Discovery Process in Post-Grant Proceedings

Patent, , ,

by Dennis Crouch

Abbott Labs v. Cordis Corp. (Fed. Cir. 2013)

In 2009 Cordis sued Abbot for infringing two of its drug-eluting stent patents. US Patent Nos 6,746,773 and 7,591,844. Abbott then petitioned the USPTO for inter partes reexamination of the two patents (pre AIA). As part of the reexamination both parties submitted expert affidavits. Then, in October 2011, Cordis petitioned the Virginia federal court – requesting two subpoenas duces tecum asking that court to compel discovery to further the reexamination process. The district court refused and, using one of my favorite words, quashed the subpoena. The Federal Circuit has now affirmed.

35 U.S.C.§ 24 requires federal courts to support the discovery process for "any contested case in the Patent and Trademark Office." Under the statute:

The clerk of any United States court for the district wherein testimony is to be taken for use in any contested case in the Patent and Trademark Office, shall, upon the application of any party thereto, issue a subpoena for any witness residing or being within such district, commanding him to appear and testify before an officer in such district authorized to take depositions and affidavits, at the time and place stated in the subpoena. The provisions of the Federal Rules of Civil Procedure relating to the attendance of witnesses and to the production of documents and things shall apply to contested cases in the Patent and Trademark Office.

Every witness subpoenaed and in attendance shall be allowed the fees and traveling expenses allowed to witnesses attending the United States district courts.

The issue on appeal is whether an inter partes reexamination counts as a "contested case." In any ordinary sense of the phrase, the inter partes reexamination is contested. However, both the district court and the Federal Circuit hold that the statutory meaning of the phrase does not include these reexaminations. The court writes that a "contested case" under the statute only includes those cases "in which the PTO has provided for the taking of depositions for use in that proceeding." With a substantial dose of circular reasoning, court deduces the following: (1) since the PTO has not provided for depositions in inter partes reexaminations; it follows that (2) inter partes reexaminations cannot be "contested cases"; and thus (3) no depositions can be taken in an inter partes reexamination.

The proper interpretation of section 24 is a question of first impression in this court. We construe the term "contested case," as used in section 24, as referring to a proceeding in which the PTO has provided for the taking of depositions for use in that proceeding.

The court's basic logic is that 35 U.S.C. §23 gives the PTO power to decide when discovery should be allowed and that the congressional deference should carry-over into Section 24. The USPTO argued that reexamination is "examinational" as evidenced by legislative history associated with the AIA. Of course, that retrospective consideration should does not supplant the actual meaning of a statute.

Looking Forward for Inter Partes Review and Post Grant Review: Of course, inter partes reexaminations are a thing-of-the-past and have been replaced with inter partes reviews and post grant reviews. Because the new statute does provide for discovery and testimony in these review proceedings then they should be treated as contested cases. The new rules for these procedures provide avenues for discovery from the parties. Section 24 could be invoked to pursue discovery of a non-party. However, the PTO has instituted regulations that would bar the filing of a subpoena with a federal court without authorization of the PTAB. 37 C.F.R. § 42.52.

The statute generally states that additional discovery should be allowed when "otherwise necessary in the interest of justice." In a recent decision, the PTAB outlined a five factor analysis that it will use to determine whether to allow additional discovery. Garman v. Cuozzo, IPR2012-00001 (26) (PTAB 2013).

  1. More Than A Possibility And Mere Allegation — The mere possibility of finding something useful, and mere allegation that something useful will be found, are insufficient to demonstrate that the requested discovery is necessary in the interest of justice. The party requesting discovery should already be in possession of evidence tending to show beyond speculation that in fact something useful will be uncovered.
  2. Litigation Positions And Underlying Basis — Asking for the other party's litigation positions and the underlying basis for those positions is not necessary in the interest of justice. The Board has established rules for the presentation of arguments and evidence. There is a proper time and place for each party to make its presentation. A party may not attempt to alter the Board's trial procedures under the pretext of discovery.
  3. Ability To Generate Equivalent Information By Other Means – Information a party can reasonably figure out or assemble without a discovery request would not be in the interest of justice to have produced by the other party. In that connection, the Board would want to know the ability of the requesting party to generate the requested information without need of discovery.
  4. Easily Understandable Instructions — The questions should be easily understandable. For example, ten pages of complex instructions for answering questions is prima facie unclear. Such instructions are counter-productive and tend to undermine the responder's ability to answer efficiently, accurately, and confidently.
  5. Requests Not Overly Burdensome To Answer — The requests must not be overly burdensome to answer, given the expedited nature of Inter Partes Review. The burden includes financial burden, burden on human resources, and burden on meeting the time schedule of Inter Partes Review. Requests should be sensible and responsibly tailored according to a genuine need.

Jurisiction of the Court of Appeals: This is another case where the Federal Circuit has refused to consider its appellate jurisdiction in the wake of Gunn v. Minton other than writing that "[w]e have jurisdiction under 28 U.S.C. § 1295(a)(1)." However, the appeal here is a discovery dispute pending before the Virginia district court and, although it involves interpretation of the patent statute, the appellate court's jurisdiction is not entirely clear.

Intellectual Ventures v. Symantec

Patent,

By Dennis Crouch

Intellectual Ventures has received billions of dollars in investment & revenue for its patent licensing program. Almost surprisingly, the company has rarely resorted to litigation in order to enforce its rights. Rather, it seems that most would-be defendants are willing to buy a license before litigation. However, Symantec won't roll over.

Intellectual Ventures I v. Symantec (D.Del. 2013)

In a new lawsuit, Intellectual Ventures (IV) has sued Symantec for infringing three separate patents: U.S. Patent Nos. 5,537,533; 6,598,131; and 6,732,359. In an ongoing lawsuit, IV is also alleging that Symantec infringes its U.S. Patent Nos. 5,987,610; 6,073,142; 6,460,050; and 7,506,155. IV is a master at bundling patents together to cover a particular market area. Here, I looked up the ownership history of all the patents being asserted and they turn out to be a diverse group:

  • The '533 patent was originally assigned to the Portland-based company MiraLink. When that company went through bankruptcy (restructuring), a shell company known as "So. Pak Pte., LLC" purchased the patent and later transferred it to Intellectual Ventures. I presume that So.Pak was an intellectual ventures shell company.
  • The '131 patent was originally owned by the now-defunct Ondotek company. When that company closed, intellectual ventures purchased the patent through a shell company known as Oxtapro Tre ME, LLC.
  • The '359 patent was originally owned by BellSouth who then sold its rights to Dono Tech Services that appears to also be an ongoing intellectual ventures shell company.
  • The '610 patent was originally owned by Ameritech who then transferred its interests to the University of Texas who then spun-out the IP enforcer "Verve LLC" who then transferred rights to AUCTNYC8 and then to IV. My suspicion is that IV controlled the game by the time that AUCTNYC8 purchased the rights.
  • The '142 patent was originally owned by the Park City Group who sold the patent to sold the patent rights to the shell company known as Pait Capital Facility who then transferred rights to IV.
  • The '050 patent was invented by two guys running their own company who then sold their rights to intellectual ventures.
  • The '155 patent was originally owned by InfoBahn before being transferred to GateKeeper then GK Webb Services and finally to Intellectual Ventures.

One thing that is unclear at this point is the extent that the original sellers retain back-end compensation rights associated with these patents.

Related articles
Intellectual Ventures: Revealing Investors
Intellectual Ventures
Intellectual Ventures sues Symantec over patents, again
Intellectual Ventures Reaches Another Semiconductor Patent Settlement
Intellectual Ventures Flexes Some Patent Muscle

Are Patent Attorneys Overpaid?

Patent

In his list of the 10-most-overpaid-jobs, Money Magazine’s Rick Newman includes the following:

Patent attorney ($170,000). We tend to think of patents as the breakthrough insights of revolutionary inventors, but they’re increasingly a form of warfare among corporations seeking to prevent each other from gaining a technology edge. The lawyers who fight those battles are among the highest-paid professionals PayScale surveys.

http://money.usnews.com/money/careers/articles/2013/03/21/the-10-most-overpaid-jobs

Oddly, Newman’s reported average of salary of $170k is well above that actually reported by his cited PayScale results.

Guest Post: Is there a justification for greater transparency in patent transactions?

Patent, ,

by Alan D. Minsk [1]

Introduction

In a recent article [2], Matt Rappaport argues for the need for greater transparency in the "marketplace" for transactions involving patents. Rappaport points out several inefficiencies that may result from a lack of transparency regarding the holdings of an entity that is seeking to license one or more of its patents. These inefficiencies result from a potential licensee being unable to readily obtain information regarding the complete holdings of the licensor, and the resultant uncertainty that may introduce regarding relevant prior art, other assets of interest, preferred negotiating tactics, etc. In general, the author thinks that the lack of transparency that results from the use of "shell" companies or other methods of disguising the actual owner of an asset create difficulties for the negotiation process, cause a failure to provide "notice" of the real party in interest (which may impact negotiations and legal options, as well as prevent knowledge of the true holdings of an entity), and subjects potential licensees to a situation in which they are at a disadvantage before even beginning a licensing discussion. There has been an increasing amount of discussion and proposed actions related to making information available regarding the entire patent holdings of patent buying entities when they seek to license portions of their patent portfolios [3].

Although some may argue that a "level playing field" (or at least a more level one) is not necessarily required for every transaction and is not something that a party is entitled to in a marketplace, this article will discuss some of the reasons why it may be beneficial to introduce a more level playing field into the market for patents. Because of the strong public policies that underlie the creation and administration of the patent system, there is a related public interest in how that system is operated. As a result, this public interest may be sufficient to justify introducing a greater degree of transparency into the "market" for patents. This greater degree of transparency may be achieved via judicial decisions, but may be more effectively introduced through enforcement of competition related laws or even new regulations (in order to produce a desired degree of uniformity in how any new requirements are implemented).

Why Increased Oversight or Regulation May Be Justified

While some may argue that patent aggregators, non-practicing entities (NPEs), or patent assertion entities (PAEs) (collectively, "patent buying entities") represent a business model that is counter-productive to the goals of the patent system or to notions of fairness, such comments seem more of a visceral response or value judgment, rather than a conclusion supported by facts. Instead of arguing about whether such entities should exist, it may be more productive to address the possible consequences of their operational methods when they purchase patents or patent applications. Specifically, how a lack of transparency in their operations can create distortions in the efficient operation of a "market" for patent rights.  Even if it is uncertain whether such entities are operating in a manner that is supportive of the goals of the patent system, there appear to be strong reasons for advocating greater transparency in their operation, as this would be expected to establish a more efficient and trustworthy "market" for patents. An additional benefit is that this will also enable a more accurate determination of whether the existence and operation of these entities support, inhibit, or are effectively neutral with respect to achieving the goals of the patent system.

There are strong public policies behind the creation and operation of the patent system and as a result, both the Federal government and the public have an inherent interest in that system. This clear from the concern for providing protection for inventions that is expressed in the U.S. Constitution [4] and the Federal statutes based on that expression [5]. The Federal government has an interest in seeing that the patent system operates in a way that enables the system to achieve its stated purpose(s), while observing its obligations to the public. The public has a similar interest in seeing that the patent system fulfills its stated purpose(s), since the system is operated by the Federal government as a service for the public.

Because of the strong public interest in the operation of the patent system and its impact on the public, I believe that the exchange of patent rights should not be exposed to the benefits and disadvantages of the free market system without a careful consideration of whether additional controls should be applied to ensure that the market operates efficiently and fairly for the participants, while supporting (or at least not harming) the interests of the public [6].    

That a "market" is being developed for patents and the rights that they enable the owner to exercise is shown by the development of patent trading systems, the holding of patent auctions, and the general increase in attention paid to the value of patents as business assets [7]. However, the asset being traded in such a market is of a different nature than most assets. Patents represent a conscious decision by the Federal government to encourage certain types of behavior by members of the public by creating a new type of property. As a result, patents themselves and the operation of the system that grants them are invested with a stronger government and public interest than is the transfer of most other types of property. This suggests that justification exists for a greater degree of scrutiny into whether the operation of entities that engage in the buying, selling, and licensing of patents do so in a way that supports (or at least does not frustrate) achieving the goals of the patent system.

Should the Patent "Market" Be Considered Part of the Patent System?

A threshold issue is whether a marketplace for the transfer of patent assets should be considered as part of the overall patent system, or instead whether it should be considered a part of the free market system (and as such, evaluated independently of its impact on the patent system). The existence of patent aggregators, NPEs, and PAEs would be expected to have at least some impact on the innovation process; such entities provide an additional exit strategy to enable inventors and companies to recoup some portion of their investment in generating the assets. In addition, the ability to sell a patent may enable an inventor to continue working on other projects, which may lead to more innovation. In general, having a marketplace in which patents may be sold is a positive development, as it may prevent a waste of assets, which is typically a desirable outcome. Therefore, it would seem that having this exit strategy would provide an incentive for at least some additional risk taking and investment in innovation.

At the least, it seems disingenuous to say that the existence of such patent buying entities has no impact on the innovation process or other aspects of the patent system. Given that there is at least a possible impact, I believe that there is justification for considering the still-developing market for patent assets as part of an overall patent system that is intended to fulfill specific goals. And, if the existence of that market is part of a system that is supposed to create an incentive for innovation, then it stands to reason that a properly functioning market is desirable in order to ensure a proper level of incentives and to most efficiently produce the desired benefits of those incentives.

Assuming that there is some impact on the patent system and its operation that can be traced to the operations of patent buying entities, what (if anything) should be done about it? Given the possible inefficiencies or distortions in the operation of a market for patents (and the overall patent system) that can result from a lack of transparency, one could simply accept this as a by-product of exposing patent rights to the operation of a free market system. However, because patents are a property right created by the Federal government for a specific purpose, it may be preferable to recognize a strong enough public interest in the operation of the market for patent rights to justify considering additional controls that would increase the transparency in transactions that occur within that market. This approach seems desirable for at least two reasons: (1) until we can be more certain that such patent buying entities are not having an undesirable impact on the patent system, it is more likely to be in the public interest to err on the side of requiring increased transparency rather than accepting decreased transparency; and (2) since the overall patent system is one designed around establishing and fostering incentives to innovate, it is expected that greater transparency would be more conducive to achieving the proper incentives than would less transparency. If controls that functioned to increase transparency were to be adopted, then such controls would assist in ensuring that the proper incentive structure was in place for an efficiently operating market, and one which presumably would operate more effectively in achieving the goals of the patent system.

Arguments for Increased Buy-Side Transparency

As noted, the article referred to in the Introduction discusses some of the problems caused by a lack of transparency in the patent licensing operations conducted by patent aggregators, NPEs, and PAEs. However, there is another aspect of the use of shell companies and other factors that reduce transparency that may impact the proper operation of a marketplace for patent assets. This is the impact such a practice has on the buying side operations of these entities; specifically, how a lack of transparency may distort the operation of a market for patents, including by preventing a more accurate valuation of patents. The lack of an accurate valuation (or at least the existence of obstacles to a more accurate valuation) does not serve the interests of those selling patents or those to whom they have a fiduciary obligation (such as venture capital investors or stockholders in a company that is selling some of its patent assets).

For example, by using shell companies and preventing disclosure of the ultimate purchaser (and in some cases the beneficiaries of a purchase) of a patent portfolio, a patent buying entity is allowed to distort the market for the value of the rights they are negotiating to purchase. This is because an inventor or other potential seller of a patent portfolio has a reduced amount of information about who wants to buy their patents and what previously existing agreements are in place between the buyer and other parties.  For example, such agreements might result in the buyer granting a license to a party that might have paid much more for the patents if the seller had negotiated with them directly.

In the case of the seller being an operating company, such agreements may cause the undesired result of granting a license to a competitor with whom the company would have rather negotiated in an effort to obtain an agreement of greater value to the company (such as a joint development agreement, co-marketing agreement, more desirable distribution terms, a patent cross-license, etc.). The use of a shell company and the failure to disclose existing agreements that may impact the licensing of a purchased patent portfolio may therefore place the seller at a severe disadvantage during negotiations. In addition, due to the lack of transparency, a seller is unable to evaluate how their patents fit into the overall holdings of the prospective buyer. This is likely to further impact the seller's appreciation of the potential value of their own patents to the buyer. Investors in a selling company may not recapture the full value of a patent that resulted from a company's investment in research and development (R&D) if the market value for a patent is distorted. Thus, it is in the interests of the investors of the selling company to have increased transparency since it impacts the valuation of the company and may impact how investors view the decisions made by the executives of the company.

The seller's lack of knowledge regarding the actual buyer and any possible beneficiaries of the sale of their patents prevents them from determining the true demand for their asset, and hence its actual value in the marketplace. As is the case with a lack of transparency in other markets, this distorts the valuation of the assets being exchanged and introduces inefficiencies into the operation of a market for such assets. However, in contrast with transactions involving other goods, the lack of transparency may also introduce a need for greater oversight in order to protect the public interest and prevent unfair and/or anti-competitive business practices that act to prevent (or at least lessen) the ability to achieve the goals of the patent system.

Increased oversight may be provided by one or more suitable mechanisms. These include interpreting unfair competition laws to require disclosure of the actual purchaser and any expected beneficiaries of the purchase of a patent portfolio, or by the establishment of new requirements on the transfer of patents as part of the Federal laws that establish and regulate the operation of the patent system. Judicial action may also have a role, such as where a Court decides that proper valuation of a patent cannot be determined without knowledge concerning the actual purchaser and its holdings, or that the validity of a patent that is being asserted cannot be determined without knowing the full holdings of the party asserting the patent.

Other Operational Aspects That May Be of Concern

The previous discussion has focused on the impact of the lack of transparency arising from using shell companies to obscure the actual buyer of a patent and/or beneficiaries of a purchase on the seller of a patent. In addition, there may be other aspects of patent buying entities that should be considered in order to determine if the operations of such entities are supportive of the goals of the patent system.

Consider the situation where a patent buying entity has investors. If the entity is publicly traded, then disclosure obligations will presumably act to make sellers (i.e., inventors or corporations that employs inventors) aware of at least some of the implications of selling their patents to the entity. However, if the entity is private, many of these obligations do not apply and information regarding operational methods may not be available. In such a case, if a patent buying entity has investors, it may be useful to know if those investors have input into what portfolios are being bought. This is because such inputs or direction may act to further reduce efficient operation of the market by hiding the interest of those investors in a particular portfolio. This affects valuation because it prevents a seller from knowing which parties may be most interested in their patents, and hence the potential demand for the assets. It therefore may enable the investors to acquire patents or licenses at less than the true market value of such assets.

Perhaps, more importantly, it may also raise antitrust or unfair competition concerns because the lack of transparency can permit investors to hide behind the buying entity while having their risk exposure to the patent assets reduced. This may reduce competition by (1) permitting investors to cooperate in efforts to reduce their risk by purchasing certain patents at below market value, and (2) providing the investors with a mechanism for asserting the purchased patents against competitors of the investors. Further, if the investment opportunity in the patent buying entity is not open to all, then those excluded may be at a competitive disadvantage relative to those that are able to invest and exercise some direction over how the patents are asserted. Another benefit to investors in a patent buying entity is that they do not have to make the R&D investment that would typically be required in order to obtain the purchased patents.

Note that even if any direction or guidance exerted by investors is indirect or informal, it may still amount to a business practice which is unfair or which alters the competitive environment. This is because the patent buying entity would be expected to act in the interests of its investors with regards to which patents to purchase and against which targets to assert those patents. Thus, the type and degree of direction exerted by investors (in a formal or in an informal sense) with regards to the purchase and assertion of patents is an aspect of the operation of patent buying entities that may need to be considered.

Regardless of the outcome, it seems appropriate to consider whether the operational behaviors of patent aggregators, NPEs, and PAEs are supportive of (or at least devoid of any negative impact on) achieving the intended goals of the patent system. This would help to ensure that the goals that were intended to be accomplished by the grant of an important Federal right are not being harmed by exposing patents to the operation of the free market system. It is likely that patent aggregators, NPEs, and PAEs are themselves not the problem, but only that certain aspects of their operations need to be modified.

The "Bottom Line"

Because the Federal government created the rights at issue and intended for them to be used for a specific purpose, it may be necessary to introduce additional controls into the operation of the developing market for patent rights. If the actions of, or the methods of operating a business that are practiced by, patent aggregators, NPEs, and PAEs are counter-productive to (or even simply unsupportive of) the goals of the patent system, then additional controls may be justified in order to restore the market for patent assets to a more desirable form. If such controls are to be adopted, their form is uncertain but presumably would include fuller disclosure of the entities that would benefit from a purchase of a patent portfolio, such as the actual buying entity and any other parties that would be expected to benefit by having a license to the purchased assets. The controls may also require disclosure of the investors in a patent buying entity and the ways (if any) in which the investors may impact the acquisition or assertion of patents.

While other markets may accept a similar lack of transparency (and the resulting inequities) as part of the free market process, such an approach may be inappropriate where patents are concerned. At the least, it seems desirable to determine if the lack of transparency being practiced by certain patent buying entities is having an undesired impact on the operation of the patent system.

[1] Alan D. Minsk is a Patent Attorney and former in-house Counsel for Unwired Planet and Intellectual Ventures. His practice focuses on counseling clients with regard to intellectual property issues that arise during the course of their business operations. He has extensive experience as a patent strategist, concentrating on the development and strategic management of patent portfolios, and has represented clients ranging from start-ups to publicly traded companies. Alan received his J.D. from Harvard Law School (1991), and received a Masters degree in Physics and a Bachelors degree in Astronomy from the University of California, Berkeley. The views, statements, and opinions expressed in this article are solely those of the author, and in no way represent or should be associated with those of the author's current employer or of a previous employer.

[2]Matt Rappaport, "How Hidden IP Assets Hurt the Entire Patent Community", IP Law360 at http://www.law360.com/technology/articles/393963/how-hidden-ip-assets-hurt-the-entire-patent-community.

[3] See "Roundtable on Proposed Requirements for Recordation of Real-Party-in-Interest Information," http://www.uspto.gov/ip/officechiefecon/roundtable_01-11-2013.jsp.

[4] Congress shall have power . . . To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries. U.S. Constit., Art. I, Sec. 8.

[5] The Patent Act, 35 U.S.C.

[6] Note that examples exist of the introduction of federal oversight to establish greater transparency and a more level playing field in other areas, such as the trading of stocks, in order to provide for a more efficient and trustworthy market. With regards to stock transactions, the transparency, disclosure, and insider trading regulations all act to protect the interests of one party (i.e., the public) in a situation in which an imbalance of information exists.

[7] Patents represent more than a collateral output of the product development cycle. Because of the many possible value propositions for a patent, a properly constructed patent portfolio can effectively protect a company's assets and in some cases may be used to reduce operating costs or generate revenue. This perspective on patents as a business asset is discussed in my articles entitled, "Old Model: Patents Protect Products. New Model: Patents Themselves Are Products," Forbes magazine's CIO Central (June 1, 2012), and "Protect Your Company — And Increase its Value with a Strategic Patent Portfolio," Seattle Business magazine (October 2012).

The Sedona Conference’s new regional patent litigation programs

Patent,

By Jason Rantanen

For those who aren't familiar with The Sedona Conference, it's a law and policy think tank that organizes programs that bring together judges, lawyers, experts and academics to discuss issues in antitrust law, intellectual property, and other forms of complex litigation. The organization offers a variety of programs from regional CLE programs to national conferences to small working groups that develop practical guidelines and reports on particular areas of the law.  Past working groups have discussed and developed reports on subjects such as claim construction, eDiscovery, and the intersection of patent and antitrust laws.  One unique aspect of The Sedona Conference is that its conferences use a dialogue-based, as opposed to debate-based, approach to understanding important issues in the law. 

The folks at The Sedona Conference recently asked me to share the announcement that they are expanding their programing on patent litigation to include regional conferences.  The first regional conferences on patent litigation will take place in New York, NY on Thursday, May 2 and in Washington, D.C. on Thursday, May 9.  Both programs are entitled “In Search of Best Practices for Patent Litigation Case Management Post-AIA” and will be part of The Sedona Conference's development of a working group on case management issues post-AIA.

The faculty for the New York program on May 2 includes:

  • Hon. Loretta Preska, Chief Judge for the Southern District of New York
  • Hon. John Koeltl, US District Judge for the Southern District of New York
  • Hon. Faith Hochberg, US District Judge for the District of New Jersey
  • David Kappos, former director of the USPTO, now of Cravath

The New York program will be held on Thursday, May 2, 2013, at the Cardozo School of Law.  For additional details, faculty bios, and to register for the NY program, visit the program page.

The faculty for the DC program on May 9 includes:

  • Hon. Paul R. Michel (ret.), formerly Chief Judge of the Federal Circuit
  • Robert G. Sterne, founding director of Sterne, Kessler, Goldstein & Fox, P.L.L.C.
  • Hon. Joy Flowers Conti, US District Judge for the Western District of Pennsylvania
  • Hon. Marvin Garbis, US District Judge for the District of Maryland
  • Teresa Stanek Rea, acting director of the USPTO

The Washington, DC program will be held on Thursday, May 9, 2013, at the offices of Sterne, Kessler, Goldstein & Fox, P.L.L.C.  For additional details, faculty bios, and to register for the DC program, please visit the program page.

PatentlyO readers will receive a $100 discount:  You will need to enter a coupon code to receive the discount.  Contact The Sedona Conference at info@sedonaconference.org and let them know you are a PatentlyO reader to obtain the coupon code.  

Average Pendency of US Patent Applications

Patent

The chart above shows the average pendency of utility patent applications at the USPTO grouped by disposal date. The basic calculation compares the patent application actual filing date with the relevant issue date or abandonment date. For this chart, the filing of an RCE does not restart the clock. Although the chart appears to show significant movement, you should note that I set the axis base at three years.

Challenging the PTO for Issuing Patents

Patent

by Dennis Crouch

Pregis Corp. v. Kappos and Free Flow Packaging (Fed. Cir. 2013)

Pregis was feeling the pinch of its competitor Free-Flow's air-packaging patents and so, in 2009, Pregis sued Free-Flow for declaratory judgment of invalidity and non-infringement. In the same lawsuit, Pregis also sued the USPTO in order to prevent the agency from issuing two of Free-Flow's pending applications. When those two patents issued, Pregis amended its complaint to allege that the PTO's action in issuing the patents was "arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law." Under the Administrative Procedures Act (APA), Pregis argued, such an action should be nullified by the court.

The district court rejected those claims against the USPTO as lacking subject matter jurisdiction and that decision was affirmed by the Federal Circuit in December 2012. – holding that "a potential infringer cannot sue the USPTO under the APA to attack the validity of an issued patent." In February, Pregis filed its petition for rehearing en banc and focuses its argument on the Supreme Court's recent decision in Sackett v. EPA, 132 S. Ct. 1367 (2012) that held that the statute's silence as to judicial review and some allowance for limited judicial review were insufficient "to overcome the APA's presumption of reviewability for all final agency action." Pregis writes in its petition for rehearing:

The Supreme Court has repeatedly rejected "implied" preclusion arguments similar to what the PTO asserted and the panel accepted here. See generally Stephen G. Breyer et al., Administrative Law and Regulatory Policy 777 (6th ed. 2006) ("Implicit preclusion is rare."). The case for "implied" preclusion of judicial review is especially weak in context of the Patent Act, since that statute's text expressly precludes judicial review of certain patent-related administrative agency actions. See 35 U.S.C. § 282 ("A due diligence determination under section 156(d)(2) is not subject to judicial review."). Section 282 demonstrates that Congress well knows how to provide for preclusion of judicial review of patent-related administrative agency actions, and did not include any such provision in the Patent Act for PTO grant decisions.

The Sackett decision demonstrates the strength of the presumption in favor of judicial review. . . . [In that case t]he Court specifically rejected the government's argument that, by affording regulated parties a right to challenge the validity of a compliance order in a subsequent enforcement action, the Clean Water Act impliedly precluded judicial review of the agency's decision to issue such an order. The Court reasoned, "the APA provides for judicial review of all final agency actions, not just those that impose a self-executing sanction." The parallel between Sackett and the present case is clear: like the agency action at issue in Sackett, the issuance of a patent imposes legal obligations and exposes regulated persons to enforcement actions (i.e., infringement actions) for non-compliance. In both cases, judicial consideration of the legality of the initial agency action in a later enforcement action does not provide a good reason to foreclose judicial review of the initial action.

The Sackett decision also rejected the government's argument that express grants of judicial review elsewhere in the Clean Water Act provided a solid basis for overcoming the presumption of judicial review. Rather, as the Sackett Court unanimously instructed, "if the express provision of judicial review in one section of a long and complicated statute were alone enough to overcome the APA's presumption of reviewability for all final agency action, it would not be much of a presumption at all."

The Federal Circuit's reaction to this latest move will be interesting. 

First-Sale Doctrine: Authorized Foreign Sales Exhaust US Copyrights [and US Patents]

Patent,

By Dennis Crouch

Kirtsaeng v. John Wiley & Sons (Supreme Court 2013)

In a 6-3 decision, the Supreme Court here holds that the first-sale doctrine applies to copies of a copyrighted work lawfully made abroad. Although the decision does not mention patent law, the case has obvious implications for patent law by weakening the ability of a patentee to legally enforce country-by-country market segmentation. The case may also have some implications for streaming of copyrighted content based on national origin.

Kirtsaeng moved to the US from Thailand and set up a side business of importing textbooks from Thailand and reselling them in the US for a substantial profit. To be clear, the imported books were not counterfeit but actual authorized versions of textbooks. Still, Wiley sued Kirtsaeng for copyright infringement and argued that the first-sale doctrine did not apply to its authorized foreign sales.

The first sale doctrine – also known as “exhaustion” – is a core feature of both copyright and patent law. The doctrine holds that intellectual property (IP) rights associated with a particular copy of a work are exhausted once there is an authorized sale or manufacture of the that copy. This doctrine allows for a robust chain of distribution and secondary market where distributors and resellers don’t need to worry about IP infringement so long as they are not dealing in counterfeit copies. One difference between copyright and patent law is that the first-sale doctrine is codified in the Copyright Act but is purely federal common law for patents. 17 U.S.C. §109(a).

In holding that a foreign authorized sale exhausts a company’s U.S. copyright, the Supreme Court obviously walked through some amount of statutory interpretation. However, the court held that its decision is also consistent with common law ideals of “impeccable historic pedigree.” The result here is that this case strongly challenges the Federal Circuit’s precedent in cases such as Jazz Photo that reject the notion of international exhaustion. To be clear, however, the Kirtsaeng decision does not actually mention patent law.

The Supreme Court is sitting on the first-sale patent case of Bowman v. Monsanto. Although that is not an international exhaustion case, parts of this decision have implications there. First, the court favorably discussed old common law doctrines that refuse to permit or enforce restraints on the alienation of chattels. In addition to citing Lord Coke, the court also wrote that the first-sale doctrine fits within that sphere of thought because it “frees courts from the administrative burden of trying to enforce restrictions upon difficult-to-trace, readily movable goods. And it avoids the selective enforcement inherent in any such effort.”

The patent case most directly impacted is Ninestar Tech. v. ITC that is pending a decision from the Supreme Court on Ninestar’s petition for writ of certiorari. That case asks the exact parallel question of “Whether the initial authorized sale outside the United States of a patented item terminates all patent rights to that item.” At this point, the Court will do well to ask the Federal Circuit to take a fresh look at their decision in that case.

The court did recognize that the decision weakens the value of the given intellectual property right. In that regard, the court basically said “tough luck” – writing that “the Constitution’s language nowhere suggests that its limited exclusive right should include a right to divide markets or a concomitant right to charge different purchasers different prices for the same book, say to increase or to maximize gain.” We can expect some amount of push-back from right-holders on this case. And, Congress would certainly be able to change the law through a new statute.

Patent Trolls in Public

Patent,

Guest post by James Bessen, Boston University School of Law and Berkman Center for Internet and Society, Harvard, and Michael J. Meurer, Boston University School of Law

As Congress considers the SHIELD Act, it is helpful to review some of the empirical evidence on the economics Patent Assertion Entities (PAEs). Following up on Colleen Chien’s recent post (Patent Trolls by the Numbers), this post looks briefly at data on the 10 publicly listed firms that were predominantly in the patent assertion business during the period from 2005 to 2010 (Acacia, Asure, Interdigital, Mosaid, Network-1, OPTi, Rambus, Tessera, Virnetx, and Wi-Lan). These companies accounted for about one sixth of all PAE lawsuits filed during this period. Although these companies might not represent the entire universe of PAEs, the greater amount of available financial information helps paint a rich picture of their business. We explored three questions:

1. How much licensing revenue do PAEs get per company sued?

We matched these patent trolls to the lawsuits filed listed in Patent Freedom’s database of patent trolls (see our paper The Private and Social Costs of Patent Trolls for details on this database and the matching). During the period from 2005 through 2010, licensing revenues totaled nearly $6 billion. The mean licensing revenue per defendant comes to $3.8 million in 2010 dollars. This figure includes licensing revenues from non-litigated patent assertions. But it understates the magnitude of licensing revenues per suit because it does not account for accruals — much of the revenue from lawsuits filed in 2010 was not collected in 2010 (and there were many more lawsuits in 2010 than in earlier years). Overall, this figure corresponds rather well with survey-based estimates in our paper The Direct Costs of NPE Disputes.

2. How does revenue vary with PAE business model?

We identified three different types of business models: “middlemen” who acquire or license patents from third party inventors (e.g., Acacia), “R&D-based” who conduct R&D and file their own patents (e.g., Rambus), and “salvage” where an operating company becomes a PAE using patents it developed for its own business (e.g., Asure / Forgent). The R&D-based PAEs file fewer lawsuits, but their licensing revenues are much greater. The R&D-based PAEs account for only 6% of the lawsuits, but 83% of the revenues, earning $54 million per defendant. The “middlemen” file 80% of the lawsuits, but earn only $0.7 million per defendant. These wide disparities correspond to other evidence about the high heterogeneity of PAEs and licensing outcomes.

3. How much of the licensing revenue flows to inventors?

Using the firm’s 10-K reports, we estimated the flows of funds to third party inventors as royalties and as patent acquisitions, as well as the flows to PAE’s own R&D departments including capitalized development costs when the PAE exited an operating business. Of the total licensing revenues earned, only 7% flowed to third party inventors. If we look at just the “middlemen” PAEs, 31% of the licensing revenues flow to third party inventors. If we include own R&D in the whole sample of PAEs, total flows to inventors of all types come to 26% of licensing revenues. These numbers suggest that on the whole, not much of the revenue received by publicly listed PAEs ends up supporting independent inventors. They also suggest that most of the licensing revenues are consumed as transaction cost, even for the “middlemen” PAEs.

 

James Bessen is a former software innovator and an economist studying innovation; Michael J. Meurer is an economist and law professor. Bessen and Meurer wrote Patent Failure, an economic analysis of the performance of the US patent system in 2008 (Princeton University Press).

PCT Applications as Prior Art

Patent

By Dennis Crouch

International Patent Applications filed under the Patent Cooperation Treaty (PCT) are ordinarily published by the World Intellectual Property Organization (WIPO) 18-months after the filing date.

In a prior comment section, some debate arose as to the effective prior-art date that would be assigned to those applications. The answer is simple – once the application is published, the application will count as prior art as of its priority filing date so long as the PCT applications designates the United States (under the current system, all contracting states are automatically designated). Here is how I get there:

  1. Under 35 U.S.C. § 102(a)(2) patent applications are counted as prior art as of their effective filing date so long as the application is published under §122(b).
  2. At first glance, the limitation of being “published under section 122(b)” seems to limit the doctrine to US published applications. However, 35 U.S.C. § 374 changes the rules by indicating that WIPO’s publication of international PCT applications “shall be deemed a publication under section 122(b).”
  3. Section 102(d) then stretches the prior art date back to the earliest priority filing date that can claim priority to the relevant disclosure.

The result is that published PCT applications that designate the US count as prior art as of their priority filing date. In this analysis, there is no restriction on application language or country of origin.

Phase-in: The phase in of this rule is fairly simple. The above calculations apply when considering prior art against an application filed on or after March 16, 2013 and that, at any point in its history, included a claim to a claimed invention that has an effective filing date of on or after March 16, 2013.

 

USPTO Fee Change on March 19

Patent, , , ,

By Dennis Crouch

On March 19, the USPTO’s new fee structure becomes effective. Some fees are going down, others are going up. “Micro entities” will likely wait until tomorrow to take action in their cases because of the new micro entity fee that is a 75% reduction of standard fees. Folks filing on post issuance reexamination or review will also wait one day for substantial savings.

  • Filing Application (Filing + Search + Examination Fees): $1,600 up from $1,260.
  • Additional claims: $80 for each additional claim; $420 for each additional independent claim. This is up from $62 and $250 respectively.
  • Issue fee: $1,780 up from $1,770.
  • Maintenance (renewal) fees:
    • Due at 3.5 years: $1,600 up from $1,150.
    • Due at 7.5 years: $3,600 up from $2,900.
    • Due at 11.5 years: $7,400 up from $4,810.
  • Request for Continued Examination:
    • First Request: $1,200 up from $930.
    • Second or Subsequent Request: $1,700 up from $930.
  • Request for Prioritized Examination: $4,000 down from $4,800.
  • Appeals:
    • Notice of Appeal: $800 up from $630.
    • Brief in Support of Appeal: $0 down from $630.
    • Forwarding Appeal to the Board: $2,000 up from $0. (Essentially, the PTO has pushed-back and increased the payment).
    • Requesting Oral Hearing: $1,300 up from $1,260.
  • Extension fees:
    • One Month: 200 up from $150.
    • Two Months: $600 up from $570.
    • Three Months: $1,400 up from $1,290.
    • Four Months: $2,200 up from $2,010.
    • Five Months: $3000 up from $2,730.
  • Post-Grant Proceedings:
    • Request for ex parte reexamination: $12,000 down from $17,750.
    • Supplemental Examination: $16,500 with $12,100 refunded if no reexamination is ordered. This is down from $21,260 with $16,120 refundable.
    • Petition for Inter Partes Review: $23,000 with $14,000 refunded if petition is denied. This is down from $27,200 with no refund.
    • Petition for Post Grant Review: $30,000 with $18,000 refunded if petition is denied. This is down from $35,800 with no refund.
  • Provisional Applications: $260 up from $250.
  • Design Patents:
    • Filing (Filing + Search + Examination Fees): $760 up from $530. (Updated to fix prior typo)
    • Issue: No change at $1,020.

New fee regime: http://www.uspto.gov/web/offices/ac/qs/ope/fee031913.htm

Obviously patent applicants are impacted by costs just like any other market participant. And, PTO fees appear to akin normal goods in that an increase in price will result in a decrease in the quantity demanded (and vice-versa). However, I also suggest (without too much proof) that most USPTO fees are still fairly inelastic. What this means for the bottom line is that the increase in fees will result in increased revenue for the PTO and that most patent applicants will need to increase their budgets accordingly.

Frolow v. Wilson: Marking Estoppel and Arising Under Jurisdiction

Patent,

by Dennis Crouch

Jack Frolow v. Wilson Sporting Goods (Fed. Cir. 2013)

The decision here focuses on the evidentiary value associated with the fact that a patent licensee marked its products as patented but then later claimed that the same products are not covered by the listed patent. After the break, I also discuss the arising-under jurisdictional issue raised by the situation but not challenged by the court.

Background: Frolow's patent covers a tennis racket with a particular moment-of-inertia and center of percussion. U.S. Patent Reissue No. Re 33,372. Wilson licensed the original patent back in 1989 but Frolow later sued – alleging breach of contract and patent infringement based upon Frolow's test that showed 42 Wilson rackets were covered by the patent but that were not subject of royalty payments. The district court partially dismissed the case on FRCP Rule 56 summary judgment – holding that Frolow had failed to present material facts sufficient to create a genuine dispute as to whether 37 of the rackets were covered by the patent and/or license. At trial, the district court then granted Wilson's FRCP Rule 50 judgment as a matter of law – holding that the patentee had failed to present sufficient evidence that the remaining five rackets fell within the scope of the patent. On appeal, the Federal Circuit has reversed the summary judgment holding.

Three Judges Four Decisions: The decision structure here is odd to say the least. All three judges agreed on the outcome but were still able to produce four separate opinions. The majority opinion is written by Judge Moore and signed by Judge Clevenger. Judge Moore and Clevenger each provided their own separate opinions with "additional views." And, Judge Newman filed a concurring opinion that agreed with the final judgment.

Here, Wilson had marked all of its rackets as patented and listed the Frolow patent number on each. Frolow asked the court to apply a doctrine of "marking estoppel" to prevent Wilson from later arguing that the products are not covered by the patent. The appellate court refused to adopt the doctrine of marking estoppel, but did find that Wilson's marking should serve as factual evidence of extra-judicial admission tending to prove infringement. In the process, the appellate court rejected the lower court's ruling that the marking was irrelevant to infringement analysis.

Placing a patent number on a product is an admission by the marking party that the marked product falls within the scope of the patent claims. The act of marking is akin to a corporate officer admitting in a letter or at a deposition that the company's product infringes a patent. A defendant, of course, is free to introduce counter evidence or explanation. Thus, the district court erred when it concluded that Wilson's marking had "no bearing on whether literal or doctrine of equivalents infringement has occurred."

Like any other type of extrajudicial admission, evidence of marking is relevant evidence. And such an admission, that the accused product falls within the asserted claims, is certainly relevant on the issue of infringement. Of course, whether a party's marking, in view of the record as a whole, raises a genuine issue of material fact, will depend on the facts of each case. . . . .

On remand, a new jury may be finally asked to decide the infringement question.

In her concurring opinion, Judge Newman suggested that the marking by Wilson should create a presumption of infringement rather than simply circumstantial evidence of infringement. That would place the burden on Wilson to disprove infringement in a manner akin to the rule created in Medtronic v. Boston Scientific, 695 F.3d 1266 (Fed. Cir. 2012). In that case, the court ruled that a licensee in good standing who files a declaratory judgment lawsuit challenging the patent has the burden of proving non-infringement. The Medtronic case is now pending before the Supreme Court on petition for writ of certiorari.

The additional separate opinions by Judges Clevenger and Moore focused on the potential unfair prejudice associated with telling the jury that Wilson had marked its rackets as covered by Frolow's patent. For Clevenger argued that evidence should probably be excluded under Fed. R. Evid. 403 because of the danger of unfair prejudice that outweighs the evidentiary value. Judge Moore disagreed.

= = = = =

Arising Under Jurisdiction?

One oddity about the case is that the patent claim was dismissed early on for failure to state a claim. In particular, Frolow admitted in the complaint that Wilson had a license and that the only problem was Wilson's failure to pay the required royalty amount. Based on meritless allegations, the court dismissed the patent claim. See Vulcan Engineering Co., Inc. v. Fata Aluminum, Inc., 278 F.3d 1366 (Fed. Cir. 2002); Cyrix Corp. v. Intel Corp., 77 F.3d 1381 (Fed. Cir. 1996); United States v. Studiengesellschaft Kohle m.b.H., 670 F.2d 1122 (Fed. Cir. 1981) ("The license waives this right to judicial relief against what, but for the license, would be an infringement."); Schering Corp. v. Zeneca, Inc., 958 F. Supp. 196 (D. Del. 1996) ("Zeneca's license provides an absolute immunity from Schering's infringement action," citing DeForest Radio Telephone and Telegraph Co. v. United States, 273 U.S. 236 (1927)).

After dismissing the patent claim, the district court was left only with the contract dispute. Certainly, that aspect of the case still involved lots of patent issues. Since the scope of licensed products was contractually defined as products that fall under the patent, the court had to figure out which rackets are "infringing" in order to know which ones are covered by the license. However, we know now (under Gunn v. Minton) that the contract claim probably does not arise under federal patent law. The absence of the patent issues was not a problem for the district court here, since there was also diversity jurisdiction. However, the jurisdictional basis is important for knowing whether the appeal goes to the Federal Circuit or to the regional circuit court of appeals. Only cases arising under the patent laws are appealed to the CAFC.

The question in my mind is whether this case arose under the patent laws. In Hunter Douglas v. Harmonic Design, 153 F.3d 1318 (Fed. Cir. 1998), the Federal Circuit found a distinction between claims cases dismissed for lack of subject matter jurisdiction under FRCP R. 12(b)(1) and claims dismissed for failure to state a claim under FRCP R. 12(b)(6). According to the court, 12(b)(1) dismissal indicates a lack of arising under jurisdiction while a claimed dismissed on 12(b)(6) can still be said to have arising under jurisdiction.  This creates a difficult to comprehend result because we may result in a situation where the well pleaded complaint is considered to include a federal patent claim even though the court dissmisses that same claim for on 12(b)(6) for failure to state a claim in the pleadings.  

The catchphrase of the Hunter Douglas decision by Judge Clevenger is whether the federal claim being stated is "wholly insubstantial."  Other courts similarly look to see whether the federal claim is a "frivolous" federal claim. If the federal claim meets either of these tests then it is said to arise under federal law even if the court later dismisses that claim.  

The question that the appellate court failed to address here is whether it had appellate jurisdiction and, that question will turn on wether the original patent claim was frivolous or wholly insubstantial.  Because jurisdictional questions are generally not waivable, Wilson could immediately file for reconsideration based upon the court's lack of appellate jurisdiction. This also makes sense because the Gunn decision was released well after briefing and oral arguments were complete. 

The New Law Effective Today: 35 U.S.C. 102

Patent, ,

By Dennis Crouch

Consider the text of new 35 U.S.C. §102.

(a) Novelty; Prior Art.— A person shall be entitled to a patent unless—

(1) the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention; or

(2) the claimed invention was described in a patent issued under section 151, or in an application for patent published or deemed published under section 122 (b), in which the patent or application, as the case may be, names another inventor and was effectively filed before the effective filing date of the claimed invention.

(b) Exceptions.—

(1) Disclosures made 1 year or less before the effective filing date of the claimed invention.— A disclosure made 1 year or less before the effective filing date of a claimed invention shall not be prior art to the claimed invention under subsection (a)(1) if—

(A) the disclosure was made by the inventor or joint inventor or by another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or

(B) the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor.

(2) Disclosures appearing in applications and patents.— A disclosure shall not be prior art to a claimed invention under subsection (a)(2) if—

(A) the subject matter disclosed was obtained directly or indirectly from the inventor or a joint inventor;

(B) the subject matter disclosed had, before such subject matter was effectively filed under subsection (a)(2), been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or

(C) the subject matter disclosed and the claimed invention, not later than the effective filing date of the claimed invention, were owned by the same person or subject to an obligation of assignment to the same person.

(c) Common Ownership Under Joint Research Agreements.— Subject matter disclosed and a claimed invention shall be deemed to have been owned by the same person or subject to an obligation of assignment to the same person in applying the provisions of subsection (b)(2)(C) if—

(1) the subject matter disclosed was developed and the claimed invention was made by, or on behalf of, 1 or more parties to a joint research agreement that was in effect on or before the effective filing date of the claimed invention;

(2) the claimed invention was made as a result of activities undertaken within the scope of the joint research agreement; and

(3) the application for patent for the claimed invention discloses or is amended to disclose the names of the parties to the joint research agreement.

(d) Patents and Published Applications Effective as Prior Art.— For purposes of determining whether a patent or application for patent is prior art to a claimed invention under subsection (a)(2), such patent or application shall be considered to have been effectively filed, with respect to any subject matter described in the patent or application—

(1) if paragraph (2) does not apply, as of the actual filing date of the patent or the application for patent; or

(2) if the patent or application for patent is entitled to claim a right of priority under section 119, 365 (a), or 365 (b), or to claim the benefit of an earlier filing date under section 120, 121, or 365 (c), based upon 1 or more prior filed applications for patent, as of the filing date of the earliest such application that describes the subject matter.

35 U.S.C. §103

A patent for a claimed invention may not be obtained, notwithstanding that the claimed invention is not identically disclosed as set forth in section 102, if the differences between the claimed invention and the prior art are such that the claimed invention as a whole would have been obvious before the effective filing date of the claimed invention to a person having ordinary skill in the art to which the claimed invention pertains. Patentability shall not be negated by the manner in which the invention was made.

= = = = =

Notes of Import:

  1. Prior art is now keyed to the effective filing date of the application-in-question and – except for grace period and derivation purposes – dates of conception and reduction to practice are no longer relevant.
  2. The fact that someone else invented your idea first (or something similar to your idea) is irrelevant except in the limited case of a derivation proceeding. Rather, what matters in the general case is whether that other party created prior art. (Prior commercial users will have limited prior user rights.)
  3. On sale and public use activities are no longer limited to activities within the US. Rather, those elements can be proven with prior art arising from any region of the world.
  4. The USPTO has interpreted "on sale" activity of 102(a)(1) to be limited to public sales or public offers for sale. That interpretation eventually be challenged in court, though the challenge will likely take several years. That shift is a change from our prior understanding of on sale activity.
  5. Under the 102(b) grace period, the law indicates that pre-filing disclosures "of the claimed invention" by the patent applicant will not serve as prior art against the inventor own later-filed patent as long as the application is filed within one year. Despite that "claimed invention" language, the USPTO has stated that the safe-harbor will work to disqualify all inventor-disclosed subject matter, even if the disclosure only suggests portions of the invention or motivations behind the invention. Of course, care should be taken with a publish-early strategy because that publication will likely negate the possibility of non-US patent rights covering the subject matter disclosed.
  6. A prior-filed US patent application will continue to serve as prior art once it is either published or patented and will have a prior art date of its earliest priority filing date that includes the relevant disclosure. Foreign applications will only count as prior art as of their publication date unless versions of those applications are filed in the US. Thus, an ordinary published Japanese patent application will be considered prior art in the US as of its publication date. However, if a US application is filed that claims priority to that Japanese application then the US application (once it publishes) will be considered prior art as of the date that the Japanese application was filed.
  7. Large companies who file many patent applications receive additional relief from their own prior art under 102(b)(2)(C) and 102(c). Basically, a company's prior filed patent application will not count as prior art (for any reason) against the company's later-filed application so long as the prior application has not published or issued by the filing-date of the later application. Further, if the later-filed application was developed as part of a joint research agreement then the law will negate the prior art status of prior filed applications of any of the parties to the joint research agreement (so long as the prior applications were unpublished as of the filing-date of the later-application).

Federal Circuit to Reconsider De Novo Review of Claim Construction

Patent,

By Jason Rantanen

In a per curium order issued a short time ago, the current sitting judges of the Federal Circuit (Chief Judge Rader and Judges Newman, Lourie, Dyk, Prost, Moore, O'Malley, Reyna, and Wallach) have granted Lighting Ballast Control's petition for rehearing en banc.  As Hal Wegner has pointed out, this comes just hours before Judge Taranto's swearing in. 

The parties have been instructed to address of deference in reviewing district court claim constructions:

a. Should this court overrule Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448 (Fed. Cir. 1998)?
b. Should this court afford deference to any aspect of a district court’s claim construction?
c. If so, which aspects should be afforded deference?

It goes without saying that these questions have tremendous significance for patent law.  One peripheral thought – will the court hold all appeals involving issues of claim construction in abeyance until it issues its en banc opinion?

The order: Download Lighting ballast 2012-1014 3 15 13 final en banc grant order

Previous PatentlyO coverage of the petition:

Aristocrat Technologies v. Int’l Game Technology

Patent,

By Jason Rantanen

Aristocrat Technologies Australia PTY Limited v. International Game Technology (Fed. Cir. 2012) Download 10-1426.Opinion.3-11-2013.1
Panel: O'Malley (author), Bryson and Linn

Aristocrat and IGT compete in the casino gaming machine industry; Aristocrat was the patent holder here.  After construing the claims, the district court granted summary judgment of noninfringement under Muniauction v. Thomson, 532 F.3d 1318 (Fed. Cir. 2008), because no single actor performed all of the claimed steps.  On appeal, the Federal Circuit affirmed the district court's claim construction and summary judgment of no direct infringement but remanded for further proceedings on inducement of infringement in light of its intervening en banc decision in Akamai Technologies, Inc. v. Limelight Networks, Inc., 692 F.3d 1301 (Fed. Cir. 2012).  This is the second case this month to address the issue of joint/divided infringement.

The patents-in-suit relate to a gaming system in which an additional prize is awarded to a player through a secondary feature game appearing after the main game is completed.  Most of the claim limitations relate to steps that would performed by the casino itself, such as "initiating a first main game at said particular gaming machine" and "awarding said one progressive prize from said plurality of progressive prizes that has been won." 

One limitation, however, requires "making a wager at a particular gaming machine in the network of gaming machines."  The district court interpreted this limitation to mean "betting, which is an act performed by the player."  Aristocrat challenged this construction on appeal, contending that "making a wager" is merely "carrying out a bet" (and thus could be performed by the same actor that carried out the other steps).  The Federal Circuit disagreed, noting the overwhelming support for the district court's construction.  It rejected Aristocrat's other claim construction challenge based on similarly overwhelming amounts of contrary evidence.  This opinion is a great example of what happens when a party tries to twist the meaning of a claim term far beyond what is reasonable or supportable. 

Divided infringement (direct): Turning to the divided infringement problem the construed claims raised, the Federal Circuit began by affirming summary judgment of no direct infringement.  The court first noted that Akamai expressly did not revisit the law of divided infringement as it applies to 271(a); to be liable for direct infringement of a method claim, a party must perform "all the steps of the claimed method, either personally or through another acting under his direction or control."  Slip op. at 25, quoting Akamai.  Under Muniauction, “the control or direction standard is satisfied in situations where the law would traditionally hold the accused direct infringer vicariously liable for the acts committed by another party that are required to complete performance of a claimed method.”  Here, no single actor performed all the claimed steps and the Federal Circuit declined to conclude that the alleged conduct satisfied the "direction or control requirement.  In doing so, it expressly rejected Aristocrat's argument that this requirement was satisfied due to the player's actions being "the 'natural, ordinary, and reasonable consequences of' IGT's conduct."  Slip op. at 27.

Divided infringement (indirect): Applying Akamai, the Federal Circuit vacated the district court's summary judgment with regard to indirect infringement, an issue that neither the parties nor the district court expended significant time on.  The Federal Circuit's opinion provides no substantive discussion on this issue but does highlight two key parts of Akamai that nicely sum it up: 

As we stated in Akamai, “[r]equiring proof that there has been direct infringement as a predicate for induced infringement is not the same as requiring proof that a single party would be liable as a direct infringer.” Akamai, 692 F.3d at 1308-09 (emphasis in original). Thus, “[a] party who knowingly induces others to engage in acts that collectively practice the steps of the patented method—and those others perform those acts—has had precisely the same impact on the patentee as a party who induces the same infringement by a single direct infringer; there is no reason, either in the text of the statute or in the policy underlying it, to treat the two inducers differently.” Id. at 1309.

Slip op. at 28. Here, Aristocrat deserved the opportunity to argue its indirect infringement theory with the benefit of the Federal Circuit's clarification regarding inducement. 

Update on petitions for certiorari in Akamai and Epic v. McKesson: As noted by Dennis earlier this month, petitions for certiorari were filed in both Akamai and Epic v. McKesson.  However, Epic and McKesson recently settled and Epic has withdrawn its cert petition. (Thanks to Tim Holbrook for pointing this out). Clarification: Both Limelight's petition and Akamai's conditional cross-petition remain pending.