Search Results for: "sas institute"

Department of Commerce Reports that PTO Fee-Setting-Authority and Improved Post-Grant Patent Challenge Lead to Economic Growth

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Doc-largeThe Department of Commerce has released a white-paper discussing the economic value of innovation and coupling that value to the need for reform of the US Patent Laws.  The report focuses on (1) the need for “timely patents” in order to successfully obtain venture capital financing; (2) the need for “high-quality” patents in the area of pharmaceuticals; and (3) the negative effects of poor quality patents and uncertainty in enforcement.  These background points are fairly well accepted. 

The more controversial aspect of the report are the Department’s policy conclusions. Namely, the Department of Commerce argues that (1) USPTO Fee setting authority (and what the Office does with that authority) will help to reduce the backlog; and (2) more broadly available and efficient post grant opposition proceedings will help reduce the cost of litigation. Finally, the report notes that the US patent office is “tax-free” in the sense that taxpayer money is not used to administer the office. The ability to avoid appropriations makes PTO reform a politically attractive policy lever.

USPTO fee-setting authority adds flexibility, allows the Office to more quickly raise needed funds, and also allows for the potential of aligning align fees with actual costs.  As an example, the white paper notes that “abandoned” applications pay only about one-third of the total examination costs.  That front-end cost is “subsidized by back-end patent issuance and maintenance fees that are assessed on successful applicants.”  The report states flatly that “With fee-setting authority, the USPTO could deliver on its aggressive goal of reducing to 20 months total average pendency. This anticipated 40% reduction in average pendency would offer greater certainty to innovators of all stripes, allowing for more timely and accurate R&D investments, and thus, substantially improve prospects for improvement in the Nation’s innovative performance and overall economic growth.”

A more efficient post grant review system would benefit the patent system offering a low-cost and quick mechanism to challenge weak patents. “These patents will then be taken out of the system, saving both potential litigation costs and costs to consumers from the exercise of unwarranted market power. . . . Indeed, almost every academic economist who has ever examined whether an enhanced system of post-grant review should be adopted has favored such adoption. . . . [E]nhanced post-grant review also offers advantages to those seeking to assert valid patents. Litigation-related delay in the resolution of validity contributes to uncertainty for technology investors, increasing the likelihood of underinvestment and mistaken investment, and adding transaction costs to technology commercialization.”

The report is titled “Patent Reform: Unleashing Innovation, Promoting Economic Growth & Producing High-Paying Jobs” and is signed by Professors Arti Rai (Chief Administrator of the USPTO’s office of External Affairs), Stuart Graham (Chief Economist of the USPTO), and Mark Doms (Chief Economist of the Department of Commerce).

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Edward DuMont Nominated to the Court of Appeals for the Federal Circuit

Patent,

The White House has announced the nomination of Edward (Ed) DuMont to the Court of Appeals for the Federal Circuit to replace Chief Judge Paul Michel who will be retiring May 31, 2010. The Senate must confirm the nomination along with the still-pending nomination of Judge O’Malley.

DuMont is a partner at WilmerHale and is an appellate specialist. He previously spent close to ten years at the Department of Justice primarily in the office of the Solicitor General and also worked in corporate transactions at Sullivan & Cromwell.

DuMont clerked for Judge Richard Posner on the Seventh Circuit in Chicago in the mid-1980’s and also spent a year in working as a lawyer at a firm in Thailand. DuMont holds a BA (history) from Yale and a JD from Stanford. He is originally from Northern California, but has worked on the East Coast for the past twenty years.

DuMont has worked on several patent appeals, often alongside former US Solicitor General Seth Waxman. Recent patent appeals including Tivo v. Echostar, Princo v. ITC (pending en banc rehearing), Airgo IP v. ArvinMeritor, Agfa Corp. v. Creo Prods., Purdue v. Endo, US Philips v. ITC.

The Federal Circuit courthouse at 717 Madison Place is less than a half-mile walk from DuMont’s current office on Pennsylvania Avenue. Like President Obama, DuMont is just shy of 50-years-old.

Although filling Chief Judge Michel’s spot, Mr. DuMont would not automatically become the next Chief Judge. Rather, that position will move to Judge Rader who is the next most-senior active judge who has not yet reached the age of 65.

BPAI Revised Procedure for Appeal Brief Review

Patent

As part of the PTO’s efforts to streamline appeal practice, the office has (internally) announced a new procedure for reviewing appeal brief formalities. Notably, the BPAI has been given the “sole responsibility” for determining whether appeal briefs are in compliance with the formalities required by 37 CFR 41.37. The USPTO has also indicated briefs will be accepted even if they contain “minor informalities” so long as those informalities do not affect the BPAI’s decisionmaking ability.

The BPAI will review each opening brief before forwarding the brief to the examiner for consideration. Once the brief is accepted by the BPAI, neither the examiner nor the Patent Appeal Center will have any power to later reject the brief as non-compliant. The non-compliance form paragraphs are also being removed from the examiner’s OACS computing system.

In a 2007 study of the prosecution files of 720 cases on appeal, I found that a full 25% had been rejected as ‘defective’ based on formalities. [Link]. A major purpose behind this power-shift is to reduce this paperwork churning and to create more uniformity in appeal processing. This shift also allows the BPAI to collect better data on the number and types of appeals being filed.

The announcement is signed by Bob Bahr, Associate Patent Commissioner (for patent examination policy).

File Attachment: bpai_revised_procedure_20100329.pdf (217 KB)

* * * *

The chart below shows the backlog of ex party BPAI appeals (excluding reexaminations).  These only include cases where appellate briefing has been completed and jurisdiction transferred from the Examiner/TC to the BPAI.

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The BPAI will be holding a roundtable on April 7.

Design Patent and Replacement Parts

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Insurance Industry Testimony: “alternatively-supplied collision repair parts typically are 26% to 50% less expensive than the car company parts, and the mere existence of competition for a given part results in the car companies lowering their corresponding part’s price by 8%. The estimated total benefit to consumers from the availability of competitive alternatives is approximately $1.5 billion a year.”

The following chart shows the cumulative number of design patents on “crash parts” owned by the major car companies. (Via insurance industry testimony).

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Consumer Federation Testimony: “Our Concern today is that the car companies are now using design patents, not for the important and legitimate protection of the overall design of their vehicles, but to prevent competition when it comes to getting the parts we need to repair our vehicles.:

Damian Porcari (Director of Licensing for Ford Motor Company): “I freely admit that a company can save money by copying a design as opposed to creating, testing, marketing, and selling an original design. This is not a revelation. It has been and will always be cheaper to steal something than to pay for it. This applies to all markets and all products. Our opponent’s argument is no more than a justification to deny all intellectual property rights across the board.”

Federal Courts Closely Scrutinizing and Slashing Patent Damage Awards

Patent,

Michael Kasdan and Joseph Casino discuss recent shifts in reasonable royalty jurisprudence with a particular focus on the recent cases of Cornell, Lucent, and Lansa.  Together, these decisions "indicate an emerging trend to more carefully scrutinize the evidentiary and economic basis of reasonable royalty-based patent damages awards in the setting of the appropriate royalty base, the application of the entire market value rule, and the calculation of the appropriate royalty rate." [Download Kasdan.Casino.Damages]

Other recent Patently-O Patent Law Journal Articles: 

Patently-O Bits and Bytes No. 317

Patent
  • Learning International IP: A relatively new patent-attorney asks the following question: “I find myself very unfamiliar with foreign patent practice. Could you recommend a book/other resource that discusses the intricacies of patent prosecution in foreign countries from the point-of-view of a US patent practitioner?” Suggestions?
  • Learning by Watching: Professor Beckerman-Rodau is spearheading an IP Podcast series available for free from Suffolk Law. [LINK]
  • Learning IP Theory: Three fairly new books recently arrived in the mail. All would be considered left leaning.

Pendency of BPAI Appeals

Patent

PatentLawPic876The BPAI reports that their average pendency of ex parte appeals decided in the 1st Quarter of FY2010 (Oct-Dec 2009) jumped to 9.9 months from 7.7 months for the prior three month period. [Link] BPAI Chief Judge Michael Fleming recently reported that the average pendency is likely to rise significantly in the coming year because of the large and growing backlog of cases on appeal.

The BPAI has done an increasingly good job of providing information directly to the public. However, this pendency data is highly misleading for a patent applicant considering the question of whether to appeal.  In particular, the BPAI figures are measured from the “appeal number assignment dates” which occur at some point after briefing is complete and therefore do not include time associated with briefing.

To provide a bit more details regarding pendency, I created a dataset of 2770 ex parte BPAI decisions decided in the past two-years (2008–2009) and their assocated file wrappers.  Using this dataset, I looked at appeal pendency as calculated from the filing of a notice appeal to the BPAI decision date. A summary of the results follow.

Results:

  • Median appeal pendency: 23.9 months (Notice of Appeal to BPAI Decision Date).
  • Median pendency of application at time of BPAI decision: 67 months (Application Filing Date to BPAI Decision Date).  I.e., the median case where an appeal has been decided had been pending for 5 1/2 years before the
  • Median pendency of application family at time of BPAI decision: 79 months (Earliest Priority Date to BPAI Decision Date).
  • Defective Briefs: 40% of the decided cases included at least one applicant brief that was rejected as defective.
  • There are three charts below: The first shows the Cumulative Frequency of Ex Parte Appeal Pendency.  This first chart is useful in considering the odds that a particular appeal would take fewer than X-months. The second chart shows the median pendency grouped by technology center. The third chart shows the percent of decided appeals that include at least one notice of a defective appeal brief for each technology center. 
  • Looking Forward: As implied by the first paragraph of this report, these figures likely understate the expected pendency for any recently filed appeal.

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Notes:

  • This report did not consider (1) remands without opinion; (2) decisions that were not published on the BPAI website; or (3) the fact that most notices of appeal filed by applicants do not actually result in a complete appeal process (because the examiner withdraws the rejection or the applicant decides to abandon the application or file an RCE).
  • See also: https://patentlyo.com/patent/2007/09/how-long-does-a.html (2007).

 

Book Review: Patent Ethics: Volume I Prosecution

Patent,

[This post is an old-one, I’ve moved it to the front because Amazon now has the books in stock.]

Patent Ethics: ProsecutionHricikEthics.jpg

by David Hricik & Mercedes Meyer

ISBN: 0195338359

$225 from Amazon

Professor David Hricik is the country’s leading expert on patent law ethics. Oxford University Press recently published his (and co-author Mercedes Meyer’s) volume on patent prosecution ethics. This is a book that includes specific guidance for both patent attorneys and patent agents. It should be within the reach of every patent prosecutor. Topics include: guidance on client engagement and dis-engagement; the duty of loyalty to the client (perhaps as opposed to the inventor); avoiding conflicts of interest; specific areas of competency in patent prosecution; avoiding pitfalls created by the duty of candor; and issues arising from attorneys who practice both prosecution with litigation. The book also includes two very helpful appendices. The first appendix is an annotated version of the PTO ethics rules where the authors discuss nuances of each rule. The second is a set of sample forms; checklists; and client-memos — a version of which should be used by every patent practitioner in handling client relations.

I suspect that this book will quickly become the leading authority on patent prosecution ethics. Although not at all foolproof, attorneys and agents who rely on the book for guidance will have some cover from charges of malpractice or inequitable conduct.

My only problem with the book is its price: $255! Once you add tax and shipping, the cost approaches $1 per page. Of course, that price would get you only about a 1/2 hour of Professor Hricik’s time. This book is the first volume in a two-part series. The second volume will be published in 2010 and will focus on patent litigation ethics.

Supervisory Patent Examiners: Rethinking their Role

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In his most recent blog post, USPTO Director David Kappos addresses problems and potentials of the USPTO's SPE system. A SPE or Supervisory Patent Examiner serves as the direct manager and trainer for around 13-20 patent examiners. SPE's obviously play an important role in the examination process. Kappos writes:pic-84.jpg

Our first-line managers play a critical role in the achievement of USPTO goals. In fact, my management experience has taught me that first-line managers have *far* more impact on the employees they manage than anyone else in the enterprise – more ability to develop employee skills and careers, more ability to produce outcomes that are successful for both employee and the enterprise. Their day-to-day work as coaches, guides, trainers, and mentors for employees is essential to creating a supportive, effective workplace.

On Patently-O and elsewhere, patent examiners have discussed qualities of good SPEs and bad SPEs. Partially in consideration of those remarks, Director Kappos is focusing on revamping the performance review system for SPEs (AKA the performance appraisal plan or PAP). The idea is to focus SPE attention and energy in the right areas. The performance rating will be based on (1) a measure of the quality of examiner work (25%); (2) a measure of workflow productivity toward the goal of pendency reduction (25%); (3) a measure of how responsive the SPE is to Art Unit examiners as well as to inquiries from applicants (20%); (4) a measure of the SPEs service as a coach and mentor to Art Unit examiners (15%); and (5) a measure of leadership activities of the SPE (15%).

Comments on the new SPE PAP can be sent to spepapawardtaskforce@uspto.gov. (Can someone send me further details on the plan?)

Read Kappos Comments

The “Matrix” for First-Inventor-To-File: An Experimental Investigation into Proposed Changes in US Patent Law

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Guest Post by Brad Pedersen and Justin Woo (Read their Full Article at http://ssrn.com/abstract=1518660)

The Patent Reform Act of 2009 would replace the current “first-to-invent” (FTI) system with a new “first-inventor-to-file” (FITF) system. While touted as a way to harmonize the US system with “first-to-file” (FTF) systems used in other countries, an experimental investigation of a matrix of two hundred typical fact patterns for two competing inventors was analyzed under all three systems (FTI, FITF and FTF) to test this assumption. Based on the matrix analysis, it appears that if FITF is adopted there likely will be changes in applicant behavior and significant extra costs for at least several years as a result of the transition to a new system; and, it is unclear whether FITF really gets the US any closer to patent harmonization.

RawAnalysis WeightedAnalysis
 Caption: Scenarios where both parties have filed applications

The proposed FITF system has a tendency to behave as an entirely different system in certain scenarios, rather than as a midway point between the existing FTI and FTF systems. A raw analysis of the results reveals a discrepancy wherein a larger percentage of second inventors are awarded a patent under the FITF system than predicted by a shift toward a FTF system. A weighted analysis reflecting likely applicant behavior from the implementation of the FITF system emphasized, rather than diminished, these discrepancies with expected results.

It appears that the “springing public disclosure” exception created under the proposed FITF system to replace the one-year grace period found in current US patent law is one of the primary reasons for the discrepancies. This exception allows applicants to control the start of the grace period that disqualifies the public disclosures and even prior filed applications of others from being prior art based on the timing of the applicant's own public disclosure. The springing nature of this exception provides unique incentives for applicants to manipulate the timing of the public disclosure of their inventions in order to manipulate the grace period, thereby creating results seemingly inconsistent with core principles of the existing FTI and FTF systems.

For a link to the entire paper, go to:http://ssrn.com/abstract=1518660

The Requirement that the Written Description be Concise

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ProlixBy Dennis Crouch

The Patent Act requires that the written description of an invention be “concise.”  35 U.S.C. 112p1. The meaning of that requirement is unclear, but but the language of Section 112 at least suggests that a written description needs to be concise in order to satisfy the enablement requirement. Of course, there is a tension between providing a disclosure that is “concise” and at the same time “full.” In Markman v. Westview, the Supreme Court recognized this tension — noting that the description must be “complete yet concise.”

In a 1967 district court case, the court focused briefly on the requirement — noting that the “descriptions contained in the patent in suit are sufficiently concise and clear to enable one skilled in the art to construct that which is taught by the patent.” San Marino Electronic Corp. v. George J. Meyer Mfg. Co., 155 U.S.P.Q. (BNA) 617 (C.D. Cal. 1967).

In my brief search, I found no cases invalidating a patent because its description was not concise. The most on-point case appears to be a pre-1952 Eighth Circuit case where the court came close to invalidating a family of patents based on their wordiness:

We think that the patents are unnecessarily prolix in verbiage and there should have been fewer claims more simply stated. They border on failure to comply with the statutory requirements concerning succinct description and particular pointing out and claiming. But consideration of the file wrappers and the trial court record has persuaded that those skilled in the art have understood them and the courts have had them explained.

National Aluminate Corp. v. Permutit Co., 145 F.2d 175 (8th Cir. 1944). It is interesting that part of the court’s problem with the patents was that they had too many claims. The USPTO does reject individual claims that it deems overly wordy or “prolix.” The idea behind those rejections is that sometimes overly-wordy claims may have the “net result of which is to confuse rather than to clarify.” However, the USPTO prolix rejections are grounded in Paragraph 2 of Section 112 — for failing the requirement of “particularly pointing out and distinctly claiming the subject matter.”

The probably more accepted use of the “concise” requirement is explained in the decision captioned Application of Knowlton, 481 F.2d 1357 (C.C.P.A. 1973). In that case the precurser to the Federal Circuit relied on the requirement to limit the power of the enablement requirement.

[I]t must be borne in mind that the disclosure need not only be full, clear and exact to satisfy the statute, it must also be concise, and that the disclosure is directed to those skilled in the art. The amount of precision necessary in any given case is always a matter of degree. Absent special circumstances it is not required that every nut, bolt and rivet actually used in mechanical inventions be described, or, in chemical cases, that the electron orbital patterns for a claimed compound be set forth.

In the right case, a defendant may well convince a court to give the concise requirement its full weight and invalidate a patent whose specification is written in confusing and overly-wordy language.

Notes:

  • I searched the BPAI database of decisions (1997–2009) and found only one case reviewing a rejection where the Examiner found claims invalid as prolix “since they contain long recitations or unimportant details which hide or obscure the invention.” Ex parte Nagano, App. No. 1996–4094 (Bd. Pat. App. Inter. 1999). In Nagano, the Board reversed the rejection – finding no support for the Examiner’s generalized assertions that the claims were confusing because of their length or contained unimportant details.

David Kappos and The Impact of KSR – a unique opportunity for our profession

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Guest Post by Paul Cole, Visiting Professor, Intellectual Property Law, Bournemouth University, UK

On Tuesday 24 November, David Kappos made a posting on the Director’s Forum including the following statement:

Some have suggested that the Office is determining obviousness in a way that stifles innovation by refusing patents for truly inventive subject matter. They’ve asked us to provide examples of non-obvious claims in view of KSR. Such examples would serve as a complement to the examples of obvious claims already in the guidelines.

David Kappos gave a presentation at the AIPLA Annual Meeting in Washington on October, and in a question and answer session that followed there were three questions which concerned KSR, more than any other topic. The two questioners who preceded me expressed dissatisfaction with seemingly unjust and arbitrary rejections for lack of inventive step. I asked whether the US examination guidelines on inventive step could be brought into line with those of the EPO, where positive and negative examples are carefully balanced, and the suggestion created a burst of applause from the audience.

More detained comments on the suggestion are found in a paper on KSR that was published in the John Marshall Review of Intellectual Property Law in 2008[1]. For convenience of reference, the final section is set out here:

The USPTO has been accused of having become significantly less applicant-friendly following the KSR decision. This may reflect concerns about “patent quality” and is reflected in the Guidelines given to examiners. A big difference is noticeable between the EPO Examination Guidelines and those of the USPTO.

The EPO Examination Guidelines at Part C Chapter IV give examples relating to the requirement of inventive step. Considerable care has been taken to balance these examples. Examples illustrating the application of known measures in an obvious way and in which inventive step can be ruled out are balanced by further examples showing the application of known measures in a non–obvious way and in which an inventive step is therefore to be recognized. An example of an obvious and consequently non-inventive combination of features is balanced by an example of a non-obvious and consequently inventive combination of features. Examples of obvious and consequently non-inventive selection are balanced by examples of non-obvious and consequently inventive selection. The single example relating to overcoming a technical prejudice shows a situation where the application should be allowed, not refused. A reader of these Guidelines is made aware that although many applications are open to objection, there are many others that cover meritorious inventions and should be allowed.

When the USPTO issued its post-KSR Guidelines, from the standpoint of a prosecution attorney they made depressing reading. For example, the first heading which refers to combining prior art elements according to known methods to yield predictable results gives two examples, one of which is Andersons-Black Rock, Inc. v. Pavement Salvage Co. and the other of which is Ruiz v SAB Chance Co. in both of which obviousness was established. There is no balancing example in which inventive character was established. There follow five other headings illustrated by examples, each and every one of which shows the claimed subject matter to be obvious. The final heading concerns the TSM test which is not illustrated by any example. Under the heading “Consideration of Applicants Rebuttal Evidence” there are cursory indications that an applicant might have something relevant to say in reply, and that, for example, they might argue that the claimed elements in combination do not merely perform the function that each element performs separately. Might it not have been a good idea to inform the Examining Corps that if an applicant can demonstrate a new and unexpected result, this is strong prima facie evidence of inventive step, that this fact is supported by several opinions of the U.S. Supreme Court and that where such evidence is available an applicant should unless there are compelling reasons to the contrary expect a grant decision to follow? Experience in the EPO is that where an applicant can demonstrate a credible technical problem that he has solved, he will almost always be granted a patent and that although other objections, e.g. “one–way-street” or “bonus effect” are available, circumstances where such objections succeed are rare, as acknowledged by the U.K. High Court in Haberman.

Instructions to examiners are of general importance to the public because they are the main tool used during examination and the important event for most applicants is grant or refusal by the patent office, litigation of patents (even in the U.S.) being uncommon. Instructions are even more important for examiners who are trainees and those who have only recently acquired signatory authority because they are likely to rely chiefly on those instructions and to take some time to achieve a deep understanding of case law. It is important to teach examiners when to make objections and the appropriate grounds for doing so, but is it not equally important to teach them when applications should be allowed and to show them examples of patents whose validity has been upheld, as the EPO does? Quality patent examination is not just a matter of ensuring that applications lacking merit are reliably refused but also of ensuring that meritorious applications are reliably granted.

It now seems that there is at least a chance that the suggestion that I and apparently others have made will be acted on, and that the possibility is under active consideration in the USPTO. Examples of decisions on new function or result which are contained in my paper include the nineteenth century Supreme Court cases Winans v Denmead and Washburn & Moen Manufacturing, Co. v. Beat’Em All Barbed-Wire Co, these decisions being selected on the basis of their instructive character and accessibility to the widest possible range of readers.

For the most to be made of this opportunity, we as students and users of the patent system can help by suggesting additional positive decisions which it would be good for the USPTO to include in the revised inventive step Guidelines. Hopefully readers will respond with references to good Board of Appeals, District Court and CAFC cases, and I look forward to reviewing a large number of hopefully constructive suggestions posted here in response.

[1] Paul Cole, KSR and Standards of Inventive Step: A European View, 8 J. MARSHALL REV. INTELL. PROP. L. 14 (2008)., downloadable from /media/docs/2011/06/Cole.pdf.

Abandoning software patents?

Patent,

Editorial by Ciarán O'Riordan, Exective Director of End Software Patents

Scope

On Monday, November 9th, the Supreme Court will hear the case of Bilski's business method patent. Being the first review of patentable subject matter since 1981, this decision could make the rules for decades to come. The court will review the 2008 ruling of the CAFC which created the "particular machine or transformation" test. This test, depending on who's reading it, could significantly narrow the scope for patenting software ideas.

The Supreme Court isn't obliged to rule on the patentability of software ideas. Bilski's patent is a business method patent, not a software patent. So why might the court make a broad ruling which would cover software? For people who are already aware of the legal arguments, I'd like to offer a review of the socio-economic arguments for abandoning software patents.

Practitioner profile

To see how different software is from most patentable fields, you just have to look at the practitioners. There is a small number of large companies with well known products, and there is a mass of small companies. The low cost of entry to software development means the number of small companies is particularly large, but we'll leave that aside to look at a bigger difference. In most patentable fields, this pyramid of big and small companies describes how products are made. If this were true for software, then the decision of patentability would be an economic decision, and some costs might have to be reduced, but there'd be no fundamental incompatibilty. But in software, this is only half the story.

In software, unlike in other patentable fields, there are two additional categories of developers. The first is the software developers that sit in the IT departments of every medium sized company. They're the folk that keep the emails flowing, who make internal software, extend software bought by the company, and who run the website. The second group is individuals, informal groups and communities who program for their own benefit or for social reasons such as providing alternatives to software seen as overly restrictive.

The existence of these two categories changes everything because it's obviously unreasonable to require them to work within the patent system, and it's unjustly restrictive. Not only are patent incentives obviously not necessary to motivate IT departments to fix problems, the timeline and budgets are orders of magnitude out of sync with the speed and costs of writing software. When a company manager reports a website problem, they don't expect the IT department to reply about first seeking legal advice for a patent search, and they don't expect to later have a bill from a patent holder because of the way in which the IT department happened to fix the problem.

For user communities programming to suit their own needs, the costs and timeline are also unreasonable, but there is also the bigger problem that the patent holder gains veto power over the distribution of the software. If the software is written for the purpose of having a freely redistributable program, then this third-party veto spoils the developer's efforts. There will be no direct profits from which to offer royalty payments, so the result is a lose-lose situation where the developer's goal is blocked, and there's isn't even anything in it for the patent holder (although the patent will still be enforced to sink the piece of software so that computer users are pushed toward a program which will pay royalties to the patent holder).

Standards

This issue is further exasperated by a problem which applies to all types of software developer: in no other domain are modern standards as crucial as they are in software. If you want to cure rubber, there are many ways to do it. When patents block a product developer from using one method, there's the possibility of useful innovation when that developer looks for an alternative method. In software, being blocked from using an email, image, or document format equates to being prohibited from writing a functional email reader, image viewer or word processor. Can you imagine the utility of an innovative word processor that can't read any existing documents? Nobody would use this, which means any innovations therein would have been wasted effort.

For video, this problem is a reality. The MPEG-LA group claims to represent more than twenty patent holders which each have one or more essential patents for implementing the commonly used mpeg video format. There's no licence available for freely redistributable software, and even royalty payers have to agree to MPEG-LA's terms. The committee developing the next standard for webpages, HTML5, spent months searching and debating which video format they could recommend in the standard, and the final answer was that, due to software patents, there is today no format they can recommend.(ref-1)

When "user communities" grow up

Now, it's important to look at the output of the mentioned user communities. If like, say, hobbiest watchmakers, they just catered for themselves and a few friends without attracting the attention of patent holders, then this wouldn't be a big problem. The system would still be unjust, but if the injustice never manifested itself, then it would be theoretical issue.

Indeed, freely redistributable software and the work that was begun by idealists and hobbyists has now lead to the world's most used webserver, the world's second most used web browser, and the GNU/Linux operating system. Indeed, the "users" are nowadays often employees, and their collaborative development models have emerged as the primary competitors in many software domains. Blocking collaboration turns out not only to be a restriction on useful individual activities, but it also stiffles competition and the mass production of useful software.

In software, rather than supporting innovators, patents protect the old against the new.

Although large firms now contribute to these projects, many of the developers are still individuals and people who don't directly profit. The terms of distribution for this software are the same now as they always have been. It's a proven formula, and a key clause is that you can't distribute if patent royalties will be required.

Example: GNU/Linux

The kernel of the GNU/Linux operating system was examined by patent attorney Dan Ravicher, who announced on August 2, 2004, that he had found no court-validated patents to be infringed but 283 *issued patents* existed which could potentially be used to support patent claims.(ref-2) Thereafter, Microsoft in the 2007 began claiming that the kernel violates 235 of its patents – although the patents have never been specified.(ref-3) Neither could be precise, but they these give us ballpark figures.

The kernel one component, and because the human-written source code is online, we can see it contains approximately 4,000,000 lines of source code. Given that a distribution of the GNU/Linux operating system, complete with applications, can contain software with more than 225 million lines of source code, when we extrapolate from the kernel numbers, we arrive at the possibility of 13,160 or 15,848 patent infringements per complete distribution.(ref-4) All of this in something that can be distributed once or a thousand times, usually at no cost, sometimes large corporations, sometimes by individuals.

This is a degree of uncertainty that can't be fixed by changes in evaluation standards.

As for innovation, lists and lists of research suggests that patents reduce software innovation.

There was a time when if you wrote something, you owned it, you could sell it, you could give it away. It could be put in the accounts and it could be used as the base for collaboration. Now, ownership of a piece of software is hopeful speculation. There is no reliable way to have a settled expectation regarding the boundaries or the extent to which you own a piece of software. This uncertainty, and this unfair regulation is what the Supreme Court has the chance to rid us of by giving the USPTO a reliable tool for excluding software ideas from patentable subject matter.

— Ciarán O'Riordan is Exective Director of End Software Patents

Microsoft Questions Strong Presumption of Patent Validity over Newly Found Prior Art

Patent,

Lucent v. Gateway, Dell, and Microsoft (Fed. Cir. 2009)

PatentLawPic798In its original opinion, the Federal Circuit vacated a $350+ million verdict against Microsoft based on improper damages calculations. On remand, the court must conduct a new damages assessment, but in that scenario Microsoft will certainly be on-the-hook for millions of dollars.

As an end-run, Microsoft has petitioned the Federal Circuit for a rehearing of the Lucent case en banc with a special focus on a particular issue that was ignored by the original opinion: the standard of proof for proving invalidity when the defendant presents prior art evidence that was not considered during patent prosecution. In particular, the software giant asks the court to “overrule its precedents requiring clear and convincing evidence of invalidity when the PTO did not consider the asserted prior art.”

Microsoft argues that the justification for a clear-and-convincing disappears when the patent challenge is based on newly uncovered prior art:

As the Supreme Court noted in KSR, however, “the rationale underlying the presumption [of validity]-that the PTO, in its expertise, has approved the claim-seems much diminished” where the claim of obviousness is based on prior art that was never before the PTO. 550 U.S. at 426. See also Penn Int ‘1 Indus., Inc. v. New World Mjg. Inc., 69 1 F.2d 1297, 1300-01 (9th Cir. 1982) (“‘The basis for the presumption-that the Patent Office has compared the claim of the patent with the prior art and used its expertise to determine validity-can no longer exist when substantial evidence of prior art not considered by the Patent Office is placed in evidence at trial.”). As the Supreme Court cogently observed, the force of the statutory presumption-which stems from the conclusion that the PTO has done “its job properly,” see Superior Fireplace Co. v. Majestic Products Co., 270 F.3d 1358, 1367 & n.l (Fed. Cir. 2001)-dissipates when the PTO lacked essential evidence.

The case relies on the writings of several academics including the Lichtman & Lemley work on Gold Plated Patents.  In April 2009, I suggested that this type of frontal challenge on the strong presumption of validity would be coming soon.

Notes:

USPTO Fees: Look for Increases

Patent

Gary Locke (Secretary of Commerce) has again indicated the Obama Administration’s support for the pending patent reform bill S. 515.  [Letter].  The letter also suggests that the PTO should be given authority to raise its fees, including “a limited interim fee adjustment.” 

For many years, the PTO has been funded entirely by user fees.  I hope that the same can continue to avoid such direct Congressional control over PTO spending.  But the PTO clearly needs money, and the alternative of cutting PTO services is likewise highly unappealing.  The third alternative: raise fees.

In the past, I have reported that patent applicant behavior is relatively inelastic to PTO fee changes. Although a 15% increase in fees would reduce the number of applications, the total revenue would increase. 

If the PTO is going to increase fees – how should it structure that increase? Notably, should more the burden be placed on (1) standard application fees; (2) issue and maintentance fees; or (3) luxury fees for excess claiming (20+) extensions of time?  All Universities qualify for the small-entity fee reduction. Does that still make sense?

Notes: The letter from Locke also promotes the idea of worksharing between patent offices when the same invention is being examined in multiple locations.

Patentable Subject Matter: Federal Circuit Upholds Patentability of Drug Dosage Method Claim

Patent,

Prometheus Labs. v. Mayo Clinic (Fed. Cir. 2009)

In a unanimous panel opinion, the Federal Circuit has rejected Mayo’s patentable subject matter challenge under 35 U.S.C. 101 – holding that the claimed methods for calibrating a drug dosage were properly the subject of patent protection. The lower court had found the claims invalid under Section 101.

In its decision, the Federal Circuit applied its recent Bilski precedent.

The proper inquiry under § 101 is whether these methods meet the Supreme Court’s machine or transformation test articulated in Benson and Diehr, and applied in Bilski, and, if so, whether the machine or the transformation is central to the purpose of the claims.

Of course, Bilski is now on appeal at the Supreme Court.

The claimed method is essentially an iterative testing mechanism where the treatment drug is injected in the patient and the patient’s subsequent metabolic response is measured. The next dosage is then re-calibrated based upon the measured metabolic response.

Holding: Following Bilski, the Federal Circuit ruled that the required administration of a drug “transforms an article into a different state or thing” and that the transformation was an “integral” part of the calibration method. As such, the claims satisfy the patentable subject matter test of Bilski.

To be patentable, the claim must not wholly preempt the use of a natural process. Here, the court only weakly rebutted Mayo’s argument:

The claims cover a particular application of natural processes to treat various diseases, but transformative steps utilizing natural processes are not unpatentable subject matter. Moreover, the claims do not preemptnatural processes; they utilize them in a series of specific steps.

Method of Diagnosis: The court was clear to distinguish the Prometheus claims from diagnosis claims that merely requiring data gathering and correlation rather than an injection of drugs.

The asserted claims are in effect claims to methods of treatment, which are always transformative when a defined group of drugs is administered to the body to ameliorate the effects of an undesired condition. . . .

The crucial error the district court made in reaching the opposite conclusion was failing to recognize that the first two steps of the asserted claims are not merely data-gathering steps. . . . [T]he administering and determining steps are part of a treatment protocol, and they are transformative.

Thus, this decision at least suggests that the asserted diagnosis claim in LabCorp v. Metabolite would not be patentable. That claim involved only two steps: (1) assaying a body fluid for its homocysteine level; and (2) correlating high homocysteine with a vitamin deficiency.

Despite the stated distinctions, this case could be seen as a muted challenge to the Supreme Court and especially to Justice Breyer’s dissent from the Court’s late dismissal of its grant of certiorari. In its one sentence reflection on Breyer’s dissent, the Federal Circuit opinion merely indicates that opinion’s lack of precedential value and that the claims are “different.”

In reaching its conclusion, the district court relied heavily on the opinion of three justices dissenting from the dismissal of the grant of certiorari in Laboratory Corp. of America Holdings v. Metabolite Laboratories, Inc., 548 U.S. 124 (2006) (Breyer, J., dissenting). . . . That dissent is not controlling law and also involved different claims from the ones at issue here.

The court was clear the parties did not dispute other validity issues such as obviousness or novelty, but rather focused solely on the question of patentable subject matter.

Chances for Supreme Court Review: The setup of this case makes is a good candidate for Supreme Court review especially if the Court is not fully satisfied by its Bilski decision. The Supreme Court has regularly used case clustering in the past when considering patent issues: Nonobviousness (John Deere (1966), Adams (1966), & Anderson’s-Black Rock (1969)); Patentable subject matter (Flook (1978), Charkabarty (1980), Diehr (1980)); Prosecution history estoppel (Warner-Jenkinson (1995) & Festo (2000)).

Notes: Judge Lourie drafted the opinion which was joined by Chief Judge Michel. District Court Judge Clark (E.D.Tex.) joined the panel sitting by designation.

USPTO Director Kappos Discusses USPTO 2010

Patent

Director David Kappos today offered his first public speech directly to the intellectual property law community since taking office as Director. The 600+ patent attorneys in attendance at the Intellectual Property Owners Association (IPO) appeared cautiously hopeful.

Some highlights:

  1. Kappos intends to focus on process-focused reform in an attempt to drop pendency and increase examination effectiveness. In particular, Kappos suggested a reengineering of the USPTO examiner count system to better encourage compact prosecution; pre-first-office-action interviews as a mechanism to quickly focus on the important issues; easing the acceleration of valuable cases while creating mechanisms for the worthless cases to be more quickly abandoned without wasting resources. While waiting for broad reforms to take effect, Kappos also suggests mechanisms for shortening pendency for focused sectors of technology. As part of this, Kappos also suggested that plans at creating a “nationwide workforce” of patent examiners.
  2. Legislative patent reform is one of the “highest priorities” of both the USPTO and the Commerce Department. (Kappos did not develop the particular areas of reform).
  3. In the Q&A session, Kappos was asked about Tafas v. Dudas and its potential resolution. He joked that it might aptly be renamed Kappos v. Kappos based upon his history of opposing the rules package and his new role as PTO director. Despite his predilection against those particular reforms, Kappos may not have power to extricate the Government from its position.
  4. In the background, is the “big overhanging problem . . . funding.” Kappos reported an expected $200 million shortfall for FY2010. Leaving little money to make improvements or to even keep-up the “extremely fragile” information technology system.

Rethinking the USPTO Examiner Count System

Patent

The USPTO uses a count system as one way to measure patent examiner productivity. Examiners receive one count for sending out an initial office action and a second count when the case is “disposed.” As you might guess, a case is disposed of when it either issues as a patent or is abandoned by the applicant. However, many folks are surprised that the applicant’s filing of a request for continued examination (RCE) also counts as a disposal. As the chart shows below, this count incentive may well be driving a flood of RCE filings. The system also provides some incentive for aggressive restriction practice that forces the applicant to divide a single application into multiple applications. Notably, (1) the examiner does not receive any extra credit for examining a larger or more complex application and (2) the eventual divisional application is ordinarily routed to the original examiner who can do the search more quickly and still get the same counts.

One of the initial missions of new PTO director David Kappos is to rethink the count system and to figure out a way to ensure that examiners have “the time they need to do their job properly” and which also “incentivizes compact prosecution.” Giving a hint at the final solution, Director Kappos also suggests that the count system should encourage “the use of interviews.” The eight member task force includes four examiner union (POPA) representatives and four PTO managers – perhaps ensuring that the solution will not be a dramatic shift. [Quotes come from an internal PTO communication.]

Add your proposal below:

Bilski Briefs [Updated with 44 Briefs]

Patent, , ,

The question of patentable subject matter has returned to the Supreme Court — this time with a focus on business methods. In January 2009, an en banc Federal Circuit implemented the “machine or transformation test” as the exclusive test for determining whether a claimed process qualifies as patentable subject matter under 35 U.S.C. 101. Now, the case is pending before the Supreme Court with two focused questions:

QUESTIONS PRESENTED

1. Whether the Federal Circuit erred by holding that a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (“machine-or-transformation” test), to be eligible for patenting under 35 U.S.C. § 101, despite this Court’s precedent declining to limit the broad statutory grant of patent eligibility for “any” new and useful process beyond excluding patents for “laws of nature, physical phenomena, and abstract ideas.”

2. Whether the Federal Circuit’s “machine-or-transformation” test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect “method[s] of doing or conducting business.” 35 U.S.C. § 273.

In this post, I have attached recently filed briefs which either (1) support Bilski or (2) support neither party. The government brief in opposition is due Sept 25 and friendly brief in opposition due within seven days of that filing.

  • Yahoo (Bilski – Yahoo! Amicus Brief (S.Ct) (as filed) (8-6-09).pdf) The focus on physicality does not make sense in today’s technology.
  • IBM (08-964 IBM.pdf) The proper test looks for a “technological contribution.”
  • Regulatory Data Corp ( 08-964 Regulatory Datacorp et al..pdf) Brief by John Duffy focuses directly on the historical importance of the statutory test. “The government is now asking this Court to impose a formalistic restriction on definition of “process” that would create an unprecedented and uncertain judicial limitation on patentable subject matter. This Court should reject that invitation just as it did more than a third of a century ago, when the government unsuccessfully advanced the very same argument. See Gottschalk v. Benson, 409 U.S. 63, 71 (1972).”
  • Accenture (08-964 tsac Accenture and Pitney Bowes, Inc.pdf) Machine or transformation test is not a reliable indicator of anything relevant. The standard for patentability should “usefulness” as set forth in the Constitution, in the patent statute, and by the Court.
  • Austin IP Law Ass’n ( 08-964 Austin Intellectual Property Law Association.pdf) The patent statute explicitly defines process quite broadly in Section 100(b). The Federal Circuit’s version of “process” in 35 U.S.C. § 101 is far narrower than the broad definition of “process” in 35 U.S.C. § 100(b) (2008).   
  • Double Rock and other IP entities (08-964tsacdoublerockcorporation.pdf) The Federal Circuit test conflicts with Supreme Court precedent and Congressional intent.
  • Law Professors [Lemley et al.] (08-964ac20lawandbusinessprofessors.pdf) The distinction on patentable subject matter should be based on the distinction between applied and abstract inventions. Bilski’s claims fail this test.
  • Chakrabarty (08-964 Chakrabarty.pdf) Brief by Scott Kieff and Richard Epstein argue that patent rights operate “like a beacon in the dark” to start conversations between innovative entities and potential users.
  • Franklin Pierce Law Center (Bilski.pdf) Court should adopt the “useful, concrete, and tangible result” test.
  • TeleCommunication Systems (08-964nsactelecommunicationsystemsinc.pdf) Subject matter eligibility should be predictably broad.
  • BIO, AdvaMed, WARF and U of Calif (08-964 tsac Biotechnology Industry Organization et al..pdf) Any decision should be clear that biotechnology is patentable.
  • Conejo Valley Bar Ass’n (08-964.ac.Conejo Valley Bar Association.pdf) The substantive elements of the patent act (102, 103, and 112) do all the necessary work.
  • Novartis (08-964tsacNovartisCorporation.pdf) A process of diagnosis should be patentable.
  • Dr. McDonough (08-964_PetitionerAmCuTMcDounough.pdf) “American innovation is not confined to Industrial Age mousetraps and other cleverly contrived gadgets. The modern economic agent is more likely to encounter innovation today in the services they consume than in the contraptions they use. The present amicus curiae suggests that the decision of the Federal Circuit in this case is an attempt to apply an Industrial Age standard to address a perceived Services Age problem, a problem that the present amicus curiae suggests does not exist.”
  • State of Oregon (08-964_NeutralAmCuOregon.pdf) (The Patent Hawk filed this brief on behalf of all Oregonians – although apparently without any official state approval) The brief makes an important point: Although Section 101 comes first in the statute, it does not make sense to use it as a screening tool at the PTO. Rather, the PTO’s skills are in comparisons of prior art and ensuring that the elements of Section 112 have been satisfied.
  • Chicago IP Law Ass’n (08-964 ac Intellectual Property Association of Chicago.pdf) There are strong parallels here with KSR; CAFC rule is too rigid.
  • Borland (Amicus Curiae Brief (Borland Software Corporation).pdf) The CAFC test does not properly follow Supreme Court precedent.
  • Time Systems (08-964 ac On Time Systems.pdf) Some abstract ideas should be patentable.
  • Monogram BioSciences and Genomic Health (08-964 ac Monogram Biosciences Inc.pdf) Patentable processes can be non-physical.
  • Sachs and Brownstone (08-964 ac Robert R. Sachs.pdf) The CAFC test is limits the patenting of software, and a bad result.
  • Boston Patent Law Association (08-964tsacbostonpatentlaw.pdf) A broad scope of patentable subject matter better preserves the health of an innovative culture; many landmark inventions fail the Federal Circuit’s Bilski test.
  • Georgia Biomedical Partnership, Inc. (08-964 Georgia Biomedical Partnership Inc.pdf) The Supreme Court has consistently refused to offer a “rigid” test.
  • Dolby Labs (08-964 Dolby Laboratories et al..pdf) The important thing is to settle expectations.
  • Teles AG ( 08-964 Teles AG.pdf) Subject matter eligibility should be “dynamic.” “Further, the global nature of today’s economy strongly recommends that the United States patent system be harmonized with robust patent systems of other nations wherever possible.”
  • Medtronic (08-964 Medtronic.pdf) Provides specific examples of medical innovations that may be unpatentable under the Federal Circuit test
  • Intellectual Property Owners (08-964acintellectualproperty.pdf) Machine or transformation test is not the only test; In its transformation test for signals, the CAFC “unduly focuses on the contents of the data . . . rather than the manner in which those signals are generated;” a general purpose computer should be considered a “particular machine.”
  • AIPLA ( 08-964 American Intellectual Property Law Association.pdf) A new exclusionary test is not needed.
  • Houston IPLA (08-964 Houston IP Law Assoc..pdf) The test negatively impacts Dell’s “build-to-order” patent (5,963,743) ; AT&T’s linear programming patent (4,744,028); and Sperry Corporation’s LZW compression patent (4,558,302).
  • Armanta, Asentinel, Cybersource, and Hooked Wireless (08-964 Entrepreneurial Software Companies.pdf) Questions of patentability are causing software companies to lose value.
  • Mr. Meiers ( 08-964 Raymond C. Meiers.pdf) A patentable invention “applies manifestations of nature and achieves a useful result.” This is the tripartite system.
  • Univ. South Florida ( 08-964 University of South Florida.pdf)
  • Awaken IP ( 08-964 AwakenIP.pdf) The CAFC test is unworkable and is as bad as the vague idea/expression dichotomy of copyright.
  • BSA ( 08-964 Business Software Alliance.pdf) Section 101 has been consistently and correctly interpreted to cover software innovations.
  • PhRMA, etc. ( 08-964 PhRMA et al..pdf) Medical processes should be patentable.”
  • Caris Diagnostics ( 08-964 Caris Diagnostics, Inc.pdf) Diagnostic method patents are important and have been called into question by Bilski.
  • AIPPI (AIPPI SupremeCourt_3455697.pdf) A flexible test is better, and TRIPS requires a flexible standard.
  • FICPI ( 08-964 FICPI.pdf) “The § 101 analysis should focus on the section’s substantive utilitarian requirement, rather than retrospectively attempting to rigidly define the categories of patentable subject matter without the foresight of the particular form technological innovations may take in the future.

Update: More Briefs

  • Professor Collins (08-964 Prof. Kevin Emerson Collins.pdf) Professor Collins has written a number of very interesting PSM articles. In his brief, he argues that the test should focus on whether “the claim impermissibly seeks a patent on a fundamental principle or an abstract idea.” One concern of the CAFC test is that it takes us off the path toward international harmonization.
  • Legal Onramp (08-964 Legal OnRamp.pdf) “Pure” business methods should not be patentable. “Unlike traditional patents on technological advances, the patenting of pure business methods is a serious obstacle to innovation because it unduly impedes competition.”
  • Eagle Forum (08-964 Eagle Forum Education & Legal Defense.pdf) Reminds us of the important constitutional role of the patent clause. “The decision below usurps the legislative role and adds complexities to patent law that are neither welcome nor justified in the 21st century.”
  • Fed Cir Bar Ass’n (08-964 Federal Circuit Bar Association.pdf) The CAFC test does not follow Supreme Court precedent.
  • Washington State Patent Law Association (08-964 tsac WSPLA.pdf) The Court should focus on Chakrabarty and Diamond v. Diehr: “any,” “new,” and “useful” “process.”
  • San Diego IP Law Ass’n (08-964 ac San Diego Intellectual Property Law Assoc.pdf)

Bits and Bytes No 120: In the News

Bits and Bytes, Patent,
  • PTO Funding Emergency: Andrew Noyes reports on an emergency funding bill for the PTO that would allow the agency to use surplus funds from its trademark budget to fund the growing shortfall on the patent side. Link. The current trademark budget surplus is estimated at $60 million. [Diane Bartz’s Reuters article on the same topic]
  • John Duffy: Michael Orey of BusinessWeek has published an article recognizing the ongoing contributions of Professor Duffy: A Scholar-Activist Challenges U.S. Patent Law.
  • Todd Dickinson: Joff Wild of IAM recently interviewed former PTO Director Todd Dickinson and posted the 9 minute video on YouTube. [Watch the Video][IAM Blog]. Dickinson walks through the three major priorities for the next director: Priority I: Reestablish the stakeholder relationship with the PTO; Priority II: Pendency & backlog (in the shadow of the financial shortfall); Priority III: Quality.
  • False Marking: PUBPAT continues its campaign against false marking. Earlier, I reported on its false marking lawsuits against Cumberland (Sweet’N Low) and Iovate (Xenadrine). Last week, the nonprofit filed a false marking suit against McNeil (Tylenol) and filed an amici brief in Pequignot v. Solo Cup. In that brief, PUBPAT argues that damages should be based on “each falsely marked article.” The brief also spells out some of the harms of falsely marked products:

    “The reason why companies mark and advertise their products as patented is because they expect doing so will provide them some benefit in the marketplace, such as by winning over consumers, building a superior brand associated with innovativeness, implying that their product has been reviewed and approved by the federal government, or implicitly threatening actual or potential competitors with allegations of patent infringement. Thus, when products are falsely marked or advertised as “patented” or with the numbers of expired, invalid, or inapplicable patents, such false marking provides these potential benefits to the false marker/advertiser without any commensurate justification and, as such, creates the potential to negatively impact the marketplace, the public interests, and the integrity of the patent system.”

  • File Attachment: SoloAmiciBrief.pdf (1100 KB)
  • File Attachment: PUBPAT v McNeil – Complaint.pdf (321 KB)