September 2013

Raising Maintenance Fees for Non-Practiced Inventions

Attorney Fees, Fee Shifting, Patent

By Dennis Crouch

Post-grant patent maintenance fees offer an easy mechanism for shifting patentee behavior. In the US, patent holders must pay a maintenance fee three times during the life of an issued patent. I think of the fee as akin to property tax. When a real-property owner fails to pay the property taxes, the state forecloses. In the patent system failure to pay the maintenance fees similarly results in the property right be taken from the non-payer. However, instead of reselling the patent at auction, the government instead announces that the previously patented invention is no longer protected by any exclusive right, i.e., that the patent right has been abandoned.

Patent rights are usually thought of as normal goods in that a higher price typically leads to a lower quantity demanded. In the maintenance fee context, higher maintenance fees lead to more patents being abandoned. And, most patents go abandoned by the time that the third-maintenance fee rolls around because patent holders decide that the extra payment is not worth the extra money.

In a recent draft article titled Removing the Troll from the Thicket: The Case for Enhancing Patent Maintenance Fees in Relation to the Size of a Patent Owner’s Non-Practiced Patent Portfolio, Professor David Olson (BC) focuses on maintenance fees as a mechanism for going after entities with large patent portfolios that are not being practiced. Olson writes:

It is proposed that patent maintenance fees be increased according to a sliding scale tied to the number of non-practiced patents a patent owner has in its portfolio. Thus, as the size of a firm’s patent portfolio increases, so too does the maintenance fee multiplier charged for all its patents, beginning with the second maintenance fee due date. All patents with common ownership interests would be aggregated in determining the fee enhancement. Because the enhanced fees do not kick in until 7.5 years after issuance, incentives to invent and to disseminate should not be significantly reduced. This proposal will encourage large patent portfolio holders to pare down their holdings by determining which of their older patents are not worth maintaining. This will benefit competitors and new inventors who are currently subject to hold-up problems from large portfolios — many of which are particularly caused by old, low-value patents held en masse.

[Read the article here: http://ssrn.com/abstract=2318521]. Olson’s approach is essentially a weak version of a “working requirement” seen in some countries that makes a patent unenforceable unless it is being used by the patentee. Instead of requiring working, Olson provides a monetary incentive.

Although Olson’s article is focused on the problem of “trolls,” his proposal would have its greatest impact on large technology companies such as IBM, Samsung, Intel, and others whose patent porfolios include large numbers of patents that are not being practiced. Those companies are already “suffering” from major increases in maintenance fees implemented by the USPTO earlier in 2013.

In my mind, the largest political roadblock to implementation is the increased burden placed on patent owners to actually understand the patents that they own. Because of the complexity and highly technical nature of modern patents and patent claims, it is rarely a trivial process for a patent owner to know whether its patents actually cover its processes in place. This is especially true because patents tend to be filed well before a commercial embodiment is on the market. Olson acknowledges this problem with the statement that a “possible objection is that this Article’s proposal will be expensive and burdensome for patent holders. . . . This burden and expense should not be understated. Accordingly, it may make sense to give a fairly long lead-in time to allow firms to comply. But it should also be noted that while this will be burdensome to patent owners, the current system with all of its uncertainty as to ownership and patent coverage is burdensome and costly to others.” Olson also writes that the patent owner is the “least cost avoider” in terms of determining whether the underlying invention is being practiced by the patentee. The problem with that argument is that, under the current system, nobody even needs to ask that question because it is irrelevant to patentability or patent enforcement (except as to remedies). Hopefully in a follow-on paper, Olson can provide us with a better mechanism for judging whether his proposal is better than the status quo or other alternatives. Setting this aside, Olson’s paper comes at an opportune time as Congress is currently drafting legislation and considering proposals to address the “problem of patent trolls.”

Other Posts:

https://patentlyo.com/patent/2009/02/reinstating-pat.html

Bits & Bytes from Jonathan Hummel

Patent

RECENTLY

#1. Intellectual Ventures deals with Nest Labs, help avoid Honeywell

Jeff John Roberts, at GigaOM, reports on a deal released last Wednesday between patent behemoth Intellectual Ventures, and a maker of home thermostats, Nest Labs. While the details of the deal are not yet public, it seems likely that the deal included the sale of some patents and the licensing of others. It looks like Nest Labs is seeking refuge from the Honeywell litigation rainstorm beneath the Intellectual Ventures umbrella. Likely the deal gives Nest Labs some weapons to use against larger Honeywell in future litigation.

#2. NUEDEXTA Capsules litigation comes to an end

Wockhardt (BSE & NSE) and Avanir Pharmaceutifcals (AVNR) have reached an agreement, ending their litigation over marketing and selling of NEUDEXTA capsules. The settlement agreement grants Wockhardt the right to begin selling a generic version of NUEDEXTA on July 30, 2026, or earlier under certain circumstances.

#3. Ministry of Sound v. Spotify

Stuart Dredge, for The Guardian, reports that Ministry of Sound is suing Spotify for infringment. The dance music group, Ministry of Sound alleges that Spotify is infringing several copyrights because Spotify has failed to remove users playlists. Ministry of Sound argues that some playlists on the streaming music service mirror the group’s dance compilations. A major issue is the contribution of ordering and arranging the songs in a playlist. Spotify has the rights to stream all the tracks on the playlists in question, but the issue here is whether the compilation structure – the order of the songs – can be copyrighted.

#4. Santa Clara Professor to joins Whitehouse  Office of S&T

Colleen Chien, Associate Professor at Santa Clara University School of Law, will serve in the White House Office of Science and Technology Policy (OSTP) as senior advisor for intellectual property and innovation to Todd Park.  Professor Chien has been published extensively on patent assertion entities (she coined the term), and the secondary market for patents.

 

PENDING

#1. Google going for noise in eBooks.

Victoria Slind-Flor, at Bloomberg, reports that Google is seeking a patent covering what it calls “triggered sounds.” "Existing e-book readers don’t take 'full advantage' of their capabilities to immerse a reader, Google says. The technology covered by the patent would allow certain trigger points in the text to call forth prerecorded sounds related to the contents of the book.

Publication Number: 20130209981

Application Number: 13/397,658

 

COOL TECH

#1. Interplanetary Internet?!

Reports out of the White House Office of Science and Technology (OSTP) carry news of the first steps in creating an interplanetary internet. Phil Larson and Mike Gazarik reported that on September 6, NASA launched the Lunar Atmosphere and Dust Environment Explorer (LADEE) mission to study the thin atmosphere around the moon. However, the satellite will also be testing a new technology, the Laser Communications Relay Demonstration. This technology is supposed to allow much faster data transmission between objects in space and ground control on Earth.

 

UPCOMING EVENTS

• Intellectual Property Symposium – Oct. 4 – University of Missouri School of Law –  Columbia, MO

“Resolving IP Disputes: Calling for an Alternative Paradigm,” hosted by the Center for Dispute Resolution at the University of Missouri School of Law. The Keynote Address will be delivered by Greg Gorder, the founder and vice chairman of Intellectual Ventures.

Links:

 

• Supreme Court IP Review Conference – Sep. 26 – Chicago-Kent

The Supreme Court IP Review (SCIPR) is a conference designed to provide intellectual property practitioners, jurists, legal academics and law students with a review of IP cases from the U.S. Supreme Court's 2012 Term, a preview of cases on the docket for the 2013 Term, and a discussion of cert. petitions to watch.

  • The Honorable Diane Wood of the U.S. Court of Appeals for the Seventh Circuit will deliver the keynote address at SCIPR 2013
  • Register online for SCIPR 2013 by 12:00 pm (CST), September 23, 2013.

 

• Fair Use and Copyright Clearance for Creative Clients: A Review of Recent Case Law and Practice – 9/24

ABA section of Intellectual of Property Webinar/Teleconference

 

 

JOBS

#1. IP Attorney (Electrical Engineering / Computer Sciences) – Law Firm – McLean, Va.

  • Roberts Mlotkowski Safran & Cole, P.C. (RMSC), an  Intellectual Property Law Firm (RMSC) located in prestigious Tysons Corner, Virginia seeks a Patent Attorney with 2-5 years experience having an electrical engineering or computer sciences degree. 

 

#2. Patent Attorney / Patent Agent – Law Firm – Syracuse, N.Y.

  • Burr & Brown, a Syracuse, New York Law Firm seeks experienced patent attorneys or patent agents to handle foreign-based patent prosecution. Candidates must have substantial experience prosecuting cases before the USPTO.

 

 

Please email me at jon.hummel@patently.com with any leads for future Bits & Bytes

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Nest Labs Strikes Patent Deal With Intellectual Ventures
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Hricik: Why Section 101 is Neither a “Condition of Patentability” nor an Invalidity Defense

Patent, , ,

By Dennis Crouch

On his side of the blog, Professor David Hricik again raises the question of whether Section 101 can serve as the basis for a defense to patentability.

[https://patentlyo.com/hricik/2013/09/why-section-101-is-neither-a-condition-of-patentability-nor-an-invalidity-defense.html]

The basic notion is that the defenses to charges of patent infringement are listed in 35 U.S.C. § 282 and there is no statutory pathway for recognizing § 101 as such a defense. Hricik also discusses some amount of legislative history in drafting of the 1952 Patent Act that bolsters his conclusion. The Supreme Court approach makes sense then only by ignoring the statutory language and legislative history.

Other Posts:

There are a few potential legal challenges on this question that are rising through the process, including the Versata case (Inter partes (CBM) review on eligibility grounds). In Sinclair-Allison v. Fifth Ave. Physician (2013-1177), the accused infringer is counter-intuitively agreeing with Hricik that subject matter eligibility is not a validity defense but instead is an off-book “eligibility defense.” The point of the line of argument is that the presumption of validity shouldn’t apply to eligibility challenges.

Oral Argument Recap: Lighting Ballast Control v. Philips

Patent, , , ,

Guest Post by Jonas Anderson, Assistant Professor at American University, Washington College of Law.

This morning, the Federal Circuit sat en banc in the case of Lighting Ballast Control v. Philips.  The case is the latest and most significant challenge to the court’s de novo standard of review in claim construction cases.  In taking the case en banc, the Federal Circuit asked the parties to brief three questions:

  • Should the Federal Circuit overrule Cybor Corp. v. FAS Techs. Inc., 138 F.3d 1448 (Fed. Cir. 1998) (in which the Federal Circuit held that “as a purely legal question, we review claim construction de novo on appeal including any allegedly fact-based questions relating to claim construction.”)?
  • Should the Federal Circuit afford deference to any aspect of a district court’s claim interpretation?
  • If so, which aspects should be afforded deference?

Both parties in this case agree that de novo review is not the appropriate standard of review for all aspects of claim construction.  The parties’ positions differ, however, as to the proper scope of appellate deference: Lighting Ballast argues that the court should completely abandon its practice of de novo review and afford deference to all aspects of claim construction decisions; Universal Lighting Technologies (the appellee), on the other hand, argues that deference is appropriate only in resolving “disputed issues of historical fact.”  The PTO echoes ULT’s stance.  In a recent paper forthcoming in the Northwestern University Law Review co-authored with Professor Peter Menell of Berkeley Law School, we argue that de novo review has already been replaced at the Federal Circuit with a more deferential standard, albeit informally.  We find evidence for out theory in the significant drop in reversal rate that has occurred over the past decade: from a high of 44% of terms in 2004 to 20% reversed in 2011.

Despite both parties arguing that Cybor should be modified to some degree and numerous Federal Circuit judges having expressed that belief in prior cases, the tone of the arguments today was certainly one of skepticism.  The three main topics addressed:

National Uniformity Concerns -  Judge Lourie’s initial question was whether deference would disrupt the national uniformity of patent law that the Federal Circuit was designed to achieve.  ULT admitted that the possibility of non-uniform claim construction decisions would be a negative outcome of overruling Cybor, but FRCP 52(a) is in tension with a pure de novo review of claim construction.  The acting Solicitor of the PTO, Nathan Kelley, closed his argument by addressing the non-uniformity concern.  Kelley argued that any non-uniformity that occurred in light of a lowered deference standard would be a benefit to the public because it would result in reduced patent scope in some parts of the country.  While that is obviously not ideal, Kelley’s point was that the concern should not be an overriding one for the court since any non-uniformity is a benefit, not a burden, to the public. 

Line-drawing Problems between Issues of Fact and Issues of Law – The issue that perhaps most captivated the Judge’s attention was whether a deferential standard was workable.  Judge Moore, perhaps one of the court’s most vocal critics of Cybor, was clearly troubled with the solution offered by ULT and the PTO.  She asked for a precise definition of a “historical fact” no less than three times, and never received an answer that satisfied her.  Because claim construction is ultimately an effort to decipher the meaning that a PHOSITA would ascribe to a claim term, she feared that every claim construction decision (other than when the patentee acts as his own lexicographer) would be considered a question of fact.  Despite the PTO and appellee’s repeated assurances that their preferred level of deference would amount to no more than a “small change” in the law, Judge Moore and others (including Judge Dyk, Lourie, and Reyna) seemed troubled by the potential implications of the change.  Judge Lourie asked whether every case would now involve litigants attempting to frame legal determinations as factual determinations.

The Impact of Stare Decisis – This issue, pursued extensively by Judge Taranto, seemed to take the litigants by surprise.  Judge Taranto repeatedly asked about the court’s ability to revisit a clearly established en banc precedent with no intervening Supreme Court case or other change in the law.  Neither side seemed to have a ready answer to his question.

Judge O’Malley, who was on the original panel decision, played a pivotal role in the argument, attempting to clarify the position of the PTO and ULT.  She interpreted their position as one in which a district court judge’s decision as to the historical meaning of a claim that was based on extrinsic evidence would be given deference, but if that interpretation runs counter to the Federal Circuit’s de novo review of the intrinsic evidence the district court’s decision would not impact the case.  This middle position was clearly not satisfactory to a number of judges.  In light of the skepticism, ULT’s counsel essentially backed away from his position that Cybor should be modified; on rebuttal he suggested that the court may well not want to modify Cybor. 

Ultimately, it will be interesting to see if the court decides to maintain the de novo standard or tries to find a way to disentangle factual issues from legal ones.  As a skeptical Judge Dyk quipped about the latter option, “let’s just experiment and see how difficult it would be.”  I sense that some on the court would like to make those distinctions (Judge O’Malley in particular), but I’m unsure whether enough votes exist to make the change.  I don’t think the court will gravitate to Lighting Ballast’s position of a pure legal error standard.  Characterizing all claim construction decisions as factual seems too radical of a departure to the court. Judge Lourie appeared taken aback when Lighting Ballast’s counsel suggested that the specification should be treated as parole evidence: “That is an extraordinary argument.”  Indeed, switching from de novo review to complete deference to all district court claim construction decisions appears, at this stage, very unlikely.

Ed.: You can listen to the oral argument here.

Acting Director Rea to Step Down from USPTO

Patent

by Dennis Crouch

In a message to her USPTO colleagues, USPTO Acting Director Teresa Stanek Rea has announced her intent to leave the agency in the near future. Director Rea joined the USPTO in 2011 as Deputy Director after Sharon Barner stepped down from that position. Rea worked closely with then USPTO Dave Kappos in developing and implementing key elements of the America Invents Act. She has been Acting Director since Kappos stepped down in January 2013. Prior to joining the USPTO, Rea was a partner at the law firm of Crowell & Morning.

The Obama administration has not yet nominated a replacement for Dave Kappos. That decision has apparently been delayed for the past nine months because the position of Secretary of Commerce (the USPTO Director's Boss) was also open. Penny Pritzker has now assumed office as the 38th US Secretary of Commerce and we can expect an announcement of a new USPTO director within the next few weeks. It is unclear whether Director Rea will stay on until an appointed director takes office. If not, the usual succession decision would place Peggy Focarino with the duties of Acting Director (although without that title). Ms. Focarino is currently Commissioner of Patents.

High Point v. Buyer’s Direct – Tell me more, tell me more (about design patents and § 103)

Patent, , ,

Guest Post By Sarah Burstein, Associate Professor of Law at the University of Oklahoma College of Law

High Point Design LLC v. Buyer’s Direct, Inc. (Fed. Cir. Sept. 11, 2013) Download High Point v Buyers Direct
Panel:  Schall (author), O’Malley, Wallach

High Point Design LLC (“High Point”) and Buyer’s Direct, Inc. (“BDI”) both manufacture fuzzy slipper-socks. In this case, BDI accused High Point of infringing U.S. Des. Patent No. D598,183 (the “D’183 patent”). In May, the district court granted summary judgment in favor of High Point, concluding that the patented design was invalid as obvious and as functional. It also dismissed BDI’s trade dress claim.

The most interesting parts of this decision deal with the issue of obviousness. In the design patent context, the § 103 analysis has two steps. First, the court must identify a proper primary reference—i.e., a “something in existence” that has “basically the same” appearance as the claimed design. Second, other references can be used (assuming certain conditions are met) to modify the primary reference “to create a design that has the same overall visual appearance of the claimed design.”

In High Point, the district court identified two Woolrich slippers, the “Penta” and the “Laurel Hill,” as primary references. In particular, the district court found that the Penta slipper “looks indistinguishable” from the claimed design and that the Laurel Hill slipper had some “insubstantial” differences but “nonetheless has the precise look that an ordinary observer would think of as a physical embodiment” of the claimed design. The district court did not, however, include any images of these designs. For your reference, however, here is a chart comparing the Penta slipper to some of the drawings from the D’183 patent: 

High Point

On appeal, the Federal Circuit decided that the district court erred in its primary reference analysis in a number of ways. According to the Federal Circuit, the district court “erred by failing to translate the design . . . into a verbal description.” On this point, the court relied on its 1996 decision in Durling v. Spectrum Furniture Co., Inc. In Durling, the court divided the first step of the § 103 analysis (i.e., the determination of whether there is a proper primary reference) into two parts, instructing district courts to: “(1) discern the correct visual impression created by the patented design as a whole; and (2) determine whether there is a single reference that creates ‘basically the same’ visual impression.” According to the Federal Circuit, the district court’s analysis in High Point failed to satisfy both of these requirements.

As to the “first part of the first step”—i.e., “discern[ing] the correct visual impression”—the Federal Circuit noted that, under Durling, “the trial court must first translate [the design patent’s] visual descriptions into words,” so that “the parties and appellate courts can discern the internal reasoning employed by the trial court to reach its decision as to whether or not a prior art design is basically the same as the claimed design.”[1] The Federal Circuit found the district court’s description of the D’183 patent to be insufficient because it described the claimed design at “too high a level of abstraction.” So it reversed and remanded on the issue of obviousness, instructing the district court to “add sufficient detail to its verbal description of the claimed design to evoke a visual image consonant with that design.” The Federal Circuit did not, however, explain how much detail would be “sufficient” to meet this evocation standard.

This part of the opinion may seem strange in light of the 2008 en banc decision in Egyptian Goddess, Inc. v. Swisa, Inc., in which the Federal Circuit cautioned district courts against “attempt[ing] to ‘construe’ a design patent claim by providing a detailed verbal description of the claimed design.” In Egyptian Goddess, the Federal Circuit did attempt to distinguish Durling, stating in a footnote that “[r]equiring such an explanation of a legal ruling as to invalidity is quite different from requiring an elaborate verbal claim construction to guide the finder of fact in conducting the infringement inquiry.” Whether that distinction is persuasive is an issue for another day.

As to the second part—i.e., determining whether there is a reference with “basically the same” impression—the Federal Circuit concluded that the district court failed to adequately explain its reasoning. It stated that, on remand, “the district court should do a side-by-side comparison of the [potential primary reference and the claimed design] to determine if they create the same visual impression.”

The Federal Circuit identified a number of other errors in the district court’s § 103 analysis, including its use of an “ordinary observer” standard. The Federal Circuit reiterated that “the obviousness of a design patent must . . . be assessed from the viewpoint of an ordinary designer,” notwithstanding some unfortunate dicta (my characterization, not the court’s) in the 2009 case of Seaway Trading Corp. v. Walgreens Corp.

However, despite all of its criticisms of the district court’s analysis, the Federal Circuit did not say that the district court’s conclusion was wrong. Indeed, the Federal Circuit expressly refused to take a position on the ultimate issue of whether the D’183 patent was obvious. And the Federal Circuit did not say that the Penta or the Laurel Hill slippers could not qualify as primary references. So it will be very interesting to see what happens on remand.

Resolving IP Disputes: Calling for an Alternative Paradigm

Patent

I hope that you’ll join us here at the University of Missouri School of Law for our upcoming Symposium on October 4, 2013 focused on Resolving Intellectual Property Disputes (with particular focus on patents). The event is titled “Resolving IP Disputes: Calling for an Alternative Paradigm” and is sponsored by the MU School of Law’s Center for the Study of Dispute Resolution as well as the Journal of Dispute Resolution (JDR). Professor Jim Levin and I are organizing the event and have lined up a set of really interesting speakers (in my view). These include Greg Gorder who is a co-founder of the multi-billion-dollar patent market maker Intellectual Ventures. I expect that the event will be fairly small with about 100 patent law professionals coming in from around the country.

To the extent that you have interested colleagues who do not read Patently-O, please forward this invitation!

Links

Thanks, Dennis Crouch (dcrouch@patentlyo.com)

UK Take on Software Patent Eligibility: Claim Must include Feature that is both Technological and Innovative

Patent, , ,

By Dennis Crouch

Lantana Ltd. v. UK Comptroller General of Patents, [2013] EWHC 2673 (Pat)

Earlier this month, High Court Judge Colin Birss released a new opinion on the European view of software patentability as seen through the eyes of an English judge. The basic rule coming from the EPC is that "programs for computers . . . as such" are not patentable. EPC Article 52. This particular case arises from the refusal of the UKIPO (not the EPO) to grant a patent to Lantana. However, the UK Patents Act of 1977 implements Article 52 UK roughly follows the law set down by the EPO.

Digging in, the main subject-matter related question that the UK court asks in software related inventions is whether the invention offers an innovative technological contribution beyond the computer program itself. In HTC v Apple [2013] EWCA Civ 451 and Aerotel Ltd v Telco Holdings Ltd, [2006] EWCA Civ 1371, the UK Court of Appeals explained the four-step process for determining whether a particular claimed invention meets this technological contribution requirement. The steps are:

i) construe the claim;

ii) identify the actual contribution offered by the claimed invention;

iii) determine whether the contribution falls solely within the scope of excluded subject matter (i.e., programs for computers); and

iv) determine whether the contribution is actually technical in nature.

In those cases, the courts made clear that the technical contribution could be either a technological mechanism or a technological effect.

A key point in the US debate on patentable subject matter is whether the technological (or non-abstract) contribution needs to be innovative. In the UK/EPO, the answer is yes, that contribution must itself be innovative in the way that it makes a "contribution to the known art."

Here, Judge Birss followed anything but an integrative approach to patentable subject matter. Rather, the focus is on whether the elements of the invention that qualify as subject-matter-eligible (i.e., technological) also offer an innovative contribution. Lantana argued that this approach conflated the question of subject matter eligibility with those of novelty and non-obviousness. However, Judge Birss disagreed:

Mr Beresford [Counsel for Lantana] submitted that [Judge Birss's approach] conflicted with the acceptance by the examiner that the claim was novel and non-obvious. I do not agree. Those matters [decided by the examiner] apply to the claim as a whole, that is to say the entire combination of features. The point here is a different one, i.e. that the idea of an email message containing machine readable instructions as a contribution to the art in this case is wrong. The computers in the claim are not operating in a new way. . . .

The claim has been found to be novel and inventive by the examiner and in that sense it makes a contribution of some kind to the art [when examined as a whole], but the applicant has been unable to identify anything which this claim can fairly be said to contribute which has a technical character.

Thus, the focus here is on finding elements of the invention that are both innovative and have a technical character. Although Judge Birss did not cite to the U.S. case of Parker v. Flook, 437 U.S. 584 (1978), he could have so reach out for support. In Flook, the U.S. Supreme Court similarly pushed patent applicants for an inventive concept that itself is a practical application, writing:

Even though a phenomenon of nature or mathematical formula may be well known, an inventive application of the principle may be patented. Conversely, the discovery of such a phenomenon cannot support a patent unless there is some other inventive concept in its application.

I suspect that the rule supported by Judge Birss here is not too far removed from that which the current U.S. Supreme Court would also fashion if given the chance. However, the current USPTO does not require that particular elemental linkage.

One important result of this approach – well recognized by Judge Birss is that the scope of subject matter eligibility shifts over time. The Lantana case involves a particular use of email systems. If the patent had been filed in the early days of email and was able to introduce an a technological mechanism that was new at the time then the application would be subject matter eligible. However, the reality is that email systems were already very well known by the time Lantana filed its application. In Judge Birss' words, the technological aspect of the invention was "conventional." As such, there was no technological contribution to be found.

In the end, the result here is that Lantana's appeal has been dismissed with the UKIPO's judgment of nonpatentability still standing.

= = = = =

As an aside, Lantana is a small US based company and the listed inventor John Wysham is the company CEO. The US version of the application (Serial No. 12/867825) was abandoned after a final obviousness rejection.

= = = = =

More information from:

Wawrzynski v. H.J. Heinz Company: CAFC Jurisdiction and Preemption of State Law Claims

Patent

By Jason Rantanen

The primary issue in this case is whether the Federal Circuit has subject matter jurisdiction over the appeal.  On that issue, the court's analysis of the arguments presented by the parties is solid.  However, in addition to concluding that it lacks jurisdiction, the panel seemingly also rules on a substantive issue in the appeal: whether patent law preempts the plaintiff's state law claims for unjust enrichment and breach of implied contract based on its alleged use (without payment) of the plaintiff's creative ideas.  Without engaging in any substantive analysis, the court concludes that "nothing in federal patent law now stands in the way of Mr. Wawrzynski pursuing his state law claims," a result that is – at least based on the court's minimal discussion of the issue – difficult to reconcile with substantial Supreme Court precedent on the subject.

Wawrzynski v. H.J. Heinz Company (Fed. Cir. 2013) Download Wawrzynski v Heinz
Panel: Newman, Plager (author), Prost 

David Wawrzynski is an entrepreneur who owns his own food delivery company.  During the 1990's, he developed a method for dipping and wiping an article of food, such as a French fry, in a specially configured condiment package.  In 1997, the patent office granted him a patent, No. 5,676,990, for a "Method of Food Article Dipping and Wiping in a Condiment Container."  The sole drawing in that patent is below.

990 patentIn 2008, Wawrzynski sent a letter to the Heinz Company presenting his condiment packaging ideas (including his "Little Dipper" concept) and soliciting a meeting.  He included promotional materials that depicted a condiment package similar to the container depicted in the '990 patent and stated that the features of the "Little Dipper" were subject to his patent.  Heinz invited Wawarzynski to meet with his representatives to present his product ideas, which he did.  At that meeting, Wawrzwynski contends that he shared the idea of creating a "dual function" product that permitted a customer to either dip a food article or squeeze out the condiment.  Following the meeting, Heinz indicated that it was not interested in Wawrzynski's product ideas and did not wish to receive additional information from him.

A few months later, Heinz released its new "DIP & SQUEEZE" packet.  In a surprising coincidence, my wife happened to bring a couple of these items home on Friday so I took the following picture:

Heinz

On October 5, 2010, Wawrzynski filed a lawsuit against Heinz in Michigan state court. (Heinz removed on the basis of diversity jurisdiction.)  Wawrzynski's amended complaint contains two legal claims: breach of an implied contract and unjust enrichment based on Heinz's alleged use of Wawrzynski's ideas for condiment packaging.  The general allegations also reference the '990 patent. 

The case was subsequently transferred to the Western District of Pennsylvania and Heinz filed an answer and counterclaim alleging that it did not infringe the Wawrzynksi patent and that the patent was invalid.  Wawrzynski answered the counterclaim stating, among other things, that "Mr. Wawrzynski avers that there is no case in controversy regarding the ‘990 Patent because he admits that Heinz is not infringing on it."  He also provided Heinz with a covenant not to sue on the '990 patent.

During the district court proceedings, Wawrzynski filed a motion to dismiss Heinz's counterclaim and Heinz filed a motion for summary judgment on the ground that Wawrzynksi's non-patent claims were preempted by federal patent law.  The district court denied Wawrtzynski's motion, concluding that "Wawrzynski's admission and covenant were "manufactured" and did not change the fact that Wawrzysnki's complaint made allegations based upon the '990 patent."  Slip Op. at 5, quoting district court.  The court also granted Heinz's motion for summary judgment.  Wawrzynski appealed the district court's rulings.

No Jurisdiction: Under the Federal Circuit's jurisdictional statute, 28 U.S.C. § 1295, if the case arises under the Federal patent laws, the court has jurisdiction; if the case is one purely of state law claims, not involving a patent issue, it does not.  Although both parties contended that the Federal Circuit had jurisdiction, the court concluded that it did not.  Wawrzynski argued that the post-AIA version of Section 1295 applied.  Under this version of Section 1295, the court has jurisdiction over appeals in actions "in which a party has asserted a compulsory counterclaim arising under any Act of Congress relating to patents." However, the newer version only applies to actions commenced on or after September 16, 2011 and this action commenced before that date.  Nor did the date of Heinz's counterclaim (September 28, 2011) count; the AIA speaks in terms of the date the action commences.

The Federal Circuit also rejected Heinz's jurisdictional argument.  Heinz argued that Wawrzynski's complaint did, in fact, assert a claim of patent infringement.  But this was not the case.  First, under the "well-pleaded complaint rule," the plaintiff is the master of the complaint and can "eschew[] claims based on federal law [and] choose to have the cause heard in state court."  Slip Op. at 10, quoting Caterpillar Inc. v. Williams, 482 U.S. 386, 398-99 (1987).  Here, Wawrzynski's complaint raised only two causes of action, both based on state law.  Although it referenced the patent, "[t]he complaint does not have a count for patent infringement or anything similar."  Slip Op. at 10.  Ultimately, the court concluded that the "sparse background discussion of the patent does not make a well-pleaded complaint for patent infringement." Slip Op. at 12.  Based on this, the court ordered the appeal transferred to the Third Circuit.

The Preemption Puzzle: Despite concluding that it lacked jurisdiction, the panel nevertheless went on to apparently rule on the issue of preemption, or at least make clear its opinon on the subject.  I find the following three paragraphs particularly puzzling.  The court seems to hold that there is no preemption in a highly summary fashion:

We note that some of the issues underlying our jurisdictional analyses also underlie the district court's summary judgment merits analyses. To fully assess the question of our jurisdiction, we necessarily have analyzed and decided certain of these issues.
For example, we have concluded that the relief requested in the complaint aligns with state law claims and not a claim for patent infringement. We also found support for Mr. Wawrzynski's contention that certain of the ideas and materials he allegedly provided to Heinz are not found in his patent. These conclusions, along with our overarching conclusion that the complaint does not present a well-pleaded patent law issue, undercut conclusions relied upon by the district court to support its grant of summary judgment of preemption. Accordingly, it appears that nothing in federal patent law now stands in the way of Mr. Wawrzynski pursuing his state law claims.

With regard to the district court's finding of non-infringement of the ′990 patent by Heinz's ‘Dip & Squeeze®’ packet, Mr. Wawrzynski's responsive pleadings contain both a concession that Heinz's product does not infringe and a covenant not to sue. Thus, it would appear that in any event there is no case or controversy remaining to support a subsequent judgment on the issue of infringement.

Slip Op. at 13 (emphasis added).  Notwithstanding the court's rather cursory dismissal, however, patent law preemption of state law claims involving ideas and other intangibles is a  complex and challenging analysis (as my unfair competition students have learned over the past two weeks).  The central Supreme Court precedent is well known: Sears v. Stiffel, Bonito Boats v. Thunder Craft Boats, Kewanee Oil v. Bicron, and the circuits have struggled with issues of preemption for decades.  While it is conceivable that some of Wawrzynski's claims are not preempted by patent law, it seems at least equally plausible that many of them are.  Given the complexity and importance of this issue, it is surprising that the panel did not choose to either let the Third Circuit address the issue or analyze the issue itself in meaingful detail if it believed it was necessary to satisfy the approach described in Gunn v. Minton (which the opinion does not mention). 

Patent Appeal Outcome by Art Unit Groups

Patent

By Dennis Crouch

This is a continuation of an analysis of ex parte appeal decision outcomes at the US Patent Office (USPTO). The focus of this post is on individual art-unit groups within the USPTO and decisions by the Board of Patent Appeals and Interferences (BPAI, now renamed PTAB). The chart may provide helpful information to both patent applicants and examiners considering whether to appeal. The set-up in these ex parte is always the same – the patent applicant is appealing an examiner's final rejection. Thus, a reversal means that the patent applicant wins on all counts and, in most cases, a patent issues soon thereafter. Under the MPEP, "[t]he examiner should never regard such a reversal as a challenge to make a new search to uncover other and better references." A new rejection following reversal requires approval from one of the Technology Center (TC) directors. Cases that are affirmed-in-part result in some claims being allowed. And an affirmance sustains all of the examiner's rejections. Now, to be clear, a Board affirmance does not mean that all of the claims in the patent are rejected since some of the claims may have been previously allowed and the applicant only appealed the rejected claims.

The chart includes particular information on what happens following affirmance of an examiner rejection. In patent prosecution the patent applicant can keep prosecution going indefinitely through the amendment / RCE process. The setback of an appeal-affirmance is no different. Following affirmance, the patent applicant can amend claims, file a request for continued examination (RCE) and keep going. It appears that a substantial number of patent applicants who want to continue prosecution prefer at that point to instead file a continuation application – beginning the process somewhat afresh and potentially with a new examiner. To highlight these options, I included information on the percent of applications where the case was abandoned following affirmance and also where the case was abandoned following affirmance without the continued prosecution of a child (continuation) application.

To create the chart below, I first generated a database of all ex parte decisions by the Board of Patent Appeals & Interferences (BPAI) decided between January of 2005 and August of 2011. I used these cutoff dates because accurate data from decisions prior to 2005 is more difficult to obtain and I wanted to allow some time following the decision to 2011 cutoff date to trace the eventual outcome. The August 2011 cutoff allows for two-years of post-decision outcome tracing. I then took a random sample of about half of those Board decisions and obtained the electronic filewrappers from the USPTO's PAIR database associated with the underlying applications. The filewrapper allowed me to identify the art unit associated with the case; whether the application has been abandoned, patented, or is still pending; and whether any continuation applications have been filed that claim priority to the original application.

The chart below is grouped by Art-Unit Group that includes up-to-ten art units and roughly follows mid-level grouping done at the USPTO. Thus, Art-Unit Group 1610 includes all art units ranging from 1610-1619. More information on these art units and technology centers is available here: http://www.uspto.gov/about/contacts/phone_directory/pat_tech/. The chart then includes the number of Board decisions included in the sample, the percentage of those decisions that are reversed, affirmed-in-part, and affirmed; the percentage of affirmed cases that were then abandoned following affirmance; and finally the percentage of affirmed cases that were then abandoned following affirmance without a child-application that is either still live or patented.

Some notes: The Art Unit Groups with the highest affirmance rates are now defunct (2840 and 1750). The lowest affirmance rates are in Art Unit Groups 3650 (Material and Article Handling), 3630 (computerized vehicle controls), and 2480 (Video Compression/Recording).

Art Unit Group 

Decisions in Sample 

Affirmed

Affirmed-in-Part 

Reversed

Abandoned following Affirmance 

Abandoned Without Child Following Affirmance

1610 

300 

57% 

7% 

35% 

90% 

58% 

1620 

166 

58% 

11% 

29% 

79% 

58% 

1630 

182 

45% 

13% 

41% 

83% 

63% 

1640 

176 

57% 

9% 

34% 

87% 

59% 

1650 

123 

63% 

12% 

25% 

87% 

52% 
             

1710 

157 

51% 

10% 

38% 

83% 

58% 

1720 

116 

52% 

11% 

37% 

77% 

57% 

1730 

111 

63% 

8% 

29% 

80% 

59% 

1740 

96 

61% 

6% 

30% 

90% 

66% 

1750 

28 

79% 

7% 

14% 

82% 

50% 

1760 

200 

70% 

8% 

22% 

78% 

48% 

1770 

116 

61% 

8% 

31% 

85% 

61% 

1780 

221 

60% 

10% 

29% 

83% 

52% 

1790 

1050 

66% 

10% 

23% 

87% 

57% 
             

2110

112 

64% 

13% 

22% 

74% 

58% 

2120 

78 

64% 

13% 

22% 

78% 

66% 

2130 

25 

44% 

24% 

32% 

64% 

55% 

2140 

38 

66% 

16% 

18% 

76% 

76% 

2150 

86 

56% 

16% 

27% 

58% 

48% 

2160 

285 

54% 

13% 

33% 

69% 

57% 

2170 

270 

56% 

16% 

27% 

77% 

60% 

2180 

148 

61% 

13% 

25% 

67% 

57% 

2190 

90 

57% 

14% 

27% 

76%

69% 
             

2420 

65 

58% 

11% 

31% 

63% 

50% 

2430 

132 

64% 

14% 

18% 

71% 

53% 

2440 

173 

52% 

14% 

32% 

57% 

44% 

2450 

145 

55% 

20% 

24% 

66% 

55% 

2460 

26 

65% 

4% 

31% 

71% 

65% 

2470 

31 

58% 

13% 

29% 

56% 

50% 

2480 

18 

33% 

22% 

44% 

50% 

17% 

2490 

15 

67% 

13% 

20% 

80% 

40% 
             

2610 

291 

53% 

14% 

32% 

76% 

59% 

2620 

351 

52% 

16% 

32% 

81% 

65% 
             

2810 

163 

57% 

10% 

32% 

69% 

56% 

2820 

86 

64% 

13% 

23% 

76% 

51% 

2830 

185 

65% 

11% 

22% 

73% 

56% 

2840 

20 

80% 

15% 

5% 

88% 

88% 

2850 

113 

63% 

13% 

24% 

79% 

68% 

2860 

18 

67% 

11% 

22% 

75% 

33% 

2870 

105 

66%

13% 

20% 

74% 

57% 

2880 

76 

57% 

17% 

26% 

77% 

63% 

2890 

53 

55% 

9% 

36% 

79% 

62% 
             

3610 

93 

52% 

18% 

29% 

75% 

54% 

3620 

343 

54% 

13% 

32% 

81% 

58% 

3630 

167 

32% 

25% 

43% 

79% 

66% 

3640 

113 

42% 

25% 

34% 

81% 

66% 

3650 

162 

31% 

29% 

40% 

76% 

54% 

3660 

73 

49% 

18% 

33% 

92%

64% 

3670 

148 

43% 

20% 

36% 

79% 

57% 

3680 

207 

43% 

17% 

38% 

77% 

54% 

3690 

113 

58% 

15% 

27% 

62% 

45% 
             

3710 

146 

53% 

20% 

27% 

82% 

61% 

3720 

274 

42% 

21% 

36% 

85% 

59% 

3730 

194 

46% 

18% 

36% 

81% 

52% 

3740 

198 

34% 

20% 

43% 

75% 

54% 

3750 

87 

40% 

16% 

43% 

86% 

66% 

3760

250 

45% 

18% 

36% 

82% 

41% 

3770 

114 

38% 

21% 

39% 

81% 

53% 

3780 

74 

54% 

19% 

27% 

85% 

60% 
One One problem with the current system is that 

Contract Dispute: When Paying to Settle a Case Counts as Revenue

Patent,

Jang v. Boston Scientific (Third Circuit 2013)

Dr. Jang is an inventor on BSC’s stent patent no. 5,922,021. Jang’s contract requires BSC share 10% of royalty revenue with Jang, including “any recovery of damages” from infringers with a $60 million cap. The question in this case was whether a prior settlement with Cordis involved such a recover of damages.

In that prior 2003 case, Cordis and BSC countersued one another. A jury found that Cordis infringed the Jang patent and that BSC infringed Cordis patents. However, the parties settled before the court calculated or awarded damages. The settlement involved a payment of $1.725 billion from BSC to Cordis. BSC admitted that the settlement agreement represented the net difference between its expected damages and those it owed Cordis. In essence, the fact that Cordis infringed the BSC/Jang patent reduced the amount that BSC owed to Cordis. However, BSC argued that it did not owe Jang anything because BSC did not receive any damages or revenues in the deal. The district court sided with BSC on the pleadings on appeal, however, the Third Circuit reversed – finding that Jang’s case should move forward. In particular, the appellate panel held that (1) the cash-offset qualifies as a “recovery of damages” and (2) that “BSC violated the implied covenant of good faith and fair dealing by structuring a settlement to thwart the agreed purpose of [the contract provision].”

A cash offset is the functional equivalent of a cash payment. . . . Courts have long recognized the equivalence of a debt offset and a cash payment through the common-law “right of setoff.” . . . In this case, BSC made money on the Jang patent. It lost money on Cordis’ separate claim. That its gain and loss were consolidated to produce one net payment does not change the fact that the Jang patent produced a monetary gain for BSC.

The real question is whether that gain qualifies as a “recovery.” We see no reason why it should not; it makes no difference to BSC’s bottom line whether it receives a check for the Jang infringement claim or reduces its debt by the same amount.

Writing in dissent, Judge Barry argued that the language of the contract was clear and contemplated damage recovery, not offsetting claims.

Although the case involves patent law it is at heart a contract dispute. Thus, the appeal was heard by the regional circuit court rather than the Federal Circuit. In a prior dispute over the same contract, the Federal Circuit claimed appellate jurisdiction apparently based upon the fact that a quasi-infringement analysis was required to settle the dispute. Under Gunn v. Minton, that case (if heard today) would not likely be heard by the Federal Circuit.

= = = = =

A large number of patent assignment deals similarly involve substantial “upside.”  If one of the parties to the deal is a litigation expert then the the other party may well assume that full enforcement of the deal will also require litigation.

Patently-O Bits & Bytes by Lawrence Higgins

Patent

Patent Jobs:

  • Steven Rinehart is looking to hire a former US Patent and Trademark Office (USPTO) examiner/patent agent for patent prosecution work. Any patent agents hired can work from home anywhere in the US. (Salt Lake City, Utah) [Link]
  • O'Brien Jones, PLLC is seeking full-time registered patent attorneys and patent agents with 2-5 years relevant experience. (Tysons Corner, Va) [Link]
  • The Silicon Valley office of Alston & Bird has an immediate opening for a Patent Prosecution associate with at least 4 years' experience in the preparation and prosecution. (EE, computer engineering or computer science is required) [Link]
  • Nike seeks a Utility Patent Specialist who will research innovation developments for utility patent opportunities. [Link]

Upcoming Events:

  • American Conference Institute is hosting the FDA Boot Camp in Boston, MA on September 17-18, 2013. ACI's FDA Boot Camp has been designed to give products or patent litigators, as well as patent prosecutors, industry in-house counsel, and life sciences investment and securities experts, a strong working knowledge of core FDA competencies. Register with discount code "PTO200".  [Link]
  • The Licensing Executives Society (LES) will hold their annual meeting September 22-25, in Philadelphia. The annual meeting is themed "IP Matters in Every Deal" the meeting is a must-attend IP, licensing and business development event. Patently-O readers save $100 with code PO13.  [Link] 
  • American Conference Institute is hosting the Paragraph IV Disputes Master Symposium in Chicago, IL on October 3-4, 2013.  At this symposium, there will be in-depth discussions and practical take aways that will prepare you for this new era of extreme Hatch-Waxman litigation. Critical sessions will address all facets of Paragraph IV litigation from pre-litigation concerns to the commencement of suit through final adjudication. Register with discount code "PTO200".  [Link]
  • The USPTO's 18th Annual Independent Inventor Conference will be held October 11-12. For two days, independent inventors and small business owners will have an unparalleled opportunity to learn, network, and jumpstart their creative endeavors. Experts and senior officials from the USPTO will present valuable information on patents, trademarks, and other intellectual property (IP) matters while successful business owners and inventors will relate their inspiring personal experiences in bringing their dreams to market.  [Link]
  • The EPO will hold their Patent Information Conference on October 22-24, in Bologna, Italy.  The EPO Patent Information Conference 2013 will be organized in co-operation with the Directorate General for the Fight against Counterfeiting – Italian Patent and Trademark Office.  [Link]
  • AIPLA annual meeting will take place October 24-26, in Washington, DC. The Annual Meeting offers  opportunities to connect with others in the IP industry from around the world to learn during sessions such as: Navigating Through the PTAB and Federal Courts After the AIA; Trademark Fair Use; What You Need to Know About the Hague Agreement; Evolving IP Rights in China, and IP Issues Facing Government R&D Contractors.  [Link]
  • American Conference Institute is hosting the FDA Boot Camp Devices Edition in Chicago, IL on November 5-6, 2013.  Many products liability lawyers, patent counsel, business and investment experts, medical and regulatory affairs professionals, and those involved in pricing and reimbursement — despite their tenure in working with FDA-regulated devices — are not well-versed in the essentials of the approval process and the regulatory hurdles of the post-approval period. ACI's Third Annual FDA Boot Camp – Devices Edition has been designed to give you a strong working knowledge of core FDA competencies. Register with discount code "PTO200".  [Link]
  • IQPC is hosting its Patent Infringement Litigation Summit on December 9th and 10th in San Francisco. The Summit will bring together in-house counsel from major companies, law firm attorneys and representatives from other vendors to facilitate strategy and information sharing among these key stakeholders. [Link]
  • The Chisum Patent Academy is now accepting registrations for their 2014 Advanced Patent Law seminars, to be held
    • March 5-7, 2014: Cincinnati, Ohio
    • August 13-15, 2014: Seattle , Washington
    • August 18-20, 2014: Seattle, Washington

    The Academy applies for 18 CLE credits in each state where seminars are held. [Link]

Contact Lawrence.Higgins@patentlyo.com with leads for future Bits and Bytes.

Surprise! The Law of Subject Matter Eligibility Remains Unsettled

Patent, , , ,

By Jason Rantanen

Accenture Global Services, GMBH v. Guidewire Software, Inc. (Fed. Cir. 2013) Download Accenture v. Guidewire
Panel: Rader (dissenting), Lourie (author), Reyna

It is difficult to think of an issue that has more deeply divided the Federal Circuit over the past few years than subject matter eligibility.  Accenture is the latest barrage and counter-barrage in this seemingly endless war.  Unlike Ultramercial v. Hulu, though, in which Judge Rader wrote the majority opinion and Judge Lourie concurred in the result, the forces arguing against subject matter eligibility of computer programs won today's battle. 

At issue in the case were claims 1-7 and 8-22 of Patent No. 7,013,284.  Claim 1 read:

A system for generating tasks to be performed in an insurance organization, the system comprising:

an insurance transaction database for storing information related to an insurance transaction, the insurance transaction database comprising a claim folder containing the information related to the insurance transaction decomposed into a plurality of levels from the group comprising a policy level, a claim level, a participant level and a line level, wherein the plurality of levels reflects a policy, the information related to the insurance transaction, claimants and an insured person in a structured
format;

a task library database for storing rules for determining tasks to be completed upon an occurrence of an event;

a client component in communication with the insurance transaction database configured for providing information relating to the insurance transaction, said client component enabling access by an assigned claim handler to a plurality of tasks that achieve an insurance related goal upon completion; and

a server component in communication with the client component, the transaction database and the task library database, the server component including an event processor, a task engine and a task assistant;

wherein the event processor is triggered by application events associated with a change in the information, and sends an event trigger to the task engine; wherein in response to the event trigger, the task engine identifies rules in the task library database associated with the event and applies the information to the identified rules to determine the tasks to be completed, and populates on a task assistant the determined tasks to be completed, wherein the task assistant transmits the determined tasks to the client component.

The district court (Judge Robinson, one of the ) held claims 1-7 (system claims) and claims 8-22 (method claims) invalid under 35 U.S.C. § 101.  Accenture appealed only claims 1-7. 

System Claims Ineligible Subject Matter: In an opinion authored by Judge Lourie, the majority agreed with the district court that the claims were patent ineligible subject matter.  The majority provided two bases for its conclusion.  First, "because the system claims offer no meaningful limitations beyond the method claims that have been held patent-ineligible" and second, "because, when considered on their own, under Mayo and our plurality opinion in CLS Bank, they fail to pass muster." Slip Op. at 10.

The majority first compared the system claims to the method claims that were conclusively invalid because Accenture failed to appeal them.  Relying on the plurality opinion in CLS Bank v. Alice, the majority concluded that the proper approach is to "compare the substantive limitations of the method claim and the system claim to see if the system claim offers a “meaningful limitation” to the abstract method claim, which has already been adjudicated to be patent-ineligible."  Id. Because the court found no additional "meaningful limitation" in the system claims, they were as patent ineligible as the method claims. 

The majority also concluded that the method claims were invalid under Section 101 even standing on their own.  Applying a preemption analysis to the abstract idea at the heart of the system claims, the majority concluded that the additional imitations did not "narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself."  Slip Op. at 15.  Furthermore, "simply implementing an abstract concept on a computer, without meaningful limtiations to that concept, does not transform a patent ineligible claim into a patent-eligible one."  Id.

Judge Rader's Dissent: Unsurprisingly, Judge Rader disagreed with the majority.  Central to his disagreement was the belief that the plurality framework relied upon by the majority in this case lacks precedential value.  "[N]o part of CLS Bank, including the plurality opinion, carries the weight of precedent.  The court's focus should be on Supreme Court precedent and precedent from this court."  Slip Op. at 20.  He also disagreed with the basic idea of the comparing the system claims to the invalid method claims, characterizing it as estoppel that will have the effect of "requiring litigants to appeal the invalidity of every claim or else risk the potential for estoppel or waiver of other claims."  Id. And Judge Rader would have concluded that, even on the merits, the claimed systems present patent-eligible subject matter.  "The claims offer “significantly more”  than the purported abstract idea, …, and meaningfully limit the claims’ scope."  Id. at 4, quoting Mayo v. Prometheus, 132 S.Ct. 1289, 1293 (2012).

Judge Rader also once again proclaims his view that the courts' approach to patent law's subject matter eligibility requirement is pure folly:

In conclusion, I note that prior to granting en banc review in CLS Bank, this court commented: “no one understands what makes an idea abstract.” CLS Bank Int’l v. Alice Corp., 685 F.3d 1341, 1349 (Fed. Cir. 2012), opinion vacated, 484 F. App’x 559 (Fed. Cir. 2012) (internal quotations marks omitted). After CLS Bank, nothing has changed. “Our opinions spend page after page revisiting our cases and those of the Supreme Court, and still we continue to disagree vigorously over what is or is not patentable subject matter.” MySpace, Inc. v. GraphOn Corp., 672 F.3d 1250, 1259 (Fed. Cir. 2012); see generally CLS Bank. Indeed, deciding what makes an idea “abstract” is “reminiscent of the oenologists trying to describe a new wine.” MySpace, 672 F.3d at 1259.

I take this opportunity to reiterate my view that “the remedy is the same: consult the statute!” CLS Bank, 717 F.3d at 1335 (additional reflections of Rader, C.J.). The statute offers broad categories of patent-eligible subject matter. The “ineligible” subject matter in these system claims is a further testament to the perversity of a standard without rules—the result of abandoning the statute.

Slip Op. at 23.  That said, Judge Rader's thoughts about indeterminacy should perhaps be taken with a grain of salt: his opinions indicate, after all, that he has very strong views that one side of the subject matter eligibility battle is right and the other wrong.

One other thing of note about this case: Mark Lemley – who has written a great deal about patenting of computer-implemented inventions, including a recent post on PatentlyO – was the lead attorney for the defendant.

Soverain’s ‘314 Patent is Now Truly Invalid

Patent, ,

Soverain Software v. Newegg (Fed. Cir. 2013) (on rehearing)

In a rare grant of rehearing, the Federal Circuit has amended its original decision in this case. In the original opinion, the Federal Circuit reversed the lower court’s finding of non-obviousness and replaced that with a holding that the asserted claims are obvious as a matter of law. [Link]

According to the request for rehearing – “The panel’s decision analyzed the wrong claim of the ‘314 patent. The asserted claims at trial were claims 35 and 51–not claims 34 and 51.” I reviewed the original briefs and those briefs suggest that claim 34 should be the focus. However, the Federal Circuit allowed the patentee another shot on appeal.

Claim 34 – the one already found obvious by the court – is directed to a “network-based sales system” that links a buyer’s computer with a “shopping cart computer” and that facilitates certain purchasing functionality, including using a “payment message” that initiates the transaction once activated. Claim 35 adds one further limitation to the mix – that “shopping cart computer is programmed to cause said payment message to be created before said buyer computer causes said payment message to be activated.”

After reviewing the small amount of evidence presented, the court held that claim 35 is also invalid as obvious.

On this rehearing, Soverain has not provided any new information concerning the specific limitation of claim 35. The inclusion of an additional known element from a similar system, as set forth in claim 35, is subject to review on established principles, as summarized in KSR International Co. v. Teleflex Inc., 550 U.S. 398, 417 (2007) (an unobvious combination must be “more than the predictable use of prior art elements according to their established functions”). The supplemental briefing reinforces the absence of dispute that that the element in claim 35 is in the CompuServe Mall prior art.

On consideration of the additional briefing and arguments, we confirm that claim 34 is representative of the “shopping cart” claims, including claim 35, and conclude that dependent claim 35 is invalid on the ground of obviousness. The court’s judgment is amended accordingly.

Now Soverain’s patent is really invalid.

In its motion for rehearing en banc, Soverain cited my prior Patently-O essay for the notion that the original opinion was big news in the way that the court fully reversed the lower court’s finding of nonobviousness. The en banc rehearing request focuses on the distinction between questions of fact and law and argues that Federal Circuit improperly delved into a fact-finding expedition. The fact-law divide is difficult for questions of obviousness since the ultimate question of obviousness is an issue-at-law based upon the factual determinations found in the Graham analysis. In its opinion, the Federal Circuit states that it is only deciding the ultimate legal question while the en banc request argues that the court delved into the factual underpinnings without providing appropriate deference. That en banc request has been denied.

I suspect that Soverain will push for a petition for writ of certiorari. In the en banc rehearing request, the company added Seth Waxman to the list of counsel and the company has at least 15 live infringement cases involving the ‘314 patent. (U.S. Patent No. 5,715,314). The damages overturned by the court here amounted to $2.5 million plus costs and an ongoing royalty of $0.15 per infringing transaction until the patent expires in 2015 (denying injunctive relief).

Now, before you feel too sorry for Soverain, you should note that the company has a set of additional patents in the family that it can still assert. See, e.g., 5,909,492, 5,708,780, 6,449,599, and 7,272,639.

What Happens Following a USPTO Board Decision

Patent

By Dennis Crouch

The chart above provides further analysis from the prior post entitled Ex Parte Appeal Outcome by Assignee 2005-2013. The chart here shows the result following BPAI/PTAB ex parte decisions and is derived from a set of 21,000 applications associated with an appellate decision between 1/2005 and 8/2011. For the majority of cases, the appellate decision appears determinative. A major caveat to these results is that about 45% of the abandoned cases are associated with a continuation application filed prior to abandonment.

Interpreting CLS Bank Int’l v. Alice

Patent

Guest Post by Professor Bernard Chao

The issue of patentable subject matter eligibility has been in considerable flux. Currently, it’s unclear whether adding computer limitations to an otherwise unpatentable concept somehow renders the concept patent eligible. The Federal Circuit tried to settle this question when the entire court heard CLS Bank Int’l v. Alice, 717 F.3d 1269 (Fed. Cir. 2013). But the judges could not find common ground and the decision contained seven separate opinions reflecting at least three distinct approaches. Now it has been suggested that the CLS Bank Int’l provided the lower courts with absolutely no guidance. After all, no opinion garnered more than five judges’ support. In an effort diminish Lourie’s opposing opinion, Judge Rader even went so far as to say that “nothing” in the CLS Bank Int’l decision “beyond our judgment has the weight of precedent.” Id. at 1292, n 1.

Ironically, under the so called Marks rule, Judge Rader may not just be wrong, his opinion could be considered the holding of the court. The United States Supreme has said that when one of its decisions has no majority opinion in support of the judgment, “the holding of the Court may be viewed as that position taken by those Members who concurred in the judgment[] on the narrowest grounds.” Marks v. United States, 430 U.S. 188, 193 (1977). Now there is some disagreement about how to identify the narrowest concurring opinion. What’s more it’s unclear if the Marks rule applies to en banc decisions of the various Courts of Appeals. But there is certainly plenty of room to argue that Judge Rader’s opinion is the Federal Circuit’s holding under Marks.

To understand how the Marks rule would apply to CLS Bank Int’l, we have to examine the decision’s different opinions. I discuss these opinions in some detail in an upcoming article in the Berkeley Technology Law Journal, but I will provide a very short summary of the judges’ views here. Judge Lourie’s opinion (joined by Judges Dyk, Prost, Reyna and Wallach) took a “strong view” of § 101’s subject matter patent eligibility requirement. Consequently, these five judges would have found that all of Alice’s claims were ineligible for patenting. Judge Rader (joined by and Judges Linn, Moore and O’Malley) took a relatively “weak view” of § 101’s eligibility requirement. But Judges Rader and Moore applied this methodology differently than Judges Linn and O’Malley. Rader and Moore argued that the method and media claims were not patent eligible, but the system claims were. In contrast, Linn and O’Malley’s would have left all the claims intact. Finally, Judge Newman took an even weaker view of §101 arguing for almost no scrutiny of patentable subject matter eligibility whatsoever. Accordingly, she would have also found all the claims were patent eligible.

Both Lourie’s and Rader’s opinions concurred in the judgment of patent ineligibility for the method claims. So seven judges agreed that the method claims were not patent eligible. Lourie’s strong view advocated for a rule that would render many claims patent ineligible, while Rader’s weak view is more conservative and jeopardizes a smaller set of claims. As applied to the patents in CLS Bank Int’l, this meant that only the method claims would be ineligible. Under one interpretation of Marks, Rader’s opinion is the narrowest view supporting the end result and would be considered the holding of CLS Bank Int’l.

To be clear, I actually disagree with Rader’s analysis and say so in my article. I also don’t want to overstate the significance of the Marks analysis. Clearly, CLS Bank Int’l is still shaky precedent and the success of any appeal to the Federal Circuit may simply be panel dependent. Hopefully, the Supreme Court will resolve the issue. In fact, the Court is currently considering a petition for certiorari in Wildtangent v. Ultramercial. But in the meantime, software patents continue to be challenged on subject matter patent eligibility grounds and the Marks rule provides one way to try to interpret the confusing precedent now.

Bits & Bytes from Jonathan Hummel

Patent, ,

RECENTLY 

#1. Minnesota becomes the first state to settle with a Patent Troll

Jennifer Bjorhus , of the Star Tribune reports that recently, the state of Minnesota reached a settlement agreement with MPHJ Technology Investments, LLC, a Delaware corporation. If the state discovers that any Minnesota residents or companies actually paid MPHJ Technology money for either a license or an alleged infringement, MPHJ will have to pay a $50,000 civil penalty and refund all money. Swanson’s office said it’s not clear how many Minnesota companies were targeted but estimated it to be hundreds.

 

#2.  The next phase in the Apple/Samsung Saga

Gene Quinn, at IPWatchdog, reports that Apple and Samsung, interestingly enough, wound up on the same side of the argument. See Apple, Inc. v. Samsung Electronics Co. (Fed. Cir., August 23, 2013).The two tech giants are arguing back against a district court decision to allow some sensitive information to become publicly available. Both parties filed motions to seal certain writings, and district Judge Lucy Koh denied the motions. Appeals joined at the Federal Circuit, that court issued an order staying the unsealing of certain documents.

 

#3. Intellectual Ventures opens a DC lobbying office

Christina Wilkie, at the Huffington Post, reports that Intellectual Ventures, the largest patent holding firm in the United States, is opening a lobbying office in the nation’s capital. This latest move for the Bellevue, Washington based patent holding firm will probably set a trend for other firms with similar business models. The recent outcry from the patent community and the general anxieties over firms with similar practices mean these companies are going on the offensive, trying to set the course for policy rather than react to it.

 

#4. New Zealand decides the software question

Reuven Cohen, for Forbes, reports that New Zealand has banned software patents. In a bill passed earlier today, the Government of New Zealand announced that software in the country will no longer be patentable. In taking the position, New Zealand joins many other nations. "For example, U.S. patent law excludes “abstract ideas”, and this has been used to refuse some patents involving software. In Europe, “computer programs as such” are excluded from patentability and European Patent Office policy is consequently that a program for a computer is not patentable if it does not have the potential to cause a “further technical effect” beyond the inherent technical interactions between hardware and software.”"

 

PENDING

#1. IBM Applies for a Virtual Shared Shopping Experience

Steve Brachmann, writing for IPWatchdog, reports International Business Machines’ recent application for a patent on a “a system for collaborative shopping” whereby users can see what is in other people’s carts and interact via computers and smartphones. The rise of online shopping in the past decade is marked, and this idea represents another way to make the often singular online experience more social.

U.S. Patent Application No. 20130211953

 

UPCOMING

1. October 4 Symposium and CLE on Resolving Patent Disputes

2. The World Congress 2nd Annual: Generic Top-Level Domain Names Summit

September 25, 2013 • New York City, NY

Tools to Protect Trademark Rights and Strategies to Prepare Your Company for the Launch of gTLDs

Event Website  |  Brochure  |  Set Reminder  |  Register

-       See more at: http://www.worldcongress.com/events/index.cfm?IndustryID=3#sthash.Km7egeE1.dpuf

 

3. ABA Trademark Fundamentals: Managing Your IP in a World of Social Media Sept. 12, 2013 Webinar/Teleconference

 

JOBS

Patent Prosecution Associate – Law Firm – Washington D.C.

-       Wenderoth, Lind & Ponack, L.L.P. is seeking a Patent Prosecution Associate to join our Mechanical group.

-       Wenderoth, Lind & Ponack, L.L.P. offers a competitive benefits package and an enjoyable work environment. Salary is commensurate with experience.

-       Apply on-line by e-mailing your cover letter, resume and transcripts to: recruiting@wenderoth.com.

IP/Patent Attorney – Law Firm – New York, N.Y.

-       Bruzga & Associates, a New York City boutique IP law firm seeks an associate patent attorney having an electrical engineering degree.

-       This is an opportunity to hone your advocacy skills, have meaningful client interaction, and significantly contribute to the firm, rather than just being a “cog in the wheels” of a big firm.

 

Contact jon.hummel@patentlyo.com with leads for future Bits & Bytes.

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