New PatentlyO Law Journal Article: Covid-19 Pandemic’s Impact on the U.S. Patent System Through November 2020

New PatentlyO Law Journal article by Nicholas Shine.  Mr. Shine is  a J.D. Candidate 2021, BSEE, is a 3L student at the University of Denver, Sturm College of Law. This essay was conducted as a directed research project under the supervision of Professor Bernard Chao.  – Jason

The Covid-19 pandemic has had and continues to have a major impact on people and countries across the globe.  The pandemic has not only affected people, it has affected many facets of life including the economy.  The United States government has passed two measures in an effort to address the issues Covid has introduced.  The Coronavirus Aid, Relief, and Economic Security (CARES) Act provided $2.2 trillion in economic stimulus. Both the CARES Act and the United States Patent and Trademark Office (USPTO) have provided relief to stakeholders with regard to patents and applications.

This essay examines patent abandonment rates and application rates to determine if they can shed light on how the Covid-19 pandemic affected innovation.  While the results show temporary perturbations, the pandemic has had minimal effect on overall trends.  This may suggest that abandonment rates and application rates may be surprisingly resistant to economic downturns or that the measurements are simply not good proxies for innovation.  Part II of this paper describes the data available from the USPTO and the methods used to work with the data. Part III examines the data as well as offer theories about the results obtained from the data.

Disclosure statement: This essay was conducted as a directed research project under the supervision of Professor Bernard Chao.  Nick Shine has been employed part-time as a law clerk at Polsinelli’s Denver office.   He has no conflicts that he is aware of, and the study required no funds.

Read: Nicholas Shine, Covid-19 Pandemic’s Impact on the U.S. Patent System Through November 2020, 2021 PatentlyO Law Journal 27 (2021) (Shine.2021.COVID-19Impact)

Prior Patently-O Patent L.J. Articles:

  • Thomas F. Cotter, Is Global FRAND Litigation Spinning Out of Control, 2021 PatentlyO Law Journal 1 (2021) (Cotter.2021.GlobalFRANDLitigation)
  • Colleen V. Chien, Nicholas Halkowski, Maria He, and Rodney Swartz, Parsing the Impact of Alice and the PEG, 2020 Patently-O Law Journal 20 (2020) (Chien.2020.ImpactOfAlice)
  • Paul R. Michel and John T. Battaglia, eBay, the Right to Exclude, and the Two Classes of Patent Owners, 2020 Patently-O Law Journal 11 (2020) (Michel.2020.RightToExclude)
  • Thomas F. Cotter, Two Errors in the Ninth Circuit’s Qualcomm Opinion, 2020 Patently-O Patent Law Journal 1 (2020). (Cotter.2020.TwoErrors.pdf)
  • Jasper L. Tran & J. Sean Benevento, Alice at Five, 2019 PatentlyO L.J. 25 (2019) (Tran.2019.AliceatFive.pdf)
  • Bernard Chao, Implementing Apportionment, 2019 PatentlyO L.J. 20 (Chao.2019.ImplementingApportionment)
  • Jeremy C. Doerre, Is There Any Need to Resort to a § 101 Exception for Prior Art Ideas?, 2019 PatentlyO L.J. 10. (2019.Doerre.AnyNeed)
  • Colleen V. Chien, Piloting Applicant-Initiated 101 Deferral Through A Randomized Controlled Trial, 2019 Patently-O Patent Law Journal 1. (2019.Chien.DeferringPSM)
  • David A. Boundy, Agency Bad Guidance Practices at the Patent and Trademark Office: a Billion Dollar Problem, 2018 Patently-O Patent Law Journal 20. (Boundy.2018.BadGuidance)
  • Colleen Chien and Jiun-Ying Wu, Decoding Patentable Subject Matter, 2018 PatentlyO Patent Law Journal 1.
  • Paul M. Janicke, Patent Venue: Half Christmas Pie, And Half Crow, 2017 Patently-O Patent Law Journal 13. (Janicke.2017.ChristmasPie.pdf)
  • Paul M. Janicke, The Imminent Outpouring from the Eastern District of Texas, 2017 Patently-O Patent Law Journal 1 (2017) (Janicke.2017.Venue)
  • Mark A. Lemley, Erik Oliver, Kent Richardson, James Yoon, & Michael Costa, Patent Purchases and Litigation Outcomes, 2016 Patently-O Patent Law Journal 15 (Lemley.2016.PatentMarket)
  • Bernard Chao and Amy Mapes, An Early Look at Mayo’s Impact on Personalized Medicine, 2016 Patently-O Patent Law Journal 10 (Chao.2016.PersonalizedMedicine)
  • James E. Daily, An Empirical Analysis of Some Proponents and Opponents of Patent Reform, 2016 Patently-O Patent Law Journal 1. (Daily.2016.Professors)
  • Tristan Gray–Le Coz and Charles Duan, Apply It to the USPTO: Review of the Implementation of Alice v. CLS Bank in Patent Examination, 2014 Patently-O Patent Law Journal 1. (GrayLeCozDuan)
  • Robert L. Stoll, Maintaining Post-Grant Review Estoppel in the America Invents Act: A Call for Legislative Restraint, 2012 Patently-O Patent Law Journal 1 (Stoll.2012.estoppel.pdf)
  • Paul Morgan, The Ambiguity in Section 102(a)(1) of the Leahy-Smith America Invents Act, 2011 Patently-O Patent Law Journal 29.  (Morgan.2011.AIAAmbiguities)
  • Joshua D. Sarnoff, Derivation and Prior Art Problems with the New Patent Act, 2011 Patently-O Patent Law Journal 12 (sarnoff.2011.derivation.pdf)
  • Bernard Chao, Not So Confidential: A Call for Restraint in Sealing Court Records, 2011 Patently-O Patent Patent Law Journal 6 (chao.sealedrecords.pdf)
  • Benjamin Levi and Rodney R. Sweetland, The Federal Trade Commission’s (FTC) Recommendations to the International Trade Commission (ITC):  Unsound, Unmeasured, and Unauthoritative, 2011 Patently-O Patent Law Journal 1 (levi.ftcunsound.pdf)
  • Kevin Emerson Collins, An Initial Comment on King Pharmaceuticals: The Printed Matter Doctrine as a Structural Doctrine and Its Implications for Prometheus Laboratories, 2010 Patently-O Patent Law Journal 111 (Collins.KingPharma.pdf)
  • Robert A. Matthews, Jr., When Multiple Plaintiffs/Relators Sue for the Same Act of Patent False Marking, 2010 Patently-O Patent Law Journal 95 (matthews.falsemarking.pdf)
  • Kristen Osenga, The Patent Office’s Fast Track Will Not Take Us in the Right Direction, 2010 Patently-O Patent L.J. 89 (Osenga.pdf)
  • Peter S. Menell,  The International Trade Commission’s Section 337 Authority, 2010 Patently-O Patent L.J. 79
  • Donald S. Chisum, Written Description of the Invention: Ariad (2010) and the Overlooked Invention Priority Principle, 2010 Patently‐O Patent L.J. 72
  • Kevin Collins, An Initial Comment on Ariad: Written Description and the Baseline of Patent Protection for After-Arising Technology, 2010 Patently-O Patent L.J. 24
  • Etan Chatlynne, Investigating Patent Law’s Presumption of Validity—An Empirical Analysis, 2010 Patently-O Patent L.J. 37
  • Michael Kasdan and Joseph Casino, Federal Courts Closely Scrutinizing and Slashing Patent Damage Awards, 2010 Patently-O Patent L.J. 24 (Kasdan.Casino.Damages)
  • Dennis Crouch, Broadening Federal Circuit Jurisprudence: Moving Beyond Federal Circuit Patent Cases, 2010 Patently-O Patent L.J. 19 (2010)
  • Edward Reines and Nathan Greenblatt, Interlocutory Appeals of Claim Construction in the Patent Reform Act of 2009, Part II, 2010 Patently‐O Patent L.J. 7  (2010) (Reines.2010)
  • Gregory P. Landis & Loria B. Yeadon, Selecting the Next Nominee for the Federal Circuit: Patently Obvious to Consider Diversity, 2010 Patently-O Patent L.J. 1 (2010) (Nominee Diversity)
  • Paul Cole, Patentability of Computer Software As Such, 2008 Patently-O Patent L.J. 1. (Cole.pdf)
  • John F. Duffy, The Death of Google’s Patents, 2008 Patently O-Pat. L.J. ___ (googlepatents101.pdf)
  • Mark R. Patterson, Reestablishing the Doctrine of Patent Exhaustion, 2007 Patently-O Patent L.J. 38
  • Arti K. Rai, The GSK Case: An Administrative Perspective, 2007 Patently-O Patent L.J. 36
  • Joshua D. Sarnoff, BIO v. DC and the New Need to Eliminate Federal Patent Law Preemption of State and Local Price and Product Regulation, 2007 Patently-O Patent L.J. 30 (Download Sarnoff.BIO.pdf)
  • John F. Duffy, Are Administrative Patent Judges Unconstitutional?, 2007 Patently-O Patent L.J. 21. (Duffy.BPAI.pdf)
  • Joseph Casino and Michael Kasdan, In re Seagate Technology: Willfulness and Waiver, a Summary and a Proposal, 2007 Patently-O Patent L.J. 1 (Casino-Seagate)

An incredible invention (incredible = not credible).

In re Hu (Fed. Cir. 2021)

Huping Hu (PhD, JD) and his spouse Maoxin Wu (MD, PhD) have been working for many years to understand human consciousness and its relationship to quantum theory.  In a series of patent applications, the pair have disclosed and claimed various applications of quantum entanglement.

Pending claim 1 of their Application No. 11/944,631 lists three easy steps for taking advantage of quantum entanglement. The basic approach:

  1. Create quantum entanglements between an originating & a targeting substance (“by irradiating said substance with magnetic pulse, laser light or microwave, or letting said substance sit for at least thirty days”);
  2. Separate the substances;
  3. Heat/cool/alter the originating substance.

The result then is a “change in weight, temperature and/or pH value of said target substance.”  The figure above shows a schema “for non-locally influencing a biological system in vivo such as a human body by first applying said target substance into said system in vivo and then manipulating the originating substance quantum-entangled with said target substance. [Published Application: 20090114526A].  This application as well as two others are pending in the case:

  1. Application No. 11/944,631 (non-local effects via quantum entanglement);
  2. Application No. 13/449,739 (treatment device for humans emitting quantum-entangling photons or magnetic pulses);
  3. Application No. 13/492,830 (treatment with water-based target);
  4. Application No. 11/670,996 (similar)

The Patent Office rejected applications as inoperative and the Federal Circuit has affirmed.  Operability is not expressly required by the patent act, but is directly derived from the utility doctrine of 35 U.S.C. § 101 (“new and useful”).  In addition, an inoperative creation also lacks enablement — especially in situations like this where the claims are directed to a functional result and not just the machine assembly.

On appeal, Hu argued that the USPTO based its decision on speculation, skepticism and ignorance rather than evidence.  The USPTO presented no prior art or any other contrary evidence.

On appeal, though, the Federal Circuit found that the USPTO had presented a prima facie case by noting that the invention: “violates the first law of thermodynamics,” is “contrary to traditional understanding of chemistry,” and “violates the classical laws of physics” including conservation of mass.   The Board noted an “absence of any known scientific principles explaining how Appellant’s invention could possibly operate in this manner, the absence of any cogent explanation in Appellant’s Specification regarding the general principals [sic] or mechanisms causing this to occur, and the absence of any verifiable test data reasonably attributable to the purported result, the Examiner reasonably characterized Appellant’s invention as being of an incredible nature.” Although Hu presented 25 scientific articles, the Board failed to find any scientific basis supporting the particular claims in Hu’s applications.

The appellate panel explained its support for the conclusion:

The PTO, as the nation’s guardian of technologic invention, must be receptive to unusual concepts, for the core of invention is unobviousness. However, concepts that strain scientific principles are properly held to a heightened standard, typically measured by reproducibility of results. Here the Board was presented with an apparent departure from conventional scientific understanding, and the Board appropriately sustained the examiners’ requirements for experimental verification. The Board applied a reasonable and objective standard, and acted reasonably in sustaining the examiners’ requirements. Should further investigation bring peer recognition and verifiable results, the PTO and the scientific community would surely be interested.

Id.

Note here – the result of this decision is not barring patentability of this type of invention, but rather a requirement that the inventor provide a better showing that the invention actually works as claimed.

Patently-O Bits and Bytes by Juvan Bonni

Recent Headlines in the IP World:

Commentary and Journal Articles:

New Job Postings on Patently-O:

Pre-Litigation Investigation of Patent Validity

by Dennis Crouch

I previously wrote about the Federal Circuit’s decision in WPEM, LLC v. SOTI Inc., 2020-1483 (Fed. Cir. Dec. 9, 2020).  The case focuses on pre-filing investigation — the amount of investigation that a patentee must conduct before filing a patent infringement lawsuit.

Here, WPEM filed an infringement action against SOTI, but later dismissed the action after learning that the patent claims were very likely invalid.  The district court awarded attorney fees to the defendant based upon the fact that “WPEM conducted no pre-filing investigation into the validity and enforceability of the Asserted Patent.” WPEM, LLC v. SOTI Inc., 2020 WL 555545 (E.D. Tex. Feb. 4, 2020).  On appeal, WPEM argued that the law strongly presumes that a patent is valid and, as such, does not require any pre-filing investigation of patent validity.  The Federal Circuit did not disagree with this argument in principle, but found this particular case to be a special case because the accused product is also the prior art.  According to the Federal Circuit the fact that the accused product was on-sale before the patent’s priority date means that the dismissal also very-much about infringement.  The federal Circuit explained:

Instead, the court [implicitly] based its award of attorneys’ fees, in part, on the frivolous nature of WPEM’s infringement position . . . an issue that could have easily been foreseen with an adequate pre-suit investigation. . . . As the court reasoned, because the Accused Technology is prior art to the ’762 patent, “if WPEM prevailed on its assertion that the Accused Technology is covered by the Asserted Patent, it would have had the effect of invalidating, rather than infringing, the Asserted Patent.” Because it is undisputed that the Accused Technology is prior art to the ’762 patent, WPEM could not bring a successful infringement suit.

What the court wrote here makes sense at one level, but it also proves too much.  A patentee will never win an infringement lawsuit after admitting that the prior art anticipates the invention.  Still, I don’t believe that the court intended to conclude that pre-filing investigation requires an investigation of validity issues.

In its new petition for writ of certiorari, WPEM asks two questions:

1. Does a patent’s presumption of validity afforded by 35 U.S.C. §282 limit a district court’s discretion to find a case exceptional under 35 U.S.C. §285 when it is only later discovered the accused technology is prior art?

2. Given the clear and convincing evidence standard to invalidate a patent, does a district court have the discretion to find a case exceptional under 35 U.S.C. §285 based upon asserted but unproven grounds of invalidity and unenforceability?

[Petition].

 

The requirement for pre-filing investigation is substantially written-down in Rule 11 of the Federal Rules of Civil Procedure:

(b) Representations to the Court. By presenting to the court a pleading … an attorney or unrepresented party certifies that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances:

(1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation;

(2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law;

(3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and

(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.

FRCP 11(b). Rule 11 has its own sanctions regime, but egregious violations of the requirements may also serve as a basis for fee shifting under the Patent Act as an “exceptional cases.”  In its decision, the Federal Circuit did not discuss Rule 11.

Intentional Over-billing of Clients Leads to 2-year Suspension

by David Hricik, Mercer Law School

A partner at a major firm had been suspended initially for six months for intentionally over-billing certain clients for 450 hours of work she and other lawyers had not performed.  (Apparently, one justice initially decides the penalty in a bar proceeding there.). Bar counsel then argued to the entire court that six months was insufficient, and the Massachusetts Supreme Court agreed.  In its opening paragraph, the court stated:

The single justice acknowledged the respondent’s “admittedly cavalier attitude toward client billing,” but concluded that “the large number of hours she reported in 2015 is not substantial evidence that all or even most of the 450 hours at issue in this case were fraudulently billed.” Our focus, however, is not on the quantum of excessive fees that were billed, but on the fundamental dishonesty inherent in the respondent’s client billings themselves. It is not the sheer number of unworked hours that establishes the misconduct but, rather, the dishonesty manifested by billing for them at all.

The case, In the Matter of Zankowski (Mass. March 25, 2021) is here.

Yes, it’s a state case. But, consistent with this, over the years I’ve heard various speeches by attorneys from the OED say that they’re forgiving of many things — mistakes happen, hindsight is often 20-20 — but intentional misconduct is not one of those things I’ve heard them mention. As the Massachusetts court wrote, billing for them at all is what indicates a serious violation. And, related to that, many state disciplinary rules, like the USPTO Rules, require certain members of firms to have in place policies to ensure compliance with the ethical rules, and so one lawyer’s misconduct could cause ripple effects.

Ford v. Montana: Supreme Court on the Scope of Personal Jurisdiction

Note – this is a civil procedure case that I’ve been following. Many lawyers will be interested, even if not directly related to intellectual property. Dennis Crouch

Ford Motor Co. v. Montana 8th Judicial District (Supreme Court 2021)

Markkaya Gullett was killed in a Ford Explorer crash near her home in Montana.  Gullett’s estate sued Ford on a product liability type claims.  Ford argued that the state lacks personal jurisdiction over the global auto company.  The Supreme Court has sided with Gullett’s estate — finding that the 14th Amendment does not prohibit this case from moving forward.

Over the past decade, the Supreme Court has tightened-up the 14th Amendment personal jurisdiction test both in terms of General Jurisdiction and Specific Jurisdiction.  Although the U.S. Constitution serves as the foundational basis for the large number of precedential cases, the text is quite short: “nor shall any State deprive any person of life, liberty, or property, without due process of law.”  The Constitutional requirements of personal jurisdiction are due process requirements.

General Jurisdiction: Ford has a longstanding permanent relationship with Montana, advertises heavily in the state, and receives hundreds-of-millions-of-dollars in revenue from in-state sales. Still, under Daimler AG v. Bauman, 571 U. S. 117 (2014), state courts will not have General Jurisdiction over the the company since it still isn’t “at home” in the state.

With Specific Jurisdiction, the Court’s recent decision in Bristol-Myers Squibb Co. v. Superior Court of Cal., San Francisco Cty., 582 U. S. ___ (2017) refocused attention on a required nexus between the the defendant’s contacts with the forum state and the cause of action.  The decision suggested to many that defendant’s connections should have a causal-link with the cause of action.  BMS also rejected a sliding-scale approach that would allow for fewer related minimum contacts in situations where the defendant has many ongoing unrelated contacts with the forum state.

Although Ford sells Explorers in Montana, the particular Ford Explorer here was not designed, manufactured, or sold in Montana. The vehicle ended-up in Montana after a series of re-sellings and relocations.  The plaintiff alleges that Ford designed, manufactured & sold a defective product (and failed to warn), but none of those actions – with respect to this particular vehicle – were directed to the state of Montana.  As such, Ford argued that it lacked minimum contacts with the state because the action did not “arise out of or relate to the defendant’s contacts.”

The Supreme Court rejected Ford’s causal-link requirement and put emphasis on the “or relates to” portion of the quote above.

None of our precedents has suggested that only a strict causal relationship between the defendant’s in-state activity and the litigation will do. As just noted, our most common formulation of the rule demands that the suit “arise out of or relate to the defendant’s contacts with the forum.” The first half of that standard asks about causation; but the back half, after the “or,” contemplates that some relationships will support jurisdiction without a causal showing.

Slip Op.  One thing interesting here is that the court suggested that its prior case in this area should construed “as though we [are] dealing with language of a statute.” Quoting Reiter (1979).  The “or” has meaning.

Now we have a line-drawing problem with what counts as “relating to,” and the majority opinion wrote that “real limits” can be discerned from precedent.

Those who have read BMS know that it was about sales of Plavix.  Although BMS sold the Plavix in California, the none of plaintiffs associated with the Supreme Court case bought Plavix in California or were injured in California.  In that case, the court found no minimum contacts.  In Ford, the distinction appears to be that the defendant was injured in Montana. The court writes: “Ford serves a market for a product in the forum State and the product malfunctions there.”  The problem with this distinction is that the difference has to do with the plaintiff’s activity, not the defendant’s activity. Yet, it still qualifies as a minimum contact by the defendant.  I think the answer is perhaps that “minimum contacts” is a term of art that means more than what it might imply from the two words themselves.  The court’s express concern in BMS was federalism — we should be cautious about California handling product liability cases about injury/sales that occurred in other states.  In this case Federalism points to Montana being an appropriate forum because a Montana citizen was injured while driving a car registered in Montana on a Montana road.

The majority opinion was authored by Justice Kagan and joined by Chief Justice Roberts and Justices Breyer, Sotomayor, and Kavanaugh.  Justices Alito and Gorsuch both wrote concurring opinions with Justice Thomas joining Justice Justice Gorsuch’s opinion.

Justice Alito, who penned the BMS decision explained that the difference between those cases is whether the state has a “legitimate interest” in hearing the case at hand.  Here, he found that no question — injury on Montana roads is enough to give Montana a state interest.  And, there is nothing fundamentally unfair about having Ford litigate these cases in the state.

Justice Gorsuch wrote an interesting concurring opinion suggesting that it is time for a new Shoe. “International Shoe just doesn’t work quite as well as it once did.”

A Resilient Petticoat

Transtex v. Laydon Composites (Fed. Cir. 2021)

If you have driven on American highways, then you have seen semi-tractor-trailers with the under-body aerodynamic skirt.  I was viscerally disappointed when these first came-out because I have a movie scene lodged in my childhood memory of a Lamborghini driver hiding from the police by driving under a trailer. (Cannonball Run?).  I’m over that now.  These things are super cool.

The patent here covers a “resilient strut” that holds the skirt in place. I guess its like a petticoat.  The basic problem the inventors faced was that rocks and other solid objects would hit the skirt and bend them out of shape.  The resilient strut allows the skirt to deflect and then to bounce back.  Figure 4 below shows one configuration of the strut.

Trasntex sued Laydon and WABCO for patent infringement, and each responded with a petition for inter partes review. The PTAB reached a final decision with a split result:

  • Claims 1, 5–11, and 15–19 proven obvious.
  • Claims 2-4, 12-14, and 20 not proven obvious.

Both sides appealed and the Federal Circuit has affirmed “in all respects.”

The basic issue for the patentee is that the broadest claims do not include any structural requirements for the resilient strut except that it includes “a longitudinal shape variation.” Rather, the limits are stated in functional form:

the resilient strut being adapted to sustain an elastic deformation when a load is applied to the resilient strut … and to self-recover the resilient strut original shape when the load is removed,

the resilient strut including a longitudinal shape variation adapted to change a mechanical strength of the resilient strut and influence a stiffness of the resilient strut.

This made somewhat easy work for the PTO, although it had to combine one reference focusing on flexible trailer skirts with another reference disclosing a resilient strut holding an air-scoop that goes on the back of a trailer. (Diagram below).

The valid claims were different because they include particular limitations requiring a “‘U’ shaped section” or “concave portions” which was not shown in the prior art asserted in the IPR. The challengers argued for a particular font where the U was more open-box shaped because that was shown in one of the references, but neither the PTAB or Federal Circuit found the arc compelling.

Affirmed.

Pretty Stiff Language Here

35 U.S.C. § 185 – Patent barred for filing without license

Notwithstanding any other provisions of law any person, and his successors, assigns, or legal representatives, shall not receive a United States patent for an invention if that person, or his successors, assigns, or legal representatives shall, without procuring the license prescribed in section 184, have made, or consented to or assisted another’s making, application in a foreign country for a patent or for the registration of a utility model, industrial design, or model in respect of the invention. A United States patent issued to such person, his successors, assigns, or legal representatives shall be invalid, unless the failure to procure such license was through error, and the patent does not disclose subject matter within the scope of section 181.

TracFone: Mandamus All Over Again

In re TracFone (Fed. Cir. 2021)

Here is a recap of where we are with this W.D. Tex. venue case before Judge Albright:

  • Precis Group sued TracFone in W.D.Tex. (Waco) for patent infringement, alleging that venue is proper because TracFone has a San Antonio Total Wireless store.
  • TracFone moved to transfer venue on improper venue (saying that the store was not TracFone’s store, and besides, the store was closed already) and also inconvenient venue.
  • Judge Albright did not decide the venue motion for several months, but kept the case rolling forward toward trial.  After eight months, TracFone petitioned the Federal Circuit for a writ of mandamus.
  • On mandamus, the Federal Circuit ordered Judge Albright to immediately consider the venue motion. The next day following mandamus, Judge Albright denied the motion to transfer venue — holding that venue was proper and convenient.

NOW: TracFone has filed a new petition for writ of mandamus seeking an order compelling Judge Albright to transfer the case to the Southern District of Florida, TracFone’s home court.  The Federal Circuit immediately ordered Precis to respond within 7 days.  Although not clear from the docket, I suspect that this petition will be passed to the same trio judges who handled the last one – Judges Reyna, Chen, and Hughes.

In my post on the case, I noted troubles with Judge Albright’s venue decision, and the mandamus petition picks up on those — arguing that “the district court here abused its discretion by accepting as true the venue allegations in the complaint where those allegations were directly contradicted by TracFone’s declarations, declarations not rebutted by any declarations of plaintiff.” [TracFone Second Mandamus Petition].

In his opinion, the district court accepted the complaint’s allegations as true and concluded that the plaintiff “has plead sufficient venue facts to establish venue in WDTX.”  The district court did not appear consider TracFone’s evidence that it submitted via declaration — that it did not own the store and that the store was closed “well before” the action was filed.   Typically, in this situation, courts consider affidavit evidence presented by defendants, and that was not done here.

In my mind, the only question here is whether the Federal Circuit will vacate the decision or instead simply order the transfer.

Timing the Venue Inquiry in W.D. Texas

Egregious Delay and Blatant Disregard for Precedent

 

 

 

 

Texas is Big: Albright did not Abuse Discretion in Moving Case from Midland to Waco.

by Dennis Crouch

In re True Chemical Solutions, LLC (Fed. Cir. 2021)

This is another mandamus petition out of Judge Albright’s courtroom — this time denied.  The patentee True Chem filed the declaratory-judgment lawsuit against PCC in the Midland division of W.D.Tex. back in 2018, before Judge Albright joined the bench.   In 2019 the case was reassigned to Judge Albright who conducted some of the proceedings in his Waco courtroom. Texas is big — the Western District of Texas is larger than most state, and the drive from Midland to Waco is 300+ miles (both parties are from Midland/Odessa).

Judge Albright suggested to the parties that the trial may also be handled in Waco.  Although True Chem wanted a Midland jury, PCC moved to transfer the case to the Waco Division, and Judge Albright granted the motion.  A primary reason for the transfer was that Waco already had proven procedures for a socially-distanced trial.  True Chem then petition for writ of mandamus to the Federal Circuit.

Most litigation regarding venue transfer is inter-district — from one district to another district.  This case is about intra-district — from one division to another division within the same district.  Both situations are captured by 28 U.S.C. 1404(a).

For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented.

Id.  In its opinion denying mandamus, the Federal Circuit noted that the law generally gives district court “broad discretion” on this issue, and the discretion is “even greater” when the transfer is intra-district.   Although the appellate court did not fully endorse Judge Albright’s decision and reasoning, it found no clear abuse of discretion.

We are not prepared to say that the district court clearly abused that discretion. The district court meaningfully analyzed the transfer factors. The court found that the more congested docket in plaintiff’s chosen forum would likely cause additional delay and prejudice to PCC, particularly given it was seeking injunctive relief. The district court further found that no non party witness resides within the Midland-Odessa Division and several non-party witnesses residing in other parts of Texas would find it significantly easier, safer, and cheaper to travel to Waco for trial. The district court added that it was unlikely that an actual physical trailer located in Midland would be an exhibit during the trial and did not foresee the opportunity for any field trips during a trial. Under these circumstances, we cannot say True Chem has established a clear and indisputable right to relief.

Slip opinion.

= = = = =

The lawsuit focuses on Performance Chemical Company’s  U.S. Patent No. 9,834,452 (“water treatment trailer”).   The complaint by True Chem seeks a declaratory judgment of non-infringement and invalidity.  The complaint walks through PCC’s use of this type of trailer going back to 2014 — three years before the application was filed.  True Chem then counterclaimed alleging infringement of the ”452 patent as well as the child; U. S. Patent 10,011,501.

I’ll note here the patent prosecution timeline.  PCC filed a provisional application in April 2017, followed by a non-provisional in July 27, 2017.  The patent issued December 5, 2017.  This is less than 4.5 months following Track One (prioritized examination).

Patent rights, Taxes, and Printing Money

by Dennis Crouch

One reason that patents remain a popular government program is that the system does not require any collection of taxes from the populace.  Rather, the government gives away property rights to individuals (or their corporate assignees) who prove themselves worthy by disclosing a new and useful invention and who pay fees to run the system.  The patent-give-away is different than the land-giveaway associated with American Westward Expansion (often known as “Land Patents”). Although the American West (and Midwest) is vast, it eventually proved finite. And, the space was already occupied by humans who were violently displaced.

Despite the oft quoted statements of Commissioner Duell, the patent space is not showing any signs of being limited in the conceivable future.  And, because a patent must be directed to a new invention, the rights only cover fields not previously occupied at the time of patent filing.

As a non-finite resource, we might also think of granting patents as akin to printing money — something that we know can create macroeconomic challenges.  But with patents, the government is not printing a commodity like money.  What we’re printing is an analogue of private property rights in the form of a right to exclude.  Each is different and unique, like a plot of land.

The right to exclude brings us back to the land patent analogy.  Here, is where those who complain about invention patents have some meat to chew on.  While land rights are limited to the physical bounds of space, a patent right pervades all corners of the country with a silent enforceable covenant to limit actions of the rest-of-the-people.  Even if I own the raw materials and embody the skill to work those materials, I cannot legally combine those in ways that fit the definition of another’s exclusive patent rights (without license).   This exclusivity is tempered by the 20-year timeline (unlike land patents that last throughout time), which many of us feel is enough to justify the exclusive rights in exchange for the social benefits of the invention and disclosure. Of course, in recent years patents have become more akin to paper dragons that may look dangerous but are regularly defanged by the Courts and the PTAB. In the end, these analogies all fail, but perhaps they help take us a step further in understanding.

Tracing the Quote: Everything that can be Invented has been Invented

Patently-O Bits and Bytes by Juvan Bonni

Recent Headlines in the IP World:

Commentary and Journal Articles:

Upcoming Events:

New Job Postings on Patently-O:

Who gets to become a Patent Attorney?

by Dennis Crouch

The USPTO has released a new Request for Comments about changing the qualification rules to sit for the Patent Bar Exam (“Admission to the Examination for Registration to Practice in Patent Cases”) that are set forth in the General Requirements Bulletin (GRB).

To be clear, the proposals in this RFC are quite modest and narrow:

  • Allowing graduate degrees (Masters / Doctoral) in an accepted science/engineering field to count for qualification under Category A.
  • Adding a few additional degree majors to Category A. These are all majors where applicants have been regularly able to qualify for the exam under Category B.  The change here is designed to streamline the process.
  • Modifying the lab requirement of Category B so that it no longer needs to be 8 hours in the same field.  Thus, it could be 4 hours of physics and 4 hours of chemistry (both with lab).

[Federal Register Notice: 2021-05940].  Comments should be submitted via www.regulations.gov (PTO-P-2021-0005) by May 22, 2021.

I recently spoke with the USPTO head Drew Hirshfeld who sees the proposals here as primarily making the system more efficient and less cumbersome.  About 1/3 of recent applicants to register fall under Category B, and handling the paperwork for those applications it is a time intensive process for both applicants and OED.

Dir. Hirshfeld noted that bigger changes may come later, such as addressing design patents and computer science; and considering the role that the registration requirements may play with regard to diversity.   Eliminating the requirements altogether is really not even on the radar.

Bigger policy changes are unlikely before a new director is appointed by President Biden.

There has been a good amount of discussion regarding the artificial monopoly created by the GRB, and whether the requirements actually further American innovation.  Back in December 2020, Senators Tillis, Coons, and Hirono sent a letter to USPTO Director Andrei Iancu seeking information about how the Office sets is criteria for who gets to become a patent attorney.  Dir. Iancu responded just before leaving office in January 2021.

The proposed changes here are effectively identical to those proposed by Dir. Iancu in his Jan 19, 2021 letter.

My view: The proposals will incrementally improve the system, but really only at a minor level.

Who gets to become a patent attorney?: You may have been hoping that I would answer the question posed in the article title. It turns out that the answer depends greatly on your country of permanent residence.  Some require a background in science/engineering, others require a background in law, only a few require both.  In the US, a patent attorney is both a lawyers and trained scientist/engineer. However we also have patent law professionals known as patent agents who are not attorneys.

I won’t spell out the particular rules here because – as my post notes – they are in flux. But, I will direct you to the USPTO’s page titled Becoming a Patent Practitioner.

 

Exclusive: You keep using that word; I don’t think you know what it means.

The pending Supreme Court case of Warsaw v. Sasso offers an interesting question about whether there is actually some middle ground of patent-related cases subject to dual Federal and State jurisdiction. 

by Dennis Crouch

There are two different statutes regarding Federal Court exclusive jurisdiction over patent cases.  One giving US district courts exclusive original jurisdiction over US patent cases and the second giving the Federal Circuit exclusive appellate jurisdiction over appeals in patent cases.  28 U.S.C. § 1338(a) provides Federal district courts with “original jurisdiction of any civil action arising under any Act of Congress relating to patents.”  The provision goes on to make clear state courts do not have jurisdiction: “No State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents.”  Id.  The second provision relates to appellate courts: The United States Court of Appeals for the Federal Circuit shall have exclusive jurisdiction over final decisions from US district courts “in any civil action arising under . . . any Act of Congress relating to patents” or where a “compulsory counterclaim” has been asserted “arising under, any Act of Congress relating to patents.” 28 U.S.C. § 1295(a).

Lots of work over the years has gone into determining whether a particular cause of action meets the arising under requirement of these provisions. See, for example, Gunn v. Minton, 568 U.S. 251 (2013) (patent litigation attorney malpractice lawsuit does not arise under the Patent Act).  You’ll note here that the term “arising under” comes from the U.S. Constitution:

The judicial power [of US Courts] shall extend to all cases, in law and equity, arising under this Constitution, the laws of the United States …

U.S. Const. Art. III, Section 2.  The Supreme Court has repeatedly found this clause to also limit jurisdiction — cases that do fit one of the enumerated frames cannot be heard by US Courts.  An example is a breach of contract dispute between two parties from the same U.S. state.  That case will typically arise under state law and thus not be the subject of a Federal lawsuit — barred by the US Constitution.  Some contract cases to wind their way into federal courts — typically under a principle of citizenship diversity or supplemental jurisdiction.

The US Constitution link is important. The statute abuts and parallels the Constitution, and that means statutory interpretation becomes constitutional interpretation. In the recent case of Gunn v. Minton, for instance, the court based its decision on general concepts of federalism and states rights. These are principles that regularly drive US Constitutional decisions, but rarely control statutory interpretation.

The most recent dispute on point is Warsaw v. Sasso (Supreme Court 2021).  The case adds an important layer: the doctrine of abstention.

Sasso licensed his patents to Warsaw (Medtronic).  The parties had a dispute over which products were covered under the license, and Sasso sued in Indiana state court for breach of contract (seeking money damages).   The outcome of the contract claim (apparently) largely depends upon whether the products are “covered by a valid claim” of one of Sasso’s patents.   So, there probably should have been some detailed patent analysis in the case.

Medtronic wanted the case in Federal Court where it could use more sophisticated tactics to invalidate the patent or avoid claim scope.  Medtronic first attempted to remove the case to Federal Court.  However, the Federal Judge remanded it back down. Sasso vWarsaw OrthopedicInc., No. 3:13-cv-1031 (N.D. Ind. Apr. 2, 2014). Then, Medtronic filed for reexamination and a number of claims were cancelled. (Note here, that at this time Medtronic was owner of the patents and pursued ex parte reexamination as a “friendly” way to limit claim scope.)  The state court apparently refused to consider these validity issues in the contract case.

Finally, Medtronic filed a declaratory judgment action in Federal Court — asking for a declaration of “No Breach … Because No Valid Claim of the ‘313 or ‘046 Patent Covers the Medtronic Products for Which Dr. Sasso Seeks Royalties.”  The district court refused to hear the case — but rather dismissed the case on grounds of abstention.

Discretion under the DJ Act: In particular, the declaratory judgment act offers discretionary jurisdiction: “any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration.” 28 U.S.C. § 2201.  On appeal, the Federal Circuit affirmed that the court acted appropriately. See Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995) (“substantial discretion in deciding whether to declare the rights of litigants”).

To be clear, in its decision, the Federal Circuit found that the DJ action filed by Medtronic did arise under the patent laws, but that it was still appropriate to dismiss the case in favor of the state court action.  “[T]his declaratory action is within the district court’s jurisdictional authority, and we have jurisdiction to receive this appeal and to determine whether the district court abused its discretion in abstaining from exercise of declaratory jurisdiction.”

The outcome though creates a conundrum: If the Federal Courts have exclusive jurisdiction over patent cases, how can a court determine that this is a patent case but still remand it for state court determination? 

Now come the petition for writ of certiorari on the following question:

Whether a federal court with exclusive jurisdiction over a claim may abstain in favor of a state court with no jurisdiction over that claim.

[Warsaw Petition for Writ of Certiorari].   Although this appears to be a case of first impression, Warsaw grounds its petition in the language of prior abstention cases. In particular, a key focus in those cases is whether the dispute “can better be settled in the proceeding pending in the state court.”  Wilton. Here, Warsaw argues, the state is actually precluded from deciding the key issues.

= = = =

Middle Ground Overlap: The statutes are worded in a way creates bright-line rules: Federal courts have exclusive authority over cases arising under the patent laws; Federal courts have no authority over patent-related disputes that don’t meet that threshold (absent other justification for Fed. Ct. Jurisdiction).  The appellate decision in this case though appears to present a middle ground — cases where dual Federal/State authority is appropriate.  Although this result is perhaps surprising, there is nothing Constitutionally troubling about dual jurisdiction.  At the same time, the answer will almost necessarily come from analyzing and interpreting the Constitution.

= = = =

Note: Justice Barrett may end up recusing herself. Her husband at one time represented Warsaw in the case .

Guest Post by Alan Cox: The Damages Testimony in VLSI Technologies v. Intel

Alan Cox is an economist with over thirty years’ experience testifying in Antitrust and Intellectual Property matters. He holds a Ph.D. in Economic Analysis and Policy from the Haas School of Business at the University of California at Berkeley.  He is an Affiliated Consultant at NERA Economic Consulting.  In this guest post he provides his observations of the damages testimony in VLSI Technologies v. Intel. As noted in the letter from Professor Chao that Dennis posted earlier, key filings in this case are not publicly accessible (nor are the transcripts). – Jason

Introduction

VLSI Technologies sued Intel for the alleged infringement of several patents.  At trial VLSI asserted two patents: 7,523,373 (“the ‘373 Patent”), and 7,725,759 (“the ‘759 Patent”).  VLSI asserted that the technology described in these patents was incorporated into 987 million Intel microprocessors of various models.  On March 2, a jury in the Western District of Texas awarded VLSI $2.18 billion in damages for Intel’s pre-trial use of the patents.

The court allowed the public to listen to public portions of the trial by telephone.  This article describes aspects of the testimony and attorney statements on damages as logged in contemporaneous notes.

The damages testimony in this trial is interesting for several reasons, including Plaintiff’s presentation of a regression analysis as the basis of its damages claim.  Regression analysis is a sophisticated quantitative technique that is widely used in the academic literature, in making business decisions and in many areas of litigation, though it is seldom presented in patent trials.  The data necessary to undertake regression analysis is generally unavailable in patent matters.  As is often the case in the application of complicated statistical methods, the results can vary with inputs, underlying assumptions, data availability and other factors.  While Intel did address possible problems or partiality in the application of the methodology, the defendant’s core attack on the regression analysis was its repeated assertion that the method has never been undertaken in the real-world process of licensing patents.

By way of additional background, it appears that ownership of the patents had changed hands at least twice as the result either of mergers or as part of a sale of the patents themselves, including the sale to VLSI.  These transactions indicated a much lower value for the patents than was claimed by VLSI and awarded by the jury.  The patented technology had been originally assigned to Freescale, an integrated circuit manufacturer spun off from Motorola, later purchased by another semiconductor manufacturer, NXP.  Freescale was the owner of the patents at the time that Intel first allegedly infringed them.  Finally, as Intel pointed out at trial, VLSI is a non-practicing entity that undertakes no research nor production and has two employees.

VLSI’s Regression Analysis

A regression is a statistical analysis that is used to estimate the impact of several variables on another variable.  One use of the method, hedonic regression, measures the impact of product attributes on the price of that product.  For example, hedonic regressions have been used to determine how prices of automobiles vary with changes in horsepower, gas mileage, brand, and other attributes.  Hedonic regressions provide ratios that measure the amount by which prices will change with a change in one of these attributes.  For example, such a ratio may be the percentage by which the price of a car increases with a percentage increase in horsepower.

In this case, VLSI’s affirmative damages case was presented by a Ph.D. economist, Ryan Sullivan.  He applied regression analysis to estimate the impact of different attributes of Intel microprocessors on the price of those microprocessors.  Most important was his estimate of the response of price to changes in microprocessor speed.  His regression result indicated that a one percent increase in microprocessor speed increased the price of an Intel microprocessor by 0.764 percent, holding all other attributes of the microprocessor constant.

There was little discussion of the regression analysis at trial since VLSI clearly wanted to focus on demonstrating how the regression resulted in a large damage number and Intel did little to challenge the implementation of the methodology.  In cross examining Dr. Sullivan, Intel’s attorneys did, however, challenge VLSI’s expert about his inclusion of some potential explanatory variables and the exclusion of others.  Some of VLSI’s expert’s responses indicated that Intel may have had some effective points of attack of VLSI’s implementation of the regression methodology had it chosen to pursue them.

Calculating Damages from Regression Results

Next, VLSI’s damages expert used his regression results to calculate the total value that Intel purportedly received for the use of the two patents.  For this he relied on VLSI’s technical experts who had testified that the ‘373 patent decreased microprocessor power consumption by 5.45 percent and that the ‘759 patent increased microprocessor performance by 1.11 percent.  He also relied on a crucial assertion by VLSI’s technology experts that a one percent improvement in power consumption or a one percent increase in performance could be “valued as” a one percent increase in speed.  Using those asserted equivalencies in the value of microprocessor speed, power consumption and performance, VLSI’s damages expert calculated the value of the benefit of the patented technology by multiplying these percentage improvements in power consumption and performance by the percentage increases in price attributable to increases in speed.  Finally, he multiplied the resulting percentage increase in revenue by the total revenue that Intel had earned on the accused products.

This calculation can be restated concisely in summary mathematical form.  VLSI’s damages expert undertook the following calculations:

Intel’s Increase in Revenue due to its use of the ’373 Patent =

Price-Speed Ratio X % Reduced Power Use X $Accused Product Sales =

0.764 X 5.45% X $Accused Product Sales

 

Intel’s Increase in Revenue due to its use of the ’759 Patent =

Price-Speed Ratio X % Increased Performance X $Accused Product Sales =

0.764 X 1.11% X $Accused Product Sales

VLSI’s damages expert testified that there would be no increase in direct manufacturing costs from utilizing the patented technology and only a very small increase in selling and marketing costs.  Since there were no incremental costs to subtract from the additional revenue allegedly earned from using the patented technology, the increase in profits was equal to the claimed increase in revenues.

The Outcome of the Hypothetical Negotiation

The next step was to determine how Intel and VLSI would share these benefits in a hypothetical negotiation, the fictional event that takes place on the eve of first infringement during which the litigants are imagined to reach agreement on a royalty.  It is often customary to discuss the negotiating process over the sharing of benefits as being shaped by the relative bargaining power of the parties at the hypothetical negotiation.  VLSI’s damages expert instead undertook an unusual calculation.  He first calculated what he claimed was Intel’s contribution to the commercial success of its microprocessors.  He then subtracted the amount of Intel’s contribution from his estimate of Intel’s increase in profits due to its use of VLSI’s patents.

To implement this division, VLSI’s damages expert started by claiming that Intel’s contribution to its success in generating the patent-related additional profit could be measured as the sum of certain costs divided by its total revenue.  The reasoning that justified this approach was that these costs were incurred in the development and marketing of Intel chips.  More specifically, he took the sum of Intel’s Selling and Marketing Costs (S&M); its General and Administrative Costs (G&A); and its Research and Development Costs (R&D) and then divided that sum by Intel’s total revenue.  That is:

Intel’s Proportional Contribution = (S&M + G&A + R&D) / Intel’s Total Revenue

The result, 20.7 percent, was deemed to be Intel’s share of the estimated increase in profits that it earned from incorporating the patented technology into its microprocessors.  The remaining 79.3 percent was, therefore, attributable to VLSI.

The asserted outcome of the hypothetical negotiation was then simply the result of multiplying 79.3 percent by the increase in Intel profits, described above.  VLSI’s damages expert estimated the amount of money that a reasonable royalty would have generated before trial, a figure presumably close to the over $2 billion awarded by the jury.  VLSI’s damages expert claimed that Intel would have been willing to pay such a royalty because it faced strong competition and needed the competitive edge that the patented technology provided to maintain its market position.

The presentation of damages as a single payment for past infringement did create a potential problem for VLSI.  During the trial, Intel asserted that VLSI’s expert had not presented a per unit royalty in his pre-trial disclosure and should not be allowed to present a per unit royalty in court.  A ruling in Intel’s favor may have made future royalties unavailable.  As it happened the court ruled in VLSI’s favor on this point.

VLSI’s Anticipation of Defendant’s Critiques

In its direct testimony on damages, VLSI addressed several additional critiques that had been raised by Intel in pretrial filings, reports or deposition testimony.  First, VLSI’s damages expert was asked in his direct testimony about Intel’s claim that VLSI and its experts had not identified any comparable real-world licenses that resulted in payments as high as those that he was claiming to be reasonable; that is, in the hundreds of millions or billions of dollars.  They also asked him about the much lower patent values implied from the purchase of Freescale and the sale of the patents to VLSI, mentioned above.

VLSI’s damages expert responded that none of those real-world licenses and sales were analogous to the hypothetical license in this case.  He asserted that licensors in real-world licensing negotiations do not have comprehensive knowledge of the importance of the patents that are under negotiation.  Similarly, purchasers of the ‘373 and the ‘759 patents would not have known of the value of the patents to Intel or even the extent of the use of the patented technologies.  Any of the earlier transactions involving the patents would not, he claimed, have incorporated Intel’s expectations and experience of the benefits of using the technology.  VLSI frequently claimed through this and other witnesses that only Intel would have understood the value of the patented technology that it was exploiting.

VLSI’s damages expert characterized the hypothetical negotiation, by contrast, as one in which both side’s “cards were facing up.”   Consequently, the licensor, Freescale, would have been fully informed of everything that Intel knew about the usefulness and value of the licensor’s technology.  VLSI appeared to claim that the information that was available to Freescale in the up-facing cards included information about sales, profits and other outcomes after the date of the hypothetical negotiation.  VLSI’s damages expert indicated that the royalty rates found in Intel’s purported real-world comparable licenses were analogous to what Tom Brady was paid as a rookie before he had demonstrated his abilities as a quarterback in a professional football league.  According to VLSI, what was relevant at the time of the hypothetical negotiation was equivalent to what Tom Brady was paid during the peak of his career, not on what was known about him before his rookie year.  The use of the analogy appears to indicate that VLSI viewed the hypothetical negotiation as being informed by events and outcomes that took place after Intel’s earliest infringement, sometimes rationalized by reference to the “Book of Wisdom.”

He was also asked about the evidence that the technology was not used by any other company other than Intel, not even by Freescale and NXP, the semiconductor manufacturers who had previously owned the patents.  He described that point as merely a “red herring” since use by the patent owner was not the only determinant of the value of the patents.  As a basis for this point, he cited the Georgia-Pacific factors that call for consideration of the extent to which the infringer has made profitable use of the invention.

Damages-Related Testimony from Other VLSI Witnesses

Before the Plaintiff’s damages expert was called, a VLSI technical witness presented the results of a “patent scoring” exercise undertaken by Innography, an IP management firm.  According to Innography’s scoring, the two patents at trial were in the top 10 percent of patent value.  VLSI’s introduction of this result may contradict its key point that only Intel had sufficient information to have some understanding of the value of the technology since Innography could presumably only make such a claim from public data.

Defense Response on Damages

Intel had apparently provided expert reports on damages from at least three expert witnesses.  These included: a Professor of Operations, Information, and Decisions at Wharton with a Ph.D. in Management from MIT; a CPA with extensive experience as an IP damages expert; and an electrical engineer with 20 years of experience as a licensing executive with IBM.  VLSI moved to have the CPA’s “cumulative” opinions excluded as being redundant and “an improper attempt to bolster” the opinions of Intel’s other damages experts.  Whatever the court’s ruling on this and other motions to exclude, Intel called only the former licensing executive, Hanc Huston, to rebut VLSI’s damages expert.

Most of Intel’s damages testimony was not available on the public telephone feed because it involved confidential information primarily related to the comparable licenses that he had identified.  Intel’s damages expert brought up the point that the patented technology had not been used by any of the assignees of the patents and that VLSI had not identified anyone else who had used the technology.  He asserted that, in his experience, such lack of use of a patent was indicative of its low value and would have driven down the royalty paid on a licensed patent.  He also testified that he had never heard of hedonic regression being used in patent licensing negotiations.

He also disagreed with VLSI’s assertion that only Intel had the information necessary to comprehend the extremely high value of the patented technology.  He pointed out that the patent itself was public knowledge and that VLSI and others could have reverse engineered Intel to understand the extent that its technology was being used.

After discussing 18 licenses that he had determined were comparable, VLSI’s damages expert concluded that a reasonable royalty for Intel’s use of the technology described in the two patents totaled $2.2 million.

On cross-examination, Intel’s damages expert was asked about a policy at IBM to license patents for a one percent royalty per patent up to a maximum royalty of five percent.  VLSI pointed out, in cross and in closing, that a one percent per patent royalty was more than the amount that VLSI was asking in damages.  He was also asked about specific licenses and settlements between IBM that involved payments in the hundreds of millions of dollars.

The Testimony of VLSI’s Rebuttal Damages Expert

The final witness on damages was Mark Chandler, the president of another IP management firm, who was called to rebut Intel’s damages testimony.  He criticized Intel’s damages expert as relying on the “indirect evidence” of royalty rates from purportedly comparable licenses as opposed to the evidence of Intel’s success with the accused products.  He also repeated the claim made by VLSI’s affirmative damages expert that none of the previous transactions were indicative of the outcome of the hypothetical negotiation.  Those transactions, he asserted, could not have taken into account the value of the technology to Intel.  He further criticized Intel’s expert’s process for identifying ostensibly comparable licenses, indicating that his method was based on technical considerations without consideration of the commercial value of the licensed patents or any other economic considerations.

This expert also indicated that Intel’s damages expert had calculated per patent royalty rates by merely dividing the reported royalty in his purportedly comparable licenses by the number of patents being licensed.  Such an average, he testified, fails to take into account the range of values of the licensed patents.  He further testified that Intel’s expert had “cherry-picked” from among over 300 licenses that were part of the record in this case, ignoring licenses that resulted in payments of hundreds of millions of dollars with at least one being over a billion dollars.

This expert also claimed that Intel had ignored “direct evidence” of the value of the patents, the value of the use that Intel had made of the patents and the additional profits allegedly derived therefrom.  He repeated the claim that, unlike in the real world, in the hypothetical negotiation the parties would be “playing with their cards up” and have full knowledge of the value of the patents to each other.

Conclusion

The trial in VLSI Technologies provided not only a dramatic outcome but useful insights in the presentation and rebuttal of a damages case.  Interested observers can look forward to further motions, orders and appeals that should provide additional information about the technology and the appropriateness of the award.

Disclosure: I have no involvement with any of the parties or the law firms at this time. I have had no involvement in this litigation. I have never worked with VLSI. I have worked on at least one litigated matter with Wilmer Hale. I have consulted for Intel twice and testified for them once over my entire career but, to repeat, have no involvement with Intel at this time.

Seeking Transparency in Waco

The following short statement was written by Prof. Bernard Chao (Denver) and then joined by 20+ additional professors whose names are listed below.  Chao was a patent attorney and patent litigator for 20 years before becoming a professor and I have long valued his insight. You’ll note that I also signed below – DC. 

= = = [PDF Version] = = =

Judge Alan Albright’s court in the Western District of Texas is rapidly becoming the latest hot spot for patent litigation. While only a total of two patent cases were filed in 2016 and 2017 in Judge Albright’s Waco federal courthouse, the number of patent filings rose to seven hundred and ninety-three (793) in 2020.  See J. Jonas Anderson & Paul R. Gugliuzza, Federal Judge Seeks Patent Cases, (forthcoming Duke L. J 2021). Professors Anderson and Gugliuzza provide a thorough explanation (and critique) of this sudden ascent. I have a smaller, but nonetheless important, point to make. If the Western District of Texas is going to hear some of patent law’s most important cases, it should not do so in secret. Unfortunately, that appears to have just what happened in one the highest dollar value patent trials in recent history.

The patent world has been abuzz about the $2.18 billion verdict that the Waco jury handed down on March 2, 2021 in VLSI Technology v. Intel. The public debate in patent law has often focused on whether courts and juries are getting patent damages right. Looking at relevant filings on damages provides critical information for this important discussion. In high stakes cases, parties typically file summary judgment motions on damages and Daubert motions attempting to exclude certain theories. These motions often attach expert reports and deposition testimony as exhibits. Together these documents illustrate how patent doctrine shapes damage awards. For example, filings often explain how the parties seek to apportion damages between the value of the infringing features and the product as a whole. This is not an easy task and parties have taken many approaches to apportionment with varying levels of success.

However, these documents cannot be retrieved from the VLSI Technology v. Intel docket. To be clear, sealing is appropriate in some instances. Companies should be able to keep their confidential technical and financial information under wraps. But at least as of March 15, 2021, the following docket entries were wholly unavailable (i.e. not even redacted copies were available).

Docket No. Date Title (some abbreviated)
252 10/8/2020 DEFENDANT INTEL CORPORATIONS SEALED MOTION FOR SUMMARY JUDGMENT OF NO PRE-SUIT INDIRECT INFRINGEMENT OR WILLFULNESS AND OF NO POSTSUITWILLFULNESS OR ENHANCED DAMAGES
258 10/08/2020 DEFENDANT INTEL CORPORATION’S SEALED MOTION FOR SUMMARY JUDGMENT OF NO PRE-COMPLAINT DAMAGES UNDER 35 U.S.C. § 287.
260 10/08/2020 DEFENDANT INTEL CORPORATION’S SEALED MOTION FOR SUMMARY JUDGMENT OF NO INFRINGEMENT AND/OR NO DAMAGES FOR CLAIMS 1, 2, 4, 17, 19, AND 20 OF U.S. PATENT NO. 7,793,025.
276 10/08/2020 VLSI’S DAUBERT SEALED MOTIONS TO EXCLUDE DAMAGES-RELATED TESTIMONY OF DEFENDANT INTEL’S EXPERTS
431 2/18/2021 Sealed Document filed: Defendant’s Response to Plaintiff’s Daubert Motions to EXCLUDE DAMAGES-RELATED TESTIMONY OF INTELS EXPERTS
443 2/18/2021 Sealed Document filed: VLSI’S OPPOSITION TO INTEL’S MOTION FOR SUMMARY JUDGMENT OF NO PRE-COMPLAINT DAMAGES UNDER 35 U.S.C. §§ 287 258
445 2/18/2021 Sealed Document filed: VLSI’S OPPOSITION TO INTEL’S MOTION FOR SUMMARY JUDGMENT OF NO INFRINGEMENT AND/OR NO DAMAGES FOR CLAIMS 1, 2, 4, 17, 19, AND 20 OF U.S. PATENT NO. 7,793,025 260
446 2/18/2021 Sealed Document filed: VLSI’S OPPOSITION TO INTEL’S MOTION FOR SUMMARY JUDGMENT OF NO PRE-SUIT INDIRECT INFRINGEMENT OR WILLFULNESS AND OF NO POST-SUIT WILLFULNESS OR ENHANCED DAMAGES 252

Two short orders granted motions to seal these filings. However, the sealed filings appear to go far beyond damages. The first order (dated October 8, 2020) granted roughly thirty motions (Docket Entries 214-244) and the second order (dated February 18, 2021) granted even more (Docket Entries 287-89, 293-319, 321-345, 374-381, 398, 404, 405, 410, 416. 418, 420, 424, 425). Many of the sealed motions are motions in limine that do not have a descriptive title.  They are simply numbered (e.g. Motion In Limine #3).  So, there is no way to even know what subjects they cover.

Judge Albright did give a small nod to transparency in his February 18, 2021 order which required “[t]he filing party shall file a publicly available, redacted version of any motion or pleading filed under seal within seven days.” Unfortunately, the redacted versions do not appear to have been filed.  A few days earlier, Judge Albright also issued a February 12, 2021, standing order that requires parties to do the same in all cases pending in his court.

But these orders are inadequate in several ways. First, they explicitly permit parties to file purportedly confidential information under seal without a motion. But the parties have no incentive to be transparent. It is the court’s job to protect the public interest, and this order abdicates that duty.  Second, there also appears to be no safeguard for parties that redact too much information in their filings, a problem we have seen before. See In re Violation of Rule 28(D) (Fed Cir. 2011)(sanctions for redacting information that was not confidential including case citations).  Third, the order does not require parties to redact exhibits. But some of the most critical information like deposition testimony and expert reports are exhibits. Finally, the order is not retroactive allowing most of the VLSI v. Intel case to remain in the dark.

This is not the first time that patent litigation has suffered from transparency problems. Other district courts have allowed too many documents to be sealed in previous high stakes cases like Broadcom v. Qualcomm (S.D. CA) and Monsanto v. Dupont (E.D. MO).  See, Bernard Chao, Not so Confidential: A Call for Restraint in Sealing Court Records, 2011 Patently-O Patent L.J. 6 & Bernard Chao & Derigan Silver, A Case Study in Patent Litigation Transparency, 2014 Journal of Dispute Resolution 83.

While these stories appear to paint a bleak picture for transparency in patent litigation, some courts are making an effort to keep their dockets accessible to the public. There have been notable decisions to ensure that filings are accessible. For example, in 2016 the Electronic Fronter Foundation successfully intervened and obtained an order from the E.D. of Texas to unseal records in a patent case, Blue Spike LLC, v Audible Magic Corp.  Earlier this month, the Federal Circuit, affirmed a lower decision rejecting attempts to seal specific filings in another patent dispute. See DePuy Synthes Products Inc. v. Veterinary Orthopedic Implants (Fed. Cir. Mar. 12 2021).

Moreover, individual court rules are now requiring greater transparency. The Federal Circuit’s latest rules clearly seek to maximize public disclosure. In each filing, Rule 25.1(d) only allows parties to mark “up to fifteen (15) unique words (including numbers)” as confidential.  A party seeking to exceed that limit must file a motion. As Silicon Valley’s home venue, the Northern District of California entertains numerous patent cases.  The court’s local rules say that material may only be sealed when a request “establishes that the the document, or portions thereof,  are privileged, protectable as a trade secret or otherwise entitled to protection under the law.”  Moreover, the request must “must be narrowly tailored to seek sealing only of sealable material.”  Ironically, even Texas state courts, which obviously do not hear patent cases, treat requests to seal far more seriously than the W.D. of Texas.  Specifically, Texas Rule of Civil Procedure 76a states that court records are “presumed to be open to the general public”, and only allows records to be sealed upon a showing that “a specific, serious and substantial interest which clearly outweighs” various interests in openness.

In short, the Western District of Texas should join these other courts and take its duty to ensure transparency seriously. As the Fifth Circuit recently put it , “[w]hen it comes to protecting the right of access, the judge is the public interest’s principal champion.” Binh Hoa Le v. Exeter Finance Corp. (5th Cir. Mar. 5, 2021). Accordingly, we make a few basic recommendations.  First, parties should not be able to file material under seal without judicial scrutiny. They should be required to file motions and justify their requests. Of course, a court also cannot rubber stamp these requests. If resources are a problem, the court can appoint a special master in larger cases. Second, parties should have to redact exhibits too. There can be valuable non-confidential information in those exhibits. Finally, a quick aside, even though judges bear the primary responsibility for making their dockets transparent, that does not mean the parties should not show more restraint. To the extent that either side is a repeat player, and thinks the patent system needs reform, they should be careful not to over seal. Their filings might end up being important contributions to the public debate.

Signatories (more…)

What do you call it? For almost two-thirds of you, it’s the “specification”

By Jason Rantanen

First of all, I’m overwhelmed by the survey responses on § 112(a) – thanks to everyone who responded to this short survey.  You’re terrific.

As of this afternoon, over 800 readers had responded to the question about how you refer to the part of the patent application that is required by 35 U.S.C. § 112(a).  The graph below shows the distribution of responses. (n=720)

When asked “What term do you use most often to refer to the part of the patent or patent application that is required by 35 U.S.C. § 112(a)?,” sixty-three percent of respondents answered “specification,” while another twenty-four percent answered “written description.”  A notable minority (9%) said “detailed description.”  There were also some write-ins, although most of them were either “Spec” or “Disclosure”

Results were consistent for patent attorneys and agents, but none of the litigators who responded used anything other than “specification” or “written description,” while 50% of the examiners who responded used “specification.” (with the caveat that examiners and litigators are a smaller n).

In addition, after results started coming in I had some concern that the initial question was ambiguous, so modified the survey to give a random set of respondents the following question instead.  Responses were similar to the first question, with a bit lower rate for “specification” (58%) and a bit higher rate for “technical description” (11%) for this version of the question.

(n=115)  (I probably should have asked this question at the outset; hindsight looms large.)

Here’s the overall distribution of respondents:

  • Patent attorney: 68%
  • Patent agent: 11%
  • Litigator: 10%
  • Examiner: 5%
  • Other categories: 6%

Finally, here’s the “patent law” definition of  “specification” from Webster’s New International Dictionary of the English Language, Unabridged, Second Edition, published in 1957:

Specification

5. Patent Law. A written description of the invention or discovery and of the manner and process of making, constructing, compounding, and using the same, concluding with a specific and distinct claim or claims of the part, improvement, or combination which the applicant regards as his discovery or invention, this latter part being often called the claim.  When the term specification is used alone it includes the claim.

Thanks to the University of Iowa College of Law law library for pulling the definition from the 1957 edition of Webster’s for me. Also, note that response choices other than “Other” were presented in a random order to avoid any order bias.

IDEA Act of 2021

The first step in a non-discriminatory US patent system is to make sure it is available to all Americans without legal limit.  The second step, and the one with real potential to drive an innovation economy, is to takes steps to ensure that the system is inspiring to all Americans.  The trick is how to get there without causing undue damage.  One underlying issue is also a lack of information about what’s really happening.

A bipartisan group of Senators and Representatives have re-introduced the IDEA Act. (Inventor Diversity for Economic Advancement (IDEA) Act of 2021).  S.632; H.R.1723.   Right now, the USPTO does not ask inventors their for any demographic information other than contact information and country of residence.  The legislation would require the PTO director to collect  inventor-level information on “gender, race, military or veteran status, and any other demographic category that the Director determines appropriate.”  Under the provision, inventors would not be required to submit the information, and any submissions would be kept “confidential and separate from the application.”  However, disaggregated information could be available for data analysis and for an annual report from the PTO.

  • S.632. Sponsor: Sen. Hirono; Cosponsors: Sens. Tillis, Coons, Leahy, Grassley.
  • H.R.1723. Sponsor. Rep. Velazquez; Cosponsor, Rep Stivers.

The proposals are now before the respective judiciary committees.  Sen. Leahy is the chair of the Subcommittee on Intellectual Property, and Sen. Tillis is the ranking member.   In the House, Intellectual Property does not have its own committee this session, but rather is part of the Subcommittee on Courts, Intellectual Property, and the Internet chaired by Rep. Johnson. Rep. Issa is the ranking member.

What do you call it?

By Jason Rantanen

What do you call the part of the patent or application that is required by 35 U.S.C. § 112(a)?   The world would love to hear your responses.  Here’s a two-question survey that will take  about 10 seconds to complete.  If there’s a reasonably large number of responses, I’ll post the results later this week.

Link to survey.