March 2006

Does the Wall Street Journal Understand Patent Law?

Articles and Publications, Patent

Last year I had a refreshing course in the positive power of patenting. We had sued a handful of companies for infringement.  They were clear copy-cats, and the cases quickly settled.  Several months later, our client sent an e-mail showing the competitors’ new product lines.  They had gone back to the drawing-board and created what was arguably a design that was even better.  Consumers are the beneficiaries with better products and even more competition.  America has always been a place of innovation — and in this case it was our patent system that forced the free-loaders to take some initiative. 

I had two companies approach me this week about patent work. They are both small businesses who want to go global.  They believe that they have great innovations, but the only way that they will have get a fair shake in the world of investors and business development is if they begin the process of securing their IP rights. 

As you may know, I am up-beat about our patent system.  Despite the bad press, there are genuine success stories that continue to drive the uniquely American innovative spirit.  Lets bring about legislative and PTO reforms to fix the problems — and I believe that there are problems — but the system is far from broken.  A complete overhaul makes interesting press, but it is not the right solution.

With all this on my mind, I was saddened by today’s Wall Street Journal’s editorial that “blame[s] the lawyers.”  Here are highlights from the paper:

  • Patents now operate to deter research and penalize innovation.
  • Patent cases are dubious if they involve patent-holders who never commercialized their inventions.
  • A third party has no standing to challenge a patent unless he is accused of infringing it.
  • The rise in filed patent applications “has less to do with genuine innovation than it does with innovative lawyers filing a patent on anything that moves.”
  • “Blame the lawyers.”

Several online articles have already been written about the editorial.  Matt Buchanan takes real issue with the over-arching blame game being played by the WSJ.  The Patent Baristas make several interesting points, including a note comparing the number of patents obtained by major corporations with those obtained by the so-called patent trolls.  This morning, an upset Patently-O reader e-mailed me about the editorial with the following comments:

Shouldn’t the writer have consulted you to get a better balanced  and more educated viewpoint?

Of course, I am apparently not so high on the speed-dial of the WSJ editors, but Stephen Nipper found an interesting response:

“It is much easier to suggest solutions when you don’t know too much about the problem.” – Malcolm Forbes.

Even the staunchly concervative IPO noted its problems with the editorial:

[T]he Journal asserted, “the percentage of [patent] approvals has climbed; approvals were close to 90% in 2000, up from 69% in 1984 . . . .” Contrast the recent speech by USPTO Director Jon Dudas at the AIPLA meeting in Palm Springs, California, in which he said approvals are now less than 60%.

CAFC: The difference between permissible repair and impermissible reconstruction cannot turn on minor details

Patent, Patent Cases 2006

Jazz Photo v. U.S. (Fed. Cir. 2006, 05–1096)

In its fourth trip to the Court of Appeals for the Federal Circuit, the U.S. Gov’t (and Fuji Film) appealed a final judgment from the Court of International Trade (CIT) that released certain Jazz disposable camera’s that had been denied entry by Customs and that ordered Customs to allow Jazz to segregate the imported shipments between permissible and impermissible imports.

Jazz refurbishes the disposable cameras in Asia and (re)imports them to the U.S.  Some of the refurbished cameras were originally sold in the U.S. and thus could be permissibly repaired, while others were originally sold outside the U.S., and their import could be blocked. (See Exhaustion).

The Gov’t argued that even under the first-sale doctrine, Jazz Photo’s reimportation of cameras should be blocked because Jazz’s work on the cameras crossed the line from “permissible repair” to “impermissible reconstruction.”  Here, the appellate panel sided with Jazz Photo.

While there is no bright-line test for determining whether a device has been permissibly repaired, it does not turn on minor details. . . . Moreover, even if the trial court did not identify the specifics of each minor operation, the fact that they were incidental . . . indicates that the court considered them to be known processes that were permissible repair. We thus discern no error in the court’s conclusion that those “various minor operations” did not make a new single use camera and thus constituted permissible repair.

The CAFC also affirmed the lower court’s order requiring Customs to support the segregation of shipments:

Customs is obligated [under 19 CFR § 19.4(b)(1)] to supervise certain activities in its warehouse and that supervision is mandatory, not discretionary. . . . Because Customs was required to supervise the segregation of the subject LFFPs in its warehouse, we see no error in the trial court’s order.

Affirmed.