The patent at issue is Cadence Pharma’s U.S. Patent No. 6,992,218 that covers an injectable form of acetaminophen. During prosecution the patentee failed to timely file a US national-stage application before the 30-month PCT deadline. However, the USPTO allowed the patentee to subsequently revive the case and file the national-stage application based on a pleading that the delay was “unintentionally.” Exela argues that the Patent Act only permitted revival in this situation when the application was unavoidable abandoned – a much more difficult standard to meet. Unfortunately for Exela, improper revival is not a cognizable defense in patent litigation. See Aristocrat Gaming v. IGT and 35 U.S.C. §282.
When Cadence sued Exela for infringement, Exela filed this collateral action against the PTO – asking the agency to cancel the improperly issued patent. The district court gave consideration to Exela’s argument but ultimately sided with the USPTO in holding that the held that the case was barred by the six-year statute of limitations defined by 28 U.S.C. § 2401(a) (“Except as [otherwise provided], every civil action commenced against the United States shall be barred unless the complaint is filed within six years after the right of action first accrues.”).
The case is now on appeal at the Federal Circuit before an interesting panel consisting of Chief Judge Rader and Judges Newman and Dyk. The case is interesting in that the USPTO has argued that its mistake here (improper revival) is one that is and should be absolutely unreviewable by any court of law. The following quote is on-point from the oral arguments.
Judge Dyk: Under Your Analysis, the PTO can act unlawfully and nobody can challenge it.
Dennis C. Barghaan on behalf of the Government: Your statement is correct.
Matthew Dowd (the less famous one) argued on behalf of Exela that the APA properly permits judicial challenges to agency conduct, such as this, that goes beyond the scope of the agency’s limited power. He writes in the brief:
This case presents the important question of when a party, who is adversely affected by a specific, unlawful agency decision, can invoke the protections of the APA. Exela filed its APA challenge shortly after being sued by the patent owner. That lawsuit is the harm directly traceable to the PTO’s ultra vires revival of the patent application. Accordingly, under the APA, Exela should be permitted to challenge the PTO’s decisionmaking.
For its part, the PTO makes two arguments: (1) The six-year statute of limitations of the APA has expired since it has been more than six years since the PTO improperly revived the patent. That argument seems to fly in the face of the statutory language of 28 U.S.C. § 2401(a) that bases the timing on the date that the “right of action first accrues.” Exela likely had no right of action (no standing) for its challenge until it was accused of infringement by the patentee. However, the PTO does have a number of precedential decisions that support its interpretation.
The second argument (2) is that, even if not time-barred, the APA provides no right of action because Congress has already explicitly determined the types of challenges that are available.
The chart above comes from LexMachina [Link] and shows the number of lawsuits filed each month for the past several years. You’ll note that the number of case filings in January 2014 is the lowest since October 2011. The rise in filings since 2011 is largely (if not completely) explained by the joinder provisions of the AIA that block a patentee from filing suit against multiple unrelated parties in a single lawsuit.
This week Steve Morsa sued Facebook on his match-engine-marketing patents. See U.S. Patent Nos. 7,904,337 and 8,341,020; Adidas sued UnderArmor for infringing twelve of its patents covering location-aware fitness devices. See U.S. Patent Nos. 7,292,867 and 7,805,149; and Dyson sued Euro-Pro for infringing its U.S. Design Patent No. D668,010 that appears to cover the Dyson Digital cordless vacuum.
In one of her first acts as de facto USPTO Director, Michelle Lee has proposed a new set of rules associated with patent assignment recordation. The proposal is quite complicated (occupying 18,000 words in the Federal Register) but the general idea is (1) that information regarding who owns which patents should be available to the public; (2) some rights-holders have been taking steps to hide their identity; and therefore (3) the USPTO proposes to require greater transparency. Although the proposal is signed by Deputy Director Lee, it was a White House initiative well before she took office.
The Office is proposing … to require that the attributable owner, including the ultimate parent entity, be identified … on filing of an application (or shortly thereafter), when there is a change in the attributable owner during the pendency of an application, at the time of issue fee and maintenance fee payments, and when a patent is involved in supplemental examination, ex parte reexamination, or a trial proceeding before the Patent Trial and Appeal Board (PTAB). The Office is also seeking comments on whether the Office should enable patent applicants and owners to voluntarily report licensing offers and related information to the Office, which the Office will then make available to the public in an accessible online format.
The recordation requirement would be retroactive and apply to all live patents and patent applications. However, the USPTO suggests that “most additional reporting will need to be done by companies that have complicated corporate structures and licenses, which often include the complex structures used by certain patent assertion entities (“PAEs”) to hide their true identities from the public.” The proposed penalty for failure to comply would have some teeth: abandonment.
Comments on the proposed rules are due by March 25, 2014 and can be emailed directly to: AC90.comments@uspto.gov. The review is being spearheaded by James Engel and Erin Harriman who are attorney advisors in the Office of Patent Legal Administration (OPLA).
Why: Before getting into the details of the proposal, we might pause to consider why the USPTO is proposing this new requirement. The USPTO identifies several potential benefits of a more complete ownership record. According to the USPTO, enhanced assignment information will:
“[A]llow [competitors] to better understand the competitive environment in which they operate.”
“[E]nhance technology transfer and reduce the costs of transactions for patent rights since patent ownership information will be more readily and easily accessible.”
“[R]educe risk of abusive patent litigation by helping the public defend itself against such abusive assertions by providing more information about all the parties that have an interest in patents or patent applications.”
In addition to these public benefits, the USPTO argues that the assignment information will help the office in several ways, such as avoiding conflicts of interest and better identifying double-patenting problems.
The key issues regarding the rules are (1) which rights-holders must be named? (2) Under what circumstances must a parent-entity be named? (3) What is the timeline for providing information to the USPTO? And (4) what would be the consequences for failure to fully comply with the regulations.
Who is an Attributable Owner?: In my 1L property law class, we discuss all sorts of way that property rights can be divided amongst present and future interest holders; lienholders; easement holders; those with equitable rather than legal title; etc. The proposed requirement here identifies three particular class of rights-holders who will be required to record their interest: (1) titleholders (someone who has been assigned title); (2) those with rights-of-enforcement (such as exclusive licensees or others that would be a necessary party to an enforcement action); and (3) entities created in order to temporarily divest (or prevent vesting) of title or enforcement rights (such as a trust, proxy, etc.). One difficulty here is that patent ownership interests are defined by a mixture of local law (state and/or foreign) and federal law. It is quite difficult to create a simple rule that fits to each of the hundreds of potential local jurisdictional mechanisms of operation.
Parent Entities: In addition to the attributable owner, the law would also require the recordation of any “ultimate parent entity” of any of the attributable owners. As a term of art, ultimate parent entity is already defined by 16 CFR 801.1(a)(3) and the USPTO is intending to follow that approach. Chapter 16 of the CFR generally relates to commercial practices and is promulgated by the Federal Trade Commission (FTC). The definition is as follows: “The term ultimate parent entity means an entity which is not controlled by any other entity.” The CFR provides the following three examples:
1. If corporation A holds 100 percent of the stock of subsidiary B, and B holds 75 percent of the stock of its subsidiary C, corporation A is the ultimate parent entity, since it controls subsidiary B directly and subsidiary C indirectly, and since it is the entity within the person which is not controlled by any other entity.
2. If corporation A is controlled by natural person D, natural person D is the ultimate parent entity.
3. P and Q are the ultimate parent entities within persons “P” and “Q.” If P and Q each own 50 percent of the voting securities of R, then P and Q are both ultimate parents of R, and R is part of both persons “P” and “Q.”
Although not clear from the definition, there is an idea that a parent entity must exhibit some amount of control over the subsidiary. One purpose here is to identify “hidden beneficial owners.”
Based on a prior post discussing comments by Chief Judge Rader regarding claims including “configured to” language, we decided to review Patent Trial and Appeal Board (“Board”) decisions from 2013 that included “configured to” language. Based on our review, we identified 1,028 decisions that included this language.
Of those decisions, 376 decisions included “configured to” language in at least one feature that was argued by the Appellant and, thus, addressed by the Board. In 344 decisions (91%), the Board gave full weight to the features following the “configured to” language. In 18 decisions (5%), the Board gave the features reduced weight by usually stating that “configured to” is an intended use and the prior art must merely be “capable of” performing the recited features. In 14 decisions (4%), the Board gave no patentable weight to the features by usually stating that the phrase does not further distinguish the claimed apparatus from the prior art. After reviewing each of the decisions, we could not identify any concrete reason why the features following the “configured to” language were given weight in some situations and not given weight in other situations.
Chart 1 provides an illustrative breakdown of these decisions.
Based on this information, we decided to review the 32 decisions where the Board gave no weight or reduced weight to the features following the “configured to” language to determine the technology associated with the appealed claims.
Twenty-two decisions were rendered for applications assigned to electrical or computer art units (e.g., Technology Centers 2100, 2400, 2600, and 2800). Of those twenty-two decisions, the Board gave no weight to the features following the “configured to” language eleven times, and the Board gave reduced weight to the features following the “configured to” language eleven times.
Nine decisions were rendered for applications assigned to mechanical art units (e.g., Technology Centers 3600 and 3700). Of those nine decisions, the Board gave no weight to the features following the “configured to” language twice, and the Board gave reduced weight to the features following the “configured to” language seven times. Only one decision was rendered for an application assigned to a chemical art unit (e.g., Technology Center 1700), and the Board gave no weight to the features following the “configured to” language in that decision.
Chart 2 provides an illustrative breakdown of these decisions based on Technology Center.
Based on this breakdown, we decided to review the twenty-two decisions in the electrical or computer art units. Surprisingly, the same three-judge panel decided nine of the twenty-two decisions. Of those nine decisions, this panel gave no weight to the features following the “configured to” language six times, and this panel gave reduced weight to the features following the “configured to” language three times. In addition, at least one judge from this panel was part of the panel of judges in five of the other thirteen decisions. In those five decisions, the Board gave no weight to the features following the “configured to” language three times, and the Board gave reduced weight to the features following the “configured to” language twice. Therefore, only eight of the twenty-two decisions in the electrical or computer art units included a panel of judges that did not include any of these three judges.
Chart 3 provides an illustrative breakdown of the panel makeup for these twenty-two decisions.
Based on recent Federal Circuit decisions (Superior Industries v. Masaba and In re Giannelli) and the increase in the percentage of issued patents that include “configured to” language in the independent claims, it will be interesting to see how the Federal Circuit and the Board consider this language in the future.
When David Kappos left the USPTO in January 2013, I asked the question: Who will be the next USPTO director? Over the past year, no names have been brought forward or are appearing on the horizon. Thus, the question should likely be revises: Will there be a next USPTO director?
The following is a response that I recently sent to Representative Bentivolio in response to a set of Questions for the Record:
Over the past decade, Congress has been quite lax at exerting detailed oversight over the USPTO and its patent examination process. Former USPTO Director David Kappos had a strong working relationship with Congress. However, it has been more than one year since Director Kappos left the position in January 2013. As we stand now, the USPTO has been without a Senate approved Director for more than one year, and has been without even an Acting Director for the past three months. At this point, direct Congressional oversight may be the best way to push the Administration toward getting the agency quickly back on track.
A recent article by Kate Tummarello in The Hill focuses on this same point. [Link] Michelle Lee has now taken over as deputy director. However, it is unclear what level of decision making authority comes with that position.
Normally, a denial of a petition for rehearing and rehearing en banc would be a non-event. As Hal Wegner pointed out in his email newsletter, however, Judge Plager’s dissent from the rehearing in Middleton v. Shinseki is worth noting. (Link: 13-7014.Order.1-31-2014.1)
Background: Judge Plager was a member of the three-judge panel that decided the original opinion (he dissented there as well). Under Federal Circuit rules, he may participate in the panel rehearing and on the court sitting en banc if en banc review is granted, but may not participate in the vote whether to grant en banc review. (You may have noticed that at the bottom of denials of petitions for rehearing and rehearing en banc there is sometimes the language “Senior Judge X, who was on the original panel, participated only in decision on the petition for panel rehearing.”).
Judge Plager’s words express his own views most directly. In a footnote to his brief dissent to the panel rehearing, Judge Plager wrote:
The Chief Judge advises that the rule in this circuit, recently pronounced by a majority of the judges of the court in regular active service, is that judges in senior status, of which I am one, are prohibited from joining another judge’s dissent from a denial of en banc, or authoring their own dissent expressing on record a criticism of the judges in regular active service for the failure to take a case en banc. This apparently is the rule even in this case, though as a member of the original panel I am expressly authorized by law to have sat on the en banc panel if the court had agreed to have one, see 28 U.S.C. § 46(c), so that the failure to take the case en banc has denied me an opportunity to try to correct what I consider to be a miscarriage of justice. However, my compliance with this rule, prohibiting circuit judges, because they are in senior status, from expressing an opinion on this aspect of the decisional work of the court, should not be taken as agreement with this rule, its purpose, effect, or for that matter its constitutionality.
Why this matters: Practically speaking, as Hal Wegner notes this is a non-issue in this case, since Judge Plager can express his reasons for disagreeing in his dissent to the panel rehearing. However, that Judge Plager chose to write about this minor internal procedural disagreement suggests that there are tensions within the court.
Surging Dissents: Lee Petherbridge and I recently revised our study of Federal Circuit dissents based on many of the comments we received on PatentlyO. Below are some figures that did not make it into the revision but which are nonetheless quite striking.
The first is a graph that combines data from Table II of Professor Jeffrey Lefstin’s 2005 study of Federal Circuit dissents with our own data. The usual caveats about cross study comparisons apply (although the data should be pretty comparable as it ultimately came from the same source). These are absolute numbers of dissents, not frequencies; the frequency chart indicates an even more striking difference.
The second item is a pair of pie charts showing the numbers of alternate writings (mainly dissents and concurrences) for each judge for the first and second parts of our period, using January 1, 2011 as a break point. While Judge Newman is the most frequent author of alternate writings, she only accounted for about a quarter of the alternate writings for the first period, and since 2011 her relative frequency of alternate writings declined. In other words, these alternate writings aren’t simply the work of a single judge; they’re being written by a significant number of judges on the court.
The legends in the above figures identify the judges with more than 5% of the total share of alternate writings for that period. I haven’t yet broken out dissents alone, but my suspicion is that they aren’t going to be meaningfully different.
This interference appeal is focused on interpreting the “functional” claim term “receiver” and relates directly to recent Patently-O discussions on the topic of means-plus-function claim terms compared with bare non-MPF functional claim terms. See Crouch, Functional Claim Language in Issued Patents (2014). Here, the court finds, roughly, that a claim term with a smidgen of structure should be seen as a structural limitation rather than one governed by 35 U.S.C. §112¶6. The case is also relevant to the still pending en banc case of Lighting Ballast where the Federal Circuit is set to decide whether a “voltage source means” limitation should be considered a means-plus-function limitation.
= = =
Inter Partes Reviews have quickly taken-on the procedural appearance and nature of their PTO-trial predecessor interference proceedings. This interference case involves a competition between EnOcean and Face Int’l over a “self-powered light switch” that can be used to remotely trigger a relay using a piezoelectric element. Many think of an interference as a fight over who gets the patent. Some cases follow that model, but many others (such as this one) are really just one party trying to block the other’s patent. Interferences also have a tradition of being quite messy and I expect that tradition to continue in the Board’s new review and derivation proceedings.
Here, EnOcean’s patent application claims priority back to a May 2000 German application with later filed PCT and US national stage applications. Face’s priority only goes to 2001, but Face’s patent issued in 2006 while EnOcean has been battling with the PTO this whole time. After Face’s patent was issued, EnOcean amended its claims to match those of Face and requested an interference.
In the interference, EnOcean identified a set of prior art (other than its own application) that, in combination invalidated Face’s patent. Considering that evidence, the PTO Board found Face’s patent claims invalid as obvious. The Board also found that EnOcean’s amended claims were not sufficiently disclosed in the 2000 priority document and that EnOcean’s claims were therefore invalid as obvious (since they didn’t have an early priority date).
The case against priority was interesting. Many of EnOcean’s patent claims include the term “receiver” as follows:
Claim 37: “a signal receiver for receiving a first electromagnetic signal transmitted by said first signal transmitter;”
Claim 38: “a receiver for receiving a first radiofrequency signal transmitted by said first signal transmitter;”
Claim 43: “a receiver adapted to receiving a radiofrequency telegram transmitted by said radio frequency transmission stage;”
Claim 45: “a receiver adapted to receiving a radiofrequency telegram transmitted by said first radio frequency transmission stage;”
But, the German priority document’s only reference to a receiver came from a single sentence, as translated:
[A] typical scenario is that all the switches … upon actuation, emit one or a plurality of radio frequency telegrams which are received by a single receiver and the latter initiates the corresponding actions (lamp on/off, dimming of lamp, etc.).
(In German, the original application uses the term “empfänger.”)
In interpreting the “receiver” limitation, the Board found that it was purely functional and thus should be interpreted as a means-plus function element governed by 35 U.S.C. §112¶6. In other claims found in the patent, EnOcean had used the phrases “signal receiving means” and “means for receiving” and the PTO Board found those terms synonymous with “receiver.” Under the statute, a means-plus-function claim term must have corresponding structure described in the specification. Since, the original German application did not include any structural discussion of a receiver or how it might work, the Board held that the US patent could not properly claim priority to the German application.
In the Appeal, the Federal Circuit has vacated – agreeing with EnOcean that its claim term “receiver” is not so functional as to be a means-plus-function claim. The court began its analysis with the black-letter precedent that “means” is a magical word. When it is used, courts should presume that the applicant intended for the term to be interpreted under 112¶6, and that the opposite presumption should be made (not 112¶6) if the magic word “means” is absent. Here, because the receiver term is not accompanied by the magical word “means,” we begin with a presumption that it is not to be interpreted under 112¶6.
After finding its beginning presumption, the court then determined that one of skill in the art would see sufficient structure from the term.
Indeed, the record indicates that the term “receiver” conveys structure to one of skill in the art—the Board itself made a factual finding that that the “skilled worker would have been familiar with the design and principles of the types of components utilized in the claimed invention, including . . . receivers.”
We also come to this conclusion, in part, because EnOcean has provided extensive evidence demonstrating that the term “receiver” conveys known structure to the skilled person. . . . Further, we are not persuaded by Face’s arguments that the term “receiver” is simply too broad to recite sufficiently definite structure. We have stated previously that just because “the disputed term is not limited to a single structure does not disqualify it as a corresponding structure, as long as the class of structures is identifiable by a person of ordinary skill in the art. Linear Tech. Corp. v. Impala Linear Corp., 379 F.3d 1311, 1322 (Fed. Cir. 2004).
What the court didn’t do here was describe what a receiver is structurally (or how has that changed over the past three decades). As part of its analysis, the court rejected the Board’s conclusion that “that there is no distinction in meaning between ‘receiver’ and ‘signal receiving means,'” since “the receiver of the EnOcean claims is defined in the claims solely in terms of functional language.”
Connecting all the dots, the court then found that the one-liner original receiver disclosure provided sufficient structure to support both the means-plus-function claim elements (receiving means) and the non-MPF receiver.
The decision here is not overly surprising and follows a number of other Federal Circuit decisions where a smidgen of structural understanding was sufficient to remove a claim term from 112¶6 analysis. Notably amongst these is the Linear Tech decision cited above where the court found the claimed “circuit for monitoring a signal” recited sufficient structure to avoid 112¶6 analysis.
In Bowman v. Monsanto, 133 S.Ct. 1761 (2013), the Supreme Court found that soybean farmer Vernon Bowman could be held liable for infringing the Monsanto GM seed patents. Bowman had purchased the seed from a local commodity soybean dealer and then planted them, thus making more seeds.
My question this morning is whether Bowman would have a cause of action against the soybean dealer under Section 2-312 of the Uniform Commercial Code (UCC) for violation of the warrantee of non-infringement.
UCC 2-312(3) provides a default warranty of non-infringement. The statute (as adopted by the various states) provides that:
Unless otherwise agreed a seller who is a merchant regularly dealing in goods of the kind warrants that the goods shall be delivered free of the rightful claim of any third person by way of infringement or the like but a buyer who furnishes specifications to the seller must hold the seller harmless against any such claim which arises out of compliance with the specifications.
Assuming no disclaimer by the dealer, can Bowman shift liability back to the dealer?
Ex parte Dan, 2014 WL 343818, Appeal No. 12-8847, APN 10/715,910 (PTAB 2014)
Monsanto’s patent application covers the growth of plant cells on a bed of lipoic acid in order to facilitate a GM transformation. Monsanto’s Examiner found the term “explant” indefinite under 112(2). The Board reversed that appeal – finding that the patent application has provided sufficient explanation of the term. In particular, the application had indicated is purpose as “a method for genetically transforming a plant cell, tissue or other suitable explant” and that the best conclusion from that statement is that explant are inherently comprised of cells.
The Board’s reasoning here (penned by Judge Jenks) makes clear that clear that the examiner’s burden in showing indefiniteness is quite high. The Board writes:
We find that Appellants have the better position. “The standard of indefiniteness is somewhat high; a claim is not indefinite merely because its scope is not ascertainable from the face of the claims.” Amgen, Inc. v. Hoechst Marion Roussel, Inc., 314 F.3d 1313, 1342 (Fed. Cir. 2003). Rather, “[a] claim is indefinite if, when read in light of the specification, it does not reasonably apprise those skilled in the art of the scope of the invention.” Id. Here, the Specification provides that the disclosed method is suitable for “transforming a plant cell, tissue or other suitable explant [material] and regenerating a transformed plant therefrom.” (Spec. 3, ll. 12-13.) Thus, the Specification refers to cells or tissues in relation to explant material, which is consistent with the use of the term explant in the art. Accordingly, we agree with Appellants that explants are essentially a collection of cells. As such, the transformation of an explant would involve transforming the underlying cells.
For its precedential support, the Board calls to the 2003 Amgen decision. The reliance on Amgen highlights a big difficulty with our current system of patent law jurisprudence – the direct application of infringement litigation case law on patent prosecution standards. Amgen was a decision where a patent had already been examined and issued and was being challenged in court. At that stage (infringement litigation), a court has no power to rewrite claims to and the strong presumption of validity associated with issued patents suggests that the proper approach is to have a “somewhat high” standard of indefiniteness. The story is completely different for cases pending before the USPTO. The vast majority of patent applicants amend their claims during the patent prosecution process in order to clarify loose language and avoid prior art. During this stage, the PTO should be given a strong hand to ensure that applicants meet the statutory requirement of “pointing out and distinctly claiming the subject matter which the inventor or a joint inventor regards as the invention.” Here we’re not talking about increasing or decreasing the scope of the patent, but rather requiring precision so that the boundary of the claims is recognizable. The nice thing about forcing this at the application stage is that applicants will have a full opportunity to amend their claims in a way that results in a valuable (but definite) patent.
Now, one result here is that Monsanto did end up clarifying in its argument that an explant is made-up of cells. In court, Monsanto would likely be bound by that argument. But the problem with having prosecution-based definitions is that they are difficult and expensive for a third-party to uncover.
Final point, the Board may have been willing to allow somewhat loose language here because it went-on to affirm a different rejection – that the claims were invalid as obvious.
Patentees are continuing to move away from the single-patent model toward a model that involves multiple patents in multiple jurisdictions. Today, over 75% of patent applications rely upon at least one prior patent filing as a priority document. I expect that figure to grow based upon incentives coming from the recently implemented first-to-file regime. Over the past 10 years, most of the change has been in increased PCT filing and increased use of US provisional patent applications. In the US, the largest users of the provisional patent applications are some of the largest strategic users of the patent system, including Qualcomm, LG, Broadcom, Marvell, Google, Apple, Samsung, Univ of California, and Texas Instruments. More than 40% of patents with a US assignee (or US inventor owned) claim priority to a provisional application. Expect that figure to rise as well.
Courts have often identified patent rights as a form of monopoly. Perhaps this stretches back to the 17th century Statute of Monopolies that ended all letters patents and other government granted monopolies except for those covering novel inventions. Economists typically reject the categorization because modern patent rights by themselves do not create market power nor even the right to sell or use the invention. (Patent rights only grant the right to exclude others).
Interesting aspect of the Supreme Court’s decision in Medtronic v. Mirowski (U.S. 2014), is the way that the court subtly revives this prior form of thinking by quoting older precedent:
The public interest, of course, favors the maintenance of a well-functioning patent system. But the “public” also has a “paramount interest in seeing that patent monopolies . . . are kept within their legitimate scope.” Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U. S. 806, 816 (1945). A patentee “should not be . . . allowed to exact royalties for the use of an idea . . . that is beyond the scope of the patent monopoly granted.” Blonder-Tongue Laboratories, Inc. v. University of Ill. Foundation, 402 U. S. 313, 349-350 (1971).
Now, the use of the monopoly term here does not appear carelessly placed but instead intentionally designed to link patent rights with the monopoly problem. This connotation is important for the Court’s policy argument that, like monopolies, patent rights need to be controlled. This follows Thomas Jefferson’s famous thoughts against monopolies but eventual support for patent rights that were limited in both scope and duration.
In a recent article addressing this issue from a European perspective, Sven Bostyn and Nicolas Petit argue that continued rhetoric linkage of patents with monopolies is problematic and may well serve “a hidden bureaucratic agenda, that of limiting patent protection through the backdoor, by using ex post antitrust remedies to alter the protective – and innovation-incentivising – patent statutes adopted ex ante by elected democratic organs.” See Bostyn & Petit, Patent=Monopoly: A Legal Fiction (December 31, 2013). The Bostyn-Petit characterization is likely relevant to US policymakers as well. I looked through the few years of Federal Circuit cases that mentioned “patent monopoly.” Time and again the court used the phrase as part of its explanation why patent rights should be limited with the excepting being cases that quote the Georgia Pacific factors. See, e.g., LifeScan Scotland, Ltd. v. Shasta Technologies, LLC, 734 F.3d 1361 (Fed. Cir 2013) (Judge Dyk); CLS Bank Intern. v. Alice Corp. Pty. Ltd., 717 F.3d 1269 (Fed. Cir. 2013) (en banc; Judge Lourie opinion); Brooks v. Dunlop Mfg. Inc., 702 F.3d 624 (Fed. Cir. 2012) (Judge Prost); Ritz Camera & Image, LLC v. SanDisk Corp., 700 F.3d 503 (Fed. Cir. 2012); SanDisk Corp. v. Kingston Technology Co., Inc., 695 F.3d 1348 (Fed. Cir. 2012) (Judge Reyna in Dissent); Akamai Technologies, Inc. v. Limelight Networks, Inc., 692 F.3d 1301 (Fed. Cir. 2012) (Judge Linn in Dissent); Therasense, Inc. v. Becton, Dickinson and Co., 649 F.3d 1276 (Fed. Cir. 2011) (Judge Bryson in Dissent); Micron Technology, Inc. v. Rambus Inc., 645 F.3d 1311 (Fed. Cir. 2011) (Judge Gajarsa in Dissent).
35 U.S.C. 101 is a foundational patent law statute that defines the scope of patent eligibility. The statute states that:
Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.
Section 101 is written in broad and open terms and has been seen as providing notice that patent law is not intended to be limited to any particular forms of technology.
In interpreting the statute, the Supreme Court has added an additional set of subject matter eligibility restrictions only nominally grounded in the statute. Most notable, these include proscriptions against the patenting of abstract ideas, natural phenomenon, and products of nature. Also excluded from eligibility are “mental processes.” It is somewhat unclear from precedent whether these mental processes are whole included within the abstract idea construct or whether instead there are some mental processes that would be excluded even though not considered abstract ideas.
Here, ABL’s patents cover a diagnostic method that basically pulls information from three separate knowledge bases, ranks the results and provides advisory information related to those results. As claimed these steps use a “computing device” to generate and provide the results. The patents also include computerized “system” claims; computer program claims; and sorage-medium claims that are all designed to facilitate the practice of the method. See U.S. Patent Nos. 6,081,786 and 6,188,988.
In 2008, SmartGene filed for declaratory judgment of invalidity and also filed a reexamination request with the USPTO. The PTO considered the prior art and confirmed patentability. However, the District Court ruled that all of the patented claims were invalid as ineligible under Section 101. Rather than walking through each claim of each patent, the District Court (1) first held that, for eligibility purposes, Claim 1 of the ‘786 patent (the method claim) was representative of all claims in the patents and (2) then found that claim ineligible under § 101. The district court wrote that the claim does “no more than describe . . . an abstract mental process engaged in routinely, either entirely within a physician’s mind, or potentially aided by other resources in the treatment of patients.”
On appeal, the Federal Circuit has affirmed in a non-precedential decision written by Judge Taranto and joined by Judges Lourie and Dyk. Famed eligibility defender Robert Sachs of Fenwick represented the Patentee whkle Fred Samuels (Cahn & Samuels) represented the DJ Plaintiff.
The Federal Circuit first considered the district court’s process in holding all claims from both patents ineligible based only upon consideration of one claim from one patent. The court affirmed the district court finding based upon a waiver principle.
On to the meat of the 101 analysis, the Federal Circuit began with a citation to CyberSource:
This conclusion [of ineligibility] follows from CyberSource Corp. v. Retail Decisions, Inc., where, based on earlier precedents, this court held that section 101 did not embrace a process defined simply as using a computer to perform a series of mental steps that people, aware of each step, can and regularly do perform in their heads.
The court went on to write that mental processes are not eligible nor are processes that use basic computer functionality to implement mental processes unless the invention specifies “new physical components” or other steps “defined other than by the mentally performable steps.”
For these princples, the court relied heavily on Supreme Court precedent of Benson, Flook, and Mayo as well as the appellate decisions of CyberSource as well as In re Grams, 888 F.2d 835, 840-41 (Fed. Cir. 1989) and In re Meyer, 688 F.2d 789, 794-95 (C.C.P.A. 1982).
The discussion of Mayo in the decision is interesting in the way that the court draws close parallels between the way laws of nature and abstract ideas should be interpreted:
Mayo demanded that, when a claim involves an abstract idea (or, in Mayo itself, a law of nature), eligibility under section 101 requires that the claim involve “enough” else—applying the idea in the realm of tangible physical objects (for product claims) or physical actions (for process claims)—that is beyond “well-understood, routine, conventional activity.” 132 S. Ct. at 1294, 1298, 1299. The claim here does not do so. It calls on a computer to do nothing that is even arguably an advance in physical implementations of routine mental information-comparison and rule-application processes. In this context, the concern about preempting public use of certain kinds of knowledge, emphasized in Mayo, is a grave one.
It appears from Myriad, that the process for determining the product-of-nature exclusion is somewhat different since there, the court allowed the patentee to obtain protection for a DNA sequence whose physical differences from the naturally occurring sequence were due to well-understood, routine, and then conventional laboratory processes.
Is a mental step an abstract idea?: The court punts on this question and instead writing that:
[M]ental processes and abstract ideas (whatever may be the precise definition and relation of those concepts) are excluded from section 101. Whatever the boundaries of the abstract ideas category, the claim at issue here involves a mental process excluded from section 101: the mental steps of comparing new and stored information and using rules to identify medical options.
The analysis here pessimistically fits the approach leading abstract idea jurisprudence that traditionally fails to explain the scope and bounds of the abstract idea category but finds that the particular invention in question fits within the category.
Judge Taranto: This decision is important because it was written by Judge Taranto. Although there was not tremendous doubt in his position, Judge Taranto did not participate in the CLS Bank en banc fiasco that resulted in no majority opinion. Judge Taranto’s participation would have likely shifted the balance in favor of a majority opinion ruling strongly against subject matter eligibility of software claims that do not add new “technology.”
Judge Taranto is also important because, of all the Federal Circuit judges, he likely best understands the pulse of the Supreme Court and I will not be surprised when the Supreme Court decision in CLS Bank parallels this one.
President Obama provided a one-liner on patent law in his recent State of the Union address:
We know that the nation that goes all-in on innovation today will own the global economy tomorrow. This is an edge America cannot surrender. Federally-funded research helped lead to the ideas and inventions behind Google and smartphones. That’s why Congress should undo the damage done by last year’s cuts to basic research so we can unleash the next great American discovery – whether it’s vaccines that stay ahead of drug-resistant bacteria, or paper-thin material that’s stronger than steel. And let’s pass a patent reform bill that allows our businesses to stay focused on innovation, not costly, needless litigation.
The USPTO (as part of the Obama Administration) has already thrown its weight behind new patent reform efforts as well. The Goodlatte Innovation Act (H.R. 3309) has already passed in the house with a 325-91 vote. In the Senate, Judiciary Committee Chair Leahy has proposed the Patent Transparency and Improvement Act (S. 1720) and that proposal is currently in committee. The proposals would include a number of reforms designed to hamper patent enforcement; provide transparency of ownership; and force more targeted early disclosures in patent cases.
Consumer Watchdog v. WARF, Reexam No. 95/000,154 (Fed. Cir. 2014)
Several years ago Consumer Watchdog (previously known as the Foundation for Taxpayer and Consumer Rights) filed an inter partes reexamination proceeding against a human-stem-cell patent owned by the Wisconsin quasi-government entity WARF. CW does not work with the technology, but filed the reexamination request as part of its public service mission.
In the reexamination, the USPTO confirmed that the patent was properly issued and CW subsequently asserted its statutory right to appeal. See 35 U.S.C. § 141.
Before delving into the appeal’s substance, the Federal Circuit halted progress on the case to particularly probe the question of whether the court has jurisdiction over the dispute – i.e., whether there exists a constitutionally sufficient “case or controversy” between the parties. At base, the question is whether any CW can claim the “injury in fact” that serves as a “hard floor of Article III jurisdiction.” See Summers v. Earth Island Institute, 555 U.S. 488, 497 (2009).
The Federal Circuit requested briefing from the parties as well as the USPTO and those have now been filed. Most importantly, the US Government (USPTO/DOJ joint brief) has sided with WARF with a conclusion that it would be unconstitutional for the Federal Circuit to fulfill the statutory promise (of a right to appeal) by hearing CWs appeal.
Potential Impact: Although the case is focused on CW as a non-profit, the potential outcome here is important for several reasons. Obviously, the ruling would disenfranchise public interest groups, not-for-profits, and industry organizations and instead provide full litigation rights primarily to parties with substantial likelihood of reaching collusive settlements that leaves would-be invalid patents intact. In an email to me, Dan Ravicher (CWs counsel) wrote:
Without a full and fair right to challenge patents at the PTO, including an equal right to appeal, the public interest community will have no avenue to rid the system of bogus patents, and we will be 100% reliant on commercial entities, which often do not have the same incentive to prove patents are invalid, as they, too, have bogus patents themselves.
Although somewhat hyperbolic, Ravicher’s comment raises real policy concerns.
At a more general level, the issue here represents an important shot in the battle for power and authority in the setting of patent law policy that is ongoing between the Patent Office and the Judiciary. The USPTO is newly emboldened with unreviewable authorities granted by the AIA; likely generous Chevron deference for those decisions that are reviewable; and has pushed for a statutory amendment that would eliminate the ability of a patent seeker to file a civil action to receive a patent. Adding to that list, this case appears to be headed in the direction of yet another non-appealable agency activity.
Mid-Level Injury: Although the US Government argues that CW lacks injury-in-fact, it also argues that the injury requirement in this situation is categorically less than what would be required for a declaratory judgment action in Federal Court. The US Government writes:
Organizations such as Consumer Watchdog, who cannot claim any concrete and particularized interest in the validity of the challenged patent, will normally lack standing to appeal. [H]owever, it does not necessarily follow that the same Article III inquiry that governs declaratory judgment relief in the district courts — under which judicial relief is normally available unless the declaratory plaintiff can show that the patentee has asserted infringement, threatened litigation, or otherwise affirmatively acted to impair the declaratory plaintiff’s freedom in the marketplace, see, e.g., Prasco LLC v. Medicis Pharmaceutical Corp., 537 F.3d 1329 (Fed. Cir. 2008) — will also govern appeals from PTO decisions in post-grant proceedings. . . .
Indeed, Congress enacted the AIA’s expanded procedures for post-grant patentability challenges partly in response to concerns that, under prior law, it was not reasonably possible for a company weighing whether to enter a particular market to test the validity of a potential competitor’s patent without first incurring the substantial costs and risks of developing a suitable — and potentially infringing — product.
. . . . Although such an interest would normally lack the immediacy required for declaratory judgment jurisdiction, the Supreme Court has explained that, in some circumstances, “[t]he person who has been accorded a procedural right to protect his concrete interests can assert that right without meeting all the normal standards for redressability and immediacy.” Lujan; Massachusetts v. EPA. Similarly, while a prospective interest in invalidating a competitor’s patent might normally implicate prudential considerations of fitness for judicial review, an explicit congressional authorization to appeal a particular category of legal determinations “eliminates any prudential standing limitations.” Raines. For these reasons, the Court could conclude in an appropriate case that the Article III inquiry governing direct appeals from the PTO differs from the inquiry that governs declaratory judgment actions in district court.
In the prior arguments, Dan Ravicher (for CW) raised an analogy to FOIA where the Supreme Court has allowed a seemingly noninterested third party to bring court challenges. The US Government brief argues that those cases as well as related fair housing cases are different and distinguishable because Congress created “substantive legal rights that entitle a party to receive concrete and individualized benefits — access to specific government records, for example, or freedom from racial discrimination in housing. A wrongful denial of those rights thus inflicts on the plaintiff a concrete and particularized injury-in-fact.”
In its responsive brief, CW argues that the statute creating the right of judicial review to requesters of agency action provides standing even if the requesters lack “statute-independent injury.” On that point, CW writes: “The government does not reference a single case in which a denied requester who cited a statute granting judicial review to such denied requesters needed to prove injury to show standing.” For its side, CW references FOIA cases as well as FEC and prior inter partes review cases that all fit this model.
Public interest groups such as PubPat, EFF, and others have shown their strength in the intellectual property law sphere and this is an important case from that regard. The importance is such that if the Federal Circuit sides against CW here to deny standing, I suspect that the Supreme Court will be ready to hear the case.
Sheridan’s Patent No. 7,415,982 covers a pipe for smokeless tobacco that he alleges is being infringed to the tune of $20 billion over the past several years. Now, rather than filing suit against the infringers, Sheridan wrote-off the loss and then claimed that loss on his income tax returns. The IRS disagreed – finding that Sheridan had failed to establish any loss actually sustained and served him with a notice of deficiency for taxes owed of $40k.
Sheridan then filed a pro se complaint in federal court seeking an injunction against the IRS from any further audits or tax collection and an order directing a refund. District court sided with the IRS – finding that it lacked subject matter jurisdiction over the case. On appeal, the 3rd Circuit affirmed – citing the Anti-Injunction Act.
The Anti–Injunction Act, 26 U.S.C. § 7421(a), states that, with limited exceptions not applicable here, “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.” Although the Act does not apply if it is clear that under no circumstances could the Government ultimately prevail in its claim of tax liability, Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 7 (1962), the exception does not apply to Sheridan’s case. The Act likewise would not apply if Sheridan had no alternative remedy, see South Carolina v. Regan, 465 U.S. 367, 378 (1984), but he could either petition the Tax Court pursuant to 26 U.S.C. § 6213 or, after paying the assessed taxes, file a refund suit under 26 U.S.C. § 7422(a). Thus, the Act applies in this case, and the District Court lacked subject matter jurisdiction to entertain Sheridan’s claims regarding the tax deficiency identified in his 2009, 2010, and 2011 returns.
The court also ridiculed Sheridan – calling his claim of “$20 billion in losses constitutes a tax for which he is owed a refund is nonsensical.”
I don’t know the facts here, but Sheridan’s claim of $20 billion in losses for the smokeless tobacco pipe may well be nonsensical. However, what’s not so nonsensical is the general notion that written-off patent infringement constitutes a business loss that could serve as the basis of a tax deduction. Would an opinion of counsel with supporting documents be sufficient to establish that the loss (past infringement) was real?
Last summer, the President’s Council of Economic Advisers issued a report arguing that Patent Assertion Entities (PAEs) are responsible for a major harmful increase in patent litigation. That report was based, among other things, on roughly twenty academic studies.
But recently, David Kappos, former Director of the US Patent and Trademark Office, declared that, to the contrary, “the building is not on fire,” in an article titled “Facts Show Patent Trolls Not Behind Rise In Suits.” Kappos dismissed the academic studies as “unhelpful” and “badly distorted” because they did not make all of their underlying data publicly available. Instead he relied only on “facts” from a recent paper by three academics, Christopher Cotropia, Jay Kesan and David Schwartz (CKS) as well as a strained interpretation of one finding in a GAO report (which also did not make its underlying data publicly available).
The CKS paper does, indeed, identify a minor error in the President’s report affecting the period from 2010 to 2012. But the paper does not challenge the data showing that PAEs are responsible for a very large increase in the number of companies sued for patent litigation over the last decade. Nor does the paper’s “granular and transparent” data appear to make any significant difference despite the assertion that it calls prior research into “serious question”: CKS find more or less the same numbers of lawsuits as other studies using comparable definitions of PAEs, despite their claims to the contrary. The CKS paper makes a contribution and it is great that the authors are able to make their data public, but it is dangerous for policy makers to base judgments on highly selective “cherry picked” data that cover only two unrepresentative years or to dismiss a large number of careful studies just because they have not disclosed all of their data.
The CKS paper targets the claim in the President’s report that “Suits brought by PAEs have tripled in just the last two years, rising from 29 percent of all infringement suits to 62 percent of all infringement suits.” While this statement is factually correct, given the definition of PAE used, it could be easily misinterpreted. That is because that two year period from 2010 to 2012 also saw a significant change in the law: the America Invents Act, passed in 2011, has a joinder provision that prevents patent holders from suing multiple, unrelated defendants in a single infringement lawsuit. This is important because prior to this change, PAEs tended to sue more unrelated defendants in each lawsuit. In other words, the 29 percent figure for 2010 represented more than 29 percent of the distinct defendants, while the 2012 figure more or less does represent 62 percent of the distinct defendants. The 29 percent figure is too small for an apples-to-apples comparison.
Ideally, one would want to compare the number of unrelated defendants in different years in order to eliminate the bias introduced by the change in the joinder provision. To make a comparison of that sort, CKS collected patent lawsuit data for 2010 and 2012, categorizing each suit by the nature of the patent holder. A patent holder could be: (1) a University; (2) an Individual Inventor/Family Trust (e.g, GeoTag); (3) a large Patent Aggregator (e.g., Acacia); (4) a Failed Operating Company or Failed Start-up; (5) a Patent Holding Company that appears unaffiliated with the original inventor or owner; (6) an Operating Company; (7) an IP Holding Company affiliated with an operating company; or (8) a Technology Development Company (e.g., Walker Digital).
Although CKS are not the first researchers to categorize different types of NPEs, they seem to think no one else has done it correctly. Specifically, they claim that “Our most basic descriptive findings are inconsistent with and call into serious question the summary data provided by RPX, Patent Freedom, and other academics.” Kappos goes slightly further, completely dismissing all previous research studies, calling them “unhelpful at best, and more likely hurtful by representing as ‘data-driven’ a picture that is actually badly distorted.” However, these charges are simply not true.
Although Kappos claims that previous studies lack a “transparent and appropriately scoped definition of ‘patent troll,'” almost all the previous research papers have extensive discussions of how they identify PAEs. Moreover, using these definitions, it turns out that summary statistics from these sources are rather close to the corresponding estimates from CKS. For example, Patent Freedom counts “non-practicing entities” (NPEs) using a definition that corresponds roughly to CKS categories 2 through 5. RPX uses a definition that includes the first five CKS categories plus category 7 plus operating companies that sue outside of their industry (not counted in CKS). Feldman et al. count patent monetizers corresponding to CKS categories 2 through 5, and 7. We can compare the number of NPE lawsuits reported by these different sources to the roughly corresponding category totals reported in the CKS paper:
Estimates of Lawsuits Filed by NPEs
Estimate from Other Research
Estimate Using CKS Data For Corresponding Categories
Difference
2010
Patent Freedom
595
689
16%
RPX
765
733
-4%
2012
Patent Freedom
2,652
2,687
1%
Feldman et al.
2,956
2,710
-8%
RPX
3,054
2,745
-10%
Do these differences show that previous research is so inconsistent with the CKS estimates as to call that research into “serious question”? Hardly. First, there is no evidence of any consistent bias in the comparisons. Indeed, while some of the estimates are greater than the CKS estimates, the Patent Freedom data generate smaller estimates than the CKS data.
Second, the differences are small, especially considering that these different researchers use somewhat different concepts of what they mean by “patent troll.” Although reasonable people might disagree about which actors to include in their studies, the studies still provide helpful guidance about trends and the extent of patent litigation. But the crudeness of these measures means that 10 or 20 percent differences are not significant. Such differences are certainly no excuse to dismiss most of the prior literature on this subject.
More important, such differences are not economically important. For example, as we shall see, PAE litigation has increased by an order of magnitude over the last decade. A 10 or 20 percent difference does not change this conclusion. Nor does such a difference fundamentally alter estimates of the economic impact of PAEs. For example, one of my studies with Mike Meurer found that PAEs cost defendants $29 billion in 2011. If the true cost were $26 billion or even $23 billion, this would not change the conclusion that PAEs impose substantial costs on defendants. These findings cannot be dismissed, as Kappos does, just because he doesn’t have access to the underlying data.
CKS have not shown any actual evidence that their data are significantly inconsistent with other studies. Nor have they shown anything that calls other research into “serious question” despite the gravity of that charge. Nor have they shown any evidence of actual bias in the previous research. Kappos and CKS dismiss a large body of prior research without showing any substantive reason to do so. While much of the prior research is based on private data, researchers have checked these data against other sources. What matters in science is not the access to the data, but the replicability of the results. Without actual evidence of a bias or major inconsistencies across different data sets, there is no reason to dismiss these studies.
CKS’s findings do show that the figures cited in the President’s report are misleading, but, as we shall see, that evidence exists in other sources as well. Recall that we need to compare the number of unrelated defendants sued in different years. To address this, CKS count the number of parties to the lawsuit excluding the patentee, the “other parties” to the lawsuit. They find that between 2010 and 2012 the number of these other parties in lawsuits filed by non-operating companies changed little. For example, in categories 2 through 5 the number of “other parties” in PAE suits went from 5,515 to 5,554.
However, the number of “other parties” listed in lawsuit filings is not an accurate measure of the unique unrelated defendants. For example, a parent company will often be listed as a defendant along with one or more subsidiaries. Fortunately, Patent Freedom has done the hard work of tracking down unique operating company defendants (and, yes, our researchers checked their work) as have several of the other researchers.
Figure (Above): Number of operating company defendants in PAE suits. Source: Patent Freedom
The Patent Freedom counts of unique NPE defendants are shown in the figure along with a trend line. The counts of defendants are much smaller than CKS’s “other parties.”
Several findings are apparent. First, there appears to be a surge in multi-party PAE lawsuits prior to passage of the America Invents Act in September 2011. Apparently, some PAEs wanted to get their suits in prior to the new joinder rules that made it more expensive to sue multiple parties.
Because of this surge, any comparison between 2010 and 2012 is bound to be highly misleading. In the Patent Freedom data, the number of unique defendants actually declined during this interval. But it is equally clear that 2010 and 2011 are exceptions to an otherwise steady, increasing trend from 2001 through last year. Claiming that patent trolls have not contributed to the rise in patent defendants by looking only at 2010 and 2012 is a serious misrepresentation.
Moreover, this finding of a large shift is supported by a large number of studies, including research by one of the CKS authors. Jay Kesan (with co-author Gwendolyn Ball) previously estimated that only 4 percent of patent lawsuits were filed by “patent licensing firms” at the beginning of the decade. To compare, the CKS data find that 21 percent of lawsuits were filed by patent licensing firms in 2010 (categories 3-5 and 7). That is a fivefold increase over the decade. The share of lawsuits grew to 45 percent of lawsuits in 2012, after the change in the joinder rule; if we add individuals & family trusts, such as the notorious GeoTag, then the share rises to 52 percent, over half of all patent lawsuits. So these data show not only a dramatic rise in the share of lawsuits filed by patent licensing firms, but also a large share of the lawsuits come from these parties in 2010 and even more in 2012. Given the earlier paper, does Professor Kesan really believe that this latest paper calls into “serious question” the findings of many other researchers that patent trolls have contributed substantially to the rise in patent litigation?
Nor does the GAO report contradict the basic trend seen here. Kappos asserts that the GAO found no “statistically relevant” change in the percent of lawsuits filed by trolls. Those words are very carefully chosen “lawyer words.” In fact, the GAO found a 40 percent increase in the PAE share of lawsuits from 2007 to 2011. However, that difference was not statistically significant given the small size of the GAO sample. The GAO also reported that the number of PAE defendants tripled during these years and PAEs accounted for half of the large increase in patent defendants during these years. The GAO report is entirely consistent with the other evidence that the share of PAE lawsuits and defendants have been rising.
Finally, the figure shows that the PAE litigation has continued to increase after the America Invents Act, more or less right on the trend line established since 2001. The Act has been touted as the solution to the problems of the patent system; the data from 2013 suggest otherwise.
The bottom line is this: based on the overwhelming weight of the evidence, including that in CKS itself, PAEs are filing dramatically more lawsuits against very many more defendants than they did at the beginning of the last decade. This is true despite the decline in defendants between 2010 and 2012; the GAO report further supports this finding. The conclusion based on all the evidence is that the building is indeed burning. Policymakers are right to take action.
= = = = = =
References
Allison, John R., Mark A. Lemley & Joshua Walker Extreme Value or Trolls on Top? The Characteristics of the Most Litigated Patents, 158 U. Pa. L. Rev. 1 (2009)
Bessen, James and Michael J. Meurer (2014), “The Direct Costs from NPE Disputes,” Cornell Law Review, v. 99(2), 387-424.
Bessen, James and Michael J. Meurer (2014 forthcoming), “The Patent Litigation Explosion,” Loyola University Chicago Law Journal, v. 45, 102-145.
Bessen, James and Michael J. Meurer (2013), “The Private Costs of Patent Litigation,” Journal of Law, Economics and Policy, 9, p. 59.
Bessen, James (2012), “A Generation of Software Patents,” Boston University Journal of Science and Technology Law, 18(2), pp. 241-61.
Bessen, James, Jennifer Ford, and Michael J. Meurer (2011), “The Private and Social Costs of Patent Trolls,” Regulation 34(4), pp. 26-35.
Chien, Colleen, Of Trolls, Davids, Goliaths, and Kings: Narratives and Evidence in the Litigation of High – Tech Patents, 87 N.C. L. Rev. 1571, 1572 (2009).
Chien, Colleen, From Arms Race to Marketplace: The New Complex Patent Ecosystem and Its Implications for the Patent System, 62 HASTINGS L.J. 297, 328 (2010)
Chien, Colleen (2013) Patent Trolls by the Numbers Santa Clara Univ. Legal Studies Research Paper No. 08-13 http://ssrn.com/abstract=2233041
Chien, Colleen, 2009. “Of Trolls, Davids, Goliaths, and Kings: Narratives and Evidence in the Litigation of High – Tech Patents,” North Carolina Law Review, 87, pp. 1571-1615
Chien, Colleen (2012) Patent Assertion Entities, Presentation to the DOJ/FTC hearing on PAEs. Washington, DC, December 10, 2012. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2187314 .
Chien, Colleen (2012) . “Startups and Patent Trolls.” Santa Clara University Legal Studies Research Paper No. 09-12 Working Paper Series, 2012.
Federal Trade Commission (FTC). “The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition.” March 2011.
Feldman, Robin, Thomas Ewing and Sara Jeruss. “The AIA 500 Expanded: Effects of Patent Monetization Entities” April 9, 2013. http://ssrn.com/abstract=2247195
Feldman, Robin (2013) Patent Demands & Startup Companies: The View from the Venture Capital Community, UC Hastings Research Paper No. 75 http://ssrn.com/abstract=2346338
Jeruss, Sara, Robin Feldman and Joshua Walker. “The America Invents Act 500: Effects of Patent Monetization Entities on US Litigation.” 11 Duke Law and Technology Review pp. 357-389 (2012).
Lemley, Mark A. “Are Universities Patent Trolls?” Fordham Intellectual Property, Media & Entertainment Law Journal 63, no. 1 (2008): 611-631.
Lemley, Mark A. “Software Patents and the Return of Functional Claiming.” Stanford Public Law Working Paper No. 2117302 Working Paper Series, 2012.
Lemley, Mark A. and Douglas Melamed. “Missing the Forest for the Trolls” Stanford Law and Economics Olin Working Paper No. 443, 2013.
In reply to a prior post, one comment asked about the whether US patents tend to have claims directed to both an apparatus and to a method or instead are those types of claims separated out into separate patents. To answer that question, I parsed through a set of recently issued utility patents – looking only at the claim preambles to see whether the claim could be classified as either a “method” claim or a “non-method” claim. My search pattern was simplistic. If the preamble included the word “method” or “process” then I defined the claim as a method claim. I then compared the independent claims within each patent to see whether the patent includes only method claims, only non-method claims, or both types. The results are as follows: 17% included only method claims; 51% include only non-method claims; and 32% include both method and non-method claims. I ran a time series and found that these ratios have changed only slightly over the past decade with the trend moving toward more combined patents and fewer method-only patents
As part of this little project, I also pulled up the preambles themselves. Of the four million independent claims in the data set, there were more than two million different preambles. The most common are listed below:
These charts are based upon an analysis of all 4.7 million patents issued between January 1976 and January 2014. I basically tallied the number of independent claims in each patent and grouped those according to the patent issue date. Throughout this time, patents have only issued on Tuesdays each week.
The first chart shows the average number of independent patent claims issued each week. Readers will notice a fairly steady rise in claim-count until around 2004 and a significant drop following that. The second chart uses this same data but adds a finer analysis. The second chart shows the proportion of patents having a given number of independent claims. This chart shows the steady rise in claim-count from the 1970s through 2004 is largely explained by a shift away from patents having only one single claim and toward patents with more than three claims. Since 2004, the tide has changed. There are now many fewer patents with more than three claims and a substantial increase in the number of patents with exactly three independent claims.
From Michelle Lee who is Deputy Under Secretary of Commerce for Intellectual Property; Deputy Director of the USPTO; and is de Facto Director of the USPTO. [Link]
Over the last five years . . . the agency’s senior leadership has made good progress to ensure our country has a strong and robust patent and trademark system for the 21st century.
. . . Going forward, the USPTO will continue to actively engage with our stakeholders, members of Congress from both political parties, as well as with others in the administration, to further improve our patent and patent litigation systems. That includes supporting Congress’ current consideration of legislation to target abusive patent litigation tactics and speed resolution of disputes over IP rights. And the USPTO will work to further the U.S. Department of Commerce’s vital role in ensuring the effective protection of IP to encourage innovation and retain America’s global competitiveness in a rapidly evolving online marketplace. I am especially eager to work with Commerce Secretary Penny Pritzker to “foster a more innovative U.S. economy—one that is better at inventing, improving and commercializing products and technologies that lead to higher productivity and competitiveness,” one of the key strategic goals articulated in the Commerce Department’s “Open for Business Agenda.” . . .
Having been born and raised in Silicon Valley—one of the most innovative regions in our nation—and having built my 25-year career as an engineer and IP attorney there, I have spent most of my life focused on creating innovative technologies and/or supporting and enabling those who do. It is indeed an honor to be able to continue on this path at the USPTO in my new role as Deputy Director of the agency. I am committed to working together with all our stakeholders to advance our shared goal of fueling the unique American ingenuity that fuels our nation’s job growth and economy.
In a prior post, I included a chart showing a recent rise in the use of the functional claim phrase “configured to.” See Crouch, What Does it Mean for a Device to be “Configured To” Perform a Particular Function, Patently-O (2014). Here, I have updated the data to also add information regarding claims that include the term “means” (the traditional primary trigger for §112(f) analysis) and those that include the phrase “for …ing” (such as “for calculating”) without reciting the term “means.” I see these chosen categories as indicia of the existence of functional claim elements. However, I recognize that my rigid automated approach is both somewhat under and over inclusive. However, the results (below) are so dramatic that it is difficult to argue that nothing is going on here. Complicating this, a legal definition of functional claim language (outside the scope of §112(6)) is difficult to nail down. Working a bit on this definition, the Supreme Court in 1946 wrote that a “claim which describes the most crucial element in a ‘new’ combination in terms of what it will do, rather than in terms of its own physical characteristics or its arrangement in the new combination, is invalid as a violation of [the indefiniteness requirement].” Halliburton v. Walker, 329 U.S. 1 (1946).
For the analysis here, I first downloaded the text of all U.S. utility patents issued between 1976 and 2014. I then wrote a script that parses through the independent claims of each patent to determine whether any of the aforementioned phrases are found within those claims. Because the worry with functional claim elements tend to be their over breadth, I looked only at independent claims rather than the naturally more narrow dependent claims. With those results in-hand, I then calculated the frequency-of-appearance in a week-by-week time series. The chart is slightly smoothed by reporting a 10-week moving average – that smoothing largely imperceptible because the time series encompasses almost 2,000 weeks of data). A nice element of using the entire population of utility patents is that there is no need to include significance levels or confidence intervals.
The basic results are apparent from the chart below. The use of traditional Means-Plus-Function (MPF) language in patent claims has dropped dramatically since the early 1990’s and continues to drop. (Blue data series). In the 1980’s most patents included an independent claim written in MPF form. Today, that frequency is less than 10%. The decline in the use of MPF claim language corresponds roughly with a set of cases that cabined-in the construed scope of MPF elements and also bolstered the doctrine that an MPF claim is invalid if the patent document lacks an affirmative statement showing a structure that performs the claimed function. See In re Donaldson Co., 16 F.3d 1189 (Fed. Cir. 1994) (en banc). Although patentees have eschewed the statutory sanctioned MPF format, they have not given up the use of functional claim limitations. In the chart below, I pick up on two particular common approach. One approach has been to replace the term “means for” with a more structural noun such as “circuit for” or “instructions for.” Those types of claim elements are shown in the green data series below and show a rise in that claim format in the 1990s that matches the decline in MPF usage. The red data series shows the use of “configured to/for” language in independent claims as discussed in the prior essay.
As patentees moved away from the use of means-plus-function claim language, they could have conceivably chosen either to focus more particularly on structural elements or instead to continue with an approach of claiming according to the function of the unspecified structure. The chart above graphically suggests that patentees have chosen the latter – replacing means-plus-function claim elements with functional claim elements carefully designed to avoid the statutory trap of §112(6).
The sheer number of patents at issue here is impressive. To be clear, we are talking about millions of patents that are caught-up in this transition. Thus, if we think that it’s a problem to have functional claim limits written outside of the safeguards of §112(6), then what we have here is a big problem.
The chart above comes from LexMachina [
President Obama provided a one-liner on patent law in his recent State of the Union address:
