Guest Post: The Rise of The End User in Patent Litigation (and Attorney Fee Shifting)

Patent

Professor Bernstein’s current scholarship focuses on the role of end users in the patent system.  Because end users are fast becoming major stakeholders in the operation of the patent system, I asked her to write a few words about how she conceives of these players. – Jason

Guest Post by Gaia Bernstein, Professor of Law, Seton Hall University School of Law

We usually think of two players in the patent system: the patentee and its competitor.  Increasingly, however, end users – who are neither patentees nor competitors – are playing a significant role in the patent system.  The attention of the press has recently turned to patent assertion entities who are suing vast numbers of customers using patented technologies in their everyday businesses.  For example, one patent assertion entity has sued individual podcasters, including the Comedian Adam Carolla. End users were also principal players in some of the recent patent cases before the Supreme Court. In Bowman v. Monsanto, Monsanto sued a farmer for re-using its patented seed technology. End users also appear as patent challengers: in Association for Molecular Pathology v. Myriad Genetics, patients and physicians sued to invalidate breast cancer gene patents. And patients and drug stores repeatedly challenge pay-for-delay agreements between patentees and competitors, claiming they undermine patients’ interests in access to generic drugs.  This is only the beginning: end users are likely to become even more prevalent in patent litigation, as 3D printers become more popular, making it more likely that an individual or a small business will make an infringing item that will expose them to patent liability.

All of this begs the questions what is an “end user” and how well is patent law suited to deal with this new player?  In The Rise of The End User in Patent Litigation, forthcoming in the Boston College Law Review, I define end users as people and companies that use a patented technology for personal consumption or in their business.  I emphasize that they are strictly users.  Even if they incorporate the patented technology into a product or service they offer their customers, they do not make or sell the technology standing by itself.  I explain that end users differ from competitors in three respects.  First, end users usually lack technological sophistication – they are generally not technological companies and do not produce and supply the allegedly infringing technology. Second, end users usually become involved in the patent conflict relatively late in the life of the patent, after the patented technology enters the market and achieves widespread adoption.  Third, end users are typically one-time players. In most cases the technology is ancillary to their business and they do not have a long-term stake.

Patent litigation is exorbitantly expensive. It is all the more expensive for end users who lack the technological expertise to challenge validity and infringement claims and cannot rely on in-house technological expertise. Because end users are often one-time players, they prefer to avoid the expense of patent litigation and settle even strong cases, making them a particularly lucrative target for patent owners. Unfortunately, even the most recent substantive patent law legislation, the America Invents Act (“AIA”) fails to address the growing role of end users. I show that while the AIA attempts to address the needs of small entities, mainly by adding and changing procedures to challenge patents in the patent office, thus providing a cheaper and faster forum for contesting validity, those same novel procedures are largely unsuitable for end users because they permit expansive challenges mostly early in the life of the patent before end users are likely to be involved in the patent dispute. The procedures that allow challenges later in the life of the patent limit the grounds available for challenging the patent. Thus, unlike even small competitors of the patent holder, end users are unlikely to benefit from the enhanced patent office proceedings put in place in the AIA.  The effect of this is to leave them without the very same tools that were implemented to protect small entities.

Ultimately, the rise of the end user is a complex phenomenon that needs to be addressed by a series of reforms, which I am addressing in other works in progress.  Here, however, I focus on the role that fee shifting of attorney fees and litigation expenses to the prevailing party can play in end user cases because a modest change could contribute toward leveling the footing of end users in all type of end user-patentee disputes.

Fee shifting in patent litigation has been a hot topic this year. Recently, the Supreme Court decided two fee shifting cases: Highmark v. Allcare and Octane Fitness v. ICON Health & Fitness. In Octane Fitness, the Court lowered the standard for awarding fee shifting in patent litigation. Congress is also considering multiple bills advocating different versions of fee shifting. The problem is that although some of the congressional bills address PAE’s suits against customers, neither these bills nor the Supreme Court decisions address the broader role that end users are now playing in our patent system. In the article, I argue that the case for fee shifting is strong where end users are implicated particularly because of the great inequality in technological sophistication between end users and patentees and because end users frequently represent many other parties who are not before the court. For these reasons, end user status should be considered as a factor that weighs in favor of fee shifting, particularly when the end user fits the paradigmatic form of a classic end user.

There is more in the article than I can write about here. If you are interested, please take a look at the full version. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2440914.

Struggling with Nautilus: Patent Claims Through the Eyes of Non-Lawyer Technologists

Patent, ,

By Dennis Crouch

This post goes on a tangent from the recent decision in Q.I. Press Controls v. Michelle K. Lee, USPTO Chief (Fed. Cir. 2014).

Quad/Tech’s Patent No. 6,867,423 covers a visual inspection system for identifying errors in printing press operation – such as paper misalignment or poor color. The invention basically has a digital camera with a ring non-strobe LED’s surrounding the lens. The camera is pointed toward the printing press operation. The prior art included cameras with ring-LED lighting as well as the use of cameras to monitor printing press activity. However, none of the prior art references combine both of these features. In the bulk of the claims, the “printing press” element is found only something akin to a field-of-use limitation found in the claim preamble. Thus, claim 1 is directed to “[a] visual inspection system configured to be in optical communication with a substrate of a printing press, said visual inspection system comprising: . . .” However, claims 61-72 refer more expressly to the printing press linkage within the body of the claim.

The court’s opinion (as we cover in a separate post) focuses on obviousness and written description. Here, I write about indefiniteness as it relates to these preamble limitations.

Is it a Technical or a Legal Document?: A usual rule of patent claim construction is that limitations found in the preamble of a claim – especially field-of-use limitations – do not limit claim scope. However, sometimes preamble terms are limiting as the Court explained in Pitney Bowes:

If the claim preamble, when read in the context of the entire claim, recites limitations of the claim, or, if the claim preamble is ‘necessary to give life, meaning, and vitality’ to the claim, then the claim preamble should be construed as if in the balance of the claim.

Pitney Bowes, Inc. v. Hewlett-Packard Co., 182 F.3d 1298, 1305 (Fed. Cir. 1999); M.P.E.P. 2111.02. Many claim construction questions involve drawing quite fine-lines of involving coverage scope. Preamble-limitations are different because we are often talking about importing an entire limitation into the coverage that was not previously there. By examining the body of court decisions, it is possible to elucidate a set of factors helpful in determining whether a particular preamble-limitation should be scope-limiting. But this is a pretty tricky issue and I don’t think that we should assume that inventors and technology developers would understand the particular circumstances of when certain preamble-limitations are limiting. Rather, those legal-technicality questions are typically the province of patent attorneys who work with the substance of the law on a daily basis.

It turns out this is important following the Supreme Court’s recent indefiniteness decision in Nautilus. In Nautilus, the Supreme Court provided a clear statement that patent claims are technical-in-nature and designed to be read by persons-having-ordinary-skill-in-the-art. For camera technology, someone of skill in the art might be a camera designer and in the indefiniteness context the indefiniteness question is whether the claim scope would be reasonably certain to the camera designer (after considering the intrinsic evidence).

Tying this back to the issue of preamble-limitations: An ordinary camera designer would not be familiar with the law of preamble-limitations and how they would apply in this case. And, this leaves us with a several of potential results. Perhaps (1) a claim is invalid as indefinite when its scope depends upon and substantially changes according to the particularities of the preamble-limitation doctrine. (2) An alternative tact is to assume that the Supreme Court’s PHOSITA has been advised by a skilled patent attorney and thus understands the law.

Presidential Elections: Campaign IP Enforcement

Patent

By Dennis Crouch

As we move into 2015, the presidential campaign season will begin again in earnest. As part of that process, it is always interesting (for IP attorneys) to see candidate views on intellectual property law. The standard approach is for candidates to say something akin to: IP rights are a fundamental aspect of our innovation economy but, patent trolls are bad and we should be careful to avoid an overzealous system that would allow IP rights to hinder the market or further innovations.

Potential candidate Hillary Clinton has made the first move showing her cards – sending a cease and desist letter to the “libertymaniacs” for violation of the campaign’s IP rights. The offending copy is shown below as is its clearly copied-from source. At this point, it is unclear whether Clinton is claiming copyright infringement, trademark infringement, or some other IP rights violation.

In general, this action falls within the category of using intellectual property rights to chill speech. It is fairly rarely for patent rights to be asserted in this category, although the ACLU argued in Myriad (at the district court) that speech rights included the right to conduct a scientific inquiry and that any patent rights impinging upon that right should be seen as invalid. The STEM-related speech concern is more relevant when focused on trade secrets and confidentiality requirements. The more applicable “fundamental rights” concern associated with patents is likely to be tied up with basic freedoms that could loosely be termed ‘privacy rights’ that should allow individuals to tinker and study without creating the potential for liability.

Examples of Nautilus Impact

Patent

In Nautilus, the Supreme Court made it easier to void a patent claim based upon its ambiguity.

I’m looking for a few real examples of cases where the standard makes a difference — claims that do not fail the ‘insolubly ambiguous’ test but that do fail the ‘reasonably certain’ test.

– Dennis

How will Nautilus affect indefiniteness at the PTO?

Indefinite, Patent, ,

Guest post by Lisa Larrimore Ouellette (Visiting Fellow, Yale Law School Information Society Project) and Jonathan Masur (Deputy Dean and Professor of Law, University of Chicago Law School).

In our new draft article, Deference Mistakes, we examine indefiniteness doctrine as one example of how decisionmakers sometimes mistakenly rely on precedents in inapposite contexts. So we were very interested in the Supreme Court’s reformulation of the indefiniteness standard in Nautilus v. Biosig on Monday, and particularly in how this decision will affect the indefiniteness standard applied in the examination context.

Pre-Nautilus, claims under examination at the PTO were supposed to be evaluated under a stricter indefiniteness standard than granted claims. In Exxon Research (2001), the Federal Circuit stated that to “accord respect to the statutory presumption of patent validity,” it would find granted patent claims indefinite “only if reasonable efforts at claim construction proved futile” and the claim was “insolubly ambiguous.”

The obvious corollary to the Federal Circuit’s holding in Exxon is that when the presumption of validity does not apply, the indefiniteness standard should be more stringent. The BPAI explicitly clarified this point in the precedential Ex parte Miyazaki (2008) when it held that examiners should use “a lower threshold of ambiguity” such that claims are indefinite if “amenable to two or more plausible constructions,” and the MPEP emphasizes this point.

As we describe in Deference Mistakes, however, the less stringent “insolubly ambiguous” standard was mistakenly imported into the examination context and repeatedly cited in BPAI and PTAB decisions even after Miyazaki. And once ambiguous claims are granted, they are entitled to the presumption of validity and are less likely to be struck down, notwithstanding that they were granted under a mistaken standard.  The affirmance of these patents on appeal following infringement proceedings likely led to the PTO granting even more indefinite patents, which were then upheld on appeal, a vicious cycle. And if these patents came to be seen as the new normal, that could have made the PTO even more permissive. The result could have been creeping decay of the PTO’s effective indefiniteness standard, with indefinite patents begetting ever more indefinite patents.

At first glance, Nautilus appears to fix this problem of two different legal standards that might be mistakenly applied in the wrong context. In footnote 10, the Supreme Court states that the “presumption of validity does not alter the degree of clarity that §112, ¶2 demands from patent applicants,” suggesting that the legal test for indefiniteness should be the same in the infringement and examination contexts. The Court expressly leaves open whether this evaluation of the claims involves subsidiary factual findings and whether deference is due to any such findings—issues the Court will return to next Term in Teva v. Sandoz. But however these fact-based issues are resolved, it seems that Miyazaki‘s articulation of the legal standard for indefiniteness is no longer good law (unless, of course, the Federal Circuit adopts this as the unitary test).

Doctrinally, this requirement of a unitary legal standard for indefiniteness seems clearly right: as the Supreme Court explained in Microsoft v. i4i, the presumption of validity required by §282 is an evidentiary standard that requires invalidity to be proven by clear-and-convincing evidence, and it is thus inapplicable to questions of law. Eliminating the dual standard also has the apparent benefit of preventing the kinds of overt mistakes we point out in Deference Mistakes.

As we explain in Deference Mistakes, however, eliminating the formal legal distinctions between “deference regimes” may not solve the problem where such deference arises from functional considerations. We worry that preventing the PTO from applying “a lower threshold of ambiguity” might inadvertently undermine the PTO’s current efforts to improve patent claim clarity. Although the EFF cheered Nautilus for being likely to “invalidate many more patents,” the Court suggested at p. 12 that the test “the Federal Circuit applies in practice” may be fine, so on remand the Federal Circuit may well use the same analysis under a new name. Even if indefiniteness is a purely legal question such that the presumption of validity has no formal effect, in practice courts may apply a relatively loose standard due to an understandable reluctance to impose the drastic penalty of invalidity just because a claim could have been written more clearly. In the examination context, where applicants have the ability to amend vague claims, the PTO’s efforts to demand greater clarity make sense. But if the looser indefiniteness standard from the infringement context is incorporated into the examination context—no longer as a doctrinal mistake, but as a legal requirement—it may subvert these efforts and exacerbate the problem of ambiguous patents.

Federal Circuit: In order to appeal USPTO post-grant decision, third party requestor must show “injury in fact”

Patent, ,

By Dennis Crouch

Consumer Watchdog v. WARF and USPTO (Fed. Cir. 2014)

The Patent Act provides for a variety of administrative review proceedings that can be filed by any third party wanting to challenge the validity of an issued patent. The statute also provides the third-party requester with a right to appeal any adverse judgment to the Court of Appeal for the Federal Circuit. Following these statutory guidelines, Consumer Watchdog requested review (inter partes reexamination) of WARF’s patents covering human embryonic stem cells. When the USPTO sided with WARF, Consumer Watchdog appealed. But Consumer Watchdog has a major problem with its appeal – standing. Consumer Watchdog is a public interest group who is not being directly impacted by WARFs patents other than the general indignity felt by all of us.

As the appeal was pending, the Supreme Court decided Already v. Nike and reminded courts that, under the Constitution, they only have power over actual cases and controversies. At Patently-O, we used that case as a springboard for questioning whether the statutory appellate authority was sufficient to satisfy the demands of the Constitution, and the Court immediately called for Consumer Watchdog and WARF to brief the question of standing.

Now, the Federal Circuit has dismissed the appeal – holding that Consumer Watchdog’s appeal cannot stand because the non-profit “has not established an injury in fact sufficient to confer Article III standing.” In essence, the court rules that the right of appeal granted by statute is unconstitutionally broad and the cure is to narrow the right in order to conform with Constitutional requirements of standing.

Regarding injury-in-fact, all parties agreed that the standing requirements mandate such injury. [T]he “requirement of injury in fact is a hard floor of Article III jurisdiction that cannot be removed by statute.” Summers v. Earth Island Inst., 555 U.S. 488 (2009). Consumer Watchdog argued that its injury was cemented and particularized after it filed for inter partes reexamination and had its case rejected by the USPTO. However, the Federal Circuit has rejected that argument:

Here, the Board’s disagreement with Consumer Watchdog did not invade any legal right conferred by the inter partes reexamination statute. The statute at issue here allowed any third party to request reexamination, and, where granted, allowed the third party to participate. The statute did not guarantee a particular outcome favorable to the requester. Consequently, the Board’s denial of Consumer Watchdog’s request did not invade any legal right conferred upon Consumer Watchdog.

For this reason, Consumer Watchdog’s analogy to the Freedom of Information Act (FOIA) and the Federal Election Campaign Act (FECA) are unpersuasive. These acts create substantive legal rights – access to certain government records – the denial of which inflicts a concrete and particularized injury in fact. . . [Here,] Consumer Watchdog was not denied anything to which it was entitled.

One result here is another set of USPTO actions for which there is no appeal.

Dan Ravicher is the key individual behind the Consumer Watchdog case. It was Ravicher who also pushed forward the Myriad case. In similar fashion, it appears to me that he has a good shot at having this case now heard by the Supreme Court.

Supreme Court asks for SG’s Views on Hearing Another Inducement Case

Patent

Commil USA v. Cisco Systems (Supreme Court 2014)

In its decision on this case, the Federal Circuit offered three separate opinions, with Judge Prost authoring a majority opinion and Judges Neman and O’Malley each dissenting-in-part (each disagreeing with a different part of the majority opinion). See Jason Rantanen, Commil v. Cisco: Issues of validity “may” negate intent for inducement, Patently-O (2013). Professor Rantanen writes:

The primary issues addressed by the court [involved] a pre-Global-Tech jury instruction [on induced infringement] and the appropriateness of considering validity when determining whether the accused party possessed the requisite state of mind for inducement of infringement.  All three judges on the panel agreed that the jury instruction was both erroneous and prejudicial while Judges Prost and O’Malley agreed that issues of validity may be considered in the intent inquiry.

Both parties petitioned the Supreme Court for review and the high court has now given those petitions a breath of life by requesting that the Solicitor General file an amicus brief providing its views on whether a grant of certiorari is warranted. If certiorari is granted, the case would be heard next term.

Commil (the patentee) asks: 

1. Whether the Federal Circuit erred in holding that a defendant’s belief that a patent is invalid is a defense to induced infringement under 35 U.S.C. § 271(b).

2. Whether the Federal Circuit erred in holding that Global-Tech v. SEB, 131 S.Ct 2060 (2011) required retrial on the issue of intent under 35 U.S.C. § 271(b) where the jury (1) found the defendant had actual knowledge of the patent and (2) was instructed that “[i]nducing third-party infringement cannot occur unintentionally.”

The appellate panel ordered a partial retrial on the issue of induced infringement.  Cisco (the accused infringer who lost the original trial) asks:

Whether, and in what circumstances, the Seventh Amendment permits a court to order a partial retrial of induced patent infringement without also retrying the related question of patent invalidity.

Judicial Error and Justice Alito’s Hypothetical in Limelight

Patent

By Jason Rantanen

As I read yesterday’s two Supreme Court opinions, I was struck by the sense that even as it grants certiorari on an extraordinary number of patent cases, the Court’s actual substantive engagement with patent law seems to be flagging.   None of its patent law opinions this term were more than 14 pages long; the shortest was 5, although Alice could be a beast.  These are well off from its opinions in KSR v. Teleflex, which came it at a more significant 24 pages.  And a quick scatterplot of majority opinion page length in patent cases since MedImmune shows a steep downward slope.

Even if opinion length really is meaningless in terms of opinion value (may be behind a paywall), however, the substantive content of these opinions is disappointing.  In Nautilus, for example, the Court held that the requirement for definiteness is something greater than what the Federal Circuit’s “insolubly ambiguous” standard, but offered no meaningful explanation of its “reasonable certainty” standard.

But the worst (best?) example of the Court’s present cursory approach to patent law issues is Justice Alito’s assertion in Limelight that the “Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent.”  But as Dennis observed yesterday, the full quotation shows that there is also either a substantial misunderstanding or sheer carelessness by the Court:

The Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent.  A method patent claims a number of steps; under this Court’s case law, the patent is not infringed unless all the steps are carried out. This principle follows ineluctably from what a patent is: the conferral of rights in a particular claimed set of elements. “Each element contained in a patent claim is deemed material to defining the scope of the patented invention,” Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520 U. S. 17, 29 (1997), and a patentee’s rights extend only to the claimed combination of elements, and no further.

…

The Federal Circuit’s contrary view would deprive §271(b) of ascertainable standards. If a defendant can be held liable under §271(b) for inducing conduct that does not constitute infringement, then how can a court assess when a patent holder’s rights have been invaded? What if a defendant pays another to perform just one step of a 12 step process, and no one performs the other steps, but that one step can be viewed as the most important step in the process? In that case the defendant has not encouraged infringement, but no principled reason prevents him from being held liable for inducement under the Federal Circuit’s reasoning, which permits inducement liability when fewer than all of a method’s steps have been performed within the meaning of the patent.

With such a profound buildup, one would expect the majority judges in Limelight to have erred greatly by allowing inducement as long as “the most important step in the process” was performed by someone.  Yet they said no such thing.  From the en banc majority opinion in Akamai v. Limelight:

 To be clear, we hold that all the steps of a claimed method must be performed in order to find induced infringement, but that it is not necessary to prove that all the steps were committed by a single entity.

692 F.3d 1301, 1306 (Fed. Cir. 2012) (en banc).  Variations on this theme are repeated throughout the majority’s opinion, and the issue of whether or not all the steps must be actually performed was never in dispute.

Justice Alito’s sharp criticism is particularly inapposite here, given the difficulty of this particular issue and the meagre analysis that is provided in the opinion.  To be clear, I agree that inducement under 271(b) should require that there be a direct infringer under 271(a).  My point is simply that execution of this opinion could have been much better, and in treating the issue so clumsily the Court reinforced the appearance of just going through the motions.

So “What if a defendant pays another to perform just one step of a 12 step process, and no one performs the other steps, but that one step can be viewed as the most important step in the process?”  Easy answer under all Federal Circuit precedent: no infringement under 271(a), (b), or (c).

What happens next?  Perhaps this will be an instance where the Court engages in post-issuance revision of its opinion, as discussed in Richard Lazarus’s recent study of The (Non)Finality of Supreme Court Opinions and highlighted in Adam Liptak’s NYT article (may be behind a paywall).  If it does so, I would hope that the Court follows Professor Lazarus’s recommendation that it amend its practices to provide meaningful public notice.  But regardless of whether such post-issuance editing takes place here, the Supreme Court’s fumble suggests that for all its apparent interest in patent cases, maybe it isn’t really paying all that much attention to what the Federal Circuit is actually saying.

Is the Federal Circuit Really Worse Than the Cubs?

Patent,

By Jason Rantanen

Yesterday, following the Supreme Court’s unanimous reversal of the Federal Circuit in Nautilus and Limelight, Vera Ranieri of the Electronic Frontier Foundation observed that:

These rulings mean that the Federal Circuit has been unanimously overruled in every single patent case heard by the Supreme Court this term. Since there have been five decisions, the Federal Circuit is now an extraordinary 0-45 in supporting votes by Supreme Court justices this year. Even the Chicago Cubs have a better record than that.

Vera Ranieri, Supreme Court Overrules Federal Circuit Again. And Again. (June 2, 2014).

Ranieri has a point: the Supreme Court has not been kind to the Federal Circuit this term.  Worse than the record on these five decisions (Highmark, Octane Fitness, Medtronic, Nautilus, and Limelight), some of the Court’s comments are harshly critical of the appellate court.  As Dennis noted yesterday, in Limelight the Court wrote that “The Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent.”  By such measures it appears that the Federal Circuit does not currently have much credibility with the Court.

These are bleak numbers indeed, but some context is important.  First, consider that even as the Supreme Court has reversed on these five cases, it also has denied certiorari in other petitions arising from the Federal Circuit (If anyone has solid figures on these, I’d love to see them).  These petitions were vigorously pursued, often with the support of amicus.  So it’s not as if the Federal Circuit is always “losing.”

In addition, it’s important to keep in mind the broader picture: so far this term, the Supreme Court has reversed in 77% of all merits decisions except those arising from the Federal Circuit.  Last year, the Court’s final reversal rate was 72%. (source: SCOSTUSBLOG).  So that the Federal Circuit went 0 for 5 (two of which, Octane Fitness and Highmark, were a linked pair) doesn’t mean that the sky is falling.  And since 2010, the Federal Circuit has actually done fairly well: out of the 13 patent cases arising from the Federal Circuit since Bilski v. Kappos, the Supreme Court has affirmed the outcome in whole or part 7 times.

Even if these figures told the entire story on reversals, however, it’s not as if the Federal Circuit presently speaks with one voice, if it ever did.  It is full of disuniformity, with multiple viewpoints that are at odds with one another.  Given this disuniformity, it should not be surprising that two of the five cases in which the Court reversed the Federal Circuit involved a highly fractured court (Highmark and Limelight).  In these cases, the Court did not reverse a unanimous Federal Circuit, but rather settled a deep intra-circuit divide.  (Nautilus involved a concurrence by Judge Schall, but he agreed with the legal standard for indefiniteness applied by the majority).

Both Highmark and Limelight illustrate this point well: in Highmark, 5 of the 12 judges on the Federal Circuit favored a deferential standard for exceptional case determinations, an approach ultimately adopted by the Court.  Likewise, in Limelight the Supreme Court essentially agreed with the five dissenting Federal Circuit judges that indirect infringement under 271(b) requires an act of direct infringement under 271(a) (although as Tim Holbrook pointed out to me, Justice Alito left open the door for active inducement of any type of direct infringement, such as 271(f) or (g)).  And, when the Court issues its opinion in Alice, it will inevitably rule in the same direction as one or another group of judges in that highly fractured decision.  So too in Teva v. Sandoz, which will address the issue of de novo review of claim construction that split the en banc Federal Circuit 6-4.  What we are observing with the Court is, in substantial part, less outright reversals and more the resolution of intra-circuit splits, divisions that are arguably – at least in the case of subject matter eligibility – of its own making.

Thanks to former Iowa Law student and semester EFF intern Dan Garon for pointing me to Ms. Ranieri’s article.  Full disclosure: I’m not a Cubs fan.  Also, I made one substantive edit, revising the number of cases since Bilski to 13 (I had originally counted Caraco v. Novo, but on reflection it’s not really a patent case).

Patent Reform 2014: Removing Non-Practicing Entities from the USITC’s Jurisdiction

Patent, , ,

This is a Guest Post from attorney Ben Snitkoff who originally posted it on the blog Technically Legal. Technically Legal is a blog and podcast run by three technology-focused lawyers and their technology expert: David O’Brien, Dominik Rabiej, Ben Snitkoff, and David Lu.

Two Representatives have introduced a bill in the House aimed at preventing non-practicing entities (NPEs) from using the International Trade Commission (ITC) as a venue for patent disputes.

First, some background. The ITC is an administrative body charged with holding hearings and making adjudications regarding imports into the United States. In addition to its other duties, it may prevent the importation of items that infringe US patents, trademarks, or copyrights. However, in order to prevent importation of infringing articles, a complainant (or plaintiff) in the ITC must prove that there is a domestic industry protected by that IP.

Before 2006, injunctions were regular in patent cases in Federal District Court. If an NPE won a case against an operating company, the NPE would almost certainly get an injunction, causing substantial damage to that company. The risk of facing an injunction was a powerful force in driving operating companies to settle cases. If the alternatives are pay money or shut down, many companies would opt to pay.

After the eBay v. MercExchange case, obtaining an injunction in District Court became more difficult, particularly in cases where the plaintiff was an NPE. However, the ITC is a creature of statute, and doesn’t play by the same injunction rules. If a complainant wins a case in the ITC, they automatically get an importation ban against at least the parties found to infringe. However, in order to win the case, you must prove that there is a domestic industry in products protected by the patents the other parties infringe. The most obvious case is that the complainant makes a product protected by a patent, and the respondents are importing devices that infringe that same patent.

After revisions to the statutes that govern the ITC in 1998, complainants could prove that there was a domestic industry by showing that they made substantial investments to license other parties to their patents, or that people who have licenses also have products that practice the asserted patents.

In recent years, investigations filed by NPEs have accounted for a growing percent of investigations before the ITC, and the call for reform has been growing.

The bill introduced in the House purports to be that reform. However, whether the bill would be effective is questionable, particularly because there is no word yet of a corresponding bill introduced in the Senate.

There are several immediate problems with the bill. First, the bill attempts to modify the ability to rely on licensing by replacing the word “licensing” with:

substantial investment in licensing activities that leads to the adoption and development of articles that incorporate the patent, copyright, trademark, mask work, or design

This provision is, at best, inartfully drafted. “Articles that incorporate the patent” has no clear meaning in case law. Similarly, with “incorporate the . . . copyright.” This invites litigation over the meaning of the term when it could be more clearly stated as:

substantial investment in licensing activities that leads to the adoption and development of articles that practice the patent, embody the copyrighted work, or incorporate the trademark, mask work, or design

It is also not very clear what the drafters mean by “adoption and development” and why both actions are necessary, as long as there is “substantial investment” in those articles.

The bill proceeds to put in statute, with some modifications, some recent rule making changes in the ITC which allowed a preliminary investigation with respect to domestic industry. However, the short-description of the bill and the bill itself disagree on the timing. The 1-pager says that “once a preliminary investigation in initiated, requiring [sic] an early initial determination as to the DI standing of a complaint within 45 days.” However, the bill requires that “The Commission shall render its determination in the preliminary investigation under this paragraph not later than 45 days after the filing of the complaint.”

Typically, in ITC practice, an investigation is not initiated until thirty days after the complaint is filed. Additionally, forty-five days is less than half the time the Commission has previously allotted for these preliminary investigations. It seems virtually impossible to allow the parties to conduct discovery, submit briefing, hold a preliminary hearing, and issue a written opinion within either forty-five days of filing, or even forty-five days after a preliminary investigation was initiated.

Finally, even in cases where a complaint fully proves their case, the ITC may choose not to exclude certain articles for importation if it was not in the public interest. Those rare cases were traditionally limited to cases where public safety and welfare were endangered by an importation ban. This bill expands the public interest to include competitive conditions in the United States. This section appears to accomplish what it sets out to do, though the ITC’s Administrative Law Judges may be reluctant to hold that the importations of consumer luxury goods rise to a level of public interest so important as implicate these new guidelines.

No Patent Office Director – 486 Days Later

Patent, , ,

By Dennis Crouch

David Kappos has been an instrumental leader in patent reform over the past several years. In the lead-up to the America Invents Act of 2011, it was Kappos – acting then in his role as USPTO Director – who serve as a trusted advisor to leaders on the Hill who were developing appropriate statutory language. In 2014, Kappos – now acting as an industry lobbyist in private practice – spearheaded a successful initiative to table further patent reforms for now.

Although now an outsider, Kappos’ influence remained so strong in the 2014 cycle because the USPTO Director hole that he left is still empty. Rather, that slot has remained vacant since Kappos left the job more than a year ago. During that time, White House has not stepped forward with a nomination for the next director. I would argue that the failure of the 2014 reforms was more about the lack of a USPTO Director guiding the changes than about the challenge brought by Mr. Kappos.

In a new letter to President Obama, Senator Hatch calls for movement:

June 2, 2014

Dear President Obama:

I write concerning the director vacancy at the U.S. Patent and Trademark Office (USPTO). Since the departure of Director David Kappos in January 2013, the USPTO has been without a permanent director. This vacancy, which has gone unfilled for over sixteen months and counting without so much as a statement from the White House, hampers the agency’s ability to influence policy and make long-term plans. We all can agree that these are challenging times that demand strong leadership at the USPTO to fuel our nation’s economic strength by harnessing our intellectual property capital.

By all accounts Deputy Director Michelle Lee has done an admirable job juggling the functions and duties of both director and deputy director. But this arrangement simply cannot continue. Without a director backed by a presidential nomination and Senate confirmation, the USPTO does not have a leader who can engage in the type of strategic and long-term planning that is crucial for ensuring the USPTO’s continued effectiveness.

Ms. Lee’s ability to take on major or controversial challenges is further limited by legitimate questions as to whether her appointment as Deputy Director was consistent with 35 U.S.C. § 3(b)(1). I hope that you did not casually disregard the clear statutory requirement that the deputy director be nominated by the director. In any case, the question underscores that Ms. Lee does not possess the same clear mandate as would a presidentially-nominated and Senate-confirmed director. Leaving Ms. Lee to shoulder the burden of USPTO leadership alone is unfair, untenable, and unacceptable for our country’s intellectual property agency.

The USPTO is forging ahead with important initiatives like opening satellite offices across the country and implementing post-grant review programs under the America Invents Act. And while the agency has reduced its backlog of patent applications in recent years, as of April 2014, there were still 619,204 unexamined patent applications. These are just a few of the challenges and opportunities facing the USPTO that are needlessly complicated by the absence of a director to provide a forward-looking vision.

When one considers what intellectual property means to our economy, the failure to put in place a strong leadership team at the USPTO is unfathomable. Effective leadership requires a director, deputy director, and their assembled team. Leaving the agency without a permanent director for nearly a year and a half without so much as a public explanation is inexcusable. I look forward to hearing your plans with regard to this vacancy, and I urge you to take prompt action to nominate a USPTO director. We cannot afford to wait any longer.

The White House is unlikely to respond publicly to this message, but will perhaps take some action before the 2016 presidential election.

Supreme Court: To Be Valid, Patent Claims Must Provide Reasonable Certainty Regarding the Claim Scope

Patent, ,

By Dennis Crouch

Nautilus v. BioSig (Supreme Court 2014) [New download here: 13-369_k53m]

Patents provide exclusive rights that are defined by a set of claims. The claims spell out the metes-and-bounds of the invention being claimed and are designed to put the world on notice of what is and what is not infringement. To facilitate this notice function of patent claims, the patent statute requires that the “claims particularly point[] out and distinctly claim[] the subject matter which the inventor or a joint inventor regards as the invention.” 35 U.S.C. § 112(b). The courts have wrapped these requirements in a doctrine known as indefiniteness. A patent claim that fails the test of indefiniteness is deemed unpatentable, invalid, and unenforceable.

Most patent claims have some amount of ambiguity in their scope. The question before the court in this case is how much is too much? Through a series of cases, the Federal Circuit has implemented was arguably a stiff test of indefiniteness – making it quite difficult to find a claim invalid as indefinite. As the Supreme Court writes:

According to the Federal Circuit, a patent claim passes the §112, ¶2 threshold so long as the claim is “amenable to construction,” and the claim, as construed, is not “insolubly ambiguous.”

In its opinion here, the Supreme Court found that the insolubly ambiguous fails to apply the statutory requirement noted above. In its place, the court has created a new test as follows:

A patent is invalid for indefiniteness if its claims, read in light of the specification delineating the patent, and the prosecution history, fail to inform, with reasonable certainty, those skilled in the art [at the time the patent was filed] about the scope of the invention. . . . .

The standard we adopt accords with opinions of this Court stating that “the certainty which the law requires in patents is not greater than is reasonable, having regard to their subject-matter.” Minerals Separation, Ltd. v. Hyde, 242 U. S. 261, 270 (1916). . . .

It cannot be sufficient that a court can ascribe some meaning to a patent’s claims; the definiteness inquiry trains on the understanding of a skilled artisan at the time of the patent application, not that of a court viewing matters post hoc. To tolerate imprecision just short of that rendering a claim “insolubly ambiguous” would diminish the definiteness requirement’s public-notice function and foster the innovation-discouraging “zone of uncertainty,” against which this Court has warned.

On remand, the Federal Circuit will decide whether the particular claims at issue here meet that test.

In the decision, the court highlights the reality that the old rule offers an incentive for patentees to intentionally “inject ambiguity into their claims.” The new standard is intended to help eliminate that standard.

Key points and ongoing issues from the opinion:

  • The addition of a reasonableness inquiry into the analysis means that indefiniteness appears to be moving be moving away from a question of law and into factual territory. The issue has traditionally been seen as part-and-parcel of claim construction, but now has the potential of being shifted to a question for trial. Of particular note here is the Supreme Court’s reluctance to decide the particular case and its allusion to the notion that the result “may turn on evaluations of expert testimony.” (quoting Markman).
  • The Supreme Court indicates that “a patent” will be invalid based upon the failure of its claims. The longstanding practice of the Federal Circuit is that indefiniteness is done on a claim-by-claim basis, but here the court suggests that approach should change.  Assuming that indefiniteness is still considered on a claim-by-claim basis, one outcome of this decision is that it adds additional value to patents with multiple claim formulations.
  • The Supreme Court indicates that any ambiguity should be considered “at the time the patent was filed” and also that the patent’s prosecution history are important in the consideration. What is unclear then is whether the court intended to mean that the consideration should be at the patent issuance, the application actual filing date, the application’s effective filing date (taking into account priority claims to prior filed applications), or the date that the claims in question were filed / amended.

Supreme Court Rejects Expanded Inducement Doctrine

Patent

By Dennis Crouch

Limelight Networks v. Akamai Tech. (Supreme Court 2014)

In an 11-page unanimous opinion, the Supreme Court has rejected the Federal Circuit’s expansion of the inducement doctrine – holding instead that inducement must be tied to underlying direct infringement. The Patent Act provides that “[w]hoever actively induces infringement of a patent shall be liable as an infringer.”

[O]ur case law leaves no doubt that inducement liability may arise”if, but only if, [there is] . . . direct infringement.” Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U. S 336, 341 (1961) (emphasis deleted).

One might think that this simple truth is enough to dispose of this appeal. But the Federal Circuit reasoned that a defendant can be liable for inducing infringement under §271(b) even if no one has committed direct infringement within the terms of §271(a) (or any other provision of the patent laws), because direct infringement can exist independently of a violation of these statutory provisions.

The Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent. A method patent claims a number of steps; under this Court’s case law, the patent is not infringed unless all the steps are carried out. This principle follows ineluctably from what a patent is: the conferral of rights in a particular claimed set of elements. “Each element contained in a patent claim is deemed material to defining the scope of the patented invention,” Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520 U. S. 17, 29 (1997), and a patentee’s rights extend only to the claimed combination of elements, and no further.

The opinion is harsh toward the Federal Circuit, but somewhat poorly written. In particular, the Supreme Court seems to have misunderstood that the Federal Circuit holding actually does require all steps of the method to be carried out in order for a finding for inducement. The Court questions:

What if a defendant pays another to perform just one step of a 12 step process, and no one performs the other steps, but that one step can be viewed as the most important step in the process? In that case the defendant has not encouraged infringement, but no principled reason prevents him from being held liable for inducement under the Federal Circuit’s reasoning, which permits inducement liability when fewer than all of a method’s steps have been performed within the meaning of the patent.

Of course, the Federal Circuit’s decision in this case would not allow infringement in this scenario either.

The Supreme Court recognized and concurred with the policy goal behind the Federal Circuit’s doctrine as serving to help prevent “a would-be infringer” from evading liability “by dividing performance of a method patent’s steps with another whom the defendant neither directs nor controls.” However, the Supreme Court concurred with other commentators that a primary cause of this concern stems from the Federal Circuit’s unduly strict “single actor” rule for determining direct infringement. Muniauction. The Court writes:

Any such anomaly, however, would result from the Federal Circuit’s interpretation of §271(a) in Muniauction. A desire to avoid Muniauction’s natural consequences does not justify fundamentally altering the rules of inducement liability that the text and structure of the Patent Act clearly require—an alteration that would result in its own serious and problematic consequences, namely, creating for §271(b) purposes some free-floating concept of “infringement” both untethered to the statutory text and difficult for the lower courts to apply consistently.

On remand, there is a good chance that the Federal Circuit will reconsider (and expand) the single-actor rule for direct infringement to more fully account for common law traditions of respondeat superior liability.

Patents as Collateral

assignment, collateral, Patent

In a prior post, I highlighted Professor William Mann’s recent article on patents as collateral. I asked him to provide a guest post that explains some of his research. – DC

Loan collateral typically calls to mind tangible assets like real estate that are easily valued and sold. However, companies are increasingly relying on the collateral value of their patent portfolios to raise financing. In a recent paper, I trace the growth of this activity from USPTO filings that record a creditor’s security interest in a patent. The volume of these filings has exploded in recent years. By 2012, 20% of patents held by domestic corporations during the 1990s had been pledged as collateral at some point in their lives.

To be clear, filing with the USPTO does not perfect a security interest in patents against future lien creditors – this is accomplished through UCC filings with the relevant state office. However, recording the security interest with the USPTO may still protect against bona fide purchasers, so creditors find it advisable to register the security interest in both places. The filings thus identify cases in which patents are important collateral, since the creditor went to the trouble to protect its security interest by filing with the USPTO as well as with the state.

Indeed, for the borrowers listed in these filings, patents are likely to be the most valuable assets they own, as the industries in which they are clustered feature low tangibility but high rates of patent production – for example, drugs, medical instruments and supplies, computer programming and data processing, and electronic components. And the creation of the patent security interest is associated with large financing and investment: In Compustat data, companies in these industries increase their debt issuance and R&D expense by 10% and 6% of total assets, respectively, in the year when they file with the USPTO. Secured debt seems to be a significant source of financing for many patenting companies, with the collateral value of their patent portfolios contributing heavily to their financing capacity.

In the paper, I further argue that strong creditor protections in bankruptcy increase financing and investment by patenting firms. I provide evidence by comparing patenting companies based on the creditor-friendliness of their state laws, and exploiting the development of caselaw addressing the interaction between state and federal laws governing patent property and contract rights. When creditors expect less delay and uncertainty in foreclosing against a patent portfolio during a potential bankruptcy, I find that they lend more against that portfolio in the first place, and borrowers use the funds to invest in research and produce more patents.

In general, the findings reflect the growing importance of intellectual property as an asset class in the economy, and increasing efforts by firms to monetize that asset class. Proposals to reform the patent system should take into account the effect this would have on patenting firms’ financing capacity, as patents would not be valuable collateral without effective patent protection.

William Mann is an assistant professor of finance at the Anderson School of Management, UCLA. The draft article

Federal Circuit: Firm Cannot Switch Sides in Patent Case

conflict of interest, malpractice, mandamus, Patent

By Dennis Crouch

In re ATopTech (Fed. Cir. 2014)

Professor Hricik already wrote some on this case [link], but I wanted to discuss it in a bit more depth as well.

In 2013, Synopsys sued ATopTech for infringing its U.S. Patent No. 6,507,941. The ‘941 patent covers a sub-grid connectivity method used in chip layout automation software known as electronic design automation (EDA). ATopTech hired the 800-lawyer behemoth firm of O’Melveny & Myers to handle the defense. However, N.D. California Judge Chesney disqualified the O’Melveny firm based upon a conflict of interest.

O’Melveny has some history with the parties. The ‘941 patent was previously owned by Magma Design and O’Melveny represented Magma Design for almost a decade, including in its 2012 merger with Synopsys. O’Melveny had also represented Magma Design in several EDA-patent lawsuits against Synopsys and had apparently considered asserting the ‘941 patent against Synopsys. Further, two of the attorneys on the O’Melveny trial team had been part of the Magma Design team, including Luann Simmons (Managing Partner of OMM San Francisco).

Based upon these facts, the district court found that the relationship between the current and former representation substantial enough to create an irrefutable presumption that confidential material information was transmitted to the attorneys regarding the current dispute. The result of that conclusion is that O’Melvany cannot now switch sides to represent the opposing party. The district court did not, however, go so far as to particularly find that the O’Melveny attorneys had actually breached any ethical duties.

In a Mandamus action, ATopTech asked the Federal Circuit to overrule the lower court decision. However, the appellate panel denied the Mandamus petition – finding instead that the lower court “had a sound basis for disqualifying OMM.”

UseNet is Prior Art

Anticipation, Novelty, Patent, Prior Art

By Dennis Crouch

Suffolk Tech v. AOL and Google (Fed. Cir. 2014)

This is a prior art case. Suffolk’s patent application was filed back in 1996, but it turns out that the invention was described in a 1995 UseNet newsgroup post posted by a college student. The question on appeal is whether that posting counts as prior art under 35 U.S.C. 102(a) (pre-AIA).

Under the statute, a patent is invalid if “(a) the invention was … described in a printed publication … before the invention thereof by the applicant for a patent.” Courts have repeatedly found that online content fits within the definition of printed publication. Rather, the touchstone question is whether the material was sufficiently publicly accessible. Public accessibility looks to the ability of persons who would be interested or skilled in the subject matter to locate the reference using only reasonable diligence. If a reference is sufficiently disseminated at time of original publication then the ability to later locate the reference is irrelevant.

Today, UseNet materials are indexed by various search engines and would clearly be considered prior art. In 1995 the indexing was not so strong, but the appellate panel here affirmed that the postings clearly fall within the scope of printed publications. For that legal conclusion, the court relied upon a handful of facts:

  • The record indicated that those of ordinary skill in the art were using the UseNet newsgroups in 1995, including Suffolk’s own technical expert.
  • Although not fully indexed, the UseNet group was structured in a hierarchical manner that would have allowed someone interested in the topic to identify the particular group and read the posts.
  • The post in question resulted in at least six responses in the week following the publication – indicating that the post was likely sufficiently distributed at publication.

Invalidity affirmed.

The case was discussed in an earlier Patently-O Posting titled Structuring a Privateering Contract (2012).

= = = =

Note – although this case was decided under pre-AIA rules, its holding should apply equally to the restructured Section 102 that also identifies “printed publications” as a form of prior art.

Guest Post: Defend Trade Secrets Act — A Primer, an Endorsement, and a Criticism

Patent, Trade Secret, , , ,

Guest Post by David S. Almeling, a partner in the San Francisco office of O’Melveny & Myers LLP. Almeling specializes in patent and trade secret litigation.

It’s been an exciting month for trade secret law. Senators Christopher Coons (D-Delaware) and Orrin Hatch (R-Utah) introduced the Defend Trade Secrets Act, a bill that would, for the first time, provide a federal right of civil action for trade secret theft. And the Judiciary Committee held a hearing during which speakers expressed support for the DTSA, including Eli Lilly’s VP and General Patent Counsel, Douglas Norman, who stated that the DTSA “will establish the gold standard for national trade secret laws globally.”

The DTSA is a game changer. If enacted, it would constitute the most dramatic rethinking of trade secret law since 1979, when the National Conference of Commissioners on Uniform State Laws approved a model statute called the Uniform Trade Secrets Act. Since then, 48 states have adopted the UTSA in some form, replacing their common-law regimes with statutory ones.

The DTSA isn’t perfect — I’ll explain why in a moment — but it’s the best bill of its kind introduced to date, and it should be enacted.

A Primer

The DTSA authorizes a trade secret owner to bring a civil cause of action in federal court for either (1) a violation of the Economic Espionage Act, which criminalized certain types of trade secret misappropriation, or (2) a “misappropriation of a trade secret that is related to a product or service used in, or intended for use in, interstate or foreign commerce.” The DTSA’s definition of misappropriation tracks closely the UTSA’s definition.

The DTSA would also:

Grant courts the power to issue ex parte orders “for the preservation of evidence” and “for the seizure of any property used…to commit” the alleged misappropriation. This is similar to the relief available under the Lanham Act for counterfeit goods.

Allow courts to award injunctions; damages for actual loss or unjust enrichment; a reasonable royalty “in lieu of damages”; exemplary damages up to treble the amount of compensatory damages, as opposed to the UTSA, which permits courts to award only double damages; and attorneys’ fees.

Establish a five-year statute of limitations, two years longer than the UTSA’s provision.

Decline to preempt any other law.

An Endorsement

The DTSA is not the first bill in recent years to propose a federal cause of action for trade secret theft.

Other recent efforts include: Senator Coons’s prior bills in 2011 and 2012; the proposal by Rep. Zoe Lofgren, the Silicon Valley–based Democrat, to enact PRATSA (Private Right of Action Against Theft of Trade Secrets Act of 2013); and the 2013 introduction of FAIR (Future of American Innovation and Research Act) by Republican Senator Jeff Flake of Arizona. These attempts all failed, never making it out of committee.

The reasons they fell short varied; I won’t rehash them here. But the DTSA is the most comprehensive bill to date, as it addresses a broad swath of trade secret theft and encompasses a robust range of remedies.

The DTSA is better than the current system — one in which each state has its own autonomous civil trade secret law. Today, 48 states have enacted some form of the UTSA, with New Jersey (in 2012) and Texas (in 2013) being the latest adherents. New York and Massachusetts are the only remaining holdouts.

Despite the UTSA’s widespread adoption, the “U” — Uniform — hasn’t lived up to its name. State legislatures often modify the UTSA. And even if every state enacted the same UTSA, there would still be a patchwork because state courts often issue different interpretations of the same UTSA provision.

Trade secret owners, employees, and others in the knowledge economy incur the costs of this state-by-state approach. Facing different laws in different states, they are left to deal with the resulting complications that come with attempts to comply with each state’s laws. And once a dispute arises, these differences also impose costs on courts and litigants, who wage needless battles over forum shopping and choice of law. A federal statute would eliminate these differences and achieve other benefits, such as easing nationwide service of process and discovery.

This isn’t the first time I’ve endorsed some form of a federal trade secret statute. I did so in a 30-page law review article in 2009 and in a five-page Law 360 article in 2013.

I’m not alone in my support of a federal trade secret statute generally and the DTSA specifically. Senator Coons’s April 29, 2014 press release notes that the DTSA has the backing of the National Association of Manufacturers, the U.S. Chamber of Commerce, and dozens of companies, including 3M, GE, Microsoft, and P&G. The AIPLA’s Trade Secret Law Committee recently voted to endorse the DTSA (disclaimer: I was one of the voting members). And other organizations, including the ABA’s IP Section and the Commission on the Theft of American Intellectual Property, announced support for some form of a federal trade secrets act in 2013.

A Criticism

Where the DTSA stumbles is in its promise not to “preempt any other provision of law.” This causes two problems.

First, the need for the DTSA stems in part from state-by-state variations in trade secret laws and the transactional and substantive problems that such variations impose. The DTSA leaves those variations in place. Worse, the DTSA adds another law to the already cluttered landscape of 48 UTSA states (with their variations), two non-UTSA states, the federal Economic Espionage Act, and a federal common trade secret law.

Second, the DTSA opens a backdoor to common-law and other causes of action that are precluded in most states. The UTSA “displaces tort, restitutionary, and other laws…providing civil remedies for misappropriation of a trade secret.” The DTSA doesn’t displace anything.

Under the DTSA, trade secret plaintiffs would have the option of pursuing their claim in state or federal court and, if they choose federal court, the additional option of asserting duplicative causes of actions that aren’t available in state courts.

Why I Still Endorse the DTSA

Trade secrets are the only major type of intellectual property (i.e., copyrights, patents, trademarks, and trade secrets) not governed primarily by a federal statute. Copyrights and patents got theirs in the 1700s. Trademark got its in the 1800s. Now that we’re firmly in the information age, it’s time for trade secrets to join their peers.

True, the DTSA is only a partial step toward uniformity, as it leaves the current state-law regime in place and doesn’t preempt overlapping causes of action. But in the absence of a complete transition from a state-based trade secret regime to a federal one, the DTSA is an important step in the right direction.

This post by David S. Almeling does not purport to represent the views of O’Melveny or its clients.