the USPTO collectively for more than 60 years. Although very much a “political” position, the role of Commissioner is most often filled by individuals who have dedicated the bulk of their careers to the USPTO.

USPTO Press Release

 

Senate Confirms Jimmie V. Reyna to the CAFC

Patent

 By Jason Rantanen

6a00d8341c588553ef013487e5c5ec970c On Monday, the Senate confirmed the nomination of Jimmie V. Reyna to the U.S. Court of Appeals for the Federal Circuit.  Reyna's expertise in international trade will serve the Federal Circuit well, as the court's jurisdiction includes appeals from the Court of International Trade (CIT) and International Trade Commission (ITC).  In addition to heading the international trade practice area at the Williams Mullen firm, Reyna has also published a slew of articles and two books on the subject.  Reyna is an active member of the Hispanic legal community and will be the first Hispanic judge on the Federal Circuit.

Patent Reform 2011: House of Representatives Bill No. H.R. 1249

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Representatives Lamar Smith, Bob Goodlatte, and Darrell Issa have introduced their version of the America Invents Act (AIA) to the House of Representatives. H.R. 1249. [AIA.pdf] The AIA closely tracks the Senate’s bill on comprehensive patent reform (S. 23) that was passed in the Senate earlier this year on a 95-5 vote. Parallel changes include a switch to a first-to-file system (with the retention of a limited one-year grace period); establishment of a modified inter partes reexamination and post grant opposition system; providing USPTO with fee-setting authority; neutering of the false marking provision; allowing pre-issuance submissions by third-parties; creating a supplemental examination system to correct inequitable conduct; and elimination of best mode failure as an invalidity defense.

The statute continues to include a substantial error in its codification of the grace period. Namely, the grace period only applies to “disclosures” and not to other commercialization activities such as sales and offers for sale.  In addition, it is unclear whether the grace period would apply situations such as the original public use case of Pennock v. Dialogue, 27 U.S. 1, 23, 7 L. Ed. 327 (1829).  In that case, the Supreme Court ruled that the inventor could not obtain a patent on its hose-making process because the inventor had sold the product (hoses) for several years before filing for patent protection. 

Some key differences from the Senate version that will lead to substantial debate include: 

  1. Details of the Post Grant Opposition Provisions…
  2. Prior User Rights: Whether “prior user rights” should be expanded to accompany the switch to a first-to-file regime. This issue arises when, for instance, a manufacturing company is using a particular process as a trade secret before another party invented and patented the process.  Under our current first-to-invent regime if the prior-user was sued for infringement, the patent would likely be invalidated under Section 102(g). See  Dunlop Holdings Ltd v. Ram Golf Corp., 524 F.2d 33 (7th Cir. 1975).  The invention-date priority contests of Section 102(g) are eliminated in a first-to-file system, raising the question of whether a non-patent-filing manufacturer should be given some prior user rights that would continue to allow these trade-secret uses. Currently, the patent statute also has a prior user right codified in Section 273. That section, however, is limited purely to business method patents. The proposed legislation would expand Section 273 to cover all patents.
  3. Special Business Method Proceedings, venue restrictions, interlocutory appeals, and attorney fee shifting.
  4. Automatic stay of litigation for inter partes reviews.
  5. Elimination of Tax Strategy patents (by considering the subject matter within the prior art).
  6. Codification of Knorr Bremse (failure to present advice of counsel cannot be used as evidence of willful infringement). 

Read the Bill: File Attachment: 033011_America Invents Act.pdf (266 KB)

Federal Circuit Refuses to Require Examiners to Articulate a Claim Construction as Part of the Examination/Rejection Process

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In re Jung (Fed. Cir. 2011)

Ed Jung is a co-founder of intellectual ventures and Dr. Lowell Wood is a world renowned technologist. In 2004, the pair filed a patent application for a photo-detector array system. The examiner rejected the claims as obvious and the BPAI affirmed. Jung appealed to the Federal Circuit arguing that “(1) the examiner failed to make a prima facie case of anticipation, and (2) the Board acted as a ‘super-examiner’ by performing independent fact-finding and applying an improperly deferential standard of review to the examiner’s rejections.”

Prima Facie Case: The patent office has the initial burden of presenting a prima facie case of invalidity. A prima facie case is adequately articulated by notifying the applicant of the reasons for its rejections so long as the explanation is not “so uninformative that it prevents the applicant from recognizing and seeking to counter the grounds for rejection.” Chester v. Miller, 906 F.2d 1574 (Fed. Cir. 1990). This requirement comes straight from Section 132 of the Patent Act. 35 U.S.C. §132(a).

Whenever, on examination, any claim for a patent is rejected, or any objection or requirement made, the Director shall notify the applicant thereof, stating the reasons for such rejection, or objection or requirement, together with such information and references as may be useful in judging of the propriety of continuing the prosecution of his application.

Once a prima facie case is presented, the burden shifts to the applicant for rebuttal.

In Jung, the Federal Circuit ruled that the examiner presented a prima facie case of invalidity based on his explanation that Jung’s broadly drafted claim encompassed the prior art.

Here, the examiner’s discussion of the theory of invalidity (anticipation), the prior art basis for the rejection (Kalnitsky), and the identification of where each limitation of the rejected claims is shown in the prior art reference by specific column and line number was more than sufficient to meet this burden.

In the appeal, Jung argued that the articulation of a prima facie case should involve more than the notice of rejection outlined in § 132. Jung asked for a claim construction of the disputed claims – similar to what would be required of a court. The Federal Circuit rejected that argument – seeing “no reason to impose a heightened burden on examiners beyond the notice requirement of § 132.”

There has never been a requirement for an examiner to make an on-the-record claim construction of every term in every rejected claim and to explain every possible difference between the prior art and the claimed invention in order to make out a prima facie rejection. This court declines to create such a burdensome and unnecessary requirement. “[Section 132] does not mandate that in order to establish prima facie anticipation, the PTO must explicitly preempt every possible response to a section 102 rejection. Section 132 merely ensures that an applicant at least be informed of the broad statutory basis for the rejection of his claims, so that he may determine what the issues are on which he can or should produce evidence.” Chester, 906 F.2d at 1578 (internal citation omitted). As discussed above, all that is required of the office to meet its prima facie burden of production is to set forth the statutory basis of the rejection and the reference or references relied upon in a sufficiently articulate and informative manner as to meet the notice requirement of § 132. As the statute itself instructs, the examiner must “notify the applicant,” “stating the reasons for such rejection,” “together with such information and references as may be useful in judging the propriety of continuing prosecution of his application.” 35 U.S.C. § 132. Here, the examiner’s discussion of the theory of invalidity (anticipation), the prior art basis for the rejection (Kalnitsky), and the identification of where each limitation of the rejected claims is shown in the prior art reference by specific column and line number was more than sufficient to meet this burden.

Jung’s argument was clearly a long-shot in this case and not well presented if the sole intent was to make sure that Jung gets this patent. Of course, Intellectual Ventures is now one of the largest patent holders in the world and its actions are almost always strategic in nature.

Post-Disclosure Grace Period – Unique but Good Policy

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Guest Post by Canadian Patent Attorney David French of Second Counsel. He also writes the Canada Patent Blog.

The U.S. Senate has now passed its new patent bill, S. 23.  Numerous comments have been made, particularly about the first-to-file revisions of this law. However, no one is commenting on the effect of the following clauses in amended section 102:

102(b) Exceptions-

(1) DISCLOSURES MADE 1 YEAR OR LESS BEFORE THE EFFECTIVE FILING DATE OF THE CLAIMED INVENTION- A disclosure made 1 year or less before the effective filing date of a claimed invention shall not be prior art to the claimed invention under subsection (a) (1) if–

(A) the disclosure was made by the inventor or joint inventor or by another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or

(B) the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor.

Subparagraph (B) has the following result:  If you disclose your invention to the public, or more precisely if the subject matter of your later patent application has been previously “publicly disclosed”, then you effectively have established your US filing date.

This is an unusual provision in patent law, indeed unique. But it appears to be good policy. It’s true; anyone relying on this provision would lose their rights in Europe. But if an inadvertent disclosure were to occur as through a public use or a public presentation, then if that disclosure meets the requirements of this section, the applicant would have thereby locked-in their right to obtain a US patent. This would be true, of course, only so long as they do not otherwise violate the one-year deadline to file based their own personal disclosures which have made the invention available to the public. This assumes, as well, that there has been no prior disclosure by a third-party.

This provision repairs a flaw in the present Canadian law. Under the Canadian patent statute, an inventor who puts his invention on the market and relies on the one-year grace period before filing in Canada, can still lose his patent rights if an independent inventor makes the invention “available to the public” before the inventor has filed his patent application. In other words, it’s still a “race to the patent office” as between strangers in Canada.

The exception of Section 102(b)(1)(B) provides relief from that pressure. Effectively, publicly disclosing your invention will shield any application from after-arising prior art. This is equivalent to obtaining a filing date.

Another way to look at the exception is that it provides a presumption that anyone who subsequently publishes an invention is assumed to have acquired knowledge of the invention from the inventor. This would bring such a disclosure within the scope of Section 102(b)(1)(A). This Section 102(b)(1)(A) is the classic Canadian pioneered “one-year inventor originating grace period”.

While this section may be good policy, it may still have a flaw that could be corrected before the House.

What does “publicly disclosed” mean? The main novelty provision of section 102 uses the expression “available to the public” to characterize fatal prior art. This has been interpreted in Europe and Canada as requiring that a prior disclosure must be “enabling” in order to be effective as prior art. If a tractor is driven around town but doesn’t make the invention understandable, then this enablement requirement means that the invention has not been made “available to the public”. Will the same requirement of enablement be imported into the expression “publicly disclosed”?

This uncertainty could be dispelled if, before the House, the bill where amended as follows:

102(b)(1)(B) the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor so as to make the invention available to the public.

On the other hand, the legislators may not wish to commit to such an interpretation. Perhaps they want the Courts to resolve this issue rather than take the responsibility themselves.

To make the amendment proposed would raise the standard required when something is “publicly disclosed” in order for such an event to serve as a shield against after-arising prior art. Perhaps the legislators do not want to be the ones that stipulate for an increase standard.

Under the existing law, once a conception of an invention has occurred and the invention has been reduced to practice, (including reduction to practice under confidential circumstances), the inventor does not have to make a public disclosure that arises to the standard of being “enabling”. He/she can delay filing up to the limit that the invention has not been suppressed or abandoned.  A delay of one year is probably not unreasonable if it fits within the statutory one-year grace period.

 Under this new provision of section 102(b)(1)(B), the sheltering of the invention will live or die according to whether an invention has been “publicly disclosed” to the standard that the law requires.

To clarify or not to clarify, that is the dilemma that the House must face in reviewing its equivalent to S. 23.

Patent Reform Passed in Senate: House Likely to Introduce Bill this Month

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by Dennis Crouch

In strong bipartisan fashion, the Senate today passed the America Invents Act (S. 23). Attention now moves to the Judiciary Committee in the House of Representatives.

The Senate measure includes:

  • The ability for the US Patent & Trademark office to set its own fees and to eliminate the practice of fee-diversion.
  • A transition to a first-to-file system as discussed previously on Patently-O.
  • Broader leeway for third-party submissions with explanations during ex parte patent prosecution.
  • A new “first-window” post-grant patent opposition system with broader jurisdiction (but a shorter timeframe) than reexaminations.
  • A provision that eliminates certain tax strategy patents.
  • Although not entirely clear at this point, it looks like damages limitations were removed from the bill prior to passage.

Republican leadership in the House, including Judiciary Chairman Lamar Smith (Tx) and Majority Leader Eric Cantor (Va) appear ready to move forward with their own version of legislation. Six years ago, Representative Smith introduced the Patent Reform Act of 2005. Under the new Republican leadership, a revived and modified Subcommittee on Intellectual Property, Competition, and the Internet has jurisdiction over patent reform measures. The new Chairman of that Subcommittee is Representative Bob Goodlatte (Va) who co-sponsored prior patent reform measures as did the Vice-Chairman, Representative Howard Coble (NC).

On March 10, 2011, I will testify before the Judiciary Committee as members consider how to draft corresponding legislation. I have specifically been asked to address judicial changes to the patent law landscape since the reform process began in 2005. During that period, the Supreme Court has taken an active role in addressing patent policy concerns in cases such as KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007) (eliminating technical hurdles for proving an invention obvious and instead applying a “common sense” analysis for assessing patentability); MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007) (holding that declaratory judgment jurisdiction may exist even if the patent holder could not have sued for infringement and that the apprehension that patentee will sue for infringement is not a necessary element for Article III jurisdiction); Bilski v. Kappos, 130 S. Ct. 3218 (2010) (holding the claimed invention – a method of hedging – unpatentable as an abstract idea); and Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007) (holding that Microsoft could not be held liable for exporting software code because source code does not qualify as a “component” of a patented invention as required under 35 U.S.C. § 271(f)). During this time, the Federal Circuit has decided more than two thousand patent appeals (including a dozen en banc decisions), many of which address the exact concerns raised in the original 2005 patent reform bill. Of course, over this period, the PTO administrative nightmare has grown to a backlog of 1.2 million pending patent applications and the Board of Patent Appeals (BPAI) backlog of pending ex parte cases has grown from 742 in March 2005 to over 20,000 today.

Filing-Date-Focused-System – The Key is the Scope of the Grace Period

Patent,

[Update] A vote on S.23 is expected this evening, March 2, 2011. Before becoming law, the bill would need to also be approved by the House of Representatives.

I want to thank Professor McCrackin and her students for providing a useful analysis that compares the patent-race issues involved with the move to a first-to-file system.

I have long maintained that pressure to move to first-to-file has very little to do with these patent races. Interferences are extremely rare. And, as we all know, if it is difficult to prove prior dates of conception and reduction to practice, it is all-but-impossible to prove diligence at the level required by caselaw. Thus, in the words of Paul Morgan, analyzing the change in terms of the patent race is a "truly academic exercise."

For this reason, in my 2010 article on anticipation I decided to move the nomenclature away from first-to-invent and first-to-file systems and instead talk about whether the patent system is filing-date-focused or invention-date-focused and also to query the type of grace period allowed by the various systems.

What few are talking about with the proposed legislation is that it would increase the scope of prior art available to invalidate a patent – even when no competing patent application is filed.

In particular, the proposed legislation severely restricts the one-year grace period currently available to a patent applicant. Under the new legislation, a prior inventor could only antedate a pre-filing disclosure if that disclosure was (1) derived from the inventor or (2) made public after the inventor publicized her invention. Under the current rules, the one-year grace period operates without regard to the source of the putative prior art.

Even more, under current law, sales and offers-to-sell only constitute prior art if those sales occurred more than one year before the patent application filing date. 35 U.S.C. § 102(b). In those circumstances, no "swearing behind" is necessary against sales activities because they only qualify as prior art if they occurred outside of the grace period. It appears from the language of the bill, that no grace period would be allowed for pre-filing sales activities. Rather, the grace period language in the proposed bill only relates to "disclosures" and on sale activity is typically not seen as a disclosure.

From a practical standpoint, these elements involving the grace period are much more likely to impact patent applicants than any potential interference issue.

(more…)

Teresa Stanek Rea Takes Post as Patent Office Deputy Director

Patent

US Patent Office Director David Kappos has announced his new Deputy Director: longtime intellectual property law professional Teresa Stanek Rea. Ms. Rea is currently a partner at Crowell & Moring and was president of the AIPLA from 2008-2009 and was previously with Burns Doane. Ms. Rea replaces Sharon Barner who stepped-down this January after a short, but effective tenure.

Ms. Rea graduated from Wayne State Law School in 1980 and has been practicing patent law for over 25 years. Before that, she practiced as a pharmacist. Her technology focus has primarily been biotechnology. Her leadership in that area will be a welcome addition to the USPTO management team. In her role as AIPLA director, Ms. Rea has been involved in many of the recent major patent cases, including Tafas v. Kappos, Ariad v. Eli Lilly, Prometheus v. Mayo, and Cardiac v. St. Jude.

Joff Wild who edits the wonderful magazine IAM reported last week that Michelle Lee (Google’s IP Chief) and Shanna Winters (Congressional Counsel) were also under consideration for the post.

 

Tracing the Quote: Everything that can be Invented has been Invented

Patent, Patentable Subject Matter

Charles H. Duell was the Commissioner of US patent office in 1899. Mr. Deull's most famous attributed utterance is that "everything that can be invented has been invented." Most patent attorneys have also heard that the quote is apocryphal.

In his 1989 article, Samuel Sass traced the quote back to 1981 book titled "The Book of Facts and Fallacies" by Chris Morgan and David Langford. Sass did his work well before Gore created the Internets, so I decided to take a fresh look at the research using Google. The following chart was created based on Google's electronic compilation of 12 million books. The chart shows the frequency that the phrase "everything that can be invented" shows up in the corpus, grouped by the year of publication of each book. The chart shows that Mr. Sass is largely correct in his assessment. Google has no reference to the quote prior to 1980 in its ngram database.

However, with a bit more searching, I came across an 1899 edition of Punch Magazine that had been donated to Harvard University by the Pulitzer family. In that edition, the comedy magazine offered a look at the "coming century." In colloquy, a genius asked "isn't there a clerk who can examine patents?" A boy replied "Quite unnecessary, Sir. Everything that can be invented has been invented."

I suspect that 1899 joke is the origin of the expression. Of course, there is still Ecclesiastes.

Prometheus Laboratories v. Mayo: The Broad Scope of Statutory Subject Matter

CAFC, Patent, Patent Cases 2010, Patentable Subject Matter, Pharma, Rantanen

By Jason Rantanen

Prometheus Laboratories, Inc. v. Mayo Collaborative Services (Fed. Cir. 2010)
Panel: Rader, Lourie (author), Bryson

Last Friday, the Federal Circuit released its second noteworthy post-Bilski decision (the first being Research Corp v. Microsoft).  The opinion, Prometheus v. Mayo, issued following a grant-vacate-remand order from the Supreme Court instructing the CAFC to revisit its original decision in light of Bilski.  Despite this procedural posture, however, the new opinion is quite similar to the old, arriving at the same conclusion through essentially the same reasoning.   

Prometheus initially came to the Federal Circuit following a district court grant of summary judgment of invalidity under § 101 (lack of patentable subject matter).  After the CAFC reversed the ruling of invalidity using its "machine-or-transformation" test, Mayo sought review by the Supreme Court.  The Court granted certiorari, vacated the CAFC decision, and remanded for consideration in light of its Bilski opinion.  Earlier Patently-O commentary includes a summary of the original Federal Circuit opinion and a discussion of the remand.

The patents-in-suit claim a method for determining whether a patient has received a therapeutically efficacious amount of drugs such as 6-mercaptopurine ("6-MP") and azthiopurine ("AZA"), which are used to treat inflammatory bowel diseases but can produce toxic side effects.  In the human body, these drugs metabolize into 6-MP metabolites, including 6-methylmercaptopurine ("6-MMP") and 6-thioguanine ("6-TG").  By administering the drug, measuring the subject's levels of 6-MMP and 6-TG and comparing them to pre-determined levels, toxicity can be minimized and efficacy maximized. 

Claim 1 of Patent No. 6,355,623 is representative:

1. A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising:
    (a) administering a drug providing 6-thioguanine to a subject having said im-mune-mediated gastrointestinal disorder; and
    (b) determining the level of 6-thioguanine in said subject having said immune-mediated gastrointestinal disorder,
    wherein the level of 6-thioguanine less than about 230 pmol per 8×108 red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject and
    wherein the level of 6-thioguanine greater than about 400 pmol per 8×108 red blood cells indicates a need to decrease the amount of said drug subsequently administered to said subject.

Although similar in most respects, some claims of the second patent-in-suit, No. 6,680,302, dispense with the "administering" step.

The Patents Do Not Claim a Physical Phenomena
On remand, the CAFC again rejected Mayo's argument that the '623 and '302 patents claim a "natural phenomenon."  In seeking a judgment of invalidity under Section 101, Mayo contended (and the district court agreed) that the "administering" and "determining" steps are merely necessary data-gathering steps for the use of the correlations between 6-TG and 6-MMP and therapeutic efficacy or toxicity in patients.  Because these correlations are simply natural phenomena, Mayo reasoned, they were unpatentable.

As before, the Federal Circuit disagreed, noting that Bilski provides a broad – although not unlimited – scope for patent protection, and “an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection.”  Slip. Op. at 12, quoting Bilski, 130 S.Ct. at 3230.  Furthermore, the court stated, neither the Supreme Court's order to vacate and remand the original Prometheus decision nor Bilski dictates a wholly different analysis or different result.  

The crux of the CAFC's determination that the asserted claims recite a patent-eligible application of naturally occurring correlations between metabolite levels and efficacy or toxicity as opposed to the natural correlation itself rests on the specific treatment steps recited by the claims: the "administering" step and the "determining" step.  "The inventive nature of the claimed methods stems not from preemption of all use of these natural processes, but from the application of a natural phenomenon in a series of steps comprising particular methods of treatment." Slip. Op. at 15-16.

In support of its conclusion, the court reiterated its earlier determination that the treatment methods in Prometheus's patents satisfy the "machine-or-transformation test.  Although this is not the exclusive test, post-Bilski, it nevertheless provides important clues to subject matter patentabilty.  In applying the machine-or-transformation framework, the court specifically rejected Mayo's argument that the disputed claims simply claim natural correlations and the associated data-gathering steps, broadly stating that the asserted claims are "claims to methods of treatment, which are always transformative when one of a defined group of drugs is administered to the body to ameliorate the effects of an undesired condition."  Slip Op. at 17.  Even leaving out the administration step does not make the claims unpatentable, as the CAFC also found the "determining" step to be transformative because it involves "[s]ome form of manipulation, such as the high pressure liquid chromatography method specified in several of the asserted dependent claims or some other modification of the substances to be measured, [which] is necessary to extract the metabolites from a bodily sample and determine their concentration."  Id. at 18.

In reaching this conclusion, however, the court was forced to distinguish its earlier decision In re Grams, 888 F.2d 835 (Fed. Cir. 1989), which similarly claimed a process that involved "(1) performing a clinical test on individuals and (2) based on the data from that test, determining if an abnormality existed and determining possible causes of any abnormality by using an algorithm."  Id. at 20.   Unlike the claims in Grams – which the CAFC found unpatentable "because the tests were just to 'obtain data'" (Slip Op. at 20) – the claims of the Prometheus patents "require the performing of clinical tests on individuals that were transformative." 

Mental Steps
In addition to its overarching analysis of the subject matter issue, the opinion also includes an interesting discussion of the use of mental steps in patent claims.  Although the CAFC agreed that the final "wherein" clauses are mental steps, "A subsequent mental step does not, by itself, negate the transformative nature of prior steps. Thus, when viewed in the proper context, the final step of providing a warning based on the results of the prior steps does not detract from the patentability of Prometheus’s claimed methods as a whole." Slip Op. at 21. Because no claim in the Prometheus patents claims only mental steps, "contrary to Mayo’s assertions, a physician who only evaluates the result of the claimed methods, without carrying out the administering and/or determining steps that are present in all the claims, cannot infringe any claim that requires such steps." Id.

Additional Commentary
In addition to an extensive discussion about the decision in response to Dennis's post on Sunday, other sites commenting on the decision include:

  • Patent Docs
  • patents4life
  • IP Watchdog
  • Chris Holman's IP Blog
  • Hal Weger of Foley has suggested that another grant of certiorari may be down the road, given the opinion's refusal to discuss a three-Justice dissent from the dismissal of certiorari in Lab. Corp., 548 U.S. 124, that was cited with approval by five Justices in two concurrences in Bilski.

Research Corp. v. Microsoft: Section 101 and Process Claims

Inequitable Conduct, Infringement, Patent, Patent Cases 2010, Patentable Subject Matter, Rantanen, , , ,

By Jason Rantanen

There are three articulated exceptions to the scope of patentable subject matter under 35 U.S.C. § 101: laws of nature, physical phenomena, and abstract ideas.  Research Corp. v. Microsoft places a high hurdle in front of challengers who seek to invalidate process patents on the third ground. 

Research Corp. Technologies v. Microsoft Corp. (Fed. Cir. 2010)
Panel: Rader (author), Newman, and Plager

Research Corporation ("RCT") owns several patents relating to digital image halftoning, which is the process of generating electronic display and print images using only a small number of pixel colors (ex.: red, blue and green in the case of color displays) while appearing to present many more colors and shades than were actually used.  Four related patents are relevant to this summary: Nos. 5,111,310, 5,341,228, 5,477,305, and 5,726,772.  The applications for the '310 and '228 patents (a continuation-in-part of the '310 patent) were filed before December 4, 1991; the remaining patents are continuations of the '228 patent and claim priority to the earlier filing dates. 

RCT brought an infringement action against Microsoft based on these patents; in response, Microsoft asserted, and the district court initially concluded, that the patents were unenforceable due to inequitable conduct, invalid and not infringed.  The Federal Circuit reversed that determination in 2008.  Microsoft subsequently sought summary judgment against the '310 and '228 patents on Section 101 patentable subject matter grounds, and asserted that the claims of the '772 patent were not entitled to the earlier priority date, thus rendering them anticipated.  The district court granted Microsoft's motions, and subsequently held that the only remaining claim, claim 29 of the '305 patent, also lacked entitlement to the earlier priority date.  Based on these ruling, the parties stipulated to a dismissal of the suit and RCT appealed.

Section 101 and Process Claims
In reversing the district court's ruling that the '310 and '228 patents failed to satisfy Section 101, the Federal Circuit identified a set of considerations that can be applied when assessing the question of abstractness.  Drawing upon the Supreme Court's precedent in this area, including its recent decision In re Bilski, the opinion first reiterates that there are only three articulated exceptions to subject matter eligibility: "laws of nature, physical phenomena, and abstract ideas." 

Focusing on the category of abstract ideas, the court noted the Supreme Court's admonition in Bilski not to provide a rigid formula or definition for abstractness.  Rather, "the Supreme Court invited this court to develop 'other limiting criteria that further the purpose of the Patent Act and are not inconsistent with its text.'" Slip Op. at 14.  With that guidance, the panel concluded that it perceived nothing abstract in the subject matter of the processes claimed in the '310 and '228 patents.  Specifically, the court observed that:

  • "The invention presents functional and palpable applications in the field of computer technology";
  • Some claims in the patents require physical components;
  • "[I]nventions with specific applications or improvements to technologies in the marketplace are not likely to be so abstract that they override the statutory language and framework of the Patent Act"; and
  • The incorporation of algorithms and formulas does not prevent patent eligibility.

Nevertheless, while finding these factors met in the instant case, the panel further noted that its analysis was limited to the context of Section 101, which provides only a coarse filter.  Abstractness challenges can also be brought against specific claims under Section 112 even if the requirements of Section 101 are met.

Comment: The court's discussion of Section 101 suggests that the issue of patentable subject matter should be analyzed with respect to the patent as a whole; in contrast, Section 112 challenges are analyzed on a per-claim basis.

Burden of Proof for Establishing Priority
In addressing the district court's ruling that the asserted claims of the '772 and '305 patents were not entitled to claim priority to the '310 and '228 filing dates, the opinion reinforced the court's prior ruling that the patent holder bears the burden of establishing priority.  As the court held, although a patent challenger has the burden of going forward with invalidating prior art, once it has done so the burden shifts to the patent holder.  Thus, in an instance where the patent holder attempts to defeat the assertion of invalidity by claiming priority to an earlier application, the patent holder bears the burden of proving the entitlement to priority – including that the claims of the earlier patent are supported by the written description of the earlier specification.

Note: The '772 and '305 patents shared the same specification as the earlier '305 and '228 patents.  If the relevant claims had been contained in the '305 or '228 patents, Microsoft would have had the burden of proving lack of written description, as opposed to the burden resting with RCT.  Thus, the fact that the claims were part of a continuation was highly significant with respect to the allocation of the burden.

Comment: A related issue is who bears the burden of proof in the context of claims to a pre-filing conception or reduction to practice date. Although not mandated by the text of the opinion, which specifically refers to the burden to establish "an earlier filing date," the court's analysis could be read to support the conclusion that the patent holder bears the burden of proof in this situation as well.

After dispensing with RCT's challenge to the district court's allocation of burden, the panel proceeded to address the priority claims on the merits.  With respect to the '772 claims, the panel agreed with the district court, concluding that they were unsupported by the prior disclosure.  The panel did reverse on the '305 claim, however, ruling that to satisfy the written description requirement for apparatus claims, the patent need not disclose every method of making the apparatus. 

Patenting by Entrepreneurs: The Berkeley Patent Survey (Part III of III)

Guest Post, Inventors, Inventorship, Patent, Survey

Guest Post by Robert Merges and Pamela Samuelson, UC Berkeley School of Law; Ted Sichelman, University of San Diego School of Law

In our previous post, we discussed some of the major findings from the Berkeley Patent Survey—the most comprehensive survey to date in the United States, probably worldwide, on how patents are used by and affect entrepreneurs, startups, and early-stage high technology companies. (For those interested in more information, a detailed discussion of the survey results is available here; a focused analysis on the drivers of startup patenting, here; and some background on the genesis of the survey, here.)

As we noted at the end of our last post, when asked about the role patents play in directly driving the innovation process, our respondents reported relatively weak effects. As Figure 1 below indicates, executives at biotechnology companies stated that, on average, patents provide slightly less than "moderate" incentives to invent, perform initial R & D, and commercialize products. For software companies, the responses fall to just below "slight" incentives.

Even when respondents are limited to those companies that hold at least one patent or application, the results do not change much. For these patent-holding companies, biotechnology companies report just slightly above moderate incentives and software companies report just above slight incentives for these same innovation-related activities.

Figure 1: The Role of Patents in the Innovation Process

These results are somewhat surprising for biotechnology companies, because anecdotal reports had indicated that biotech companies relied heavily on patenting to protect their investments in R & D. On the other hand, the results do generally accord with anecdotal reports from the software industry.

The authors of the 2008 Berkeley Patent Survey report are not all of one mind about how to interpret the incentive effect findings of our study. Some of us would discount these results in that they reflect the perceptions of executives about how patents work, and might not accord with economic reality. Specifically, while these executives may have understood our questions, they may not have fully comprehended the role patenting plays in the innovation process, which is often subtle. For instance, in an earlier post we noted important secondary effects of patents, such as attracting capital and enabling arm's-length transactions. These effects may contribute enough of a "plus factor" to make certain projects viable, even if executives do not think of patents in those terms. In other words, if patents are effective in garnering investment capital—which is then used to perform R & D—although executives might not view patents as the immediate cause of innovation, patents might still play an important role in the innovation process that is not fully reflected in our study results. Yet, others of us are more willing to give credence to the perception of entrepreneurs who report that patents provide weak to moderate incentives to invest in innovation. Who are we as scholars to say that they are incorrect in their assessment about the importance (or not) of patents?

We acknowledge that our analysis to date of the study results do not allow us to say one way or the other whether the views of the executives accurately reflect the economics of the patent system. Thus, it would be wrong to conclude, as one commentator has, that one of the key findings of our study is that patents "play essentially no role in fostering innovation among startup companies . . . outside biotech and other limited areas." In the same fashion, it may also be wrong to conclude that the executives taking the survey were not fully aware of the economics of patents, and the reality is that patents play a major role in promoting innovation. Rather, based on our study results, one can draw competing inferences that explain the results. As such, we come to no conclusions in this article regarding the actual role patents play in fostering startup innovation (or not).

To be sure, relying on other evidence, several of us have expressed views on the topic elsewhere. Unfortunately, even combining this additional evidence with our study data does not definitively answer the question. The data, however, present an interesting paradox: If executives believe that patents provide relatively weak incentives to innovate, why are so many startup firms seeking them? Our first post indicated that securing financing was a reason why many firms reported seeking patents.

Reinforcing that finding is another significant result. Our survey asked entrepreneurs to report their views on the importance of patents to potential funders, such as venture capitalists (VCs), angel investors, other firms, commercial banks, and friends and family. Our respondents indicate that many potential investors with whom they negotiated said that patents were important to their investment decisions. Of companies negotiating with VC firms, 67% report that these firms indicated that patents were an important factor in their investment decisions.

Interestingly, this result was not just driven by biotech and medical device firms. Broken down by industry, the figures were 60% for software companies, 73% for biotech, and 85% for medical devices. Respondents also report that substantial percentages of other types of investors, such as angels, investment banks, and other companies found patents important to their investment decisions.

In our view, this last finding may help to explain why many high tech startups seek patents, even though their executives report that patents provide relatively weak incentives to innovate. Raising money, rather than invention itself, may be the key.

Of course, this conclusion begs the question of why patents are important in the startup financing process in the first instance. Like the innovation incentives issue, the authors are not in full accord on the explanations here. One possible interpretation is that startup executives are generally unaware of the link between patents and success in the innovative process, which results in financial markets selecting those companies that patent more heavily. Another interpretation is that patents serve important functions not related to the innovation process, such as helping to prevent infringement lawsuits, providing leverage in cross-licensing negotiations, and acting as "signals" of firm competency, which drive investment. A third interpretation may be that investors want startups to patent so there will be some marketable assets if the companies fail in the market. And these interpretations are not mutually exclusive. Unfortunately, as we indicated earlier, our analysis cannot resolve this dilemma. We hope that further research by us and others ultimately will make progress in doing so. In the meantime, we believe our study offers one of the most important resources for understanding the effects and use of patents by entrepreneurs.

Patenting Computer-Implemented-Inventions (CIIs) in the EPO

Patent

The following note was written by European Patent Attorney Paul Cole who is also the Visiting Professor of IP at Bournemouth University

EPO Enlarged Appeal Board decision in G 0003/08 Programs for computers/PRESIDENT’S REFERENCE

The EPO President asked the Enlarged Board to consider a set of questions concerning the patentability of programs for computers (computer-implemented inventions, CIIs) on which she deemed the Boards of Appeal to have given different decisions and which she held to be of fundamental importance within the meaning of a. 112(1) EPC. Her referral had been preceded by an informal letter from her predecessor, Alain Pompidou, dated 22 February 2007, in which Lord Justice Jacob’s suggestion in the Aerotel/Macrossan judgment of 27 October 2006 ([2006] EWCA Civ 1371) of referring the issue of CII patentability to the Enlarged Board had been dismissed as unnecessary.  About 100 Amicus curiae briefs had been filed, amongst which a number questioned the admissibility of the referral, a view which was supported inter alia by Lord Hoffmann who was until his recent retirement the member of the UK House of Lords Judicial Committee who usually wrote the opinion of the House in cases involving IP.

 The opinion of the Enlarged Board is available here. 

and a more extended file of the case including the questions originally referred and the reasons for the reference can be found here.

In the outcome, the doubts proved well-founded and the referral was rejected as inadmissible. The views of the Enlarged Board are summarised in the official headnote:

“1. In exercising his or her right of referral a President of the EPO is entitled to make full use of the discretion granted by Article 112 (1) (b) EPC, even if his or her appreciation of the need for a referral has changed after a relatively short time.

2. Different decisions by a single Technical Board of Appeal in differing compositions may be the basis of an admissible referral by the President of the EPO of a point of law to the Enlarged Board of Appeal pursuant to Article 112 (1) (b) EPC.

3. As the wording of Article 112 (1) (b) EPC is not clear with respect to the meaning of “different/abweichende/divergent” decisions the provision has to be interpreted in the light of its object and purpose according to Article 31 of the Vienna Convention on the Law of Treaties (VCLT). The purpose of the referral right under 112 (1) (b) EPC is to establish uniformity of law within the European patent system. Having regard to this purpose of the presidential right to refer legal questions to the Enlarged Board of Appeal the notion “different decisions” has to be understood restrictively in the sense of “conflicting decisions”.

4. The notion of legal development is an additional factor which must be carefully considered when interpreting the notion of “different decision” in Article 112 (1) (b) EPC. Development of the law is an essential aspect of its application, whatever method of interpretation is applied, and is therefore inherent in all judicial activity. Consequently, legal development as such cannot on its own form the basis for a referral, only because case law in new legal and/or technical fields does not always develop in linear fashion, and earlier approaches may be  abandoned or modified.

5. Legal rulings are characterised not by their verdicts, but by their grounds. The Enlarged Board of Appeal may thus take obiter dicta into account in examining whether two decisions satisfy the requirements of Article 112 (1) (b) EPC.

6. T 0424/03, Microsoft does deviate from a view expressed in T 1173/97, IBM, concerning whether a claim to a program on a computer-readable medium necessarily avoids exclusion from patentability under Article 52(2) EPC. However this is a legitimate development of the case law and there is no divergence which would make the referral of this point to the Enlarged Board of Appeal by the President admissible.

7. The Enlarged Board of Appeal cannot identify any other inconsistencies between the grounds of the decisions which the referral by the President alleges are divergent. The referral is therefore inadmissible under Article 112(1)(b) EPC.”

 As regards the relationship between excluded subject mater and inventive step, the Enlarged Board concluded: 

“Indeed if the Boards continue to follow the precepts of T 1173/97 IBM it follows that a claim to a computer implemented method or a computer program on a computer-readable storage medium will never fall within the exclusion of claimed subject-matter under Articles 52(2) and (3) EPC, just as a claim to a picture on a cup will also never fall under this exclusion. However, this does not mean that the list of subject-matters in Article 52(2) EPC (including in particular “programs for computers”) has no effect on such claims. An elaborate system for taking that effect into account in the assessment of whether there is an inventive step has been developed, as laid out in T 154/04, Duns. While it is not the task of the Enlarged Board in this Opinion to judge whether this system is correct, since none of the questions put relate directly to its use, it is evident from its frequent use in decisions of the Boards of Appeal that the list of “non-inventions” in Article 52(2) EPC can play a very important role in determining whether claimed subject-matter is inventive … It would appear that the case law, as summarised in T 154/04, has created a practicable system for delimiting the innovations for which a patent may be granted.” 

The Enlarged Board did not attempt ant definition of technical effect, but commented: 

“While the referral has not actually identified a divergence in the case law, there is at least the potential for confusion, arising from the assumption that any technical considerations are sufficient to confer technical character on claimed subject-matter, a position which was apparently adopted in some cases (e.g. T 769/92, Sohei, Headnote 1). However T 1173/97, IBM sets the barrier higher in the case of computer programs. It argues that all computer programs have technical effects, since for example when different programs are executed they cause different electrical currents to circulate in the computer they run on. However such technical effects are not sufficient to confer “technical character” on the programs; they must cause further technical effects. In the same way, it seems to this Board, although it may be said that all computer programming involves technical considerations since it is concerned with defining a method which can be carried out by a machine, that in itself is not enough to demonstrate that the program which results from the programming has technical character; the programmer must have had technical considerations beyond “merely” finding a computer algorithm to carry out some procedure.” 

The fine print of the opinion will attract obsessive attention from specialists in this area, but the bottom line for the time being is that the status quo will be maintained. European practitioners await the Bilski decision with, if anything, even more interest.