Search Results for: google oracle copyright

Do Patents Discourage Innovation?

Patent

Meurer_white_65wTwo former Boston University Law School Colleagues occupied New York Times headlines on Sunday in a discussion of the economics of patent law.   Michael Meurer and Jim Bessen are both economists and both law professors. Over the past few years, the pair has compiled a tremendous amount of economic data regarding patents and companies who patent.

Meurer & Bessen’s bottom line: On average, the patent system is bad for innovation.  They agree innovator firms often profit from their own patents. However, the pair’s data shows that the innovator firms are also the ones most likely to be targeted by other patent holders. (litigation, licensing, etc.) In today’s system, they find, the disincentives created by other people’s patents outweighs the incentives to build your own portfolio.  I.e., on average, the patent system discourages innovation. (Patents do a much better job in pharmaceuticals and much worse job in IT.)

Bessen_jamesMeurer & Bessen do not suggest dismantling the patent system — rather, they believe that a number serious reform measures are needed to shift the balance back to a positive state where patents incentivize innovation.

Their reform proposals call for clear predictable patent boundaries — something that every patent practitioner knows is a serious problem. Unfortunately, the current reform proposals hardly even touch this major issue.

Their book, Do Patents Work?, will be out in 2008 (Princeton). For now, you can find snippits of the research at the following links:

Guest Post: Despite Alice Corp, McRO’s Software Patents Should be Seen as Eligible under Section 101

Patent, , ,

This is a guest post written by Tim Molino who is the Policy Director for BSA, which as shortened its name to The Software Alliance. Prior to joining BSA, Tim was Chief Counsel for Sen. Klobuchar (MN) and before that, he was a patent litigator for eight years.  The BSA has just filed an amicus brief in the Activision Blizzard case whose Section 101 issue is pending before the Federal Circuit.  This is one of the several cases where parties are testing for the boundaries of Alice Corp. – Dennis

= = = = =

by Tim Molino

The highly-anticipated Alice Corp. v CLS Bank case was widely expected to clarify the application of Section 101 to computer-implemented inventions and many expected the decision would answer the contentious question of whether software is eligible for patent protection.  Instead, the Supreme Court issued a relatively narrow ruling that cast doubt on the eligibility of most business methods, but suggested that software-based inventions that “improve the functioning of the computer itself” or “effect an improvement in any other technology or technical field” would likely be eligible.

Now lower courts are beginning to apply the Alice and the Supreme Court’s distinction between abstract business practices and technological inventions. To date, the bulk of the district court decisions have dealt with so-called business method patents that recite a business practice or economic concept combined with a token recitation of implementation on a computer.  District courts have correctly invalidated these patents under 101 in the wake of Alice and Bilski. But we have also seen some troubling decisions where Alice has been misapplied to invalidate patents directed to real technology, rather than abstract business concepts.

Docket Navigator data suggests that in 2015, we could see more than 150 patent cases in district courts, arguing the patents are invalid on 101 grounds – and if the current trends continue, the patent would be invalidated in as many as 111 of those cases. These trend lines are troubling. With more than $50 billion in software research and development incentives at stake, it is imperative that the Federal Circuit make a course correction and send a clear signal that software-based technology is eligible for patent protection.

McRO v. Activision Blizzard – An Opportunity

Fortunately, the Federal Circuit has an opportunity to provide much-needed guidance to the lower courts in the upcoming McRO v. Activision Blizzard appeal. The McRO patents describe a computerized process for “automated rules-based use of morph targets and delta sets for lip-synchronized three-dimensional animation” that was a significant improvement over computer-aided processes previously used in the industry.

In this case, the Federal Circuit will use the Mayo and Alice decisions to guide their ruling. The Mayo and Alice decisions set forth a two-step analysis for eligibility:  First, the court must “determine whether the claims at issue are directed to” an ineligible “abstract idea, law of nature, or a natural phenomenon.”  If so, the court must then consider the elements of each claim to determine whether they contain sufficient detail and additional limitations “to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.”

The lower court began its eligibility analysis in McRO v. Activision by noting that “[f]acially, these claims do not seem directed to an abstract idea. They are tangible, each covering an approach to automated three-dimensional computer animation, which is a specific technological process.”  However, instead of stopping there and recognizing that the patents did not involve an “abstract idea,” the court proceeded to invalidate them based on its conclusion that the claims covered nothing significantly more than the abstract idea of “using a rules-based morph target approach” to accomplish “automatic lip synchronization for computer-generated 3D animation.”

As we argue in our brief, reaching this counterintuitive (and seemingly counterfactual) conclusion required fundamental errors in applying both steps of the Alice analysis.

Step One – Are the claims directed to an abstract idea?

The claims at issue are directed to a specific, practical and useful improvement to an existing technological process.  Claim 1 of the ‘576 patent reads:

A method for automatically animating lip synchronization and facial expression of three-dimensional characters comprising:

obtaining a first set of rules that define output morph weight set stream as a function of phoneme sequence and time of said phoneme sequence;
An apparatus for automatically animating lip synchronization and facial expression of three-dimensional characters comprising:
obtaining a timed data file of phonemes having a plurality of sub-sequences; generating an intermediate stream of output morph weight sets and a plurality of transition parameters between two adjacent morph weight sets by evaluating said plurality of sub-sequences against said first set of rules;
generating a final stream of output morph weight sets at a desired frame rate from said intermediate stream of output morph weight sets and said plurality of transition parameters; and
applying said final stream of output morph weight sets to a sequence of animated characters to produce lip synchronization and facial expression control of said animated characters.

Clearly, this claim describes a concrete, real-world innovation that solves the difficult problem of accurately replicating the human face and speech in CGI and animation.

So how did the lower court conclude that it recites nothing more than an abstract idea?  It did so by reversing the order of Alice’s two analytical steps and by collapsing them into a single inquiry.

Rather than first determining whether the claim as written was directed to an abstract idea and then assessing the claim’s “additional element” to determine whether they add significantly more to the idea, the court began by seeking to uncover the “abstract idea” lurking underneath the claim language by stripping away all elements that were known in the prior art in an attempt to discover the claims “point of novelty.”

Step Two – Does the claim contain additional elements that ensure the patent amounts to “significantly more” than the underlying abstract idea?

The lower court’s application of step-two is equally misguided and problematic. In step two of the Alice test, the court must assess whether the “additional elements” (i.e., any element beyond the abstract idea itself) places meaningful limitations on the scope of the claim.

In describing step two, the Supreme Court stated in Mayo that “well-understood, routine, conventional activity” previously used in the field “is normally not sufficient to transform an unpatentable [abstract idea] into a patent-eligible application . . . .”  In other words, it is not generally “enough” simply to append routine, conventional steps – described at a high level of generality – to the abstract idea.

Unfortunately, the lower court fundamentally misinterprets this statement to mean that only novel elements (rather than all “additional elements”) should be considered for purposes of the “significantly more” analysis.  The court then proceeds (yet again) to read all of the additional elements out of the claim because they lack sufficient novelty.  Unsurprisingly, once all of the additional limitations recited in the claim are stripped away, all that is left is the abstract idea, leading the court to conclude that the claim fails the “significantly more” test.

This approach lacks any basis in the case law and ignores the fundamental difference between what is “known” in the prior art and what is “conventional” in industry practice.  For something to be conventional it must not only be known, but widely-adopted. Put simply, the fact that space travel is “known” in human society by no means makes it a “conventional” practice.

Conflating these two concepts and disregarding any element that has a basis in the prior art makes it virtually impossible to satisfy step two.  As the Supreme Court recognized in Mayo, “all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas,” and as a result “too broad an interpretation” of these implicit exclusions from eligibility would “eviscerate patent law.”

The approach taken by the lower court would fulfill this dismal prophesy.  As Judge Pfaelzer noted in a subsequent decision, “it is difficult to imagine any software patent that survives under McRO’s approach—most inventions today build on what is known in the art, and an improvement to software will almost inevitably be an algorithm or concept which, when viewed in isolation, will seem abstract. This analysis would likely render all software patents ineligible, contrary to Congress’s wishes.”

The Federal Circuit must be clear and decisive in nipping this in the bud. In deciding McRO, not only should they overrule the lower court’s erroneous conclusion, but they should take care to provide additional guidance regarding the correct application of the Alice test to avoid similar misapplication in other cases. This would provide much-needed clarity and certainty to patent holders and industries that rely on technology and software patents, shoring up our economic competitiveness and maintaining more than 2.5 million American jobs.

******

BSA’s members include: Adobe, Altium, Apple, ANSYS, Autodesk, Bentley Systems, CA Technologies, CNC/Mastercam, Dell, IBM, Intuit, Microsoft, Minitab, Oracle, PTC, salesforce.com, Siemens PLM Software, Symantec, Tekla, The MathWorks, and Trend Micro.

******

Briefs Filed Thus Far:

Bilski: Full CAFC to Reexamine the Scope of Subject Matter Patentability

Patent, , , , ,

In re Bilski (Fed. Cir. 2008 – en Banc)

Taking sua sponte action, the Federal Circuit has ordered an en banc rehearing of the In re Bilski case – asking the following five questions:

  1. Whether claim 1 of the 08/833,892 patent application claims patent-eligible subject matter under 35 U.S.C. § 101?
  2. What standard should govern in determining whether a process is patent-eligible subject matter under section 101?
  3. Whether the claimed subject matter is not patent-eligible because it constitutes an abstract idea or mental process; when does a claim that contains both mental and physical steps create patent-eligible subject matter?
  4. Whether a method or process must result in a physical transformation of an article or be tied to a machine to be patent-eligible subject matter under section 101? 
  5. Whether it is appropriate to reconsider State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), and AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (Fed. Cir. 1999), in this case and, if so, whether those cases should be overruled in any respect?

The Patent Application and Patent Applicants: Bilski involves claims to a method of managing the risk of bad weather through commodities trading. The claims are not tied to any particular form of technology — thus, they do not require a computer or particular storage media. In some quarters, this process lacking a technological tie-in is termed a “mental method.” 

Bernie Bilski apparently was the CEO and owner of a small company called WeatherWise. At least some WeatherWise patents were purchased in 2007 by the “Pittsburgh Technology Licensing Corp”  According to court documents, PTL is a wholly owned subsidiary of WeatherWise holdings. (See WeatherWise v. WeatherBill).

Although we don’t have the text of the application yet, this case looks problematic because of serious obviousness problems and lack of specificity in the claims.  Thus, the court will have no sympathy for Bilski — making this the perfect test case for someone wanting to strink Section 101 coverage and eliminate business method patents.  Representative Claim 1 reads as follows:

1.  A method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price comprising the steps of:< ?xml:namespace prefix ="" o />

(a) initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumer;

(b) identifying market participants for said commodity having a counter-risk position to said consumers; and

(c) initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions.

Procedure: This cases arises out of a rejection from the Patent Board of Appeals (BPAI). In its opinion, the Board asked for assistance from the CAFC in addressing Subject Matter Patentability of non-technological method claims: “The Federal Circuit cannot address rejections that it does not see. . . . It would be helpful if the Federal Circuit would address this question directly.” BPAI Decision. Bilski then apealed directly from the BPAI to the CAFC and oral arguments were held in October 2007.  Rather than issuing an opinion, the court convened and voted to rehear the case en banc.

Timing and Amicus: The parties (Bilski & PTO) have already fully briefed the case. Thus, the CAFC is only allowing one supplimental brief each to be filed simultaneously on March 6, 2008. Amicus briefs discussing the five questions are requested by the court and may be filed without specific permission. Amicus briefs will be due 30 days later and must otherwise comply with FRAP and FCR 29.  (Thanks Joe: Amicus should be due April 5th, but because that falls on a Saturday, they will be due April 7). The hearing is scheduled for May 8 at 2:00 pm.

(more…)

Anonymous Loan Shopping — An Unpatentable Abstract Idea

Patent, , , ,

By Dennis Crouch

On summary judgment, Judge Guilford (C.D.Cal) found Mortgage Grader’s asserted patents[1] ineligible under 35 U.S.C. § 101.[2]  On appeal, the Federal Circuit has affirmed this substantive holding as well as the district court’s procedural decision to allow the defendant (First Choice) to re-add its Section 101 contention after first dropping it.[3]  The appellate decision here was authored by Chief Judge Stark (D.Del) who was sitting by designation.  Judges O’Malley and Taranto joined the unanimous opinion.

A patent is not permitted to effectively claim an abstract idea.  In Mayo/Alice, the Supreme Court outlined a two-step process for determining whether this exception applies to Section 101’s otherwise broad eligibility principles: (1) is the claim at issue directed to a patent-ineligible concept and (2) if so, does the claim include an “inventive concept … sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.”[4]

Here, the district court found that the claims-at-issue were generally directed to “anonymous loan shopping” which is an unpatentable abstract idea.[5]  According to the court and apart from the computerization claim limits, the “series of steps covered by the asserted claims—borrower applies for a loan, a third party calculates the borrower’s credit grading, lenders provide loan pricing information to the third party based on the borrower’s credit grading, and only thereafter (at the election of the borrower) the borrower discloses its identity to a lender—could all be performed by humans without a computer.”  These human-mind-potentials cannot be claimed in the abstract.  In step two of Mayo/Alice, the court considered the computerization elements of the claims, but found only “generic computer components such as an ‘interface,’ ‘network,’ and ‘database.’ These generic computer components do not satisfy the inventive concept requirement.”

In the appeal, the patentee argued a factual dispute regarding the history of loan processing in an attempt to show that the process here was not “old.”  The appellate panel, however, found the testimony essentially irrelevant to the legal question of whether claim is directed to an abstract idea.

====

On the procedural point, the defendant had dropped its eligibility defense from its contentions. However, following the Supreme Court’s Alice decision added the contention back into place – but well after the court appointed deadline.  On appeal, the appellate panel confirmed that the district court did not abuse its discretion in allowing that procedural anomaly because of the significance of the decision:

In Alice, the Supreme Court held that “merely requiring generic computer implementation fails to transform [an] abstract idea into a patent-eligible invention.” 134 S. Ct. at 2352. We recognized the significance of Alice in buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1354–55 (Fed. Cir. 2014), in which we stated that Alice “made clear that a claim directed to an abstract idea does not move into § 101 eligibility territory by merely requiring generic computer implementation” (internal quotation marks omitted). The impact of Alice is also illustrated by our decision in Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709 (Fed. Cir. 2014) (“Ultramercial III”). Ultramercial had sued WildTangent for infringement of U.S. Patent No. 7,346,545, a patent directed to allowing consumers to view copyrighted media products on the Internet at no cost in exchange for viewing an advertisement. See id. at 712. When the case was first before us, in 2011, we reversed the district court’s grant of WildTangent’s Rule 12(b)(6) motion to dismiss, holding that “as a practical application of the general concept of advertising as currency and an improvement to prior art technology, the claimed invention is not so manifestly abstract as to override the statutory language of § 101.” Ultramercial, LLC v. Hulu, LLC, 657 F.3d 1323, 1330 (Fed. Cir. 2011) (“Ultramercial I”) (internal quotation marks omitted). The Supreme Court granted WildTangent’s petition for certiorari, vacated our order, and remanded for further consideration in light of Mayo. Ultramercial III, 772 F.3d at 713. On remand, we again reversed the district court, holding yet again that the claims were patent-eligible. Ultramercial v. Hulu, 722 F.3d 1335, 1354 (Fed. Cir. 2013) (“Ultramercial II”). Once more, the Supreme Court granted WildTangent’s petition for certiorari, vacated our order, and remanded, this time for further consideration in light of Alice. Id. On this further remand, with the “added benefit of the Supreme Court’s reasoning in Alice,” we affirmed the district court and found the claims to be not patent-eligible. Id. Our conclusion was expressly based on Alice’s holding that “adding a computer to otherwise conventional steps does not make an invention patent-eligible.” Id. at 713, 716–17.

Ultramercial III demonstrates that a § 101 defense previously lacking in merit may be meritorious after Alice. This scenario is most likely to occur with respect to patent claims that involve implementations of economic arrangements using generic computer technology, as the claims do here. For example, the asserted claims of the ’694 patent require use of a “computer system” or “computer network” for facilitating anonymous loan shopping and the asserted claim of the ’728 patent requires “programmatically generating” and uses a “network” for shopping for loans. In this context, it was not an abuse of discretion to allow Appellees to inject a § 101 defense into the case after Alice.

= = = = =

[1] U.S. Patent Nos. 7,366,694 (“’694 patent”) and 7,680,728 (“’728 patent”).

[2] Mortgage Grader, Inc. v. Costco Wholesale Corp., 89 F. Supp. 3d 1055, 1065 (C.D. Cal. 2015) (Costco was later dismissed as a party).

[3] Mortgage Grade, Inc. v. First Choice Loan Services, ___ F.3d ___, App. No. 15-1415 (Fed. Cir. 2016) available at http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/15-1415.Opinion.1-15-2016.1.PDF.

[4] Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012) (as clarified by Alice).

[5] Claim 1 of the ‘694 patent, that the court found sufficiently representative is listed as follows:

1. A computer-implemented system for enabling borrowers to anonymously shop for loan packages offered by a plurality of lenders, the system comprising:

a database that stores loan package data specifying loan packages for home loans offered by the lenders, the loan package data specifying, for each of the loan packages, at least a loan type, an interest rate, and a required borrower credit grading; and

a computer system that provides:

a first interface that allows the lenders to securely upload at least some of the loan package data for their respective loan packages to the database over a computer network; and

a second interface that prompts a borrower to enter personal loan evaluation information, and invokes, on a computer, a borrower grading module which uses at least the entered personal loan evaluation information to calculate a credit grading for the borrower, said credit grading being distinct from a credit score of the borrower, and being based on underwriting criteria used by at least some of said lenders;

wherein the second interface provides functionality for the borrower to search the database to identify a set of loan packages for which the borrower qualifies based on the credit grading, and to compare the loan packages within the set, including loan type and interest rate, while remaining anonymous to each of the lenders and without having to post a request to any of the lenders, said second interface configured to display to the borrower an indication of a total cost of each loan package in the set, said total cost including costs of closing services not provided by corresponding lenders;

and wherein the computer-implemented system further enables the borrower to selectively expose at least the personal loan evaluation information to a lender corresponding to a selected loan package.

Patent Law Tidbits

Patent

Comments: Thousands of patent attorneys read Patently-O every day. (This week, we’ll reach 3,000,000 visits).  In addition to ‘passive’ readers, Patently-O has also been recognized as fostering an open discourse on patent law and its application to particular cases. These discussions — usually through comments — are written at a fairly high-level and continue to help me develop an understanding of the changing law. Thanks to all of you who have left comments or otherwise contacted me about our recent patent law debates. Two things to put people on notice:

  • I allow anonymous and unfiltered comments because many patent attorneys don’t want to go ‘on record’ about much of anything. You should be aware that the Typepad software does record your network’s IP address. Thus, I can tell if you are writing from the FAA, US Courts, Quinn Emanuel, etc.  Although I don’t know, I suspect that a networking expert could potential drill-down for more specific information.  I won’t give this information out to anyone without a subpoena  — but Typepad does keep it on record. 
  • There should be no need to mention this, but perceived anonymity sometimes blinds people — comments sometimes get out of line. My tendency not to censor comments, but instead to simply block offending commenters from ever posting.

Around the horn:

Quote of the week comes from Dan Ravicher discussing Patriot Scientific’s troll-like behavior:

“While one can’t blame them for doing what is in their self interest – much like one can’t blame cockroaches for appearing when it is you who left crumbs on the counter – it is past time for our policy makers to ask themselves whether such activity is beneficial for the public, or is instead a siphoning of resources that could be better spent on doing technological research or passed on to consumers in lower prices for goods.”

 

BRI: Even under BRI Means Plus Function Claims Limited by Structure Recited in Specification

Patent

by Dennis Crouch

IPCom v. HTC (Fed. Cir. 2017)

After IPCom sued HTC for infringing its U.S. Patent No. 6,879,830, HTC countered with its PTO request for inter partes reexamination of the asserted claims.  While the AIA Trials (i.e. inter partes reviews) are heard directly by a PTAB panel, reexaminations are first decided by a patent examiner before being appealed to the PTAB.  Here, the examiner initially sided with the patentee – finding the challenged claims patentable.  However, the Board issued a new grounds of rejection for most of the claims.  That obviousness rejection was later sustained (even after a claim amendment).  On appeal, the Federal Circuit has largely affirmed, but reversed a portion of the claim construction — this time the limits of means-plus-function claiming has helped the patentee.

One limitation found in challenged claim 1 requires: an arrangement for reactivating the link with the first base station if the handover is unsuccessful.

Although not written in means-plus-function language, the nonce word “an arrangement for” without further recited structure easily qualifies under 35 U.S.C. 112 p6.

Section 112 p6 (now 112(f)): An element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof, and such claim shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.

It turns out that the Federal Circuit already construed this very phrase as means-plus-function in its 2012 decision involving the same patent. HTC Corp. v. IPCom GmbH & Co., 667 F.3d 1270 (Fed. Cir. 2012).  However, when conducting its broadest reasonable construction of the claim limitation, the PTAB failed to particularly tie the MPF limitation to the structure (here algorithm) recited in the specification.  Rather, for the PTAB apparently any arrangement for achieving the stated function would fall within the claim scope.  On appeal, the Federal Circuit rejected the PTAB approach and instead held that a means plus function claim term is limited by the scope of the structural recitations found in the specification – even under the PTO’s broadest reasonable interpretation.

The decision here is not new law but instead parallels the important MPF case of In re Donaldson Co., 16 F.3d 1189, 1193 (Fed. Cir. 1994) (en banc).  In Donaldson, the PTO argued that the BRI construction of a means-plus-function claim term should encompass “any means capable of performing the recited function.”  On appeal, the en banc Federal Circuit rejected that argument – holding instead that even under BRI, construction of a means-plus-function limitation “must look to the specification and interpret that language in light of the corresponding structure, material, or acts described therein, and equivalents thereof.”

Like Donaldson, the Board here impermissibly treated the means-plus-function limitation in its patentability analysis as if it were a purely functional limitation.

On remand, the PTAB will need to reevaluate the scope of the claims and then determine whether the recited prior art discloses the requisite particulars.

[DECISION]

 

Step-One: Don’t Assume an Abstract Idea

Patent,

by Dennis Crouch

McRO v. Bandai Namco, et al.  (Fed. Cir. 2016)

In an important Eligibility case, the Federal Circuit has ruled that MRCO’s software patent claims are eligible — rejecting District Court Judge Wu’s judgement on the pleadings that the non-business-method claims are invalid as effectively claiming an abstract idea. In my 2014 post in the case I wrote that the case may serve as an opportunity fo the Federal Circuit “to draw a new line in the sand.”

The invention at issue is directed toward a specific problem that had troubled the field of animation – automatically animating lip synchronization and facial expression of animated characters. See U.S. Patent Nos. 6,307,576 (“‘576 Patent”) and 6,611,278 (“‘278 Patent”).  The patented method employed by the invention is to key the audio signal to a set of phenome sequences and then create a set of morph-weight-set streams used as input sequences for the animated characters.  The morph stream input provides both timing and movement of facial expressions, including emotion.   The inventions claim priority back to 1997.

In its decision, the Federal Circuit holds “that the ordered combination of claimed steps, using unconventional rules that relate sub-sequences of phonemes, timings, and morph weight sets, is not directed to an abstract idea and is therefore patent-eligible subject matter under § 101. Accordingly, we reverse.”  Thus, the court followed its precedent in Enfish and holds here that the claims do not even meet Alice Step-One.  In addition to the 20+ defendants, briefs were also filed by EFF, Public Knowledge, BSA and The Software Alliance.  The Decision here was authored by Judge Reyna and joined by Judges Taranto and Stoll.

A patent may not effectively cover an abstract idea, law of nature, or natural phenomena. Alice Corp.   The Supreme Court in Alice/Mayo established its two-step framework that first asks whether a patent claim is “directed to” one of these eligibility exceptions.  If so, the claim can be saved if it also includes an “inventive concept” that sufficiently transforms the nature of the claim.  However, “[i]f the claims are not directed to an abstract idea, the inquiry ends.”  McRO at 20.

One problem with the two step framework is based upon the fact that all inventions can be boiled down to an ineligible abstract idea. In Mayo, the Supreme Court recognized this risk in its statement that “all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.”  This starting point, risks removing any teeth from Alice/Mayo Step-1.  The Federal Circuit, however, has refused to follow that pathway but instead has set down precedent that courts “must be careful to avoid oversimplifying the claims” in seeking a gist or abstraction. TLI Commc’ns.

A second problem with the framework is that the meaning of “abstract” has not been fully defined.  Here, the Federal Circuit attempts to provide a rough framework based upon the idea of preemption. The court looked particularly for (1) specific limitations that help avoid preemption (e.g. Morse); and (2) more than merely automation of existing human activity. The court also emphasized that the eligibility analysis must consider the claim as a whole.

The court writes:

Here, the structure of the limited rules reflects a specific implementation not demonstrated as that which “any [animator] engaged in the search for [an automation process] would likely have utilized.” Myriad. By incorporating the specific features of the rules as claim limitations, claim 1 is limited to a specific process for automatically animating characters using particular information and techniques and does not preempt approaches that use rules of a different structure or different techniques. See Morse. When looked at as a whole, claim 1 is directed to a patentable, technological improvement over the existing, manual 3-D animation techniques. The claim uses the limited rules in a process specifically designed to achieve an improved technological result in conventional industry practice. Alice. Claim 1 of the ’576 patent, therefore, is not directed to an abstract idea.

I have pasted claim 1 below:

1. A method for automatically animating lip synchronization and facial expression of three-dimensional characters comprising:

obtaining a first set of rules that define output morph weight set stream as a function of phoneme sequence and time of said phoneme sequence;

obtaining a timed data file of phonemes having a plurality of sub-sequences;

generating an intermediate stream of output morph weight sets and a plurality of transition parameters between two adjacent morph weight sets by evaluating said plurality of sub-sequences against said first set of rules;

generating a final stream of output morph weight sets at a desired frame rate from said intermediate stream of output morph weight sets and said plurality of transition parameters; and

applying said final stream of output morph weight sets to a sequence of animated characters to produce lip synchronization and facial expression control of said animated characters.

Non Practicing Entities in Europe

Patent

Guest Post by Peter Arrowsmith. Arrowsmith is a patent attorney and partner at the London based firm Cleveland IP.

Non practicing entities (NPEs) are a familiar part of the IP landscape in Europe, just as they are in the US. However, NPE activity has historically been lower in Europe. This article analyses the present situation in Europe compared to the US. In addition, we analyse how NPE activity might develop in Europe with the anticipated arrival of the Unified Patents Court (UPC).

 Factors that encourage NPE activity

There are various factors in a patent system that might influence or encourage activity by a NPE.  A non-exhaustive list of possible factors is outlined below, and Europe is compared against the US.

1. Low cost risk in litigation

A NPE is likely to be encouraged to litigate if they can initiate infringement proceedings without incurring a significant cost risk. In the US this is often possible because the losing side does not typically pay the winner’s legal costs. Additionally, NPEs can often find a law firm willing to take the case on a conditional fee basis. In Europe, by contrast, the losing side is typically required to pay at least a portion of the winner’s legal costs. Conditional fee arrangements are also less common.

Verdict: US more favourable to NPEs

2. High costs in litigation for the other side

A NPE is likely to benefit in a system where the opposing side will incur high costs in defending themselves. In such a system the pressure to settle will be significant, simply to avoid the costs involved in litigation. In Europe the cost of multi-jurisdictional litigation is likely to be high, but not necessarily higher than the costs involved in US litigation.

Verdict: Dead heat

3. Uncertainty

A NPE is likely to benefit in a patent system where the outcome of a case is difficult to predict, especially if this is coupled with high costs in litigation. This is likely to encourage a NPE to bring more cases on the basis that they are statistically likely to register some wins. In turn, this will increase pressure to settle before trial. Europe may be considered more predictable than the US in this comparison, simply because decisions are made by experienced patent judges, rather than lay juries.

Verdict: US more favourable to NPEs

 4. Size of Market

A NPE is likely to benefit if their patent has a wide geographical scope in an important market because a single adverse decision could have a large economic impact on the other side. In the US a single decision can be effective across the entire country, whereas in Europe it is necessary to enforce patents country-by-country.

Verdict: US more favourable to NPEs

 5. Bifurcation

A system in which the issues of infringement and validity are considered separately is also likely to favour a NPE. In such a system the NPE can obtain a favourable decision on infringement before validity is even considered. This may increase pressure on the other side to settle following an initial decision, even in cases where the validity of the patent is questionable. Europe may be more attractive to NPEs in this comparison since certain countries (notably Germany) permit bifurcation.

Verdict: Europe more favourable to NPEs

 6. Speed

A fast system can allow a NPE to exert pressure on the other side, which can encourage early settlement. These systems are likely to favour NPEs. In this comparison there is little to choose between Europe and the US, since fast or slow decisions are possible in both systems, depending on the forum chosen to commence proceedings.

Verdict: Dead heat

Overall this analysis suggests that the US patent system is more attractive than Europe for NPEs, which is consistent with the reality that we see. The European system is, however, still viable for NPEs, although they may need to be more selective about the cases and targets they pursue.

The Unified Patents Court – a new opportunity for NPEs

NPEs have registered a number of recent successes in European Courts (see, for instance, Vringo vs. ZTE in the UK), demonstrating that the European patent system can support this business model. All of the factors above would need to be considered by a NPE to decide whether litigation would be worthwhile in each case.

Of course, the patent system in Europe is on the verge of significant change, and the Unified Patents Court (UPC) is close to becoming a reality. The introduction of this Court will significantly alter the litigation landscape, meaning that a change in NPE activity can be expected.

In the current European system only national courts of individual countries are competent to decide on the infringement of European patents. Once it is established, the UPC will be competent to decide on validity and infringement of patents across the cooperating states, which covers most of Europe. A significant motivation in the development of this Court has been the desire to increase simplicity and decrease the cost of pan-Europe patent litigation. If successful, the new Court is likely to have many advantages for conventional business. However, a side effect is that the new Court may increase the attractiveness of Europe from the perspective of a NPE.

In particular, the UPC would appear to present a number of potential advantages from the perspective of a NPE.

1. Size of Market

The UPC will issue decisions that are effective across most of the European continent. Thus, the economic impact of individual decisions is likely to be high for the losing party – much higher than in the present system.

2. Bifurcation

The UPC is likely to permit bifurcation in certain instances. This is likely to favour NPEs, since they may be able to obtain a favourable decision on infringement before validity is considered. This is likely to increase the pressure to settle, even in situations where a patent has questionable validity.

3. Uncertainty

There is currently a great deal of uncertainty about how the new Court will operate, especially in the early days, in the absence of a body of case law. This initial uncertainty is likely to favour NPEs, since it will be harder to predict how a case will be decided, increasing the pressure to settle before trial.

Once the UPC is established there will be a period during which patent owners can ‘opt out’ of the exclusive jurisdiction of the Court. During the early years, this will allow patent owners to continue to use national courts, while there is uncertainty over how the UPC will operate.  Many European practitioners anticipate that conventional applicants are likely to exercise this opt out, provided the fee for doing so is not exorbitant. For a NPE there are likely to be more advantages in the UPC than the current system, meaning that few are likely to opt out of the Court’s jurisdiction. This means that a significant number of early cases in the UPC may involve NPEs.

Hindsight Bias

Patent, ,

In my patent policy seminar at Boston University Law School, we recently studied hindsight bias and how it can play-out in the innovation sphere.  Professor Gregory Mandel at Albany Law School has a pair of great empirical papers on the topic here and here.  Mandel concludes that a juror’s knowledge of the invention makes the juror much more likely to believe that the invention would have been obvious.

To reach a proper non-obvious conclusion, the decision-maker must step backward in time to a moment when the invention was unknown. Unfortunately, Humans are cognitively incapable of ignoring what they have learned, as required for the proper ex ante analysis.

In class, I followed-suit and gave the students a test of their own hindsight bias.  In one group, students were given a problem and were also told how it was solved.  The other group was simply given the problem. Both groups were asked to rate the nonobviousness of a solution.

ForesightHindsightII

Although not statistically significant because of the small seminar size, my class results closely followed Mandel’s results.  Students who did not know of the solution were more likely to think that a solution was nonobvious.  However, after students learned how the problem was solved, they were then more likely to think that the solution was obvious. This is the crux of hindsight bias. 

Notes:

  • Something that makes the results even stronger is that before the class, all the students were assigned the Mandel hindsight bias reading and they also knew that the topic of the day was hindsight bias. 
  • Professor Joseph Miller at Lewis & Clark Law School is working on this issue as well — he gave me the idea for this specific problem-solution.
  • Peter Zura discusses hindsight bias here.

USPTO Grant Rate 2021

Patent

by Dennis Crouch

The following chart provides one look at USPTO historic patent grant rate for patent applications filed over the past 20 years.  The chart groups together patent applications as of their filing-month and then simply reports the percentage patented, abandoned, and still-pending.  The red-line in the chat excludes the still pending applications and thus reports the grant rate of disposed-of applications.

A few notes.

  • There are many ways to calculate a patent grant rate.  This one is perhaps the simplest in that I simply looked at the current status of each published utility application – serial number by serial number.  I treated all utility applications equal, regardless of whether it was part of a larger patent family or whether it was subject to an RCE.
  • Beware of recent grant rate data:  In my model here, there are only two ways that a patent can escape from being still-pending: Either (1) the patent issues or (2) the applicant abandons the application.  And, the former (disposals-by-patenting) typically take less time than the latter (disposals-by-abandoning).  As the PTO begins examining a cohort of patent applications, it typically issues a number of first-action allowances, while most applicants hold on for at least a final rejection before abandoning. What all this means is that more-recent grant rate data can be skewed.

Guest Post: 35 USC 289—Grant of Certiorari in Samsung v Apple = The Opportunity for a Better-Crafted Standard for Awarding Total profits

Patent, , , , ,

Guest post by Gary L. Griswold.  Mr. Griswold is a Consultant residing in Hudson, WI and was formerly President of and Chief Intellectual Property Counsel for 3M Innovative Properties Company. The paper reflects the views of the author. He wishes to thank Bob Armitage and Mike Kirk for their excellent contributions to the essay.

In August, 2015, I published an article on Patently-O entitled “35 USC 289-After Apple v Samsung, Time for a Better-Crafted Judicial Standard for Awarding “Total Profits.” [i] The article appeared before the Supreme Court granted certiorari in this appeal.[ii] My use of the word “after” was, thus, a bit premature. The crafting of a new judicial standard may actually be accomplished over the next several months, as the Supreme Court considers the damages issue in Apple v. Samsung case later in its current term.

The statutory basis for awarding damages in this case is no “small-change.” 35 USC 289 provides the design patent holder with the infringer’s “total profits” on the “article of manufacture” to which the patented design “has been applied”[iii]. My August article referenced a Patently-O article by Professor Rantanen that included an analysis of the Federal Circuit’s Apple v Samsung decision and its ramifications, suggesting that the section 289 damages provision could induce “an explosion of design patent assertions and lawsuits.”[iv] Indeed, section 289 holds the potential for design patent procurement and assertion to become the next big “patent assertion entity” business model.

Some commentators have suggested that design patents, being sought and accumulated differently from utility patents, are not likely to stimulate much PAE interest. Whatever merit in that view, it needs to be tempered with the realization that greed is the mother of all of this type of business-model invention. One need only reflect on the fact that more than 1,000 qui tam actions for false marking were filed by opportunistic plaintiffs following the 2009 Federal Circuit decision in Forest Group, Inc. v. Bon Tool Co. before such actions were thankfully banished by the “Leahy-Smith America Invents Act.”[v] The prospects for design infringement revenue generation based on the “total profits”-recovery provision in 35 USC 289 could make successful design patent assertion a staggeringly profitable business. The potential for such an outcome as well as an example of such assertion was referenced in the briefs relating to the Apple v. Samsung certiorari petition[vi].

The possibility of a surge in design-patent PAE activity is almost certainly one of many reasons why the Supreme Court granted certiorari—and why it should not squander the opportunity presented in the Apple v. Samsung appeal to provide a reasoned and principled demarcation between those fact patterns where a “total profits” remedy is clearly warranted and those where it is not.

In deciding this appeal, the Supreme Court may focus on what constitutes an “article of manufacture” under section 289. The statute provides a design patent infringer “shall be liable to the [design patent] owner to the extent of [the infringer’s] total profit” if the infringer “applies the patented design … to any article of manufacture.” [vii](emphasis added) But, the patented design is not necessarily synonymous with the article of manufacture itself.

Indeed, for section 289 purposes, an “article of manufacture” has been held to be the entire substrate to which the patented design is applied. For example, it has been held that a boat becomes the “article of manufacture” when the patented design is for the windshield applied to the boat[viii]. Other examples of “articles of manufactures” whose total profits might be subject to a section 289 recovery include (1) a large agricultural combine, when the patented design is for a tire tread applied to a tire used on the combine; (2) an automobile, when the patented design is for the automobile’s rear taillights; and (3) an HDTV, when the patented design is for a semiconductor used in the television.

In my earlier articles, I described such “total profits” recovery scenarios as a problem in need of a judicial solution. I suggested eliminating access to section 289 “total profits” recoveries in situations where a consensus exists that a remedy of this type would be entirely unwarranted. My approach would interpret section 289 as authorizing a total-profits recovery only “if the patented design is substantially the basis for customer demand for the entire article”.[ix] If it is the basis for consumer demand, the section 289 total-profits recovery would apply to the article; if not, a recovery of total profits would not be available for the article.

This approach bears some similarity to the determination of utility patent damages under the entire market value rule[x]. A utility patent on a boat windshield does not allow the value of the boat to be used as the basis for determining a reasonable royalty absent a demonstration that the windshield was the basis for the customer demand for the boat.

In addition, the “customer demand” limitation is consistent with the apparent rationale for enacting section 289 in the first place. Current section 289 and its predecessors replaced a Supreme Court decision[xi] that provided limited damages to design patent owners even where the infringers had applied the patented design to an article of manufacture in order to create the customer demand for the article of manufacture. In such a situation, forcing the copyist to turn over its total profits obtained on the infringing article represents good policy.

However, even under a “customer demand” limitation, section 289 is no timid remedy. It would not involve any form of “apportionment” of the profits to be awarded to the design patent holder on the ground that some proportion of the profits might be attributable to non- design patented factors. Apportionment is not consistent with the Congressional intent when section 289 and its predecessors were enacted.

Moreover, even if the section 289 remedy is unavailable, the patent owner is not left without the right to recover damages. All the remedies otherwise available for patent infringement remain, whether or not a section 289 “total profits” recovery can be secured as long as there is no double recovery of damages[xii].

The Apple v. Samsung case is of particular importance because imposing the “customer demand” standard on section 289 recoveries does not require another act of Congress. The courts are free to interpret statutes to effectuate the purpose Congress had in enacting them. Under section 289, Congress did nothing to preclude the courts from determining what qualifies—and does not qualify—as an “article of manufacture.”

The Federal Circuit sees this judicial flexibility otherwise. It (incorrectly) saw its hands as having been tied by Congress in Apple v. Samsung, stating: “We are bound by what the statute says, irrespective of policy arguments that may be against it”[xiii]. Fortunately, the Supreme Court has the opportunity to see the situation differently.

The Supreme Court may—and should—see it differently. It can define an “article of manufacture” as being limited to objects for which the patented design is substantially the basis for customer demand. Courts have acted similarly in the past to assure that application of a statute will not result in foreseeable outcomes which are clearly inappropriate and manifestly unintended. The emergence of the “entire market value” rule is a good example of where the alleged “infringing product” cannot be reflexively used as the basis for a damages calculation where the “patented invention” is a mere component or feature of the product and not the product itself.

The Court will have, however, some competing approaches to consider in the course of deciding this appeal. Another possible approach to interpreting section 289 is the so-called “separate product” exception. This exception to a section 289 recovery limits the availability of total profits to the smallest separately sold product to which the patented design is applied. While this exception has the potential to limit the possibility of some of the ludicrous outcomes noted above, it is no panacea. For example, it fails to exclude a section 289 recovery where a design patented graphical user interface (GUI) is used in an electronic device which does not involve a separately sold product. This is a serious deficiency because of the difficulty in finding any policy rationale for awarding total profits on an electronic device simply because a design on a GUI used in it is patented.

Apple has, nonetheless, suggested in its responsive brief to “Defendant-Appellants’ Petition for Rehearing en banc” what amounts to a more generalized rendition of a “separate product” exception: “As the panel correctly recognized, this distinctive design was not severable from the inner workings of Samsung’s smartphones, see Op.27-28, in a way that a cupholder is analytically distinct from the overall look-and-feel of a car.”[xiv] (emphasis added) While “severability” appears to be a more general “exception” criterion than simply being a “separate” product, the “severability” approach does not appear to address the deficiency explained above for the “separate product” exception.

If there is a concern with the “customer demand” limitation, it would be whether the limitation is so broad that it swallows most or all of the “total profits” rule. Indeed, there are many factors which cause a purchaser to acquire a particular article of manufacture—most notably its functional aspects. However, to apply the “customer demand” approach, one begins with the customer looking for something in a product space and then making the specific decision to purchase. Everyday products with new, ornamental designs such as specially shaped paper clips are a good example.[xv] While they have a known function, they are most likely purchased for their appearance. An option would be to only consider the ornamental features of a product to determine whether they were substantially the basis for customer demand, but that may well be too narrow and could lead to a total profit remedy for minor differences from an ornamental perspective.

The Supreme Court would not have granted certiorari without a sense that its guidance was needed to properly titrate a powerful damages provision. It can best do so by allowing section 289 to remain a viable incentive to create and commercialize new designs, but then limiting the articles of manufacture qualifying for a “total profits” recovery to those where the patented design is substantially the basis for customer demand for the article of manufacture. Such a holding would secure section 289 as both a distinguishing and distinguished feature of U.S. design patent law.

[i] Griswold, Gary. “35 USC 289 – After Apple v. Samsung, Time for a Better-Crafted Judicial Standard for Awarding “Total Profits”? Patently-O. August 14, 2015. https://patentlyo.com/patent/2015/08/griswold-patent-damages.html

[ii] See U.S. Supreme Court Orders List from March 21, 2016 at 2. http://www.supremecourt.gov/orders/courtorders/032116zor_h3ci.pdf

[iii] 35 U.S.C. § 289:

“Whoever during the term of a patent for a design, without license of the owner, (1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or (2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties.

Nothing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement.”

[iv] Rantanen, Jason, “Apple v. Samsung: Design Patents Win.” Patently-O. May 18, 2015. https://patentlyo.com/patent/2015/05/samsung-design-patents.html

[v] Laurie Rose Lubiano, “The America Invents Act applies the brakes to the false marking bandwagon.” LEXOLOGY, January 3 2012. http://www.lexology.com/library/detail.aspx?g=401c9bea-d643-4521-bc7d-c63d5b4a25f5

[vi] Samsung Petition for a Writ of Cert. Case No. 15-777. at 36-38. http://www.scotusblog.com/wp-content/uploads/2016/01/15-777_PetitionForAWritOfCertiorari.pdf

[vii] 35 U.S.C. § 289

[viii] Order on Motion for Partial SJ, In re Pacific Coast Marine Windshields Ltd. v. Malibu Boats LLC, Case No. 6:12-cv-33 (M.D. Fl. August 22, 2014)

[ix] See Griswold, https://patentlyo.com/patent/2015/08/griswold-patent-damages.html; See also Griswold, Gary. “35 USC § 289 – An Important Feature of U.S. Design Patent Law: An Approach to its Application.” IPO Law Journal. April 6, 2015. http://www.ipo.org/wp-content/uploads/2015/04/griswold_an-approach.pdf

[x] See Cornell University v. Hewlett-Packard Co., 609 F.Supp. 2d 279, 288-89 (N.D.N.Y. 2009):

(1) The infringing components must be the basis for customer demand for the entire machine including the parts beyond the claimed invention, (2) the individual infringing and non-infringing components must be sold together so that they constitute a functional unit or are parts of a complete machine or single assembly of parts, and (3) the individual infringing and non-infringing components must be analogous to a single functioning unit. It is not enough that the infringing and non-infringing components are sold together for business advantage. Notably, these requirements are additive, not alternative, ways to demonstrate eligibility for application of the entire market value rule.

See also Virnetz, Inc. v. Cisco Systems, Inc., 113 F.3d 1308, 1326 (Fed. Cir. 2014) (Judge Prost: “we recently affirmed that ‘[a] patentee may assess damages on the entire market value of the accused product only where the patented feature creates the basis for customer demand or substantially creates the value of the component parts.”)

[xi] See Dobson v. Dornan, 118 U.S. 10, (1886); Dobson v. Hartford Carpet Co., 114 U.S. 439 (1885); Dobson v. Bigelow Carpet Co., 114 U.S. 439 (1885); Bigelow Carpet Co. v. Dobson/Hartford Carpet Co. v. Same, 10 F. 385,386; 1882 U.S. App. LEXIS 2295 (E.D. Pa. 1882).

[xii] 35 U.S.C. § 289, paragraph 2: “Nothing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement.”

[xiii] Apple v. Samsung, Fed. Cir. Opinion at 27, fn. 1.

[xiv] See Brief in Opp’n to Rhg, Apple v. Samsung, Case No. 2014-1335; 2015-1029 at 27-28 (Fed. Cir. July 20, 2015)

[xv] See, e.g., Design Patent No. USD647,138: https://docs.google.com/viewer?url=patentimages.storage.googleapis.com/pdfs/USD647138.pdf

 

Cardpool: Amending Claims in Reexam after Court Judgment of Invalidity

Patent, , , ,

by Dennis Crouch

The timing of a settlement is sometimes really important for patentees — especially if a court is about to find your patent invalid.

Slightly complex story: In Cardpool v. Plastic Jungle, the district court ruled on summary judgment that Cardpool’s gift-card-exchange patent claims invalid under 35 U.S.C. 101 and dismissed the case with prejudice. U.S. Patent No. 7,494,048.  That decision was initially affirmed by the Federal Circuit in a R.36 Judgment Without Opinion. Shortly thereafter, however, the USPTO issued a reexamination certificate finding the claims (as amended in reexam) patentable (of course, the PTO did not consider eligibility but only novelty and nonobviousness).

The timing of the reexamination certificate gave Cardpool the opportunity to request rehearing from the Federal Circuit. The appellate court agreed and vacated its prior summary affirmance (although not the district court’s opinion) and remanded to the district court to consider the impact of the reexamination changes.

The parties apparently came to some agreement and thus on remand the parties jointly moved for the district court to vacate its invalidity judgment since the claims had been amended and since the PTO certificate issued before the appellate mandate. See Fresenius USA, Inc. v. Baxter Int’l, Inc., 721 F.3d 1330, 1346 (Fed. Cir. 2013).

However, the district court rejected the plea for vacatur — finding that the PTO decision does not “displace a district court judgment” and that it would be “against the public interest” to allow a patentee to overcome an invalidity judgment simply by “amending its invalid claims.”

No Vacation: Now, on appeal again, the Federal Circuit has affirmed the lower court ruling that vacatur is not necessary or proper:

The Supreme Court counsels that “vacatur must be decreed for those judgments whose review is . . . ‘prevented through happenstance’—that is to say, where a controversy presented for review has ‘become moot due to circumstances unattributable to any of the parties.’” U.S. Bancorp Mortg. Co. v. Bonner Mall P’ship, 513 U.S. 18, 23 (1994).

Here, the mootness is due to amendments made by the patentee.  As such, the appellate court refused to vacate the district court judgment.

= = = = =

Res Judicata: What is unclear here is the level of claim & issue preclusion that will apply going forward when Cardpool asserts the patent against some third party.  Claim 1 was found invalid by a final judgment. However, Claim 1 has now been amended.   Could Cardpool sue Plastic Jungle (or its assigns) on the revised Claim 1?  Could Cardpool sue an unrelated alleged infringer? Writing for the majority, Judge Newman suggests (but does not hold) that Cardpool will be able to do so:

On the facts and procedures of this case, the issue of validity of the reexamined claims remains to be addressed in any future proceeding. In the initial proceeding the original claims were adjudicated only on the ground of subject matter eligibility under section 101. As in Aspex, the effect of a prior judgment rendered on specific issues as applied to the original claims, depends on the facts and issues of the reexamination, and invokes equity as well as law.

I pulled-up the reexamined claims and found that they were extensively amended to require that the method be computer-implemented using a processor, computer program, data requests, validation process by the processor, etc.  I would be truly surprised, if these amendments are sufficient to overcome the Alice Corp. test for eligibility (as implemented).

 

What to do About All These Invalid Patents?

Patent

By Dennis Crouch

The recorder-of-deeds here in Boone County Missouri is pretty good at her job. Although there is an occasional error in the records, those errors are quickly remedied once found.  The property records are regularly relied upon and their correctness is important to ensure smooth operation of the real property marketplace.

Over the past few years, the Supreme Court has uncovered a few glaring errors in the patent records.  Namely – hundreds of thousands of patent claims have issued that are – in fact – not patentable.  These problematic claims either lack eligible subject matter under the patent common law and 35 U.S.C. § 101; are indefinite under 35 U.S.C. § 112; or are obvious under 35 U.S.C. § 103.  This results is prompted by the recent decisions in Supreme Court cases such as Alice Corp. v.. CLS Bank International, 134 S.Ct. 2347 (2014); Nautilus, Inc. v. Biosig Instruments, Inc., 134 S.Ct. 2120 (2014); Association for Molecular Pathology v. Myriad Genetics, Inc., 133 S.Ct. 2107 (2013); Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S.Ct. 1289 (2012); and KSR Intern. Co. v. Teleflex Inc., 550 U.S. 398 (2007).

Prior to these decisions, the USPTO had been issuing patents under more lenient standards. See, e.g. State Street Bank (Fed. Cir. 1998). For its part, the USPTO has quickly modified its approach effectuate the new precedent that offers more stringent tests of patent eligibility and patentability. The result is not necessarily fewer issued patents or a lower grant rate, but instead perhaps a modification (narrowing) of claim scope.

These decisions are all naturally retroactive in that they apply fully to the aforementioned problematic claims found in already issued patents.  However, the general approach thus far has been to leave those patents and their problematic claims on the patent rolls as if nothing had happened unless and until a third-party challenges their validity or the patentee abandons the protection.  Q: Is this a problem? A: Yes.

Next time: A few ideas for moving forward.

Guest Post by Christal Sheppard: Solving a Knotty Problem: An Outrageous Call for Patent Reform Part Deux

Patent, ,

Dr. Sheppard is an Assistant Professor of Law at the University of Nebraska Lincoln College of Law.  Prior to joining the University of Nebraska, Dr. Sheppard was Chief Counsel on Patents and Trademarks and Courts and Competition policy for the United States House of Representatives Commmittee on the Judiciary. – Jason

By A. Christal Sheppard

Just over a week ago, Dennis Crouch stated on Patently-O that “[i]t is simply ridiculous that after 40 years of debate, we still do not have an answer to the simple question of whether (or when) software is patentable.”  The confusion on what is and what is not patentable is not a new debate but has come to a head in the last few years with the Supreme Court taking on certiorari multiple cases on the matter of patentable subject matter and the Court of Appeals for the Federal Circuit, arguably, disregarding Supreme Court precedent.

We all understand the problem[1], but what is the solution?  The question of what should be patentable is fundamentally a public policy decision.  This public policy decision is one that the framers of the Constitution contemplated and specifically tasked one specific entity with balancing the equities.  The Constitution states “The Congress shall have Power…[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”  Congress not the Courts was tasked to determine what should be eligible for the “embarrassment of a patent.”  However, the Courts, led by the Court of Appeals for the Federal Circuit, not the Congress, have driven the expansion of Patentable Subject Matter to “anything under the sun made by man.” 

Case law dictates that the intent of Congress was 1) that patentable subject matter is a requirement separate from that of the other requirements of the patent laws and 2) that Congress intended for anything under the sun made by man to be potentially patentable with the exception of laws of nature, natural phenomena and abstract ideas. Thus, the Courts have, by a stepwise expansion of patentable subject matter to software and business methods, created a situation whereby the high tech industry has been legally encouraged to tie itself into a Gordian knot.  A knot that, without overruling prior precedent, or creative interpretation of precedent, the Courts cannot resolve.

This blog post is to propose that the United States Congress immediately take an active role in the creation of the parameters for patentable subject matter.[2] Congress is the only entity that has the ability and the resources to resolve this conflict in a reasonable and responsible manner. It is also the entity charged by the Constitution with doing so.

I’m not unaware that using the terms “reasonable” and “responsible” in the same sentence with the United States Congress during an election year will globally elicit sound effects from chortles to foul language questioning my mental facilities.  However, below are a few points that are worth considering regarding who is best positioned to advance a solution to what most of the intellectual property community would consider a mess. 

  1. The Constitution does not require patents to be granted and while our international agreements do require minimum patent rights, software and business methods are not among them.[3]  Currently we have a Court created expansion of the definition of what is eligible for patent.  Congress has yet to wade into this morass of what should be eligible for a patent except to provide for exceptions to the Court-created expansion. Congress has created exceptions in piecemeal “fixes”, specific individual carve-outs, instead of addressing the broader issue head-on.[4]
  2. History shows that Congress once before stepped in when the Supreme Court and the predecessor to the Court of Appeals for the Federal Circuit were in discordance.  In the 1940s, the country was then also wrestling to establish a standard of invention.  The Administration appointed a Commission and the patent bar was up in arms.  As a result, section 103 – nonobviousness – was added to the statute by Congress in 1952 to inject a stabilizing effect that the Courts and general practice had not been able to accomplish over decades.  What is needed in the current situation is stabilization.  Today, the Courts are destabilizing the law of patentable subject matter rather than stabilizing it.
  3. Businesses need certainty to operate and to plan effectively. Only Congress can be prospective in its resolution.  For instance, if Congress decides that software and business methods are not patentable subject matter ONLY the Congress can make this prospective to not conflict with settled expectations.  If the Supreme Court narrows patentable subject matter, or patentability more generally, trillions of dollars of company valuation evaporate from the balance sheets with one Supreme Court decision.[5]  However, Congress can decide that starting on a date certain in the future that all patents granted or applications filed before that date are under the “old” common law rules and all patents post-implementation are under the new law.  Congress can provide finality on this issue without gutting company value.[6]  
  4. Only Congress can create an alternative method of protection, apart from patent, for items that they determine do not meet the test for “promoting the process of science.”  For example, concurrent with the delayed implementation of a narrower definition of patentable subject matter, Congress can provide sui generis protection for those fields they decide to carve-out.  Many such ideas have been proposed, such as shorter exclusivity duration and limited remedies.
  5. A Congress, unlike the Courts whose precedent binds future judges, cannot bind a future Congress.  Should the law of patentability need to expand for unknown advancements, Congress can do that in a way that is much less disingenuous than the Courts.   The framers of the Constitution contemplated this in their directive to Congress.  The language in the Constitutional defining  what should be eligible for the monopoly is malleable so that patent law can adjust as technology and the need for promotion for the advance of science changes over time. 

There are a multitude of very good reasons why calling on Congress is not a perfect solution.  But with Myriad and the patentability of gene sequences and genetic testing on the horizon, does the intellectual property community want the Courts or Congress to decide this public policy issue?  Businesses need certainty and only Congress can now provide that stabilizing influence without destabilizing entire industries.  Whether Congress will or not, ought not prevent the assertion that they should. 

Food for thought…

[1] The Supreme Court decisions have done nothing to clarify what is and what is not patentable.  At this juncture, not only is the Federal Circuit in rebellion against the Supreme Court; an influential judge from another circuit dismissed an entire high-tech case with prejudice and promptly penned an article entitled “Why There Are Too Many Patents in America”; the International Trade Commission is under siege from an explosion of technology cases and recently sought comment from the public as to whether certain patents should have limited remedies; the Administration (United States Patent and Trademark Office and the Department of Justice) have differing opinions regarding the patentability of genes and genetic tests; thermonuclear patent warfare between high tech companies is overloading our courts; market based solutions are spawning Fortune 500 companies as the new patent troll; and a patent valuation bubble reminiscent of the real estate market before the crash is driven ever forward as companies amass patents as a shield of paper armor not as an instrument of innovation. 

[2] One thing is certain, there will not be unanimous agreement on what should be patentable subject matter; however, someone should decide and should decide now.  Moreover, that decision should not negatively affect those who have relied upon the law as the Court defined and expanded it over the last 40 years only to now sound the horns of retreat. 

[3] I am not here advocating for any particular resolution, I am merely pointing out a fact.

[4] Prior user rights for business method patents in the 1999 American Inventors Protection Act; Human organisms, tax patents and creating a business method patent post-grant opposition procedure in the 2011 America Invents Act.  The Congress did not address the latter three as patentable subject matter issues, but in carving them out the Congress is showing that there are additional areas that they have determined should not be entitled to patents where the Courts have determined otherwise. 

[5] Of course patents are subject to case-by-case challenges but the Supreme Court seems to be signaling that whole categories of patents, while still technically eligible, would not meet the Courts inventiveness test as a practical matter.

[6] Congress can also provide some finality on the issue of whether patentable subject matter is a separate requirement from 102, 103 and 112.

Patently-O Bits and Bytes No. 18

Patent
  • JOLTDIGESTHarvard’s Journal of Law & Technology is generally considered on of the top two academic journals focusing on Law & Technology (along with Berkeley’s TLJ). JOLT recently increased its online footprint with the JOLT DIGEST where they regularly cover important new cases.
  • Software Patents: Although in Bilski, the CAFC is not likely to consider software patents per se, there is a strong and growing movement to eliminate all software patents. The descriptively named “End Software Patents” group is led by Ben Klemens (Author of Math You Can’t Use) and is continuing to move forward. Interestingly, Microsoft Explorer crashed when I visited their site. [See LegalPad’s article]
  • Software Patents: On the more academic side, two serious patent dataheads (Iain Cockburn and Megan MacGarvie) have analyzed economic results of software patents in various industries. Their results: (1) When patents are held by those currently market, it is more difficult for a startup to get financing; and (2) When a startup holds patents, it has a greater chance of obtaining financing.  [LINK] DDC Comment: This is, of course, exactly how we would expect the market to react.
  • Auctioning the Right to File a Patent Application: Ayres and Parchomovsky have an interesting, if misguided, paper on patent rights. They see a problem with too many patents and suggest a “cap.” The right to file patent applications could be auctioned and then traded or sold in a secondary market. [LINK]
  • Kempton Lam has an interesting discussion on patents and other matters with Mike Dillon GC of Sun. [LINK]

What should the patent attorney do? 

Patent

After coming up with a core idea for a new product, Inventor jumps on chatGPT and asks the AI to expand upon the product idea, including providing additional design elements based upon the inventor’s original description. ChatGPT comes through with flying colors and provides several detailed designs that inventor had not considered.  Inventor is diligent in their disclosure docs to include the chatGPT transcript.  Patent search reveals that Inventor’s original idea is not patentable by itself, but it is likely patentable when combined with the chatGPT input. The patent attorney sees value  in having claims directed solely to the features provided by chatGPT.

You are the patent attorney, what do you do in this situation?

Where is the preemption test?

Patent

The newest Supreme Court patent eligibility case was recently filed by Rudy Telscher in Consumer 2.0, Inc., D/B/A Rently v. Tenant Turner, Inc. (Supreme Court 2020).  Rather than directly challenging Alice Corp., Rently argues that the Federal Circuit has done a poor job of implementing the Supreme Court’s guidance.  The Supreme Court decisions on eligibility are focused on avoiding improper preemption. While mouthing the word preemption as a goal, the Federal Circuit has repeatedly ruled that preemption forms no part of its eligibility test.

Questions presented:

In Alice Corp. v. CLS Bank International, 573 U.S. 208 (2014), this Court laid out the standards for analyzing patent eligibility under 35 U.S.C. § 101, and explained the main concern undergirding the analysis was one of preemption. This Court did not lay out the exact boundaries of the test, but rather had previously instructed the Federal Circuit may expand on the test so long as it was consistent with the statute. The Federal Circuit however routinely skips the preemption analysis, and has imported a quasi-section 103 analysis into Step Two of the test for determining whether the claims recite only “conventional” features or amount to “something more” than a claim on the abstract idea itself.

The questions presented here are:

1) Whether preemption is a threshold and defining consideration that the lower courts must consider in determining whether a claimed invention is directed to patent eligible subject matter under Section 101, and

2) Whether the courts below have erred in conflating the Step Two conventionality analysis of Alice with the factual prior art patentability analysis of Section 103, without the evidentiary opportunities and protections against hindsight bias afforded by Section 103 and in conflict with this Court’s precedent in Graham v. John Deere Co. of Kansas City, 383 U.S. 1 (1966)

[Petition]

An interesting aspect of this case is the newness of the patent at issue.  U.S. Patent No. 9,875,590.  During prosecution, the examiner cited to Alice and rejected the claims as ineligible.  The patent applicant then amended the claims to overcome the rejection.  Then, during litigation the district court found the claims ineligible as a question of law and that determination was affirmed on appeal.

Claim at issue:

7. A method for providing automated entry to properties, comprising:

making properties available for viewing to invited visitors;

providing an application interface of an application running on a computing system to a property manager, the property manager being a manager, a listing agent or an owner of the property, the application interface prompting the property manager to enter a visitor name and contact information for a visitor, wherein upon receipt of the visitor name and contact information, the application provides the visitor with an invitation to receive automated entry information including code information that is valid during a specified period of time so that the visitor can enter a property by themselves, the invitation being delivered to the visitor electronically, the invitation being applicable only to the property and the invitation requesting identification from the visitor;

placing a lock box or an automated door lock at or near each property;

upon the application receiving and confirming identification information for the visitor, providing, by the application, automated entry information to the visitor that allows the visitor to enter the property, the automated entry information including code information that is valid during the specified period of time;

upon the visitor providing the code information to the lock box or the automated door lock at the property within the specified period of time, the lock box or automated door lock opening to facilitate automated entry to the property;

tracking visitor activities at the properties; and

making information about the properties available within a user interface.

 

1877 Supreme Court Thought’s on Oil States?

Patent

Cochrane v. Deener, 94 U.S. 780 (1877)

It would, perhaps, be desirable if all cases of this sort [i.e., patent cases] could be referred to a commission of intelligent experts and practical men to report their opinion thereon, with their reasons, for the final action of the court. … Neither courts nor ordinary juries are perfectly adapted to the investigation of mechanical and scientific questions. .

Right to a Jury Trial in Patent Validity / Revocation

Patent

by Dennis Crouch

Oil States Energy Services, LLC, v. Greene’s Energy Group, LLC., now pending before the Supreme Court raises one important question:

Issue: Whether inter partes review … violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.

In June 2017, the Supreme Court granted certiorari and briefing is expected to continue through November 2017.

One amicus group did not wait till their filing deadline but instead has preemptively filed a brief “in support of neither party” even before any of the party briefs have been filed. Professor Tomás Gómez-Arostegui has focused on IP legal history for the past decade joined with British legal history scholar Sean Bottomley to establish several basic historical points:

Records from the 18th century are unequivocal and demonstrate that juries decided validity questions (including novelty) at several stages of the life of a patent. Juries were tasked with determining validity during infringement litigation, whether initiated at law or in equity; during court proceedings for revoking patents; and sometimes during patent prosecution. For a time, the Privy Council could also revoke patents, but it last did so in 1779. . . .

[READ THE BRIEF: 16-0712 ac H Tomas Gomez-Arostegui]

A primary thrust of the brief is to challenge the conclusions made by Mark Lemley in his article, Why Do Juries Decide if Patents are Valid?, 99 Virginia L. Rev. 1673 (2013).  The brief “corrects recent misconceptions on the subject, including those
appearing in [the Lemley] article relied upon by the parties.”

Fairly silly way to conduct business, but the constitutional permissiblity of the AIA Trial regime will depend upon whether revocation of patent rights were handled by jury trials in England around the time the Bill of Rights was adopted.  As the Supreme Court has repeatedly affirmed, “The right of trial by jury thus preserved is the right which existed under the English common law when the Amendment was adopted.” Balt. & Carolina Line, Inc. v. Redman, 295 U.S. 654 (1935).  Although its fairly complex, the basic questions are (1) is revocation a common-law question (as opposed to one of equity) and if so (2) was it handled by a jury?   This is where Prof. Gómez-Arostegui steps in, writing:

  • In infringement actions: “the validity of a patent (if contested) was always decided at law, regardless of where the plaintiff initially filed. Moreover, the law courts would always try the case before a jury unless the parties had [otherwise] stipulated.”
  • In injunction actions filed in the Court of Chancery, the court would generally force the parties to file a separate common law action in order to permit the jury to resolve validity.
  • “[J]uries regularly decided the following issues related to validity: (1) whether the invention was new; (2) whether the patentee was the actual inventor of the purported invention; (3) whether the invention was useful; (4) whether the specification accurately described the claimed invention; and (5) whether the specification enabled a person working in the relevant art to construct the item described in it.”
  • “In a recent article, Professor Lemley argues that an ultimate or overarching issue of validity existed in the late 18th century that was ‘not itself a question
    of fact,’ but was instead a question of law. . . . Given the significance of this assertion, and the fact the Respondent has already relied upon it, it requires close inspection. In short, Lemley is incorrect and he cites no authorities that support the proposition.”
  • Patent revocation via writ of scire facias did operate via the Court of Chancery.  However, according to the brief here, “The Court of Chancery always sat as a law court in these instances and always sent issues of fact related to validity to the King’s Bench for a jury trial.” “Notably, scire facias did not require fraud or inequitable conduct, as the Federal Circuit claims [in Lockwood].”

One big gap for Gómez-Arostegui is with regard to the Privy Counsel who “could also revoke patents” including when “not new.”  The last revocation in this manner was 1779 on an issue of national security.  There are, however, no records of any petitions filed after 1780 and contemporary writing suggest that the revocation process moved entirely to scire facias.   The brief suggests that, if it were available, parties would have continued to push through the Privy Counsel because scire facias was so expensive and complicated.

= = = =

Now, lets say that the Supreme Court buys the notion that patent validity was a question of law requiring a jury trial, there is still another line of important Supreme Court precedent saying that “the Seventh Amendment is generally inapplicable in administrative proceedings, where jury trials would be incompatible with the whole concept of administrative adjudication and would substantially interfere with the . . . . [agency’s] role in the statutory scheme.” Curtis v. Loether, 415 U.S. 189, 194-95 (1974), quoted in Greg Reilly, The Constitutionality of Administrative Patent Cancellation (2017).