December 2008

On the Price Elasticity of Demand for Patents

In a recent working paper, two European economists studied the price elasticity of demand for patents based on data from past twenty-five years. Their empirical result – the demand for patents is responsive to price, but relatively inelastic. I have created the following table showing where their result fits in the overall elasticity schema of goods and services.

Good

Estimated Elasticity

Description

Salt

0.1

Highly Inelastic

Patents

0.4

Inelastic

Legal Services in General

0.4

Inelastic

Utilities

0.4

Inelastic

New Tires

1.0

Moderate

Restaurant Meals

2.3

Elastic

Chevrolet Automobiles

4.0

Elastic

Elasticity is simply a way to measure (or estimate) the how the demand for a good changes in response to a change in the price of that good. Their results essentially show that pricing mechanisms could be effective in shaping applicant behavior, but that a significant result would require a dramatic change in fees. From a historical perspective, the authors attribute at least part of the “boom” in patent filings to a relative fee reduction and generally “very inexpensive” fees. “Higher fees would … [help] reduce the upward trend in propensity to patent.”

Notes:

  • Read the paper: On the Price Elasticity of Demand for Patents by Gaetan de Rassenfosse and Bruno van Pottelsberghe de la Potterie. [LINK]
  • Historical data is only available for a limited range of pricing schemes.  In his paper on Patent Demand Tim Wilson proposes raising the patent filing fee to $50,000 with the assumption that the demand for patents becomes more elastic as the price becomes dramatically higher.  

What Happens After the BPAI Reverses an Examiner Rejection

Even after the Board of Patent Appeals and Interferences (BPAI) reverses an examiner’s rejection, the case is returned to the same examiner to ensure that the application is in condition for allowance. 37 CFR 41.54. At that point, the examiner is not allowed to make another search for prior art. However, the examiner may reopen prosecution and enter a new grounds for rejection “[i]f the examiner has specific knowledge of the existence of a particular reference or references which indicate nonpatentability of any of the appealed claims.” MPEP §1214.04. According to the MPEP, reopening prosecution requires written approval of the Technology Center Director.

To get a sense of how this post-reversal process operates in practice, I looked at a set of 149 decisions from 2006 where the BPAI had reversed examiner rejections. In 80% of cases, the examiner accepted the BPAI decision and did not re-open prosecution. In these cases, a patent generally issued within nine-months of the BPAI decision (median of six months) unless the applicant caused some delay. A typical delay is seen in IBM’s Application No. 10/047,116. After winning an appeal on nonobviousness grounds and receiving a notice of allowance, IBM failed to pay the issue fee in a timely fashion. The patent finally issued after the PTO granted a petition to revive.

In the remaining 20% of the reversals, the PTO re-opened prosecution by offering new grounds for rejection. Occasionally the new grounds are suggested by the BPAI but more often they come from the examiner and fall under §101, §103, or §112. The current status of those re-opened cases from my 2006 sample can roughly be broken into thirds: a third of the cases were eventually patented despite the new rejection; a third of the cases are still pending; and a third of the cases were abandoned after the PTO continued to press its case. A handful of the pending cases are on their way to the BPAI for a second go-round.

Notes:

  • One PTO insider takes issue with my statement that after being reversed “the examiner is not allowed to make another search for prior art.” The MPEP §1214.04 states that “[t]he examiner should never regard such a reversal as a challenge to make a new search to uncover other and better references.” According to the insider, that statement is not a prohibition on making a new search, but only a “discouragement.” In practice, new searches are conducted and, if new art is found the PTO will reopen prosecution.

Federal Circuit Transfers Case Out of Texas (Applying New Fifth Circuit Precedent)

In re TS Tech USA Corp. (Fed. Cir. 2008) (precedential order)

Responding to an interlocutory petition for a writ of mandamus, the Federal Circuit has ordered a patent case transferred from Judge Ward’s courtroom in the Eastern District of Texas to the Southern District of Ohio. Both venues were “proper,” but the appellate panel found the Ohio venue “far more convenient.”

In 2007, Michigan based Lear Corp (not Lear Jets) sued TS Tech for infringing its patent covering a pivotable vehicle headrest. The accused TS headrest assemblies were supplied to Honda and used in the Civic and Accura RDX. TS is a Japanese company, but the defendants are TS’s North American subsidiaries headquartered in Ohio and Canada.

In 2008, the Fifth Circuit (TX, LA, MS) decided another venue case on mandamus – finding that cases should be transferred from the Eastern District of Texas when the new venue is “clearly more convenient.” In re VW (5th Cir. 2008) (en banc)(cert petition pending). On mandamus, a lower court’s refusal to transfer will only be reversed if it produces a “patently erroneous result.”

Here, the lower court erred in its application of 5th Circuit law in several ways:

  • Plaintiff’s Choice: The lower court gave too much (“inordinate”) weight to the plaintiff’s choice of venue.
  • Distance from Home: When a defendant is more than 100 miles from home, “inconvenience to witnesses increases in direct relationship to the additional distance to be traveled.” Here, all the witnesses are in Michigan, Ohio, and Canada. All of those witnesses “would need to travel approximately 900 more miles to attend trial in Texas than in Ohio.”
  • Physical Evidence: “Because all of the physical evidence, including the headrests and the documentary evidence, are far more conveniently located near the Ohio venue, the district court erred in not weighing this factor in favor of transfer.”
  • Public Interest: Texas has no interest in handling this patent dispute since the only relevant connection to the venue is that some vehicles containing the accused headrest assembly were sold in the venue. “None of the companies have an office in the Eastern District of Texas; no identified witnesses reside in the Eastern District of Texas; and no evidence is located within the venue.” Thus, the “citizens of the Eastern District of Texas have no more or less of a meaningful connection to this case than any other venue.”

Patently erroneous: Although “patentably erroneous” is difficult to define, the Federal Circuit found the errors sufficient to grant the writ. They reasoned that the 5th Circuit VW case – where mandamus was also granted – was based on essentially identical errors.

Transfer Ordered.

Tags:

Patently-O Bits and Bytes No. 84

  • USPTO News: Although the move has been in the works for some time, Raymond Chen is now Solicitor of the USPTO and Deputy General Counsel for Intellectual Property Law. Chen’s JD is from NYU. He also has a BS in electrical engineering from the UCLA. Prior to joining the solicitor’s office, Chen was a technical assistant at the United States Court of Appeals for the Federal Circuit. Chen’s parents were both engineers as well.
  • Voting: Patently-O is in second place in the ABA Blog championship. Vote for Patently-O here.
  • Suing the Software Giants: In 1998 three central-Indiana inventors filed for patent protection iconic software. The claims – finally issued in 2008 – cover a method of using icons that look like the content of the files they represent. The first named inventor – Greg Swartz – moved to Arizona and has recently filed an infringement complaint in that state. Defendants include Google (Chrome Browser), Microsoft (Vista), and Apple (iPhone). (U.S. Patent No. 7,346,850; ArsTechnica). The Niro firm is representing the patent holder – Cygnus Systems. An additional continuation is pending. The complaint can be found through Stanford’s LexMachina Database.

Patently-O Bits and Bytes No. 84

  • USPTO News: Although the move has been in the works for some time, Raymond Chen is now Solicitor of the USPTO and Deputy General Counsel for Intellectual Property Law. Chen’s JD is from NYU. He also has a BS in electrical engineering from the UCLA. Prior to joining the solicitor’s office, Chen was a technical assistant at the United States Court of Appeals for the Federal Circuit. Chen’s parents were both engineers as well.
  • Voting: Patently-O is in second place in the ABA Blog championship. Vote for Patently-O here.
  • Suing the Software Giants: In 1998 three central-Indiana inventors filed for patent protection iconic software. The claims – finally issued in 2008 – cover a method of using icons that look like the content of the files they represent. The first named inventor – Greg Swartz – moved to Arizona and has recently filed an infringement complaint in that state. Defendants include Google (Chrome Browser), Microsoft (Vista), and Apple (iPhone). (U.S. Patent No. 7,346,850; ArsTechnica). The Niro firm is representing the patent holder – Cygnus Systems. An additional continuation is pending. The complaint can be found through Stanford’s LexMachina Database.

Gilbert Hyatt: BPAI Erred in Aggressive Grouping of Claims

Hyatt v. Dudas (Fed. Cir. 2008)

Gilbert Hyatt has been famous for his early microprocessor patents. This appeal “concerns the patentability of approximately 2,400 claims in twelve related patent applications … that claim priority … to the early 1980s or before.” Since being filed, all twelve applications have also been “amended to add hundreds of claims that were not included in the original applications.”

The PTO examiner rejected all the claims in all twelve applications – most commonly for lacking proper written description. On appeal, the BPAI refused to independently review each of Hyatt’s claims, and instead only considered the twenty-one claims that he had discussed in the “Summary of the Invention” section of the BPAI briefs. Appealing that decision, Hyatt convinced the DC district court that the BPAI had improperly selected the representative claims. The PTO now appeals that district court decision.

On appeal, the Federal Circuit affirmed – finding that the BPAI cannot create a representative claim by simply grouping all claims rejected for lacking written description under the same “ground of rejection” “unless the claims share a common limitation that lacks written description support.” 37 CFR 1.192(c)(7).

“[T]he applicant can waive appeal of a ground of rejection, and can waive the right to demand additional subgrouping of claims within a given appealed ground. But the applicant cannot waive the Board’s obligation to select and consider at least one representative claim for each properly defined ground of rejection appealed.”

Affirmed. On remand, the BPAI must consider “all grounds of rejection challenged by Hyatt. . . However, the Board is free on remand to apply the rule of waiver to any grounds of rejection not contested by Hyatt in his initial appeals to the Board, provided that such grounds do not become relevant on remand due to realignment of the representative claims or other aspects not previously at issue.”

Notes:

  • 2400 claiming priority thirty years back…

PTO must interpret claims in light of specification and as they would be interpreted by PHOSITA

In re Wheeler (Fed. Cir. 2008) (non-precedential).

Wheeler’s patent application covers a fishing pole with an illuminated transparent rod. A light in the handle illuminates the whole rod. The BPAI found the invention anticipated by another illuminated fishing rod patent. On appeal, however, the Federal Circuit reversed.

The difference is one of claim construction. The BPAI held that the claim only required a portion of the rod be illuminated, but the Federal Circuit interpreted the claims to require that the entire rod be illuminated. Since the prior art only disclosed a partially illuminated rod, the question of anticipation turned on this claim construction issue.

PTO Claim Construction: As with district court decisions, BPAI claim construction decisions are reviewed de novo on appeal. However, the law of claim construction allows the PTO to construe claims much more broadly than would a district court. In particular, during prosecution, claims are given their “broadest reasonable interpretation to facilitate precision in claiming.” Of course, even at the PTO “claim language should be read in light of the specification as it would be interpreted by one of ordinary skill in the art.”

Here, Wheeler’s patent claims “an illuminated fishing pole…made from a transparent, flexible material.” The specification also states that the entire fishing rod is transparent and lighted along its length. Applying its interpretation, the Federal Circuit found that the claim required that the entire rod be transparent and lit. Because that limitation was not found in the prior art, the claim is considered novel.

Chamber of Commerce Calls for Internal Changes at the PTO

The US Chamber of Commerce has released a set of recommendations for President Elect Obama in dealing with the USPTO. Some highlights below:

  • Comparing the past twenty years:

     

Year

Budget (Mil)

Patent Examiners

New Apps

Total Backlog

Pendency (Months)

1988

$144

1,540

148,000

268,000

20

1998

$567

2590

240,000

481,000

24

2008

$1,915

5,960

463,700

750,600

32

    

  • The PTO should use “fee and order of examination incentives” to encourage applicants to provide higher quality applications and information disclosures. Thus, instead of making a hard cut-off for RCE filings, the PTO should consider charging an “increasing fee for successive continuations or RCE filings.”
  • The PTO should allow oversight and transparency in its quality review process.
  • The Second-Pair-of-Eyes Review program “seems to be breeding a negative attitude among examiners and many applicants. The concept of quality review is essential, but the focus needs to change so that poor, unjustified decisions are not made in the alleged interest of quality.”
  • The next PTO director should have experience in patent prosecution and litigation.
  • Deferred Examination: “If the PTO cannot reduce its backlog through other means and the number of patent filings continues to increase, consideration should be given to allowing patent applicants to defer examination of their applications for perhaps up to three years.”
  • Key contributors to the report include Dana Colarulli (Legislative lead for the IPO); Q Todd Dickinson (former PTO director); Nicholas Godici (former PTO commissioner of patents); Esther Kepplinger (former director of patent operations at the PTO); Mike Kirk (former deputy commissioner of patents); Stephen Kunin (former director of patent examination policy for the PTO); Gerald Mossinghoff (former PTO director); Charles Van Horn; and Herb Wamsley (IPO) .
  • Read the Report.

Patent Law School Exam: Essay No. 2

2. (25 POINTS) AlphaDog’s US patent has one claim:

1. A method of paying a company executive comprising:

Calculating a salary, wherein the salary is calculated by multiplying the average non-executive company employee income by an X-factor, wherein the X-factor is between 10 and 99; and

Paying the executive the salary.

During examination, the claim was amended. As originally filed, the claimed X-factor range was "between 10 and 120." AlphaDog had amended the claim to avoid a prior art reference that discussed paying executives over 100-times the average employee salary. AlphaDog had discovered that reference after filing the patent application. The company amended the claims, but did not tell the patent office of the reference (believing that it was no longer relevant to the claimed invention).

BetaDog has two employees – the CEO and her secretary. BetaDog’s CEO is paid 9-times the salary of the secretary. Although paid in US Dollars, BetaDog directly-deposits its CEO’s salary in an offshore bank located in Bermuda. AlphaDog sues BetaDog and its CEO for patent infringement. Explain the relevant legal issues, and figure out who wins and loses.

Federal Circuit Affirms (Not) “Obvious to Try” Jury Instructions

Rentrop v. Spectranetics Corp. (Fed. Cir. 2008)

Dr. Rentrop is the chief of research at St. Vincent’s Hospital in NYC. For several years Rentrop used Spectranetics optical catheters to deliver LASER treatment. The Spectranetics catheters came in various tip diameters ranging from 1.4 mm to 2 mm. Finding those diameters too inflexible, Rentrop had the idea of using a 0.9 mm tip. Rentrop told Spectranetics of his idea and help them to create a prototype. Eventually Spectranetics obtained FDA approval and began marketing. In the meantime, the parties began to dispute over financial issues. Rentrop wanted a cut of the profits and so he filed for patent protection and eventually sued Spectranetics for infringement. The jury awarded $500,000 in damages.

On appeal, the Federal Circuit quickly affirmed. The most interesting legal issue of the case involves the pre-KSR jury instructions. The first part focused on the teaching-suggestion-motiviation test:

“In evaluating the scope and content of the prior art, you should keep in mind that there must have been some suggestion for a person skilled in the art to make the combination covered by the claims of the patent in issue in order for the claims to have been obvious. In other words, a claim in a patent is not obvious and invalid, simply because the claim combines elements that can all be found among the prior art references. It must have been a motivation or a suggestion to combine the limits in a manner disclosed by the patent.”

The Federal Circuit found this instruction proper – in context – because the instructions defined motivation as potentially arising “from common knowledge, or common sense of the person of ordinary skill in the art, without any specific hint or suggestion in a particular reference.”

Obvious to Try: The jury instruction on obviousness also included the statement that a “the test for obviousness is not whether or not it would have been obvious to try to make the invention.” The defendant argued that the instruction violates KSR. In KSR, the Supreme Court held that the Federal Circuit was in error to hold that a “patent claim cannot be proved obvious merely by showing that the combination of elements was obvious to try.” The Federal Circuit, however, was able to logically reconcile the two statements – noting that the jury instruction “does not imply that a showing that the specific combination of elements was obvious to try is insufficient to find obviousness.”

Notes:

  • Northern District of California Chief Judge Vaughn Walker authored the opinion while sitting by designation on the Federal Circuit.
  • Spectranetics recently filed for ex parte reexamination of two of Rentrop’s patents. [LINK]

Federal Circuit Affirms (Not) “Obvious to Try” Jury Instructions

Rentrop v. Spectranetics Corp. (Fed. Cir. 2008)

Dr. Rentrop is the chief of research at St. Vincent’s Hospital in NYC. For several years Rentrop used Spectranetics optical catheters to deliver LASER treatment. The Spectranetics catheters came in various tip diameters ranging from 1.4 mm to 2 mm. Finding those diameters too inflexible, Rentrop had the idea of using a 0.9 mm tip. Rentrop told Spectranetics of his idea and help them to create a prototype. Eventually Spectranetics obtained FDA approval and began marketing. In the meantime, the parties began to dispute over financial issues. Rentrop wanted a cut of the profits and so he filed for patent protection and eventually sued Spectranetics for infringement. The jury awarded $500,000 in damages.

On appeal, the Federal Circuit quickly affirmed. The most interesting legal issue of the case involves the pre-KSR jury instructions. The first part focused on the teaching-suggestion-motiviation test:

“In evaluating the scope and content of the prior art, you should keep in mind that there must have been some suggestion for a person skilled in the art to make the combination covered by the claims of the patent in issue in order for the claims to have been obvious. In other words, a claim in a patent is not obvious and invalid, simply because the claim combines elements that can all be found among the prior art references. It must have been a motivation or a suggestion to combine the limits in a manner disclosed by the patent.”

The Federal Circuit found this instruction proper – in context – because the instructions defined motivation as potentially arising “from common knowledge, or common sense of the person of ordinary skill in the art, without any specific hint or suggestion in a particular reference.”

Obvious to Try: The jury instruction on obviousness also included the statement that a “the test for obviousness is not whether or not it would have been obvious to try to make the invention.” The defendant argued that the instruction violates KSR. In KSR, the Supreme Court held that the Federal Circuit was in error to hold that a “patent claim cannot be proved obvious merely by showing that the combination of elements was obvious to try.” The Federal Circuit, however, was able to logically reconcile the two statements – noting that the jury instruction “does not imply that a showing that the specific combination of elements was obvious to try is insufficient to find obviousness.”

Notes:

  • Northern District of California Chief Judge Vaughn Walker authored the opinion while sitting by designation on the Federal Circuit.
  • Spectranetics recently filed for ex parte reexamination of two of Rentrop’s patents. [LINK]

Federal Circuit Proposed Timing Rules

The Federal Circuit has proposed a couple of rule changes:

  • Amicus Brief: Any amicus curiae brief or motion for leave to file the brief will now need to be filed within 14 calendar days from the filing of the petition or response that the amicus curiae supports. (When supporting neither party, the amicus brief or motion must be filed within 14 calendar days of the filing of the petition).
  • Rehearing Timing: A petition for rehearing may be filed within 30 days after entry of judgment.

Any comments are due to the court clerk by January 16, 2008.

[Notice]

Federal Circuit Proposed Timing Rules

The Federal Circuit has proposed a couple of rule changes:

  • Amicus Brief: Any amicus curiae brief or motion for leave to file the brief will now need to be filed within 14 calendar days from the filing of the petition or response that the amicus curiae supports. (When supporting neither party, the amicus brief or motion must be filed within 14 calendar days of the filing of the petition).
  • Rehearing Timing: A petition for rehearing may be filed within 30 days after entry of judgment.

Any comments are due to the court clerk by January 16, 2008.

[Notice]

Patent Law School Exam: Essay No. 3

3. (15 POINTS) Under 35 U.S.C. § 112 patent claims may be invalidated as indefinite. The Federal Circuit has interpreted the law to invalidate patented claims only when those claims are “insolubly ambiguous.” The insolubly ambiguous standard is a high standard, and patent claims are quite unlikely to be found invalid under that standard. More recently, policymakers have considered lowering the standard, but only for pre-issuance patent applications undergoing patent prosecution. Is this proposal a good idea? Why?

Federal Circuit Invalidates Immunization Patent for lack of Patentable Subject Matter

Classen Immunotherapies v. Biogen IDEC (Fed. Cir. 2008)(Nonprecedential)

Judge Moore penned the one-paragraph Classen decision:

“In light of our decision in In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) (en banc), we affirm the district court’s grant of summary judgment that these claims are invalid under 35 U.S.C. § 101. Dr. Classen’s claims are neither “tied to a particular machine or apparatus” nor do they “transform[] a particular article into a different state or thing.” Bilski, 545 F.3d at 954. Therefore we affirm.”

Classen’s claims focus on several methods for evaluating vaccine immunization schedules. Claim 1 of patent 5,723,283 is reproduced below:

  1. A method of determining whether an immunization schedule affects the incidence or severity of a chronic immune-mediated disorder in a treatment group of mammals, relative to a control group of mammals, which comprises:

    immunizing mammals in the treatment group of mammals with one or more doses of one or more immunogens, according to said immunization schedule, and

    comparing the incidence, prevalence, frequency or severity of said chronic immune-mediated disorder or the level of a marker of such a disorder, in the treatment group, with that in the control group.

The claims here are quite similar to those addressed in the ill-fated Metabolite Supreme Court case. That case was dismissed by the court prior to reaching a final decision based on procedural failures.

The question left in my mind is how the step of “immunizing mammals” is properly disqualified.

Notes:

  • The panel consisted of Federal Circuit Judges Newman and Moore and District Court Judge Farnan sitting by designation from Delaware. Judge Farnan is a highly experienced patent law judge. The short opinion may well be the only consensus reached amongst the panel. I suspect that Judge Newman would write a much different “full” opinion on the case than would Judge Moore.
  • The accused infringers here include Biogen IDEC, GlaxoSmithKline, Merck & Co, Chiron, and others. I am surprised that these companies – which rely heavily on treatment method patents – would have argued strongly that the “immunizing” step was not sufficient to overcome

Federal Circuit Invalidates Immunization Patent for lack of Patentable Subject Matter

Classen Immunotherapies v. Biogen IDEC (Fed. Cir. 2008)(Nonprecedential)

Judge Moore penned the one-paragraph Classen decision:

“In light of our decision in In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) (en banc), we affirm the district court’s grant of summary judgment that these claims are invalid under 35 U.S.C. § 101. Dr. Classen’s claims are neither “tied to a particular machine or apparatus” nor do they “transform[] a particular article into a different state or thing.” Bilski, 545 F.3d at 954. Therefore we affirm.”

Classen’s claims focus on several methods for evaluating vaccine immunization schedules. Claim 1 of patent 5,723,283 is reproduced below:

  1. A method of determining whether an immunization schedule affects the incidence or severity of a chronic immune-mediated disorder in a treatment group of mammals, relative to a control group of mammals, which comprises:

    immunizing mammals in the treatment group of mammals with one or more doses of one or more immunogens, according to said immunization schedule, and

    comparing the incidence, prevalence, frequency or severity of said chronic immune-mediated disorder or the level of a marker of such a disorder, in the treatment group, with that in the control group.

The claims here are quite similar to those addressed in the ill-fated Metabolite Supreme Court case. That case was dismissed by the court prior to reaching a final decision based on procedural failures.

The question left in my mind is how the step of “immunizing mammals” is properly disqualified.

Notes:

  • The panel consisted of Federal Circuit Judges Newman and Moore and District Court Judge Farnan sitting by designation from Delaware. Judge Farnan is a highly experienced patent law judge. The short opinion may well be the only consensus reached amongst the panel. I suspect that Judge Newman would write a much different “full” opinion on the case than would Judge Moore.
  • The accused infringers here include Biogen IDEC, GlaxoSmithKline, Merck & Co, Chiron, and others. I am surprised that these companies – which rely heavily on treatment method patents – would have argued strongly that the “immunizing” step was not sufficient to overcome

Post Microsoft v. AT&T: 271(f) ExtraTerritorial Infringement Still Applies to Process Claims

Cardiac Pacemakers v. St. Jude Medical (Fed. Cir. 2008) (non-precedential)

35 U.S.C. § 271(f) defines a special cause of action for supplying components of a patented invention to be assembled abroad. 

In the 2005 Union Carbide case, the Federal Circuit seemingly expanded 271(f) to cover components used in a claimed method. Then, in the 2007 Microsoft v. AT&T decision, the Supreme Court found that 271(f) does not extend to cover foreign duplicated software.  Part of the Supreme Court’s justification for its narrow interpretation of 271(f) was based on the traditional presumption against extraterritorial application of US laws.

In this case, the asserted claims are method claims, and the accused infringer (St. Jude) argued that Union Carbide v. Shell Oil is so “flatly inconsistent” with the reasoning of Microsoft, that it too should be overturned

“The three decisions that the district court felt constrained to follow – Eolas, AT&T, and Shell Oil – have been overturned or disapproved by the Supreme Court.”

On appeal, however, the Federal Circuit simply found that “the Supreme Court’s decision does not alter [the] holding” that “271(f) applies to components used in the performance of patented methods and processes.”

As a panel, we cannot reverse the holding of another panel of this court. We thus affirm the district court’s decisions relating to damages.

BPAI: PTO Should Apply Broadest Reasonable Claim Interpretation to Section 101 Analysis

Ex parte Koo (BPAI 2008)

Acting sua sponte, a BPAI panel recently entered a new ground for rejection against an IBM patent application: That the claimed process is unpatentable subject matter based on the Federal Circuit’s recent en banc decision in Bilski. The claim is directed to a method of optimizing relational database queries and appears to be specifically directed to speeding up queries where a table is joined to itself. Although the preamble does focus on a “relational database management system,” the body of the claim does not refer to any specific machinery beyond queries, sub-expressions, rows, and sets.

The legal point to consider from this case is that the PTO will apply its “broadest reasonable” claim interpretation during its §101 analysis. Here, the BPAI panel found that the broadest reasonable interpretation of IBM’s claim does not necessarily “require computer or machine implementation” and thus that the claim fails the “tied to a particular machine” prong of Bilski machine-transformation test.

“Claim 1 does not recite any steps that necessarily involve machine implementation. While the preamble of claim 1 recites a “system,” the “system” of claim 1 is not recited in terms of hardware or tangible structural elements. Rather, the “system” could be a software system, where the elements of claim 1 are implemented solely in software or algorithms. Thus, the nominal recitation of a “system” in the preamble does not transform claim 1 into patentable subject matter under § 101.”

The BPAI also found that the claim “does not call for any transformation of an article to a different state or thing, nor does it require any transformation of data or signals.” Based on the claimed step of “reforming the query,” I would argue that the claim does require a transformation, but that transformation does not satisfy Bilski because the thing transformed (the query) is not “representative of physical objects or substances.”

Notes & Comment

  • In the appeal, the BPAI overturned the examiner’s obviousness rejection based on the absence of a “self join” in the cited prior art.
  • The disputed claim:

1. A method for optimizing a query in a relational database management system, the method comprising:

  • evaluating the query to determine whether a sub-expression of the query is being joined to itself and whether a predicate of the query comprises an equality test between a same column of the sub-expression;
  • determining whether a first row set producible from a first set of references of the query to the sub-expression is subsumed by a second row set producible from a second set of references of the query to the subexpression; and
  • reforming the query to eliminate the joining of the sub-expression to itself based on evaluation of the query and determination of whether the first row set is subsumed by the second row set.

CAFC Affirms PTO’s right to fire quality assurance specialist for 35%+ error rate.

Asokkumar Pal v. Department of Commerce (Fed. Cir. 2008)(nonprecedential)

Pal was a quality assurance specialist at the USPTO. His job was to review patent examiner decisions and determine whether the examiner made any ‘errors’ in either rejecting or allowing claims. In 2005 and 2006, the PTO reviewed 16 randomly selected cases from Pal’s file to determine whether he was properly reviewing examiner decisions. They found he was not making the correct decisions – that he erred more than 35% of the time. (A 25% error rate would have been acceptable). Acting on the advice of Pal’s supervisor and another SPE, Peggy Focarino decided to fire Pal. Focarino’s decision was upheld by the Merit Systems Protection Board (MSPB). Pal then appealed to the Federal Circuit.

Standard of Review: The Federal Circuit has jurisdiction over MSPB appeals. Most MSPB appeals to the Federal Circuit are affirmed. This result can be explained by the “highly deferential standard of review” given to the board. The Federal Circuit will only overturn an MBPB decision that is “arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law.” Factual determinations are only reviewed for “substantial evidence.” Thus, “if the Board rests its decision on evidence that could lead a reasonable mind to reach the conclusion reached by the Board, we must accept the Board’s decision.

On appeal, Pal argued that the PTO’s judgment was faulty because it only looked at 16 cases in determining his error rate rather than his entire body of work (or his work spanning his probationary period). The Federal Circuit rejected that argument finding “no requirement that the agency must use any particular method for picking which work performed … will be subject to test.” In addition, Focarino did not err in discussing the case with a SPE who was familiar with the technology.

Mr. Pal had been with the Patent Office for 25 years and had received 22 “outstanding” performance evaluations and two “commendable” performance evaluations. His performance evaluation of “unacceptable” was his last and led to this cause of action. During his years, Mr. Pal trained junior examiners, taught the MPEP, and is a registered patent agent. The MSPB had noted that “it is extremely unfortunate that the agency could not have found another position for the Appellant, who seems to have many talents and has been a successful Federal employee for most of his lengthy career.” However, the decision to fire an employee versus demote an employee is within the discretion of the PTO.

In his brief, Mr. Pal argued that other similarly situated employees had mistake rates “as high as 45-50 percent” that “were never rated unacceptable.” That argument was not addressed by the Federal Circuit.

Court Lacks Personal Jurisdiction over Foreign Patentee in Declaratory Judgment Action

Avocent Huntsville Corp. v. Aten Int’l (Fed. Cir. 2008)

Avocent (of Huntsville, Alabama) sued Aten (of Taiwan) for a declaratory judgment of non-infringement and invalidity. In a split appellate decision, the majority (Judges Schall and Linn) found that the district court lacked personal jurisdiction over Aten. The dissent (Judge Newman) would have allowed the Northern District of Alabama court to proceed with the declaratory judgment action.

Patent litigation follows the Supreme Court’s well trod standards for determining whether a court has personal jurisdiction over the parties. Courts speak in the language of minimum contacts, purposeful availment, and traditional notions of fair play. At base, the facts of each case is individually assessed to determine whether those notions have been satisfied. For specific jurisdiction in the declaratory judgment setting, the courts must also determine whether the DJ claim “arises out of or relates to” the DJ defendant’s contacts with the state.

The contacts here include (1) an infringement threat letter from Aten to Avocent mailed to Alabama and to Amazon.com; (2) distribution and sale of Aten products in Alabama through a subsidiary corporation; (3) Aten’s previous patent enforcement litigation in Texas and the ITC.

The Federal Circuit has repeatedly held that a threat letter alone is insufficient to create personal jurisdiction. Rather, for specific personal jurisdiction, the threat letter must accompany other activities related to the DJ action. In that vein, the majority also held that Aten’s “mere acts” of importing and selling products in the Alabama forum do not count as other activities because those sales do not “relate in any material way to the patent right that is at the center of any declaratory judgment claim.” Finally, personal jurisdiction is examined on a state-by-state bases. Thus, the Aten’s prior lawsuits in Texas and the ITC do not impact the issue of personal jurisdiction in Alabama. Open and shut.

In dissent, Judge Newman noted, inter alia, the lack of an alternative forum for the complaint and the existence of Alabama state law claims.