Get a Job doing Patent Law
Today, USPTO Director provided her first Post-Election speech that includes some thoughts on IP policy after Obama.
I believe the incoming administration must and will continue our effort to promote innovation fueled by a strong and robust IP system. Support for IP in the United States has a long history of bipartisanship, and there’s no reason to imagine that changing with a new president and a new Congress, both of whom have economic growth as a top priority. . . .
I’m optimistic the incoming administration will share our appreciation of the importance of intellectual property as a driver of economic growth. As I look ahead, I foresee legislative patent reform changes will continue to be discussed in Congress, though those conversations will likely occur later in the term after some of the other priorities including filling a Supreme Court vacancy, immigration and tax reform are addressed, and any legislative patent reform will likely be more targeted, rather than the comprehensive reforms we’ve seen in prior Congresses. I would hope any legislative proposal will take into account the numerous positive changes that have occurred recently in the patent system including: through the courts, including on attorneys fees, pleading requirements and discovery limits, and at the USPTO through the PTAB and the agency’s efforts to improve the quality of patents in our system. As far as issues, I predict legislative discussions may include venue reform and possibly changes to Section 101 and PTAB. On venue, with nearly half of the patent cases filed in 2015 filed in a single district out of 94 federal judicial districts, it is easy for critics to contend that plaintiffs seek out this district preferentially for the wrong reasons. And the mere perception that there are advantages to be gained by forum-shopping challenges the public’s faith in the patent system. So there will be continuing pressure for legislative (and likely judicial) action on the issue of venue. The scope of any legislative reform remains is to be determined, but I predict that the focus will be on more targeted, rather than comprehensive reform as we saw these past couple Congresses. Further, I anticipate that the USPTO’s work across the globe to ensure that other countries have strong IP protections adequate enforcement mechanisms and remedies, and appropriate technology transfer (or licensing and competition) policies, will continue in the next Administration particularly in such countries as China and others. This is a President-elect that has promised economic growth and job creation in our country, and IP will necessarily be a key piece to achieving that goal. . . .
I firmly believe that the USPTO is healthy, well-functioning and poised to successfully handle whatever challenges and opportunities lie ahead. . . . When President Obama was inaugurated in 2009, his focus was on leading this nation’s recovery from the Great Recession. One of his first acts was to ask the Smithsonian to provide for display in the Oval Office some patent models that demonstrated past American innovation that led to new jobs and new industries. The president said that throughout our history, Americans solved problems through innovation and IP. He wanted to see reminders of that every day as he encountered the challenges he faced. The Smithsonian provided him with three models: Samuel Morse’s telegraph (1849), John Peer’s gear cutter (1874), and Henry Williams’ steamboat wheel (1877). As I stood behind the President in the Oval Office earlier this year when he signed the Defend Trade Secrets Act, I couldn’t help but notice those three models along the wall to my left—still there almost eight years later—and feel extraordinarily humbled and honored. I feel that same honor and humility today standing before all of you and reflecting on just how much we have accomplished under this administration. I’ve been fortunate to lead the USPTO at a time when intellectual property issues have been front and center on the consciousness of the American public and President and to have had the opportunity to help guide the direction in a small way. My hope is that the President-elect keeps the patent models from Morse, Peer and Williams in his office as a reminder of the importance of intellectual property to the economic prosperity that I know he wants for our country.
Read the full remarks here.
by David Hricik [Originally published on Nov 1]
The announcement is here. I will be submitting comments before the 12/27 deadline, and so if you have any ideas or thoughts, please post away. The proposed amendment include responses to comments made back in 2011 when the USPTO was initially pondering this, and the proposed rule now reads:
(a) A patent by its very nature is affected with a public interest. The public interest is best served, and the most effective patent examination occurs when, at the time an application is being examined, the Office is aware of and evaluates the teachings of all information material to patentability. Each individual associated with the filing and prosecution of a patent application has a duty of candor and good faith in dealing with the Office, which includes a duty to disclose to the Office all information known to that individual to be material to patentability under the but-for materiality standard as defined in paragraph (b) of this section. The duty to disclose information exists with respect to each pending claim until the claim is cancelled or withdrawn from consideration or the application becomes abandoned. Information material to the patentability of a claim that is cancelled or withdrawn from consideration need not be submitted if the information is not material to the patentability of any claim remaining under consideration in the application. There is no duty to submit information which is not material to the patentability of any existing claim. The duty to disclose all information known to be material to patentability is deemed to be satisfied if all information known to be material to patentability of any claim issued in a patent was cited by the Office or submitted to the Office in the manner prescribed by §§ 1.97(b) through (d) and 1.98. However, no patent will be granted on an application in connection with which affirmative egregious misconduct was engaged in, fraud on the Office was practiced or attempted, or the duty of disclosure was violated through bad faith or intentional misconduct. The Office encourages applicants to carefully examine:
(1) Prior art cited in search reports of a foreign patent office in a counterpart application, and
(2) The closest information over which individuals associated with the filing or prosecution of a patent application believe any pending claim patentably defines, to make sure that any material information contained therein is disclosed to the Office.
(b) Information is but-for material to patentability if the Office would not allow a claim if the Office were aware of the information, applying the preponderance of the evidence standard and giving the claim its broadest reasonable construction consistent with the specification.
* * * * *
■ 3. Section 1.555 is amended by revising paragraphs (a) and (b) to read as follows:§ 1.555 Information material to patentability in ex parte reexamination and inter partes reexamination proceedings.
(a) A patent by its very nature is affected with a public interest. The public interest is best served, and the most effective reexamination occurs when, at the time a reexamination proceeding is being conducted, the Office is aware of and evaluates the teachings of all information material to patentability in a reexamination proceeding. Each individual associated with the patent owner in a reexamination proceeding has a duty of candor and good faith in dealing with the Office, which includes a duty to disclose to the Office all information known to that individual to be material to patentability in a reexamination proceeding under the but-for materiality standard as defined in paragraph (b) of this section. The individuals who have a duty to disclose to the Office all information known to them to be material to patentability in a reexamination proceeding are the patent owner, each attorney or agent who represents the patent owner, and every other individual who is substantively involved on behalf of the patent owner in a reexamination proceeding. The duty to disclose the information exists with respect to each claim pending in the reexamination proceeding until the claim is cancelled. Information material to the patentability of a cancelled claim need not be submitted if the information is not material to patentability of any claim remaining under consideration in the reexamination proceeding. The duty to disclose all information known to be material to patentability in a reexamination proceeding is deemed to be satisfied if all information known to be material to patentability of any claim in the patent after issuance of the reexamination certificate was cited by the Office or submitted to the Office in an information disclosure statement. However, the duties of candor, good faith, and disclosure have not been complied with if affirmative egregious misconduct was engaged in, any fraud on the Office was practiced or attempted, or the duty of disclosure was violated through bad faith or intentional misconduct by, or on behalf of, the patent owner in the reexamination proceeding. Any information disclosure statement must be filed with the items listed in § 1.98(a) as applied to individuals associated with the patent owner in a reexamination proceeding and should be filed within two months of the date of the order for reexamination or as soon thereafter as possible.
(b) Information is but-for material to patentability if, for any matter proper for consideration in reexamination, the Office would not find a claim patentable if the Office were aware of the information, applying the preponderance of the evidence standard and giving the claim its broadest reasonable construction consistent with the specification.
I’m looking forward to speaking again at the National CLE Conference (SKI CLE) – this year in Snowmass Colorado, January 4-8 2017. [http://nationalcleconference.com/]. Obviously, the skiing is great, but the I am looking forward to the conference itself and the fireside patent law conversations.
The IP program is chaired by Scott Alter (Lathrop & Gage) and David Bernstein (Debevoise). Speakers include Judges Kimberly Moore and Kara Stoll, Professor Rochelle Dreyfuss (NYU), Donald Dunner (Finnegan), Suzanne Munck (Primary Author of the FTC Patent Troll Report). Hot topics include patent exhaustion and cyber law. I will be doing the Patent Law year-in-review and prospective Republican Agenda.
One nice aspect of the event is that it involves eight different conferences running in parallel. Topics include: Bankruptcy ■ Civil Litigation ■ Employee Benefits ■ Environmental Law, Land Use, Energy and Litigation ■ Family ■ Health ■ Intellectual Property ■ Labor & Employment.
DISCOUNT CODE: Let me know if you are coming. If you register, use PATENTLY-O as a discount code ($100 off).
[Disclosure: Although I am not making any money directly from this post, National CLE is paying for a portion of my expenses as an academic speaker at the event.]
by Dennis Crouch
Substantive Patent Law: Newly filed petition in Merck & Cie v. Watson Labs raises a core substantive patent issue – does the on sale bar apply to secret sales? The defendant asks:
Whether the “on sale” bar found in § 102(b) applies only to sales or offers of sale made available to the public, as Congress, this Court, and the United States have all made clear, or whether it also applies to non-public sales or offers of sale, as the Federal Circuit has held.
The Merck petition is focused on pre-AIA patents. The PTO (and patentees) are arguing more forcefully that the AIA certainly intended to exclude secret sales from the scope of prior art in cases now pending before the Federal Circuit.
The second new substantive patent law case is Google v. Arendi that challenge’s the Federal Circuit’s limitations on the use of common sense in the obviousness analysis. In its decision, the Federal Circuit limited KSR to combination patents and held that “common sense” cannot be used to supply missing limitations. Google argues that the Federal Circuit’s approach is contrary to the broad and flexible obviousness analysis required by KSR. Patentees bristle term “common sense” – they see an overly flexible analysis as providing opportunities to invalidate patents without evidence. The question: “Did the Federal Circuit err in restricting the Board’s ability to rely on the common sense and common knowledge of skilled artisans to establish the obviousness of patent claims?”
As these new petitions were being filed, the Supreme Court has also denied the pending obviousness, anticipation, and eligibility petitions. In addition, Cooper v. Square has also been denied.
Civil Procedure: In J&J v. Rembrandt, the defendant J&J won at trial. However, Rembrandt later learned that J&J’s expert had testified falsely and the Federal Circuit ordered the case re-opened under R.60(b)(3) that empowers district courts to revisit final judgments after a showing of “fraud …, misrepresentation, or misconduct by the opposing party.” The various circuits follow different standards and procedures for analyzing process and J&J has asked the Supreme Court to reconcile these (in its favor). Another CivPro petition was also filed by Eon Corp that questions whether an appellee needed to file a R.50 JMOL motion to overturn a jury verdict that was based upon a faulty legal conclusion by the district court (here claim construction). The Question Presented is:
Whether the Federal Circuit erred in ordering entry of judgment as a matter of law on a ground not presented in a Rule 50 motion in the district court, even though the ground presented a purely legal question.
Both J&J and Eon are only marginally patent cases, the core procedure case now pending is TC Heartland that would substantially upset the status quo of patent lawsuit concentration in E.D. Texas. Briefing continues in TC Heartland. In recent weeks a set of seven amici briefs were filed on the top side.
Next week Supreme Court conference includes review of the most likely-to-be-granted petition of Impression Products, Inc. v. Lexmark International, Inc. that focuses on important questions of post-sale exhaustion of patent rights. The setup – If I buy a used product that was made and sold by the patentee, do I still need to worry that I might get sued for patent infringement? The Federal Circuit says yes. The Supreme Court is likely to add some caveats to that. The US Government (Obama Administration via DOJ) has argued that the case should be reviewed and that the Federal Circuit’s position should be rejected. Both parties then filed supplemental responsive briefs. Lexmark’s best argument here is that these principles are well settled and that Congress can take on the role of tweaking them if needed.
Upcoming Supreme Court Oral Argument: Life Tech (export of components) set for December 6, 2016.
By Dennis Crouch
In the landmark case of Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. the US Supreme Court laid-out the process for determining whether to grant deference to a federal agency’s interpretation of ‘its’ statute.[1] ‘Chevron deference’ as it is often termed provides agencies with power to interpret the statutory law – and that interpretation will be given deference if ever appealed to a court of law. In some areas, the agencies are in full control. However, patent law is different. The patent courts (i.e., the Federal Circuit) has repeatedly held that the USPTO was never granted substantive rulemaking authority by Congress and, as a consequence, the agency’s interpretations of the substantive patent law are not subject to deference. Instead, USPTO interpretations of substantive patent law are reviewed de novo on appeal. The AIA substantially increased the USPTO’s procedural authority with creation of the AIA Trials division and fee setting authority. Those interpretations of PTO procedural statutes are given deference by the Federal Circuit.
Some academics have argued that deference should apply to substantive patent law rulemaking, such as interpretation of the “on sale” doctrine.[2] However, the law may soon head the opposite direction.
Now pending before the Senate is the “Separation of Powers Restoration Act of 2016” sponsored by Senators Hatch, Grassley, and Lee.[3] The House version passed in July 2016 on party lines with 100+ Republican co-sponsors. In January, party lines will have shifted to allow a renewed version of the Bill to be passed in both the House and the Senate and signed into law by President Trump.
The proposal is about as simple as can be. The one-page bill simply adds the words “de novo” into the Administrative Procedure Act Section 706 – the section that provides for the scope of review of an agency action. Under the new law, any APA appeal will require de novo review of “all relevant questions of law, including the interpretation of constitutional and statutory provisions and rules.”
This change would breathe new life into Challenges of the AIA Trial system, USITC decisions, as well as a large host of USPTO procedural examination rules and fees.
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[1] 467 U.S. 837 (1984).
[2] See, Stuart Minor Benjamin & Arti K. Rai, Administrative Power in the Era of Patent Stare Decisis, 65 Duke L.J. 1563 (2016) building on their prior work at Stuart Minor Benjamin & Arti K. Rai, Who’s Afraid of the APA? What the Patent System Can Learn from Administrative Law, 95 Geo. L.J. 269 (2007); Christopher J. Walker, Chevron Deference and Patent Exceptionalism, 65 Duke L.J. 2016; and Melissa F. Wasserman, The Changing Guard of Patent Law: Chevron Deference for the PTO, 54 William & Mary L.Rev. 1959 (2013).
[3] H.R.4768.
Amdocs v. Openet (Fed. Cir. 2016)
In the end, I don’t know how important Amdocs will be, but it offers an interesting split decision on the eligibility of software patent claims. Senior Judge Plager and Judge Newman were in the majority — finding the claims eligible — with Judge Reyna in dissent. One takeaway is that the Federal Circuit continues to be divided on the issues. By luck-of-the-panel in this case, the minority on the court as a whole were the majority on the panel (pushing against Alice & Mayo). Going forward, the split can be reconciled by another Supreme Court opinion, a forceful Federal Circuit en banc decision, or perhaps by future judicial appointments by President Trump. I expect 2-3 vacancies on the court during Trump’s first term.
In a 2014 post I described the Amdocs district court decision invalidating the claims. The four patents at issue all stem from the same original application relating to a software and network structure for computing the bill for network communications usage. One benefit imparted by the invention is associated with its physically distributed architecture that “minimizes the impact on network and system resources” by allowing “data to reside close to the information sources.” According to the majority opinion, “each patent explains that this is an advantage over prior art systems that stored information in one location, which made it difficult to keep up with massive record flows from the network devices and which required huge databases.” The nexus with the tated benefit is difficult to find in many of the claims themselve. See Claim 1 below, which was taken as representative of the asserted claims of Amdocs ‘065 patent:
1. A computer program product embodied on a computer readable storage medium for processing network accounting information comprising:
computer code for receiving from a first source a first network accounting record;
computer code for correlating the first network accounting record with accounting information available from a second source; and
computer code for using the accounting information with which the first network accounting record is correlated to enhance the first network accounting record.
You’ll note that the claim is an almost pure software claim — requiring “computer code” “embodied on a computer readable storage medium.” The code has three functions: (1) receiving a network accounting record; (2) correlating the record with additional accounting information; and (3) using the accounting information to “enhance” the original network accounting record. The claim term “enhance” is construed narrowly than you might imagine as the addition of one or more fields to the record. An example of an added field would be a user’s name that might be added to the accounting record that previously used a numeric identifier. The court also found that the term “enhance” should be interpreted as requiring that – and doing so in a “a distributed fashion … close to their sources” rather than at a centralized location. This narrow interpretation of the term “enhance” do not flow naturally from the claim language, but do turn out to be crucial to the outcome.
In reviewing the claim, the court noted that “somewhat facially-similar claims” have been alternatively invalidated as abstract ideas and found eligible. Compare, for example, Digitech with Enfish and DDR. Here, the court wrote that the claims are “much closer” to the ones found eligible. I might rewrite their opinion to say that the judges in the majority prefer the decisions finding eligibility over those invalidating software patent claims.
The two recent Supreme Court cases of Alice and Mayo spell out the court’s two-step framework for determining whether a patent is improperly directed to one of the excluded categories of abstract ideas, natural phenomena, and laws of nature. Briefly, the court first determines whether “the claims at issue are directed to one of those patent-ineligible concepts.” If so, the decision-maker must then determine whether any particular elements in the claim “transform the nature of the claim into a patent-eligible application.” This second step requires consideration of additional elements both individually and in combination in search for an “inventive concept . . . sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.” [Quoting Mayo and Alice throughout].
In making its eligibility conclusion in Amdocs, the appellate majority focused on the claim requirement (as construed) that processing be done in a distributed fashion. According to the court, “enhancing data in a distributed fashion” is “an unconventional technological solution . . . to a technological problem (massive record flows which previously required massive databases).” Remember here though that we are not talking about patenting a distributed system, but rather patenting a “computer program product embodied on a computer readable storage medium” used to implement the features.
Rather than taking Alice/Mayo steps in turn, the majority accepted “for argument’s sake” that the claims were directed to abstract ideas. However, the claim adds “something more” beyond an abstract idea. Here, the court notes that the claims require “distributed architecture—an architecture providing a technological solution to a technological problem. This provides the requisite ‘something more’ than the performance of “well-understood, routine, [and] conventional activities previously known to the industry.”
Despite being the stated “unconventional” idea of using a distributed architecture, the court noted that the patent may still fail on anticipation or obviousnesss grounds.
Writing in dissent, Judge Reyna offered several different arguments. First, Reyna argue that the court’s skipping of Alice/Mayo Step 1 helped lead to an incorrect result. If you do not define the abstract idea at issue, how do you know whether the claim includes something more? Reyna also argued that the “distribution architecture … is insufficient to satisfy Alice step two” because the limitation is not actually found in the claims and, even as interpreted provide only a functional result. Reyna does note that the specification provides sufficient description of a distributed architecture, but that the claims themselves lack the requisite detail.
The specifications disclose a distributed system architecture comprising special-purpose components configured to cooperate with one another according to defined protocols in a user-configurable manner for the purpose of deriving useful accounting records in a more scalable and efficient manner than previously possible. The disclosed system improves upon prior art systems by creating a specific “distributed filtering and aggregation system . . . [that] eliminates capacity bottlenecks” through distributed processing. ’ The disclosed system is patent eligible. But the inquiry is not whether the specifications disclose a patent-eligible system, but whether the claims are directed to a patent ineligible concept.
The chart below shows Shepard’s citation results for recent Supreme Court eligibility cases. I chart the number of federal court decisions citing to each of these seven major Supreme Court decisions. 2016 numbers do not include November-December 2016.
* I apologize that the chart won’t be easy to read for those who are colorblind. Truthfully, it is hard for anyone to tease out information regarding any particular decision.
The question on everyone’s mind is how the patent office and patent system will be restructured once Donald Trump becomes president. Trump has substantial personal experience protecting and enforcing his own trademarks, including attempts to protect more controversial marks such as ‘you’re fired.’ However his businesses have few if any patent rights and have relied on the perception of luxury rather than innovation for their successes. An element of Trumps campaign was the recognition that he personally understands how to find an exploit loopholes in government regulation and that his experience make him uniquely qualified to fix the holes. Question for the patent system is whether president Trump will see patent trolls, pharmaceutical pricing, and the Eastern District of Texas as exploitations needing to be fixed. It is unclear at this point who will manage the transition team but hope for a smooth transition from Outgoing Director Michelle Lee to the next USPTO leader. Democracy!
The following is reprinted from USPTO Director Michelle K. Lee’s “Director’s Blog.” On December 13, 2016, the USPTO is hosting its next patent quality conference.
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by Michelle Lee
I’m pleased to report that we have completed the Clarity of the Record Pilot launched earlier this year as part of our Enhanced Patent Quality Initiative. We’ve achieved our goal of identifying some best practices for enhancing the clarity of various aspects of the prosecution record. These include best practices for documenting the USPTO’s positions with respect to claim interpretation, reasons for allowance, and interview summaries as well as encouraging examiners to initiate pre-search interviews when needed to gain a better understanding of the claimed invention. I would like to fill you in on some of our findings, and also encourage you to attend our day-long patent quality conference on December 13, where we will report in detail on the progress of the dozen or so programs in the Enhanced Patent Quality Initiative.
Through this pilot, we identified the following best practices as key drivers for clarity and trained our examiners on these practices:
For interview summaries, providing:
For reasons for allowance:
For claim interpretation:
As a result of this pilot, we found there is progress to be made in the treatment of 35 USC 112(f) limitations, interview summaries, and reasons for allowance, while our highest clarity was in the area of 35 USC 102 and 103 rejections. Going forward, we plan to continue increasing clarity in all aspects of our practice.
Overall, we measured 68 unique data points, each data point representing a different best practice for achieving clarity. We found that on average, pilot examiners used 14% more of these best practices in pilot cases as compared to control cases, and this increased use of best practices contributed to an increase in overall clarity in pilot cases. Notably, we found that in pilot cases examiners employed:
Also, we found that pilot participants carried on using the best practices they learned in the pilot, even to applications not in the pilot program. This is a strong indication that the examiners embraced the training. We also had anecdotal evidence that pilot participants encouraged fellow, non-pilot examiners to use the best practices during the prosecution of their own cases. Clearly the pilot participants saw a value to using these best practices when examining applications.
The Clarity of the Record Pilot ran from March 6 to August 20 of this year. To ensure a diverse pool of examiners, we invited randomly selected utility patent examiners with at least two years of patent examining experience to participate. All told, 125 examiners representing all utility technology centers participated, and roughly two-thirds of these participants were primary examiners.
The pilot kicked off with initial training in the form of four different modules – an initial module to provide participants with an overview of the pilot and three modules to provide identified best practices to enhance clarity with respect to the pilot’s three focus areas – claim interpretation, reasons for allowance and interview summaries. All of the modules started with a discussion about the goals of the pilot and the importance of clarity of the record.
Pilot participants were expected to use identified best practices when drafting office actions for a select number of cases. In addition, throughout the pilot, participants attended meetings (called “quality enhancement meetings”) to discuss interesting takeaways with fellow pilot participants. The quality enhancement meetings were typically held with examiners working within similar technologies; however, there were also pilot-wide meetings involving invited speakers, including a judge from the Patent Trial and Appeal Board and the Commissioner for Patents, who shared their perspective on the importance of clarifying the prosecution record. Participants also met biweekly with a pilot manager to receive one-on-one training and to consult on lessons learned.
To evaluate the pilot, the Office of Patent Quality Assurance reviewed the clarity of approximately 2,600 cases for a statistical assessment of whether the best practices of the pilot improved the clarity of office actions. In addition, we analyzed feedback from the quality enhancement meetings and training sessions, including a list of best practices developed by the pilot participants. Using this information, we identified the best practices that were key drivers of overall clarity. Based on the results from the pilot program, we are analyzing the data to provide recommendations on implementation of the pilot’s best practices across the patent examining corps.
We have a new journal here at Mizzou Law with the bold acronym of BETR – the Business, Entrepreneurship & Tax Law Review (“BETR”). (An early idea had it as BEST, but I helped to lower expectations). Startup is always a bit dicey and so I wanted to help get out the word. In addition to traditional academic articles, the the journal is also publishing white papers (5-15 pages) with a more practical bent and much more quickly published.
Subject matter: intellectual property, taxation, banking and finance, and regulatory issues.
Contact: Editor-in-Chief mulawbetr@missouri.edu (Currently Alex Langley).
SAS v ComplementSoft (Fed. Cir. 2016)
Today, the Federal Circuit denied SAS’s en banc request challenging the USPTO’s approach to partial-institution of inter partes review petitions. In a substantial number of cases, the PTO only partially agrees with the IPR petition and thus grants a trial on only some of the challenged claims. In the present case, for instance, SAS’s IPR Petition challenged all of the claims (1-16) found in ComplementSoft’s Patent No. 7,110,936, but the Director (via the Board) instituted review only on claims 1 and 3-10.
The statute seems to side with SAS: The Board “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner” 35 U.S.C. § 318(a). However, the appellate panel in this case (following prior precedent) held that “Section 318(a) only requires the Board to address claims as to which review was granted.”
In its petition, SAS wrotes:
Because § 318(a) is clear and unambiguous in requiring a final written decision as to “any patent claim challenged by the petitioner,” the PTO had no authority to adopt a contrary rule authorizing IPRs “to proceed on all or some of the challenged claims,” 37 C.F.R. § 42.108(a). Regardless of efficiency or workload concerns, the PTO’s rulemaking authority “does not include a power to revise clear statutory terms.” Utility Air Regulatory Grp. v. Environmental Protection Agency, 134 S. Ct. 2427, 2446 (2014).
In what appears to be a 10-1 decision, the Federal Circuit has denied SAS’s petition for en banc review. Although the majority offered no opinion, Judge Newman did offer her dissent (as she did in the original panel decision).
For American readers – As you plan for your business day on November 8, 2016 – Please remember to Vote.
I originally posted the photo below on Patently-O back in 2004 with the following caption:
Here is a picture of my neighbor and Senate hopeful Barack Obama and his daughter casting his vote.
This next chart is helpful for those considering patent application pendency. As the title suggests, the chart shows the pendency of U.S. Utility Patent Applications grouped by quarterly disposal date. Here, the pendency begins with an application’s filing date and ends with either a patent being issued or the application being abandoned.
The chart itself actually includes five separate data series: Three displaying average pendency and two displaying median pendency. Although the average is useful for someone considering a portfolio of applications, the median may offer a more ‘typical’ application. The series are labelled either “Crouch Data”, “USPTO CE Data”, or USPTO Dashboard. The USPTO CE Data includes pendency for utility applications filed 1981+ and disposed-of 1985-2014 and the raw data on disposals comes from the USPTO Chief Economist. Because I wanted to include some post-2014 data, I also obtained a sample of about 30,000 applications published 2001+ and looked at the disposal pendency of those applications. This is the Crouch Data. Finally, I also included the past two years of data from the USPTO Dashboard. The averages and medians are reported these data sets except for the Dashboard. Looking at differences between the data – the primary difference is that the Crouch Data shows a higher pendency. I believe that this is primarily driven by the fact that a non-trivial number of patents issue prior to an application’s would-be publication date and thus are excluded from my data set.
In general, you’ll note that the average/medians have shifted fairly dramatically over the past three decades — more than doubling from 1996 to 2010 and now falling again in recent years. The USPTO reports the most recent average pendency at 33 months from filing.
by Dennis Crouch
This post continues from two prior data-posts:
Adding-in data from the USPTO Chief Economist (Alan Marco), I have updated my chart of the USPTO utility patent grant rate. The chart shows my verson of patent grant rate calculated as the number of patents issued (allowed) divided by the number of disposed-of-applications where the disposed-of-applications includes serialized utility applications either (1) abandoned or (2) issued as patents (allowed) during the given period and does not give any consideration to RCE filing.
In the chart above, you’ll find in allowance rate that I calculated using the USPTO Chief Economist disposal data that stretches back to 1985. Overlaid in blue is my data previously presented. You’ll notice substantial similarity between the data sets during the period of overlap, but some differences. You’ll note that – on average – the rate calculated from my data is greater than that calculated from USPTO data. Although I cannot entirely exclude a counting error, I expect that the differences can be explained primarily by the fact that the USPTO data includes all utility applications while my figures are limited to published applications. Others have shown that non-published applications tend to have a lower allowance rate (these are, for the most part, applicants that have chosen not to file globally and tend to include a higher proportion of software and business method inventions). In addition, I believe that the USPTO counts the patenting as of the allowance date rather than the issue date, which is why I put “allowed” in parenthesis above. A further explanation for the differences that my data relies upon only a sample of around 30,000 published applications rather than the entire population.
In my estimation, the chart fails to reveal any ‘natural’ or steady-state allowance rate. It is also difficult to correlate the allowance rate with particular changes in the law or court decisions. Rather, best guess is that the primary impact on the overall allowance rate stems from USPTO Policy as set by its Director.
I asked my former student Zachary Kasnetz to write this post on his forthcoming article explaining the Federal Circuit’s errors in its en banc Tam decision. A draft version of his article is available online: ssrn.com/abstract=2864016. – DC
By Zachary Kasnetz
I would like to thank Professor Crouch for this opportunity to share my views on the Federal Circuit’s decision in In re Tam, 808 F.3d 1321 (Fed. Cir. 2015) (en banc), in advance of the Missouri Law Review’s publication of my article. This post discusses some of the arguments I make as to why the court erred in holding Section 2(a) of the Lanham Act facially unconstitutional.
Section 2(a) of the Lanham Act prohibits registration of any mark that “may disparage . . . persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt or disrepute.” 15 U.S.C. 1052(a). It has long been controversial and commentators have largely agreed that it is unconstitutional. See In re Tam, 808 F.3d at 1334 n.4 (citing commentary). Tam held: (1) Section 2(a) was a content-based and view-point based restriction on speech; (2) it regulated the expressive, not commercial aspects of Tam’s mark; (3) it actually regulated speech; (4) registration was not a subsidy or government speech; and (4) could not pass strict or intermediate scrutiny. The holding and reasoning are flawed regarding the numbers 1, 2, and 4.[1]
First, the Court reasoned backwards. First, the court should have decided whether Section 2(a) actually regulated speech at all and then whether it was a government speech or a subsidy. If the answer to that question was no, then whether Section 2(a) was content and viewpoint-based and whether it impacted the commercial or expressive aspects of Tam’s mark would have been irrelevant. Government speech and subsidies are not “exempt” from First Amendment scrutiny as the majority claims: they don’t implicate the First Amendment at all because they do not abridge any speech. See Rust v. Sullivan, 500 U.S. 173, 193 (1991); Pleasant Grove v. Summum, 555 U.S. 460, 467 (2008).
Second, Section 2(a) only impacts the commercial aspects of Tam’s speech because a trademark is “a form of commercial speech and nothing more.” In re Tam, 808 F.3d at 1376 (Reyna, J., dissenting) (quoting Friedman v. Rogers, 440 U.S. 1 (1979)). All benefits of registration are commercial in nature, i.e., they make it easier to enforce the mark. Registration has no impact on Tam’s ability to express any ideas or messages. Cf. Author’s League of Am. v. Oman, 790 F.2d 220, 223 (2d Cir. 1986). As Judge Reyna dryly pointed, the majority held that “Mr. Tam’s speech, which disparages those of Asian descent, is valuable political speech that the government may not regulate except to ban its use in commerce by everyone but Mr. Tam.” Id. at 1378. There is no First Amendment right to government assistance in preventing others from expressing ideas or views. Cf. Davenport v. Wash. Educ. Ass’n, 551 U.S. 177, 188-90 (2008).
Therefore, the only basis for the majority’s opinion is the unconstitutional conditions doctrine, under which the government may not condition an important benefit on the surrender of an important constitutional right, even if it could withhold the benefit entirely. The doctrine is notoriously incoherent and inconsistent in its application. Tam’s basic holding is that Section 2(a) is an unconstitutional condition because it is a content and viewpoint based regulation/restriction/burden on speech. But there’s no such thing as a content-based unconstitutional condition.
A condition’s constitutional permissibility turns on the relationship between the condition and the government program at issue. See, e.g., USAID v. Alliance for Open Soc’y Int’l, Inc., 133 S. Ct. 2321, 2329 (2013). The more “germane”, i.e., reasonably related to the goals of program, a condition is, the more likely it is to be constitutional. See Sullivan, Unconstitutional Conditions, 102 Harv. L. Rev. 1413, 1420-21 (1989). Any condition on a government benefit or participation in a government program implicating the First Amendment necessarily draws content-based distinctions: the question is whether that distinction is reasonably related to the program’s goals. According to the majority, the goals of federal trademark law are (1) protecting the rights of mark holders and (2) preventing consumer deception and confusion. If we accept that this is correct, the constitutionality of Section 2(a) turns on its relation to those goals. The majority believes it is “completely untethered” those purposes. In re Tam, 808 F.3d at 1354. I disagree.
Trademarks allow consumers to quickly identify the source and quality of goods or services. Therefore, trademark law conditions registration on a mark meeting certain requirements, including that it not be disparaging. Certain kinds of marks are better at this than others, lying across the spectrum of distinctiveness from arbitrary or fanciful to generic. Given the massive amount of information bombarding consumers, I argue that marks communicating other information or messages are less effective. The government has an interest in ensuring that “the stream of commercial information flows cleanly as well as freely.” Va. Bd. of Pharmacy v. Va. Citizen’s Consumer Council, Inc., 425 U.S. 758, 771–72 (1976)). Disparaging marks, by definition, communicate more than the source and quality the good or service they attach to. By denying the benefits of federal registration, Section 2(a) mildly incentivizes the selection of more effective marks. Thus, it is reasonably related to trademark law’s goals. Moreover, it only likely affects the choice of marks: it is not trying to “leverage [a government benefit] to regulate speech outside of the program itself.” USAID v. Alliance for Open Soc’y Int’l, Inc., 133 S. Ct. at 2329 (2013).
Trademark law draws many distinctions between different marks based on their content. As a far as I know, the constitutionality of the ban on registering trademarks containing “the flag or coat of arms of the United States, or of any State or municipality, or of any foreign nation,” 15 U.S.C. § 1052(b), has never been questioned. Nor has the ban on those containing “a name, portrait, or signature identifying a particular living individual . . , or the name, signature, or portrait of a deceased President of the United States during the life of his widow, . .” Id. at § 1052(c). The government has never been required to show that such marks would actually be confusing or insufficiently distinctive despite the fact that this provision obviously singles out a category of potential trademarks based solely on their content.
Does Section 2(a) Actually Impact Speech?
I am also extremely skeptical that denying registration to disparaging marks actually has a chilling effect on speech. The majority fears that Section 2(a) chills potential selection of disparaging marks, but the real issue isn’t whether trademark choice is being affected, but whether “ideas or viewpoints” will be suppressed. Simon & Schuster v. Members of N.Y. State Crime Victims Bd., 502 U.S. 105, 116 (1991). But trademarks are “commercial speech and nothing more.” Friedman v. Rogers, 447 U.S. at 562. Consider Tam. If he had known that there was a real possibility that he would have been unable to register THE SLANTS because it was disparaging he would have chosen not to create his music or would not have made music intended to express pride in his Asian heritage? I doubt it and I have not seen any evidence to support such a claim. Perhaps he would have chosen a different name for his band, but again I’m skeptical. Thus, Section 2(a) is “exceedingly unlikely” to suppress or chill expression of any ideas and viewpoints. See Lyng v. Int’l Union, UAW, 485 U.S. 360, 365 (1988).
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The author is an Associate at Growe Eisen Karlen Eilerts in St. Louis. He earned his J.D. from the University of Missouri in May 2016 and his B.A. from the University of Maryland in 2012.
[1] Assuming arguendo, that I am wrong about numbers 1, 2, and 4, I agree that Section 2(a) could not pass strict or intermediate scrutiny. I also agree that placement on the register does not turn Tam’s purportedly disparaging message into government speech.
For the chart below, I collected a randomized sample of outcomes from 30,000 utility patent applications published 2001-2016. For each application, I identified the ‘disposal date’ – with the disposal date being either (1) the date that the resulting patent issued or (2) the date that the patent application was deemed abandoned. Still pending applications (even those subject to an RCE) were not given a disposal date.
For the chart below, I grouped disposals by quarter and then calculated the percent issued as patents compared with the percent abandoned. You’ll note the drop in allowance rate in 2008-2009 under Jon Dudas with the rapid rise in allowance rate once David Kappos took-over as director. Although less dramatic, allowance rate continued to rise under Michelle Lee. Of course, the allowance rate depends upon both the USPTO approach to prosecution as well as that of the applicant.
There are many different ways to calculate USPTO “allowance rate” and this is only one. The PTO typically considers the filing of an RCE to be a disposal. That approach makes the allowance rate appear substantially lower. Others look at an entire patent family — making the allowance rate appear substantially higher.
Today the Supreme Court heard oral arguments in SCA Hygiene v. First Quality with the following question presented:
Whether and to what extent the defense of laches may bar a claim for patent infringement brought within the Patent Act’s six-year statutory limitations period, 35 U.S.C. § 286.
Sitting in the background is the Supreme Court’s parallel copyright decision in Petrella v. MGM (2014) holding that the doctrine of laches cannot bar a claim for legal damages brought within the three-year statutory limitations of copyright law. In its opinion, the Federal Circuit distinguished Petrella – finding that in this situation patents should be treated differently than copyrights.
Martin Black (Dechert) argued for petitioner-patentee SCA Hygiene and suggested that Petrella paves the way: “There is nothing in the Patent Act which compels the creation of a unique patent law rule, and if the Court were to create an exception here, that would invite litigation in the lower courts over a wide range of Federal statutes.”
According to Black, the focus should be on the statute – and the statute does not provide for laches. Further, section 286 is entitled “Time Limitation on Damages” — that is the section that should be applied when determining whether a patentee unduly delayed its enforcement.
Mr. Black: Laches has never been applied in the face of the Federal statute of limitations. The Court looked at that issue exhaustively in Petrella and could not find Respondents one single example.
Petrella was decided 6-3 and with Justice Scalia’s death the result would be 5-3. Justice Breyer dissented then and indicated in oral argument “Just to repeat, I’m still dissenting.”
Mr. Waxman, representing the accused infringer in this case (who won on laches) began by highlighting the background of the 1952 Patent Act — “This Court has repeatedly recognized that the 1952 Patent Act sought to retain and reflect patent law as it then existed.” And, at that time (1952), laches was thought to be an available defense.
Mr. Waxman: The question in this case is what Congress understood the patent law doctrine was in 1952. And we think that there is a literal mountain of cases. Every single case that was decided in any court at any level from 1897 when the six-year damages cap was put into place until today, with the exception of one district court decision in Massachusetts which demonstrably misapplied the two authorities that it cited, every single case has recognized that — that laches was a defense in an appropriate case to claims for damages. And no case has ever said or suggested to the contrary.
CHIEF JUSTICE ROBERTS: That mountain of cases were in equity, right? . . . that’s where your mountain becomes a mole hill, right? . . .
Mr. Waxman: But the point I’m trying to make — and if I make no other point, please let me not be misunderstood here — Congress in 1952 simply continued in haec verba the statute that had existed on the books since it was put in on the equity side in 1897. And there were — whether it is a mountain, a mole hill, or a mesa, all of the — okay. Never mind. I’ll just stick with mountain or mole hill. All of the — I mean, I — I don’t think — I hope I live long enough to have another case where I can come to Court and say, all of the case law that decide — that examine this question, all of which was adjudicating the applicability of laches to claims of damages alongside the six-year damages limitation provision, all of them recognize that laches existed comfortably alongside that provision. And there is nothing really anomalous about that.
The difference then, according to Waxman, between patents and copyright is not really found in the statutory text itself but instead emanates from the history and congressional sense at the times of enactment. For patents, the background law allowed laches and congress intended to implement that background law in 1952.
Mr. Black disagreed with the state-of-the-law:
So it was in front of Congress in 1952 with three things. This Court’s precedent that said that laches could not be used to bar legal relief. You had the merger of law and equity in 1938 which scrambled all the eggs. You had the 1946 Lanham Act, which also went through the committee on patents and copyrights where they specifically included the word “laches” in the statute. And you had the abolition of the remedy that parties had been seeking as the primary means of monetary relief in patent law for 60 years. There is no way that you can look at that, that fact, and get around it by pointing to a book, a treatise, which, by the way, does not have a section in it on unenforceability.
A practical problem with eliminating laches is the lying-in-wait scenario — do we allow a patentee to simply wait for years until the defendant is locked-in and then sue? Mr. Black argued that Congress offered a solution — concerned third parties can file a declaratory judgment action or else a petition for inter partes review. Black also argued that the lying-in-wait scenerio doesn’t happen in practice because the patent term ends too soon (unlike in copyright law). The discussion also entered into patent trolls and the FTC recent report. Mr. Black argued that “The companies that get hurt by [Laches] are operating companies who don’t like to sue and therefore wait until they have to [while] patent trolls . . . have to sue to monetize.”
For this study, I collected PAIR data from a sample of about 10,000 published utility patent applications that were filed 2007-2016. (not considering priority claims). For each of those applications, I simply categorized whether the application was (1) patented; (2) abandoned; or (3) still pending. The chart above shows the results grouped by quarterly filing date. Looking at applications filed in 2014q4 (~ two years ago) 26% are patented, 6% abandoned, and 68% still pending. By the time applications application have been pending for four years only about 15% remain pending.
There are few abandoned applications during the first 2 1/2 years of pendency – it seems that most applicants wait at least for a final rejection before giving up. An application pending for 4+ years is likely to involve substantial after-final practice (RCEs, appeals, etc.) that substantially slows down final resolution.
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