February 2009

Accelerated Examination Case Study

The quickest patent issued in 2008: U.S. Patent No. 7,408,364 is assigned to Advanced Sensor Technologies, Inc. (King of Prussia, PA). When ASTi filed its application on a sensor for measuring moisture and salinity in May 2008, it included an accelerated examination petition, a statement of pre-examination search, and a set of examination support documents. Three weeks later, the PTO granted ASTi’s petition for accelerated examination. On June 19, the Examiner began his examination, and issued a notice of allowance for the single claim on June 20. The patent issued on August 5, 2008 – 76 days after the application was originally filed. ASTi has filed multiple continuations – at least one of which has already issued. The patent was prosecuted by longtime patent attorney Mike Catania. The median pendency for the art unit (2831) during the past year was 2.2 years – more than ten-times longer than it took ASTi to get its patent. The median pendency for the primary examiner handling the case during the same period was 2.7 years.

ASTi’s examination support documents include a discussion of nine prior art references. Catania steps through each of the cited references and explains what claim elements are missing from the references. This discussion very much parallels what an attorney would have written in an office action response. The document also discusses nonobviousness and asserts that a prima facie case of obviousness cannot be made because several claim elements are not found in any of the cited prior art references. The document then goes through each claim element and points to particular disclosure in the specification that describes and/or enables the element.

Inequitable Conduct & Cost: The two knocks against the accelerated examination system are the potential for inequitable conduct and the cost of the procedure. I have heard patent attorneys say they would never use the process because of the inherent risk. Part of the vehement reaction is historic. Before the accelerated examination process was created in August 2006, it was much easier for an applicant to put an application on the accelerated examination track through the process then known only as a petition to make special.

Inequitable conduct fears are related to potential charges of failure to conduct a proper search or misrepresentation of the prior art. Both of those are legitimate. Here, however, Catania explained the exact search terms used and the databases searched. This organized and transparent approach coupled with a competent search is unlikely to create inequitable conduct. Regarding discussion of the prior art, Catania’s write-up looks like a response to an office action. Almost every case includes at least one response to an obviousness rejection. Most cases include multiple such responses. It is difficult to tell how this strategy is more problematic than the standard approach. In fact, by providing the opening volley, Catania seems to have set the stage in a way that reduced further need to respond. The cost is certainly more because it requires a well done prior art search, search report and a discussion of the references in relation to the claims. The search & report should run under $1,000 and the discussion should be about the same cost as responding to a well reasoned office action. Although, the attorney will not need to step through the sometimes painful process of amending claims. Almost certainly, prosecution of this case was cheaper than the typical case that is allowed after an RCE and amendment. Of course, the process has a learning curve   [Mike – can you tell us how much did this cost here, and who did the search?].

What’s the Benefit: The greatest benefit of accelerated examination practice is that the patent issues much more quickly. For some clients early issuance is strategically important. From anecdotal evidence – such as this case – it appears that the PTO is more willing to immediately allow cases rather than going through the rejection churn. I believe that the PTO is assigning accelerated examination cases to primary examiners who are already more likely to allow cases quickly, without amendment, and without the notice of allowance being withdrawn because of a second-pair-of-eyes review.

For some firms, there may also be a benefit of getting the work done and paid for up front when the client is excited about the technology and the inventor still works at the company – rather than three years later when the traditional response to an office action would be done.

Documents:

Examiner SlimThugS USPTO Rap

Workplace Caution – Link has Audio Profanity

Examiner SlimThugS has an amazingly bad – but funny – USPTO Rap with video posted to YouTube. The song is titled “Dangerous” and includes lots of profanity (repeated use of mf’n). Some classic lines include:

“This attorney, he stepped up to me. He tried to knock down my 103. But you aint gonna amend past me; Cause I shot him back with a 102(b).”

“Using databases west and east everybody knows I’m the database beast. You think you can get a patent with those claims. Girl you better think twice, those claims are so lame.”

“I just found a 102(b) prior art, and now the beat down is gonna start. … I hit them with the 102(b), yeah”

http://www.youtube.com/watch?v=9PBVG4a3wNI

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Waiving Arguments at the Board of Patent Appeals

PatentLawPic692Pivonka v. Axelrod (Fed. Cir. 2009)(non-precedential)

In 2003, Axelrod asked the PTO to declare an interference against Pivonka’s patent which had issued the year prior. (Pat. No. 6,408,797). During the interference, the BPAI found Pivonka’s collapsible pet carrier claims to be unpatentable as obvious. [Link] On appeal, the Federal Circuit affirmed.

In reviewing a BPAI obviousness rejection, the Federal Circuit looks for “substantial evidence” to support any factual determinations, but reviews the ultimate question of obviousness de novo.

Here Pivonka pointed to three potential errors: (1) improperly saying that the invention has a “barn-like structure;” (2) failing to consider the patented claims individually; and (3) failing to appreciate the structural differences and functional benefits provided by the claimed invention as compared to the prior art.

The Federal Circuit dismissed these concerns in turn: (1) the reference to the barn was merely shorthand and not reversible error; (2) the applicant waived any right to have claims 2–9 considered separately by failing to make arguments on those claims earlier; and (3) the Board’s conclusion of obviousness was correct.

“Under KSR International Co. v. Teleflex, Inc. “[t]he combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.” 550 U.S. 398, 1739 (2007). According to Dr. Shina’s unrebutted affidavit [Axelrod’s Expert], both the structural benefits and the way in which to build the container claimed by Pivonka were readily apparent to a person of ordinary skill in the art. Accordingly, we find no error in the Board’s conclusion that claims 1-9 are obvious.”

The Court also rejected an argument of improper procedure based on Pivonka’s waiver of the issue before the BPAI. One important take-away from this case is that the Federal Circuit generally treats the BPAI as it would a lower court in the sense that an issue must first be raised with the BPAI in order to be ripe for appeal to the Federal Circuit. If the issue is not raised at the lower level, then any appeal will be deemed waived.

Although not directly related, I enjoyed the following recent anonymous comment to another post:

Whoever said "necessity is the mother of invention" was wrong. According to KSR, "necessity is the mother of obviousness."

Underlying the interference is a patent infringement case between Pivonka and TFH Publications (Axelrod’s assignee). That case is also on appeal but will be heard by a different panel. Interestingly, after this favorable decision, TFH requested that the case be reassigned to the Axelrod panel. The Federal Circuit denied that motion. [Link]

Federal Circuit Affirms District Court’s Extension of 30-Month FDA Stay

Eli Lilly v. Teva Pharmaceuticals (Fed. Cir. 2009)

Teva is hoping to make a generic version of Lilly’s Evista brand raloxifene tablets that are used to help prevent postmenopausal osteoporosis. In May 2006, Teva filed an abbreviated new drug agreement (ANDA) and Lilly subsequently sued for patent infringement and to block the generic release. Under the law, after the patentee files suit, the FDA cannot then approve the generic for thirty months “unless the court has extended or reduced the period because of a failure of either [party] to cooperate reasonably in expediting the action.” This is commonly known as the “thirty month stay.”

In this case, the court originally set a trial date four months after the end of the thirty month period. In the months leading up to trial Teva altered its proposed generic formulation, which changed Lilly’s litigation strategy. As a result, the district court ordered that the FDA thirty month stay be extended for four extra months – until May 2009. Teva filed an emergency appeal to lift the stay.

On appeal, a split Federal Circuit panel affirmed – finding that the district court acted within its discretion in extending the stay based on Teva’s activity. “Trial courts, thus, may shorten or extend the thirty-month statutory period based on the parties’ uncooperative discovery practices before the court.” In its decision, the court distinguished the 2002 Andrx v. Bioval case. In Andrx, the Federal Circuit found that the district court had abused its discretion in shortening a thirty-month stay based on a party’s “positions before the FDA.” Rather, changes to the thirty-month period must be based on failure to cooperate court.

In dissent, Judge Prost argued that the majority misinterpreted the statute to grant too much deference to the district court in extending the stay. Rather, the statute requires that the stay should only be extended when a party fails “to cooperate reasonably in expediting the action.” Here, Judge Prost argues, the lower court did not find that Teva failed to cooperate, but only that Lilly could use more time to respond. The statute is limited in a way that does not allow extension of the stay in that situation.

Notes:

  • Judge Rader wrote the majority opinion and was joined by Chief Judge Michel.
  • On the expedited schedule, Appellant filed its principle brief November 24, 2008; briefing was complete on December 30, 2008; Oral arguments were heard on January 14, 2009; and a decision rendered on February 24, 2009.

Merchants Warranty of Non-Infringement

Section 2-312 of the Uniform Commercial Code (UCC) discusses warranties of title against infringers. Unless disclaimed, a “merchant regularly dealing in goods of the kinds” automatically warrants to the buyer that the goods being sold are “free of the rightful claim of any third person by way of infringement or the like.” The accompanying notes make clear that when goods are sold out of the seller’s normal stock (rather than special ordered) “it is the seller’s duty to see that no claim of infringement of a patent or trademark by a third party will impair the buyer’s title.” On the other hand, if the buyer makes a special order with its own specifications, any patent liability “will run from buyer to seller” and “the buyer is under an obligation in good faith to indemnify the seller for any loss suffered.”

In the 2008 case of Pacific Sunware of California, Inc. v. Olaes Enterprises, Inc, the California Court of Appeals interpreted the parallel provision in the California Uniform Commercial Code. The court there -HISTORY focused on the phrase “rightful claim” and held that a “rightful claim” is not limited to winning claims. Rather, the seller is liable to defend the buyer against any “nonfrivolous claim of infringement that has any significant and adverse effect on the buyer’s ability to make use of the purchased goods.” (Reversing the lower court ruling).

In its analysis, the court relied upon Professor Hricik’s 1997 Texas Tech Law Review article on how to “shift liability” for patent infringement. [link]

At this point, I will note that Patently-O hereby disclaims all warrantees – especially this one.

USPTO Maintenance Fees

A large portion of PTO revenue comes through applicant’s payment of maintenance fees. Under the current fee structure, three post-grant maintenance fees must be paid in order to keep a patent from prematurely expiring. A large entity pays $980 3.5 years after issuance; $2,480 7.5 years after issuance; and $4,110 11.5 after issuance. If the fee is not paid then the patent will expire at the next 4, 8, or 12 year mark. In FY08, the PTO reported over $500 million in revenue from maintenance fees.

I wanted to look at how maintenance fees are being paid, so I downloaded the past decade of OG Notices and parsed-out notices of patent expiration. The chart below shows some results.

PatentLawPic686

The chart shows survival rates for the four (red), eight (blue), and twelve (green) year marks. Each datapoint represents the average survival rate for patents that would have expired on that date. For instance, of the 2229 utility patents that issued on December 31, 1996, the first fee was paid for 84% of the patents, the first two fees were paid for 63% of the patents, and all three fees were paied for 49% of the patents. (Note – I did not yet add-back cases that were revived due to unintentional abandonment.)

The median patent has an ordinary enforceable term of about 17 years. This is based on the twenty year term which begins at filing of the non-provisional application minus three years of prosecution. If prosecution takes longer than three years, then the term will likely be extended under the PTA provisions.

However, this data shows that the median patent term is actually cut short by about five years because applicants decide not to pay the large final fee.

A third feature to recognize from this chart is that the percentage of patents whose fees are being paid is increasing over time. However, the PTO has indicated that it expects a drop in maintenance fee payments due to the economic slump.

Judge Moore looked at expiration data for patents issued in 1991 in her paper on “Worthless Patents.” Her result is that patents were more likely to “survive” (i.e., have their maintenance fees paid) when they have more claims, more art cited, more related applications, and longer prosecution times. US corporate owners were more likely to pay the fees than individual or foreign owners. She also found that Semiconductor and Optics patents were the most likely to survive. Amusement patents were unlikely to survive.

Top Patent Blogs (according to links from other blogs)

Gene Quinn of IPWatchdog has complied the following ranking of “top patent blogs” based on their Technorati.com rating. Technorati rates blogs according to how many other blogs link-back. The actual ranking is not of much use (some of my favorites did not even make the list), but it is nice to have an updated list of sources. Thanks Gene.

(more…)

Provisional Patent Applications: Waiting to File Non-Provisionals

For better or worse, provisional patent applications have always been used as a way to delay patent prosecution. The procedure has become popular as a relatively cheap and informal mechanism for preserving priority of invention without losing patent term. Although a provisional application sets a priority date, the application does not even reach the examination queue until the full utility patent application is filed. Thus, on average, each day of delay in filing the utility patent application pushes the issue date back one day as well. However, provisional applications also serve as a mechanism for extending the tail end of the patent term because the twenty-year patent term does not begin to run until filing of the utility patent.

Provisional applications have become quite popular. In FY2007, for instance, over 132,000 provisional applications were filed and about 30% of recent patents assigned to US companies reference a provisional filing. [Link]

To see how provisional filings are being used, I compiled a set of 65,000 patents that issued sometime between Jan 2007 and Feb 2009 (inclusive). All the patents in the group share the common property of claiming priority only to one or more provisional applications. I additionally excluded patents that made other priority claims such as continuations, divisionals, and continuations-in-part. Once I formed the set of patents, I then looked at the filing date of the provisional application compared with the filing of the utility application to how applicants are using the extra year of deferred examination. For patents claiming priority to multiple provisional applications, I used the date of the earliest filed provisional application.

The graph below shows the result. The vast majority of applicants wait until the year is almost up before taking action and filing the non-provisional application. About two-thirds of the non-provisional applications were filed with less than ten days remaining in the one-year provisional pendency. In over ten percent of the cases, applicants properly filed the non-provisional more than 365 days after the original provisional filing because of weekends, holidays, and/or leap year.

200902212058.jpg

Two weeks ago, I had a conversation with a patent litigator about the propensity of patent attorneys to barely meet deadlines. He was worried about the potential for malpractice claims against his firm. And, here, I found a surprising number of cases that appear to miss the deadline.

My lingering question for patent attorneys and applicants — why delay so long? Is it simply a matter of doing work according to deadline? Does it matter that delaying filing the application also delays the eventual issuance of the patent?

Provisional Patent Applications: Waiting to File Non-Provisionals

For better or worse, provisional patent applications have always been used as a way to delay patent prosecution. The procedure has become popular as a relatively cheap and informal mechanism for preserving priority of invention without losing patent term. Although a provisional application sets a priority date, the application does not even reach the examination queue until the full utility patent application is filed. Thus, on average, each day of delay in filing the utility patent application pushes the issue date back one day as well. However, provisional applications also serve as a mechanism for extending the tail end of the patent term because the twenty-year patent term does not begin to run until filing of the utility patent.

Provisional applications have become quite popular. In FY2007, for instance, over 132,000 provisional applications were filed and about 30% of recent patents assigned to US companies reference a provisional filing. [Link]

To see how provisional filings are being used, I compiled a set of 65,000 patents that issued sometime between Jan 2007 and Feb 2009 (inclusive). All the patents in the group share the common property of claiming priority only to one or more provisional applications. I additionally excluded patents that made other priority claims such as continuations, divisionals, and continuations-in-part. Once I formed the set of patents, I then looked at the filing date of the provisional application compared with the filing of the utility application to how applicants are using the extra year of deferred examination. For patents claiming priority to multiple provisional applications, I used the date of the earliest filed provisional application.

The graph below shows the result. The vast majority of applicants wait until the year is almost up before taking action and filing the non-provisional application. About two-thirds of the non-provisional applications were filed with less than ten days remaining in the one-year provisional pendency. In over ten percent of the cases, applicants properly filed the non-provisional more than 365 days after the original provisional filing because of weekends, holidays, and/or leap year.

200902212058.jpg

Two weeks ago, I had a conversation with a patent litigator about the propensity of patent attorneys to barely meet deadlines. He was worried about the potential for malpractice claims against his firm. And, here, I found a surprising number of cases that appear to miss the deadline.

My lingering question for patent attorneys and applicants — why delay so long? Is it simply a matter of doing work according to deadline? Does it matter that delaying filing the application also delays the eventual issuance of the patent?

Provisional Patent Applications: Waiting to File Non-Provisionals

For better or worse, provisional patent applications have always been used as a way to delay patent prosecution. The procedure has become popular as a relatively cheap and informal mechanism for preserving priority of invention without losing patent term. Although a provisional application sets a priority date, the application does not even reach the examination queue until the full utility patent application is filed. Thus, on average, each day of delay in filing the utility patent application pushes the issue date back one day as well. However, provisional applications also serve as a mechanism for extending the tail end of the patent term because the twenty-year patent term does not begin to run until filing of the utility patent.

Provisional applications have become quite popular. In FY2007, for instance, over 132,000 provisional applications were filed and about 30% of recent patents assigned to US companies reference a provisional filing. [Link]

To see how provisional filings are being used, I compiled a set of 65,000 patents that issued sometime between Jan 2007 and Feb 2009 (inclusive). All the patents in the group share the common property of claiming priority only to one or more provisional applications. I additionally excluded patents that made other priority claims such as continuations, divisionals, and continuations-in-part. Once I formed the set of patents, I then looked at the filing date of the provisional application compared with the filing of the utility application to how applicants are using the extra year of deferred examination. For patents claiming priority to multiple provisional applications, I used the date of the earliest filed provisional application.

The graph below shows the result. The vast majority of applicants wait until the year is almost up before taking action and filing the non-provisional application. About two-thirds of the non-provisional applications were filed with less than ten days remaining in the one-year provisional pendency. In over ten percent of the cases, applicants properly filed the non-provisional more than 365 days after the original provisional filing because of weekends, holidays, and/or leap year.

200902212058.jpg

Two weeks ago, I had a conversation with a patent litigator about the propensity of patent attorneys to barely meet deadlines. He was worried about the potential for malpractice claims against his firm. And, here, I found a surprising number of cases that appear to miss the deadline.

My lingering question for patent attorneys and applicants — why delay so long? Is it simply a matter of doing work according to deadline? Does it matter that delaying filing the application also delays the eventual issuance of the patent?

References Cited

I compiled a list of the over five hundred thousand reference citations in the almost eighteen thousand utility patents issued in the past two months. (Jan 1, 2009 – Feb 18, 2009, excluding reissues and reexaminations). In this sample, the average patent issued with 31 cited references. This is a skewed average – the median patent only cites 15 references. The vast majority of references (77%) are introduced by the applicant during prosecution while less than a quarter (23%) are cited by the examiner.

Patent documents (including US & foreign issued patents and published applications) represent 82% of the cited documents while non-patent literature represents 18% of the total. As was noted in the comments regarding PTO search tools, PTO searches are overwhelmingly focused on patent documents. Thus, 95% of references cited by PTO examiners are patent documents. (See pie chart aside).

Although – on average – applicants submit most of the prior art, Applicants submitted absolutely no references (zero) 15% of the patents in my study, and the median number of references cited by the applicant is only 7. Applicants cite over 200 references in only 2% of cases. The PTO’s stalled IDS rules give the applicant 20 ‘free’ references that can be cited without payment of a fee or further description. About 23% of the issued patents in my sample include more than 20 references cited by the applicant. The chart below is a histogram of applicant submitted references. About 12% of patents are “off the chart.” In those cases the applicant cited more than 40 references.

Take-away: First, the data shows that applicant submitted references are substantially different from those cited by examiners. Non-patent literature is an important category of prior art that is largely missed by examiners, and the current information disclosure system does a pretty good job of getting more of that type of art in front of the examiner than he or she would otherwise see. A second point is that most of the time, examiners are not being swamped by reference submissions. It is surprising that 15% of patented cases include absolutely no applicant cited references. On the other hand, folks who submit over 200 references are deliberately choosing to do so. Generally, the very large reference volume comes in cases where the applicant knows that the innovation is important and is looking for more assured protection. In those cases, I don’t see the harm in making the applicant somehow pay for the additional resources required to review those references. [Of course, in that case, the PTO should allow more examination time as well]

The next graph shows the average number of applicant-cited references for various top-patenting companies. The size of the blue bar reflects the number of applicant cited reference on average, for that assignee’s Jan-Feb 2009 patents. (Scale at bottom). The graph is sorted so that companies with the greatest average number of cites are shown at the top. Although this is not strictly true, the difference between companies is largely a difference in areas of technology. Thus, companies patenting electronics generally cite less prior art than others. You may also notice in this list that US based companies tend to cite more prior art. The final chart in the series shows that – on average, US assignees submit over three times as many prior art references as do their foreign counterparts or patents without an assignee.

Extending Patent Terms

ScreenShot016I looked again at patent term adjustments (PTA) for US patents. 3294 utility patents were granted on February 17, 2009. Of those, 2467 (75%) included some patent term adjustment based on PTO delays in prosecution under 35 U.S.C. § 154(b). For each of these patents, some additional quantum of exclusivity is added to the end of the patent term so long as maintenance fees are paid.

The median adjustment was just over one year (376 days) with the average adjustment of 430 days. The longest adjustment in the group was over five years (1958 days). That patent (No. 7,490,438) is directed to an automobile door and is based on an application filed in 2000. In that case, the applicant appealed twice. The examiner was reversed both times. The applicant lost 11 potential PTA days for filing an IDS after the first office action.

Notes

Patent Attorney Argument as Inequitable Conduct

Rothman v. Target Corp. (Fed. Cir. 2009)

A New Jersey jury found Rothman’s patent invalid, not infringed, and unenforceable due to inequitable conduct. (Pat No. 6,855,029). On appeal, the Federal Circuit reversed the inequitable conduct holding, but otherwise affirmed.

Obviousness: The asserted patent covers a breastfeeding shirt that includes a concealed, but fully supportive nursing bra. The original prototype was built by Ms. Rothman by sewing a Jockey brand tank-top together with an Olga brand nursing bra and some additional fabric. Thus, here we have a situation where the inventor took off the shelf items and took a few hours (a day into the night) to form them into a new combination. The appellate panel recognized that the particular manner in which an invention is actually made does not negate patentability. However, the appellate panel did see the simple inventive process as evidence of “the predictability and expectations in this field of art.” Based on these facts, the court could find no reason to disturb the obviousness holding since a PHOSITA “would have been motivated to combine an existing tank top with an existing nursing bra to arrive at the claimed invention.”

Inequitable Conduct: The Federal Circuit reversed the jury’s finding of inequitable conduct. One point of interest involved the patent attorney argument that “nursing garments are highly specialized … as distinguished from maternity garments, [and] are not analogous prior art to women’s garments in general…. Therefore, it is improper to combine a prior art reference from nursing garments with a prior art reference from garments generally, with no connection to nursing garments.” It turned out that the patent attorney had no prior experience in nursing garment technology and did not consult any industry experts before making his claims regarding the ‘highly specialized’ nature of the art and the impropriety of combining prior art.

The Federal Circuit no problem with these attorney statements:


[The attorney’s] remarks show an effort to persuade that does not even approach an effort to deceive the PTO or abuse the prosecution process. …

Appellees find fault with the final sentence from the excerpt above. However, [the attorney’s] conclusion that it is “improper to combine a prior art reference from nursing garments with a prior art reference from garments generally, with no connection to nursing garments” is nothing more than attorney argument based on the foregoing facts … [derived] from his analysis that nursing garments are different from regular women’s wear. … In any event, this type of conclusory analysis betrays no intent to deceive the PTO and obtain a patent with objectively false information. Rather, it is an attempt to characterize the prior art in a manner favorable to the attorney’s client—far from deception. No reasonable jury could rely on Mr. Jacobson’s statements as clear and convincing proof of inequitable conduct.

While the law prohibits genuine misrepresentations of material fact, a prosecuting attorney is free to present argument in favor of patentability without fear of committing inequitable conduct. . . . This court has little basis to find deceptive intent in the routine back and forth between examiner and applicant. Moreover, this court recognizes that the Patent Act gives the examiner the discretion to reject or accept an applicant’s arguments based on the examiner’s own conclusions regarding the prosecution record.

Attorneys should take this decision with a grain of salt based on the fact that Judge Rader authored the opinion and Judge Friedman was on the panel. Judge Rader is well known for his opinion that inequitable conduct is too liberally adjudged.

Federal Circuit Takings Case: Set Up for Supreme Court Review

Casitas Municipal Water v. US (Fed. Cir. 2009) (en banc denial) (MAYER, SCHALL , and MOORE*)

Casitas is not a patent case, it is a takings case involving regulatory restrictions on water use imposed by US Government. The Federal Circuit has jurisdiction over this takings claim against the US Government because it is on appeal from the Court of Federal Claims (CFC). Although the Federal Circuit has denied the Federal Government’s motion for en banc rehearing, a set of diverging opinions sets this case in position for likely Supreme Court review.

History: The Ventura River Project provides water supply to Ventura County, California. In 1956, the US Government granted the local government the “perpetual right to use all water that becomes available through the construction and operation of the Project.” Then, in 1997, steelhead trout living in the Project became an endangered species under the Endangered Species Act (ESA), and the US Government required that Casitas construct a fish ladder and divert water over the fish ladder. Casitas complied, but filed suit in the CFC alleging that the Federal Government had taken its property without just compensation (and also under breach of contract). The CFC classified the Government action as “regulatory” rather than a “physical.” In takings law, compensation for regulatory takings is much more difficult to obtain, and Casitas admitted that it could not prove the required elements. This conclusion followed the Federal Government argument that “it did not seize, appropriate, divert, or impound any water, but merely required water to be left in the stream.”

Appeal: On appeal, the Federal Circuit reversed. Writing for the majority, Judge Moore concluded “that the government physically appropriated water that Casitas held a usufructuary right in.”

Here, the government admits for the purposes of summary judgment that it required Casitas to build the fish ladder facility, which is a man-made concrete structure that was not a portion of the existing … The government also admits that the operation of the fish ladder required water, which prior to the fish ladder’s construction flowed into the Casitas Reservoir … Specifically, the government admits that the operation of the fish ladder includes closing the overshot gate …and that the closure of this gate causes water that would have gone into the Casitas Reservoir via the Robles-Casitas Canal to be diverted into the fish ladder. … These admissions make clear that the government did not merely require some water to remain in stream, but instead actively caused the physical diversion of water away from the Robles-Casitas Canal … and towards the fish ladder, thus reducing Casitas’ water supply.

In dissent, Judge Mayer rejected the physical takings argument. At base, he argued, Casitas does not actually own the water. Rather, under California law, all water sources within California “belong to the public.” Even if Casitas did own the water flow, Mayer would have seen the endangered species requirements as regulatory because the requirements simply force a specific use of the water rather than take it away.

En Banc Rehearing: In what looks like a 7-5 (or 6-6) vote, the Federal Circuit denied a rehearing en banc. Judge Moore wrote a new opinion defending her original approach in the original opinion. In particular, Judge Moore focused on the “facts as presented” in the case. “[T]he government conceded (1) that Casitas had a property right in the water diverted from the Ventura River, and (2) that the government required Casitas to build and operate the fish ladder in such a way as to permanently appropriate water in which Casitas had the conceded property right.” Based on those two facts, the holding of a physical takings was easy.

Judge Gajarsa would have heard the case en banc. Gajarsa (joined by Chief Judge Michel and Judge Dyk) saw the taking as clearly regulatory in form because nothing had actually been taken by the US Government.

This denial implicates fundamental questions regarding takings law. The panel majority’s opinion suggests that a government action can be construed to be a physical taking even if no physical proprietary interest has actually been taken by the United States. This is contrary to present Supreme Court law and contrary to our case law. Accepting this analysis of the panel majority eliminates the fine distinction and balance that has been established by the Supreme Court between physical and regulatory takings. Moreover, it eliminates the ability of the legislature to provide for limited and parsimonious legislation protecting endangered species.

Notes:

  • Republican vs. Democrat: Moore’s position is clearly one of stronger property rights while Gajarsa/Mayer’s position is in favor of regulatory power of the government. It appears that this decision falls along political lines. Those thinking of the regulation as a physical taking (Moore, Schall, Rader, JJ) are all Republican appointees. Three of the five thinking of the regulation as regulatory in nature are Democratic appointees (Linn, Dyk, Gajarsa, JJ are all Clinton appointees; Michel, CJ, and Mayer, J, are Reagan appointees). At least three of the four other judges voted to deny a rehearing. Of those four, three are Republican appointees (Newman, Lourie, Prost, JJ, are all Republican appointees; Bryson, J, is a Clinton appointee). As you can see here, eight of the twelve active Federal Circuit judges are Republican appointees.
  • En Banc Denial
  • Original CAFC Opinion: Casitas Mun. Water Dist. v. United States, 543 F.3d 1276 (Fed. Cir. 2008).
  • Original CFC Opinion

Percent of Patents Discussing “Microsoft,” part II

In an earlier post, I introduced some data relating to patents that discuss Microsoft somewhere in the patent document. That post showed that almost 5% of newly issued patents refer to the software giant in some way. That data also showed a strong upward trend over time. The post received a few interesting comments as well as a few suggestions. [LINK] In response, I have added some additional data to the graphs. The first graph below shows the percent of patents that discuss Microsoft (in blue) and now also includes the percent of patents that are assigned to Microsoft (in red). Several years ago, Microsoft publicized their intention to obtain a large number of patents. That intention is becoming a reality, and Microsoft recently obtained its 10,000th patent. However, only about 20% of patents that discuss Microsoft are actually assigned to the company.

The next graph compares the patents discussing “Microsoft” with other products/companies. Here, I include patents that discuss “Microsoft” (blue), “UNIX” (green), “LINUX” (red), and “Apple” (tan). UNIX has seen some growth, but not much since the mid 1990’s. In the past couple of years, the number of LINUX patents have grown dramatically, but still pale in comparison to Microsoft patents. Although the absolute numbers for LINUX related patents are still small, they are surprisingly high based on the anti-patent lore of LINUX developers. Apple has remained steady over the years. Of course, my results for Apple should be tempered by the false positive results that actually refer to the fruit rather than the computer company or its products.

An issue in all these graphs is time lag. The time lag of issued patents may be easily seen by searching for patents that discuss “Google.” – The result is only 1342 patents but 4682 published applications.

Brief post on the stimulus [updated]

pic-9.jpgTo put $800 billion in perspective, I like to think in terms of households. In the US, there are around 115 million households with a little under three persons per household. Simple division gives us $7,000 per household. The median household income of Patently-O readers is at least two to three times greater than the national median of $50,000. The income-correlated cost will be at least proportional — pushing $20,000 for Patently-O households.

A weak economy has little demand for patent attorneys. Patent attorneys make less money, clients disappear, and law firms close. Although patents can be countercyclic, on average they are not – especially in a sustained downturn.

In the 1990’s, I taught high-school level math and physics as a Peace Corps volunteer in Ghana, West Africa. Many of my students were smarter and certainly harder working than their American counterparts. Yet, the Ghanaians have an expected per capita income of just under $1,000 per year. Those kids are a victim of circumstance. In the US, we reap the windfall of circumstance. Our individual income levels are within our control only to a certain extent.

The bottom line here is that this additional $20,000 cost is worth while … if it works. I guess that we’ll find out.

Obviousness; Scope and Content of the Prior Art; Secondary Considerations

Süd-Chemie v. Multisorb Technologies (Fed. Cir. 2009)

Süd-Chemie holds a patent covering a desiccant container for keeping products dry in shipment. In an infringement action, the Kentucky district court found the patent invalid as obvious. On appeal, the Federal Circuit vacated – holding that the lower court had erred in its analysis of the scope and content of the prior art. There are two primary take-away points from Sud-Chemie. First, obviousness jurisprudence continues to require detailed analysis of the claims and the prior art. I.e., KSR did not suddenly allow handwaving as a substitute for evidence and clear argument. Second, well presented secondary indicia of nonobviousness continue to be important in rebutting obviousness allegations.

Here, the claimed patent required the use of “compatible polymeric materials” used in a laminate seal. The prior art disclosed the use of laminate materials taken from the same general class of materials. However, the Federal Circuit recognized that the prior art did not specify that the selected materials be “compatible” in a way to allow for a proper laminate seal.

This is a case where a definition of the claim term in the specification greatly aided the patentee. The specification defined “compatible” materials as those that “mix on a molecular scale and will crystallize homogeneously.” The prior art reference did not teach this form of compatibility. In fact, the prior art appeared to teach “incompatible” materials.  

Multisorb ignores the fact that while the ’942 patent requires the inner surfaces of the laminate and microporous films to have similar softening points, Komatsu [the prior art] requires the films to have dissimilar softening points. Komatsu thus does not teach the use of a microporous film that is compatible with the inner surface of the laminate film.

Looking at secondary considerations, the Federal Circuit instructed district courts to “attend carefully to any evidence of … secondary considerations of nonobviousness.” Here, the focus is on the surprising and unexpected result that compatible materials formed stronger bonds even without adhesive.

The Federal Circuit did not apply these findings to form a conclusion on the issue of obviousness. Rather, the court remanded for further development of the facts.

[NOTE- This decision is from January 2009]

Federal Circuit Finds DJ Jurisdiction Even After Time-Limited Covenant Not To Sue

Revolution Eyewear v. Aspex Eyewear (Fed. Cir. 2009)pic-8.jpg

After several years of litigation, the patentee-plaintiff Revolution delivered a covenant not to sue to Aspex. The covenant was limited to the asserted patent and to activities prior to dismissal of the action. The district court dismissed the case, but Aspex did not let go. The accused infringer wanted assurances that it could continue selling the accused version of its eyeglass design without worrying about future charges of infringement.

In the appeal, Judge Newman agreed that a case or controversy continues to exist and that under MedImmune, the district court still retains jurisdiction. In the backdrop, the Newman was careful to differentiate this case from those where an accused defendant may be hoping to seek a speculative judicial opinion on future product lines:

This case is of larger substance than merely a would-be competitor seeking to test the waters by way of an advisory judicial opinion on an adverse patent….These parties are already in infringement litigation initiated by the patentee, the case has been pending since 2003, and already has produced a summary judgment of invalidity (which was later vacated by this court, 175 Fed. Appx. 350); the patentee filed its covenant in 2007, after four years of litigation, on the eve of trial of the question of enforceability. Throughout this period the accused eyewear were removed from the market by Aspex, and would not be shielded by the covenant should it be returned to the market, as Aspex states is its intention. Aspex states, and Revolution agreed at the argument of this appeal, that it is reasonable to believe that Revolution will again file suit should Aspex return to this market with the same product as it previously sold. By now barring the counterclaims that have been pending since 2003, Aspex states that this court would enable the “scare-the-customer-and-run” tactics that were deplored in Arrowhead.

Dismissal Reversed. On remand, the lower court retains subject matter jurisdiction over the declaratory judgment counterclaims.

Percent of Patents Discussing “Microsoft”

I looked at all patents that include the word “Microsoft” somewhere within the patent document. These include patents assigned to the company as well as well as patents that simply refer to Microsoft in the specification or list of cited references. That almost 5% of new all patents refer to the software giant is a sign that the company’s technology serves as a creative platform for ongoing developments.