Published Applications as Prior Art

July 28, 2009Academic Studies, Articles and Publications, PatentDennis Crouch

[edited to fix my pre-coffee typos where my eyes though provisional = published]

In 2001, the USPTO published its first patent application. Since then, almost two-million patent applications have published. During this same time period, about 1.3 million patents issued. There are a couple of ways that the prior art created by patent applications change the prosecution game. First, published applications increase the sheer volume of prior art. Most notably, around ten percent of the published applications will never issue and would not have been otherwise published. And, even if published elsewhere at a later date, applicants would be faced with the later 102(a) effective date rather than the 102(e) effective date associated with a published application. This ties in with the second importance of published patent applications — they bring innovations to light more quickly and in a manner that patent examiners can readily use. Along these lines, the early publication of published applications triggers the clock for the statutory bar of 102(b).

Looking at patents issued during the past four years, I calculated the average percent of cited references that are US published patent applications. As you might expect, that figure has been rising steadily – doubling from under 6% in 2006 to almost 12% for patents issued in the early part of 2009. The evidence shows that examiners are using the patent applications. On their own examiner’s locate 41% of all cited US patent application publications even while locating only 25% of other cited references. (The remaining references are submitted by the applicant).

Note, this post was prompted by an interesting series of comments on IPWatchdog questioning whether this newly available prior art has been a factor in the dropping allowance rate.

The Unreasonableness of the Patent Office’s ‘Broadest Reasonable Interpretation’ Standard

July 21, 2009Academic Studies, Articles and Publications, Claim Construction, PatentBroadest Reasonable Interpretation, Claim ConstructionDennis Crouch

Chris Cotropia (Richmond Law) and Dawn-Marie Bey (King & Spalding) have an interesting draft article out on the PTO’s “broadest reasonable interpretation” standard for interpreting claims during patent prosecution. The article notes that the increase in post-grant reviews (reexaminations) running concurrently with infringement litigation raises the stakes of the PTO’s standard.

From the abstract:

Although there has been much commentary on patent claim interpretation methodology in general, very little has been written about the unique interpretation approach the Patent Office employs. The courts, starting with the Court of Customs and Patent Appeals and continuing with the Federal Circuit, instruct the Patent Office to give every applied-for claim its ‘broadest reasonable interpretation’ (BRI) during patent examination. This Article explores this special standard and concludes that not only are the previously articulated rationales behind the BRI standard severely lacking, the standard is also contrary to both the patent statutes and the concept of a unitary patent system. The BRI standard additionally allows patent examiners to avoid difficult claim interpretation issues, leads to improper and uncorrectable denials of patent protection, and is incurably ambiguous.

Notes:

Read the article here.
MPEP 2111 “CLAIMS MUST BE GIVEN THEIR BROADEST REASONABLE INTERPRETATION“
Ex parte Koo (BPAI 2008) (PTO Should Apply Broadest Reasonable Claim Interpretation to Section 101 Analysis)

The Changing Nature Inventing: Collaborative Inventing

July 9, 2009Academic Studies, Articles and Publications, PatentDennis Crouch

Although inventing can still be a solo endeavor, patenting data indicates that paradigm no longer predominates. Over the past four decades, the number of inventors per patent has steadily crept upward. The first chart below shows the average number of inventors per patent moving from 1.6 for patents issued in the 1970’s to 2.5 for patents issued since 2000.*

As the chart below shows, this rising average is being driven by a dramatic increase in the proportion of “highly collaborative” inventions with three or more listed inventors. That rise is coupled with a proportional decrease in the proportion of solo inventions. Interestingly, the proportion of two-inventor patents has stayed relatively steady throughout the entire time period.

Some areas of technology lend themselves to team work. Biotech research and drug development is typically extremely expensive and done in structured teams while lower-tech areas may not be so structured. Compare, for instance patents in classes 514 (drugs) and 435 (chemistry of molecular biology) with patents in classes 135 (tents) and 297 (chairs). The first group averages three times the number of inventors as the second group.

It may also be that team-built inventions are more likely to get funding and be patented. Thus, non-US applicants are more likely to spend patenting money in the US on multi-inventor applicants. Likewise, multi-inventor applications are likely to have larger patent families through continuations and CIPs.

The rugged individualists are still out there – they are just getting more lonesome.

Notes:

This data is derived from a sample of 750,000 patents issued from August 1971 through February 2009. All reported results are significant at the 99% confidence level.

Inter Partes Reexamination Statistics

July 7, 2009Academic Studies, Articles and Publications, Patent, ReexaminationDennis Crouch

In August 2008, Messrs Baluch and Maebius of Foley & Lardner published an interim report on the results of inter partes reexamination proceedings. At the time of their writing, however, only 30 inter partes reexaminations had been pushed-through to conclusion with a reexamination certificate. In the past year, that total has more than doubled to 73 issued reexamination certificates.

Of course, the main point about inter partes reexaminations is that the process can be incredibly slow if either party pushes. Only about 50% of the inter partes reexaminations filed 2001-2005 have been completed either through issuance of a reexamination certificate (on the merits) or procedurally terminated. Overall, the reexamination certificates took an average of 37.5 months to issue (median of 34.4 months). When all is said and done, this pendency will be much longer since the slow and/or hotly disputed cases are all still pending. Only one (1) of the completed cases received a BPAI decision (all claims were cancelled after BPAI affirmed) and no completed cases have received a court decision.

Results of the reexamination certificates: Inter partes reexaminations continue to show promise as a mechanism for “killing” patent claims. Of the 73 issued reexamination certificates, 60% (44) cancel all the claims and only 12% (9) confirm all the original claims as patentable. The remaining 27% (20) change the claimset in some way. For the 19 inter partes reexamination certificates issued on patents with co-pending litigation, 42% (8) resulted in all claims being cancelled; 5% (1) confirmed all claims as patentable; and 53% (10) changed the claimset in some fashion.

Evidence Based Prosecution: The Status of Applications Filed 4 ½ Years Ago

June 25, 2009Academic Studies, Articles and Publications, BPAI, PatentDennis Crouch

This morning I created a dataset of prosecution information for 462 randomly selected utility patent applications filed in December 2004 and January 2005 to get a sense of where those applications stand after 4 ½ years of prosecution. Overall, 48% of the applications have issued as patents; 26% have been abandoned; and 26% are still pending. (Note – I excluded the 12% of cases from my sample that were never published as applications because data is not available for most of them).

Table 1 below shows the detailed status for each case as provided by the USPTO’s PAIR system. All but two of the pending cases have received at least an initial examination. The two still-unexamined cases are both software-related applications.

High-Level Status	Status	Percent of Cases
Patented	Patented Case	47.8%
Abandoned	Abandoned — Failure to Respond to an Office Action	25.2%
Abandoned	Abandoned — Failure to Pay Issue Fee	0.7%
Abandoned	Expressly Abandoned — During Examination	0.2%
Pending	Non Final Action Mailed	8.9%
Pending	Final Rejection Mailed	6.4%
Pending	Response to Non-Final Office Action Entered and Forwarded to Examiner	5.0%
Pending	On Appeal — Awaiting Decision by the Board of Appeals	1.0%
Pending	Notice of Allowance Mailed — Application Received in Office of Publications	1.0%
Pending	Notice of Appeal Filed	0.7%
Pending	Publications — Issue Fee Payment Verified	0.5%
Pending	Examiner’s Answer to Appeal Brief Mailed	0.5%
Pending	Docketed New Case – Ready for Examination	0.5%
Pending	Appeal Awaiting BPAI Docketing	0.5%
Pending	Withdrawn Abandonment awaiting examiner action	0.2%
Pending	Response after Final Action Forwarded to Examiner	0.2%
Pending	Appeal Brief (or Supplemental Brief) Entered and Forwarded to Examiner	0.2%
Pending	Advisory Action Mailed	0.2%
Table 1

An often frustrating aspect of application pendency is that abandoned cases can be kept alive by filing a continuation application. Of those cases that have been either patented or abandoned, 25% have one or more descendents in the form continuation or CIP applications. (I have not determined whether those continuations are themselves still pending.)

Of the cases already completed (no longer pending), the median patent took 2.6 years to issue while the median abandonment did not occur until 3.1 years into prosecution. Along this line, the longer a case was pending, the greater the likelihood that the case was abandoned. Thus, 71% of cases that were pending for fewer than three years were allowed while only 29% of cases that were pending for three to four and a half years were allowed.

The chart below shows the percentage of applications pending as a function of the number of years in prosecution. Although the average time in prosecution for this cohort cannot be calculated yet (because so many cases are still pending), the median time in prosecution – as seen in the chart – is 3.3 years.

The patent office examination corps is divided into various technology centers. In my sample, TC 2800 (Semiconductors, Electrical and Optical Systems and Components) had allowed the highest percentage of cases (70%) and had the lowest rate of applications still-pending after 4 ½ years (3%). TC 1600 (Biotechnology and Organic Chemistry) has the highest abandonment rate (36%) while TC 2600 has the highest percentage of cases still pending (48%).

Evidence Based Prosecution: The Status of Applications Filed 4 ½ Years Ago

June 25, 2009Academic Studies, Articles and Publications, BPAI, PatentJonathan Hummel

High-Level Status	Status	Percent of Cases
Patented	Patented Case	47.8%
Abandoned	Abandoned — Failure to Respond to an Office Action	25.2%
Abandoned	Abandoned — Failure to Pay Issue Fee	0.7%
Abandoned	Expressly Abandoned — During Examination	0.2%
Pending	Non Final Action Mailed	8.9%
Pending	Final Rejection Mailed	6.4%
Pending	Response to Non-Final Office Action Entered and Forwarded to Examiner	5.0%
Pending	On Appeal — Awaiting Decision by the Board of Appeals	1.0%
Pending	Notice of Allowance Mailed — Application Received in Office of Publications	1.0%
Pending	Notice of Appeal Filed	0.7%
Pending	Publications — Issue Fee Payment Verified	0.5%
Pending	Examiner’s Answer to Appeal Brief Mailed	0.5%
Pending	Docketed New Case – Ready for Examination	0.5%
Pending	Appeal Awaiting BPAI Docketing	0.5%
Pending	Withdrawn Abandonment awaiting examiner action	0.2%
Pending	Response after Final Action Forwarded to Examiner	0.2%
Pending	Appeal Brief (or Supplemental Brief) Entered and Forwarded to Examiner	0.2%
Pending	Advisory Action Mailed	0.2%
Table 1

Evidence Based Prosecution: The Status of Applications Filed 4 ½ Years Ago

June 25, 2009Academic Studies, Articles and Publications, BPAIDennis Crouch

High-Level Status	Status	Percent of Cases
Patented	Patented Case	47.8%
Abandoned	Abandoned — Failure to Respond to an Office Action	25.2%
Abandoned	Abandoned — Failure to Pay Issue Fee	0.7%
Abandoned	Expressly Abandoned — During Examination	0.2%
Pending	Non Final Action Mailed	8.9%
Pending	Final Rejection Mailed	6.4%
Pending	Response to Non-Final Office Action Entered and Forwarded to Examiner	5.0%
Pending	On Appeal — Awaiting Decision by the Board of Appeals	1.0%
Pending	Notice of Allowance Mailed — Application Received in Office of Publications	1.0%
Pending	Notice of Appeal Filed	0.7%
Pending	Publications — Issue Fee Payment Verified	0.5%
Pending	Examiner’s Answer to Appeal Brief Mailed	0.5%
Pending	Docketed New Case – Ready for Examination	0.5%
Pending	Appeal Awaiting BPAI Docketing	0.5%
Pending	Withdrawn Abandonment awaiting examiner action	0.2%
Pending	Response after Final Action Forwarded to Examiner	0.2%
Pending	Appeal Brief (or Supplemental Brief) Entered and Forwarded to Examiner	0.2%
Pending	Advisory Action Mailed	0.2%
Table 1

Understanding the Role of the Board of Patent Appeals: Ex Parte Rejection Rates on Appeal

June 22, 2009Academic Studies, Articles and Publications, BPAI, Patentanticipation, obviousnessDennis Crouch

By Dennis Crouch PDF Version of the Article

Abstract:

This study provides an issue-by-issue analysis of decisions on ex parte appeals by the Board of Patent Appeals and Interferences (BPAI) of the United States Patent and Trademark Office (USPTO). All the cases in this study were appealed to the BPAI after one or more of the pending claims were rejected by a patent examiner.

In the study, I report that most BPAI appeals focus on two or more issues. Of those, the majority of issues (61%) are affirmed and the remainder reversed. When more issues are presented, the case as a whole becomes more likely to be affirmed-in-part. In addition, I find that the likelihood that a case is affirmed has increased over time (Jan 2008 – May 2009).

By far, the most common issue on appeal is obviousness. I find that 87% – 90% of ex parte BPAI decisions decide an issue of obviousness. Only 4% of appeals consider neither obviousness nor novelty. The major aberration of this trend is for cases involving biotechnology and organic chemistry (TC 1600). 18% of BPAI decisions arising from TC 1600 focus on issues other than obviousness and novelty.

In comparing results by issue, I find that obviousness rejections are more likely to be affirmed than are other types of rejections. Most cases (74%) that discuss neither obviousness nor novelty are reversed.

The BPAI is becoming increasingly important. Over the past several years, the BPAI has seen a dramatic rise in the number of appeals being filed. In addition every recent patent reform legislative proposal has included an increased role for the Board.

Appealing BPAI Rejections: Part I

June 2, 2009Academic Studies, Articles and Publications, BPAI, Dissent, PatentFederal Circuit En BancDennis Crouch

My keen research assistant Patrick Barnacle pulled up records on 56 ex parte patent appeals that have been decided by the Court of Appeals for the Federal Circuit since March 2005. All of these cases arise from rejections sustained by the USPTO’s internal Board of Patent Appeals and Interferences (BPAI). We are working to create a more complete database. In the meantime, I wanted to report some preliminary results on timing.

The median ex parte appeal took just over fifteen months to complete as measured from the date of the BPAI decision until the date of the Federal Circuit decision. As measured from the filing of the CAFC Notice of Appeal, the median appeal took exactly one year (365 days). Some appeals took longer: Comiskey, Ferguson, and Bilski each took more than two years from the NOA, but they were all tied to en banc decisions. About 25% of the appeals took less than ten months from the NOA.

Once oral arguments (if any) are complete, the Federal Circuit is rather quick at issuing an opinion. The median decision was issued 47 days after the oral arguments. (Again, a skewed average of 86 days is driven by the handful of en banc decisions) 30% of the decisions came within one week of oral arguments – most of those took one to two days.

We have not yet analyzed the correlation between delay and results, but it appears that especially quick decisions tend to favor the PTO over the applicant. As you might expect, delays in judgment correlate with longer opinions; opinions marked precedential; dissenting opinions; and opinions with Judge Newman on the panel.

Holman: A Contrarian Law Professor’s Two Cents on the Arkansas Carpenter’s (Ciprofloxacin) Petition for Certiorari

May 7, 2009Academic Studies, Articles and Publications, PatentAffirmed Without Opinion, Claim ConstructionDennis Crouch

By Christopher M. Holman, Ph.D., J.D., Associate Professor at UMKC Law School

Professor Mark Lemley recently filed an amici curiae brief on behalf of himself and a cohort of prominent professors of law, economics, and business in support of a petition for certiorari in Arkansas Carpenter's Health and Welfare Fund v. Bayer (the "Professors’ Brief").[1] Joining the professors as amici on the brief are the American Antitrust Institute, the Public Patent Foundation, and AARP. These professors and organizations are asking the Supreme Court to review and reverse the Federal Circuit's decision in In re Ciprofloxacin Hydrochloride Antitrust Litigation.[2] Arkansas Carpenter's is the latest in a string of certiorari petitions that have been filed in cases involving an unsuccessful antitrust challenge to a so-called “reverse payments settlement” between a drug patent owner and a potential generic competitor. So far the Supreme Court has denied all of the petitions.

The defining characteristic of a reverse payments settlement is the transfer of some form of consideration, often but not always cash, from the patent owner to the alleged infringer. In most settlements of patent infringement suits any payment typically flows from the alleged infringer to the patent owner, i.e., in the "forward" direction. Reverse payment settlements of challenges brought against prescription drug patents under the Hatch-Waxman Act have been controversial for years. The FTC and others charge that these agreements are anti-competitive and result in substantially higher prescription drug prices for consumers (and ultimately third-party payers such as the government). The atypical direction of the payment is considered suspect by many who view it as evidence that the merits of the patent case must be weak, and argue that the branded drug company is in effect paying the generic company to stay off the market and using the patent as a mere pretense to skirt antitrust liability. Clearly, absent the patent a naked agreement by a generic drug company to stay off the market in exchange for cash would constitute an antitrust violation.

Nonetheless, courts who have considered the legality of reverse payment settlements have repeatedly concluded that, in view of the incentives and dynamics created by the unique structure of a patent infringement suits brought under the Hatch-Waxman Act, it is neither surprising nor particularly suspicious to find payments flowing from the patent owner to the alleged infringer in the settlement of these suits. In fact, even the FTC has acknowledged that at least some reverse payment settlements are legitimate and even pro-competitive. In most patent infringement litigations, the alleged infringer faces the prospect of potentially large money damages based on its past infringement, so there is often an incentive to pay the patent owner to settle the lawsuit and avoid this risk. In contrast, Hatch-Waxman litigation generally occurs before the potentially infringing generic drug goes on the market. The generic drug company typically faces no risk of money damages for past infringement. At the same time, the drug patent owner faces huge potential financial losses if even one court finds its patent invalid or not infringed, and given the uncertainty patent litigation, particularly at the district court level, it is not surprising that some patent owners would be willing to pay to settle the lawsuit and resolve the uncertainty.

The Professor's Brief is essentially an updated version of a brief Professor Lemley filed in 2006 in support of a petition for certiorari in In re Tamoxifen, a reverse payment settlement antitrust challenge arising out of the Second Circuit. In 2006, I seriously considered signing on to his Tamoxifen amici brief; without having delved into the issue, the notion of reverse payments settlements as characterized by Professor Lemley and others struck me as suspicious and anti-competitive . After all, why would a patent owner pay an alleged infringer to settle a lawsuit unless the merits of the patent case were weak? Under these circumstances, is it not logical to infer that the parties are using the patent lawsuit as a mere pretense to provide cover for what is in actuality an agreement between potential competitors not to compete? However, before I signed on to the brief I decided to read the Second Circuit'sTamoxifen decision, as well as the reverse payments settlement decisions that had already been issued by the Sixth and Eleventh circuits. In his brief, Professor Lemley argued that the decisions from these other circuits were in conflict with the Second Circuit's decision in Tamoxifen. After reading the cases, I found that I disagreed with Professor Lemley's interpretation of the decisions, and concluded that in fact there is no split between the circuits. In fact, the decisions by the Second, Sixth and Eleventh circuits (and now the Federal Circuit) are all quite consistent, taking into account that each case involves its own unique settlement agreements and other surrounding facts, and that the decisions necessarily reflect the facts of the individual case being decided.

Reading these decisions sparked my curiosity, particularly since my interpretation of the case law diverged substantially from that of Lemley and many other academic commentators. I decided to research the topic, and in 2007 I published an article entitled “Do Reverse Payments Settlements Violate the Antitrust Laws?”[3] In the article, I survey the diverse array of patent settlements that have been lumped together under the imprecise label "reverse payment settlement,” and explain the factors that motivate the structure of these settlements. After reviewing the facts surrounding specific settlement agreements, and considering the well reasoned explanations of various judges who have rejected the notion that the mere presence of a reverse payment can render an otherwise legitimate patent settlement illegal, I came to disagree with the position propagated by the FTC and academics such as Professor Lemley, i.e., that the mere inclusion of a reverse payment in an otherwise legal patent litigation settlement renders the agreement per se or presumptively in violation of the antitrust laws. Moreover, my view is aligned with that of the vast majority of courts that have addressed the issue. After a close reading of the decisions, it is clear to me that the purported split between the circuits has so far failed to materialize, although the situation could change if and when other circuits weigh in on the issue.

In this short article penned for Patently-O, I will challenge some of the specific assertions made in the Professors’ Brief. For simplicity, many of the citations in this article are to my law review article. Those interested in a more expansive treatment of the subject are encouraged to consult the law review article, which includes primary cites to the cases and other authorities.

(more…)

Challenging the Strong Presumption of Patent Validity

April 15, 2009Academic Studies, Articles and Publications, Invalidity, PatentAIA Trials, PGRDennis Crouch

One of the next major legal challenges to patent rights will be against the strong presumption of validity associated with the patent grant. Section 282 of the patent act says only that a patent and its claims "shall be presumed valid." Under longstanding doctrine, this presumption can only be overcome with clear and convincing evidence of invalidity. The challenge to this presumption is most likely on two fronts: (1) expanded post-grant review and (2) court challenges to the weight of the presumption.

Expanded Post Grant Review: The PTO uses the lower preponderance (more likely than not) standard when refusing to grant patent rights, and expanded post-grant oppositions will likely allow would-be defendants to challenge patents at the lower standard.

Challenging the Weight of the Presumption: The greater change would come, however, if the Supreme Court takes a case on point. Since the 1952 Supreme Court has not definitively weighed-in on the the level of proof necessary to overcome the statutory presumption of validity, and the Court's Radio Corp (1934) opinion arguably sums up the pre-unification state of the law: "The force of that presumption has found varying expression in this and other courts." Of course, the unified Federal Circuit cleared the air by firmly establishing the clear and convincing standard as the standard. In a 2004 article, Mark Janis reviews the history of the presumption – finding that the clear and convincing standard was already the majority rule prior to unification, but that the Federal Circuit made the standard "meaningful once again." His message: "there is no strict, inevitable correlation between the words of the evidentiary standard and the overlying message delivered by the presumption of validity."

More recently, in KSR the Supreme Court all but suggested one potential petition question: "whether the failure to disclose [relevant prior art] during prosecution … voids the presumption of validity given to issued patents." A more likely focus may be on reducing strength of the presumption over prior art that was not considered during prosecution.

Question: How would patent practice change if the strong presumption of validity was only applicable over prior art actually considered during prosecution?

Notes:

I do not believe that the presumption of validity should be reduced. However, I wrote this post to let folks know that it is on the horizon and that a change is somewhat likely during the life of any currently pending patent application.
Mark Janis, Reforming Patent Validity Litigation: The "Dubious Preponderance", 19 Berkeley Tech. L.J. 923 (2004).
This post was prompted by an e-mail amongst IP law professors with special input from Mark Lemley, Arti Rai, David Hricik, Howard Skaist, Josh Sarnoff and Tom Field. See also Mark A. Lemley and Douglas Lichtman, Rethinking Patent Law's Presumption of Validity, 60 Stanford Law Review 45 (2007)(suggesting gold-plated patents).

Percentage of Patents that were Initially Rejected

April 3, 2009Academic Studies, Articles and Publications, Patent, Patent ProsecutionDennis Crouch

This relates to my statements regarding the percentage of applications that receive at least an initial rejection. The graph below shows the percentage of patents issued (2000-2006) that were initially rejected by the PTO broken up into groups of art-units. Thus AU 1630 group actually includes AU 1630 – 1639. Close to 95% of the patents issued through the AU 1630 group during that period were initially rejected before being eventually allowed.

As with the design patent discussion yesterday, the rejection rate above is for applications that eventually issue as patents. For any given application, the effective rejection rate was likely higher because abandoned applications are probably more likely to have been rejected.

This data is now getting a bit old – but it is what it is. This data came from public PAIR before researchers were blocked from accessing it in any substantial way. Since 2006, applicants have complained of increased rejections. My perception that this change is not a shift toward more first office action rejections, but rather a shift toward sustaining more of those rejections in the second and subsequent office actions.

Design Patents: Sailing Through the PTO

April 2, 2009Academic Studies, Articles and Publications, Design Patent, Patent, Patent ProsecutionDennis Crouch

Over eighty percent of utility patent applications are initially rejected during prosecution. Some areas of technology – such as semiconductors – have a lower rejection rate while others – such as electronic commerce methods – have an even higher rejection rate.

I wanted to compare the result for utility patents with design patents. I pulled up information on 1000 of the most recently issued design patents (all issued in March, 2009) and parsed through the file histories to see how design patent prosecution compares. As the graph below shows, in my sample, only 25.6% of the recently issued patents received an initial rejection during prosecution. To be clear, this 25% rejection rate is for applications that eventually issue as patents. To get an overall picture of design patent rejections, we need to also consider the applications that are abandoned and never issue as patents. Recent PTO statistics show that a bit under 20% of design patent applications are abandoned. Because design patent file histories are kept secret unless a patent issues, we cannot know why any individual case is abandoned – However, the two most likely situations are that the applicant (a) failed to respond to a rejection or (b) failed to pay the issue fee. Even if we assume that 100% of the abandoned cases are initially rejected, that only pushes the initial rejection rate to about 40%.

As the graph below shows, of the 1000 issued design patents in my sample, only 4.1% received a final rejection during prosecution; and only 0.2% cases (2 out of 1000) included a notice of appeal. None of the 1000 cases included an appeal brief.

The design patents in the study had an average pendency of 15.3 months calculated by finding the number of months between the filing date and the issue date. As may be expected, applications that included at least one rejection took considerably longer to issue (21.5 months) as compared to those that were never rejected (13.2 months). (These means are different at 99.9 CI).

Most design patents (58%) in my sample have only one inventor. However, 69% of the inventors are listed as joint inventors. A number of the muliti-inventor patents included trans-national inventorship with inventors originating from two or more separate countries. About 1% of the applications listed at least one inventor from the US & Great Britain. Another 1% listed at least one inventor from both the US and China.

Inequitable Conduct: Trends at the Federal Circuit

March 19, 2009Academic Studies, Articles and Publications, Inequitable Conduct, PatentFederal Circuit En Banc, Inequitable ConductDennis Crouch

In Larson Mfg, Judge Linn revived the call to rebuild the ramparts protecting patent applicants against charges of inequitable conduct. For some sense of history, I used Westlaw to pull-up the past twenty-five years of Federal Circuit decisions and counted the number of decisions that at least mention “inequitable conduct.” The result is a clear increase in the number of decisions discussing inequitable conduct. Although the absolute number of Federal Circuit patent decisions has also risen somewhat, the growth rate of IC decisions greater.

The graph below shows the number of Federal Circuit decisions that at least mention “inequitable conduct” for each year 1984-2008.

2009 may buck the trend. As of March 19, 2009, only two decisions mentioned inequitable conduct (Larson Mfg., and Rothman). At that rate, we might project only nine or ten decisions for the entire year.

I use the ‘mention’ of inequitable conduct here because the stated ‘plague’ primarily focuses on the allegations of inequitable conduct. The mere allegations of inequitable conduct are certainly harmful to the patentee. However – more than that – they are harmful to the profession and to the patent system as a whole by continually suggesting that patent attorneys and patent agents are facilitating fraudulent activities.

Rooklidge: Patent Reform Damages Provision Violates Seventh Amendment

March 15, 2009Academic Studies, Articles and Publications, Damages, Patent, Patent Legislationanticipation, Damages, Licenses, obviousnessDennis Crouch

The following post is by Bill Rooklidge. Rooklidge is a patent litigator and former head of the AIPLA. He clerked at the Federal Circuit in the early 1980’s.

Richard Cauley’s March 14, 2009 guest post accurately characterized the damages reform provision of the Patent Reform Act of 2009 as “a judicial nightmare” because of its procedural complications, attendant delay and reversal potential. Two additional problems with that provision merit note: it perpetuates prior art subtraction and introduces into jury trial multiple potential violations of the Seventh Amendment.

Fact-finding and the Seventh Amendment. The Supreme Court coined the term “gatekeeper” in Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993), to describe the trial court’s obligation to “ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable.” In addition to rulings on Daubert motions, courts also fulfill their gatekeeper role by ruling on motions for summary judgment and judgment as a matter of law, motions in limine, evidentiary objections, and jury instructions. The bills’ damages section would enhance the courts’ gatekeeper role, but in doing so unconstitutionally invade the jury’s province as fact finder.

The bills would add to 35 U.S.C. §284 paragraph (c)(1), which would require the court to select from three methods for calculating a reasonable royalty “based on the facts of the case and after adducing any further evidence the court deems necessary.” A procedural rule requiring the court to weigh evidence to select from alternate theories would be void for depriving the patentee of its right to jury trial. See Fidelity & Deposit Co. of Maryland v. United States, 187 U.S. 315, 320 (1902). A genuine issue of material fact, that is, a dispute over facts that might affect the outcome, requires the issue to go to the jury. See generally Anderson v. Liberty Lobby, 477 U.S. 242 (1986). Similarly, the trial court’s exclusion of the entire market value rule under paragraph (c)(1)(A) for the patentee’s failure to make “a showing to the satisfaction of the court,” would violate the Seventh Amendment in a jury trial in which the patentee presents enough evidence to create a genuine issue of material fact. See Minks v. Polaris Indus., Inc., 546 F.3d 1364, 1372 (Fed. Cir. 2008) (vacating because trial “court necessarily engaged in an independent review of the evidence and substituted its conclusion for that of the jury on the factual issue of compensatory damages”).

The first section of the bills’ section (c)(1)(B) authorizes trial courts to exclude the patentee’s prior licenses for failure to make a “showing to the satisfaction of the court” of three facts regarding the claimant’s other licenses:

“the claimed invention has been the subject of a nonexclusive license for the use made by the invention by the infringer”;

the licenses have been extended “to a number of persons sufficient to indicate a generally marketplace recognition of the reasonableness of the licensing terms”; and

“the license was secured prior to the filing of the case before the court.”

The court also must determine whether the infringer’s use is “of substantially the same scope, volume, and benefit of the rights granted under such license. The second sentence of paragraph (c)(1)(B) requires a similar procedure for noninfringing substitutes for the infringing product or process. And paragraph (c)(1)(C) likewise requires the court to “conduct an analysis to ensure that a reasonable royalty is applied only the portion of the economic value of the infringing product or process properly attributable to the claimed invention’s specific contribution over the prior art.” A court making these findings would invade the province of the jury where the patentee presents substantial evidence on these issues.

Prior Art Subtraction. Section (c)(1)(A)’s requirement for application of the entire market value rule that the “claimed invention’s specific contribution over the prior art” be the “predominant basis for market demand” is just the latest form of “prior art subtraction.” Use of “specific contribution over the prior art” is an attempt to separate the “gist” or “heart” of the invention from the patent claims, and would introduce the extra step of subjectively redefining the scope of a patent. The Federal Circuit long ago rejected using the “gist” or “heart” of the invention to determine obviousness, see Para-Ordnance Mfg. v. SGS Importers Int’l, Inc., 73 F.3d 1085 (Fed. Cir. 1995), and recently rejected using the “point of novelty” in design patent law. Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665, 678 (Fed. Cir. 2008). Stripping the prior art elements out of the claimed invention that has been examined by the USPTO, construed by the federal district court, and relied upon to determine validity and infringement, in no way approximates the “heart” or “gist” of the invention, and that inherently subjective process would be unfair to the patent owner, and would eliminate application of the entire market value to inventions consisting entirely of prior art elements, arguably the vast majority.

Paragraph (c)(1)(C) would limit the reasonable royalty base to the “economic value of the infringing product or process properly attributable to the claimed invention’s specific contribution over the prior art,” replacing apportionment with prior art subtraction. This analysis is no substitute for the sophisticated and nuanced apportionment approach available under existing case law such as Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116, 1133-37 (S.D.N.Y. 1970). Paragraph (c)(1)(C) would address the combination invention problem by stating that for combination inventions “the contribution over the prior art may include the value of the additional function resulting from the combination, as well as the enhanced value, if any, of some or all of the prior art elements as part of the combination, if the patentee demonstrates that value.” This analysis, which finds no precedent in existing case law and lacks any readily definable economic standards, does not even begin to address the problem that subtracting the prior art elements simply does not approximate what the inventor really invented.

Replacement of “contribution over the prior art” with the “essential features” language from the Supreme Court’s recent Quanta Computer, Inc. v. LG Electronics, Inc., 128 S. Ct. 2109 (2008), would just put another label on prior art subtraction. Regardless of label, the bills’ damages provision would drastically reduce patent owners’ ability to obtain reasonable royalty damages, which could not be less fair to those, like independent inventors, research institutions and universities, that have no ability to obtain lost profits damages.

Notes

Forward Looking Patent Damages
Patent Reform 2009: Damages
Patent Reform Act of 2009
Richard Cauley’s March 14, 2009 guest post
Rooklidge: Reform of a Fast-Moving Target: The Development of Patent Law Since the 2004 National Academies Report: rooklidgereform.pdf

Guest Post: Hot Topics in US Patent Reexamination

March 10, 2009Academic Studies, Articles and Publications, Guest Post, Patent, ReexaminationAIA Trials, IPR, PGR, USPTO DirectorDennis Crouch

By Robert Greene Sterne. Rob Sterne is a founding director of the IP firm Sterne Kessler Goldstein & Fox. I asked him to write about current ‘hot topics’ in patent reexamination.

The marked increase in the use of reexamination has naturally caused more frequent and closer evaluation and scrutiny of its unique procedures by involved parties and the courts. In FY2008, according to official USPTO (PTO) statistics, 168 inter partes reexams and 680 ex parte reexams were instituted. Compare this to FY2005, where 59 inter partes reexams and 524 ex parte reexams were instituted just three years ago. In short, it is becoming one of the faster developing areas of intellectual property law and, in the words of top PTO officials, it is a true “work in progress.”

Developed in conjunction with the Sedona Patent Litigation Conference and a team of my colleagues (and incorporating feedback of dozens of sources including judges, senior officials from the PTO, patent litigators, patent prosecutors, academics, bloggers, and interested members of the public), a comprehensive and neutral white paper overview of this subject matter provides an in-depth review of hot issues currently confronting parties that find themselves in the “parallel universe” of patent reexamination and concurrent litigation in the district courts and USITC. The hot topics addressed include (A) impact of PTO decisions on stock price, (B) reexamination pendency, (C) substantial new questions of patentability, (D) real party in interest, (E) duty of disclosure, (F) protective orders, (G) stay of litigation in view of reexamination, (H) appeals from the Central Reexamination Unit to the Board of Patent Appeals and Interferences, (I) the impact of reexamination on settlement, and (J) page and time limits in reexamination proceedings.

Here is a closer look at three of these topics:

Litigation Stays: Reality or Myth – The percentage of reexams that are in the ‘parallel universe’ of district court or USITC patent litigation continues to climb. For example, in FY2008, 62% of current inter partes reexams and 30% of ex parte reexams were in parallel litigation. Judges have wide latitude in granting or denying stays and litigants must carefully evaluate prior stay decisions from their judge and the court they are in to effectively prognosticate how the judge will rule. Especially with respect to inter partes reexams, the grant of a stay can effectively be “game over” for the patent owner.
Stock Fluctuation: Impact of PTO and Court Decisions on Stock Price – The practical impact of reexam on patent owners can be enormous. There are recent celebrated examples of stocks dropping 40% in hours after the release of a non-final office action rejecting claims in a suit, even though this development is not controlling on a court case because the reexam is not final. Third party requestors engage in litigation in the press by issuing inflammatory press releases that spin the truth. Patent owners need to be prepared for this media battle to protect their stock price. Moreover, the PTO mails decisions to parties in the reexam, putting the patent owner at a real disadvantage in dealing with the potential reexam media war.
Reexamination Pendency: So How Long Does it Take? – The stated goal of the PTO CRU is 24 months from the time the reexam is instituted to a Final CRU office action or action closing prosecution. By statute, the CRU must handle reexams with “special dispatch.” However, there are no definitive statistics on how long it takes for a reexam to be handled to completion by the CRU and then through appeal at the BPAI. Our current best estimate is that it takes approximately two to four years for the CRU to complete a reexam, typically a little faster for ex parte reexams, and two to four years for the BPAI to complete a reexam appeal. Thus, the reexam process could take four to eight years before it arrives at the US Court of Appeals for the Federal Circuit on appeal. This is a significant amount of time and requires additional strategy and tactical decisions by the parties.

For additional insight into patent reexamination, download recent podcasts – “2008 Patent Reexamination Trends” (Episode #1) here and “The Parallel Universe of Patent Reexamination and Litigation” (Episode #2) here.Download the latest version of the Sedona Conference related paper referenced above here, where you can read in-depth about the full list of hot topics identified above.

Patent Law Professors on the Move

March 9, 2009Academic Studies, Bits and Bytes, PatentDennis Crouch

The lateral market for patent law professors is alive and steaming ahead.

Scott Kieff has accepted a position at GW law school in DC and will be moving from Washington University in St. Louis. GW may well have the best patent focused program in the country. At any opportunity, Kieff promotes the notion that strong property rights almost always lead to the best outcome.
Tim Holbrook is off a recent stint at Stanford Law school and is taking a position at Emory in Atlanta. Emory's patent space has been vacant since Margo Bagley left for UVA several years ago. Holbrook is leaving his fulltime position at Chicago-Kent.
Also leaving Chicago is Katherine Strandburg (from Depaul). Strandburg is taking a position at NYU where she will join Richard Epstein and my undergraduate classmate Troy McKenzie. McKenzie is a chemical engineer, but does not do patent law. Instead he focuses on bankruptcy.
In a coup, Mark Janis is headed home to Indiana (Bloomington) – leaving his longtime post at Iowa. Janis largely focuses on the interplay between trademark and patent rights.
Dave Schwartz is moving from John Marshall to fill Holbrook's position at Kent. Before moving into academia, Dave was a partner at a firm handling patent litigation and prosecution.

Each of these individuals have been helpful to me at some point during the past few years. Thank you, and good luck in your new positions!

What is a troll patent and why are they bad?

March 6, 2009Academic Studies, Articles and Publications, PatentLicenses, USPTO DirectorDennis Crouch

By TJ Chiang (Professor at George Mason Law School). Professor Chiang wrote the following squib after reading yet another article complaining about patent trolls.

There is much debate and controversy over the term "patent troll." Let me suggest a fairly narrow definition, but one that identifies a category of patents with distinct problems. Moreover, let me suggest that we should talk about individual patents as "troll patents," rather than entire entities as patent trolls. A troll patent is one that:

Is owned by someone that does not practice the invention.
Is infringed by, and asserted against, non-copiers exclusively or almost exclusively. By copying I mean any kind of derivation, not just slavish replication.
Has no licensees practicing the particular patented invention except for defendants in (2) who took licenses as settlement.
Is asserted against a large industry that is, based on (2), composed of non-copiers.

The problem with a patent troll—or, more accurately, the particular troll patent—that fits all four conditions above is that the troll patent does only two things. First, it gathers dust in the patent office. Second, it inflates prices on products. The patent itself contributes nothing useful to society, in so far as the people who actually make anything useful would have done it equally in the absence of the patent.

These four conditions also rule out a few non-practicing entities; or, rather, many of the patents held by these entities. University-held patents are largely not troll patents, in so far as they are often on substantial advances where the infringers copy. Individual inventors are also not always trolls. An individual inventor that licenses others to commercialize the invention is not a troll; nor where the inventor actually has something significant that gets pirated. But a patent owner who sits in wait to ambush an industry later, with a patent that does nothing otherwise except gather dust, is a troll.

One hypothetical that will surely be thrown at me is the individual inventor who tries to commercialize the invention, but fails, and then sues the industry years later. This inventor is a visionary ahead of his time who was merely unlucky. On the other hand, this inventor still contributed nothing useful to society. It is worth emphasizing the fact that, by my hypothetical, the industry produced the same technology independently, without copying anything from the patent. In the absence of copying by someone else or the commercialization of the product through the patent, I do not see the inventor as having done society much of a favor.

USPTO Maintenance Fees

February 23, 2009Academic Studies, Articles and Publications, Revival, USPTO NewsVenueDennis Crouch

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.

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.

Provisional Patent Applications: Waiting to File Non-Provisionals

February 22, 2009Academic Studies, Articles and Publications, Provisional Patent ApplicationDennis Crouch

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.

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?