Moving forward with a small claims patent court

December 20, 2012PatentVenueDennis Crouch

The Patents County Court has been deciding "small" patent cases for the past 20 years. Under Hon. Colin Birss, the court now limits claims to £500,000. Larger claims can be brought in the High Court. In the US, all patent infringement cases are heard in Federal District court. And, it ordinarily does not make much sense to file a patent lawsuit when there is less than $1,000,000 at stake.

Over the next year, the USPTO and perhaps other agencies will be holding hearings on whether the US should develop a small claims proceeding for lower-value patent enforcement actions. In a recent release, the USPTO has asked for input on whether this type of enforcement proceeding would have market value and, if created, what parameters should guide its implementation.

Among the information of interest to the USPTO is whether there is a need and desire for this type of proceeding, in what circumstances is this proceeding needed if such a need exists, and what features this proceeding should possess. In particular the USPTO seeks information about core characteristics of a patent small claims proceeding including characteristics such as subject matter jurisdiction, venue, case management, appellate review, available remedies, and conformity with the U.S. constitutional framework (e.g. 7th Amendment).

https://s3.amazonaws.com/public-inspection.federalregister.gov/2012-30483.pdf. Email comments to David.Gerk@uspto.gov by March 18, 2013.

Prior proposals in the 1980's and 1990's received positive treatment from the bar, but failed to garner congressional support.

Something can be both Funny and Improperly Scandalous, even a Federal Circuit Opinion

December 19, 2012PatentDennis Crouch

By Dennis Crouch

In re Fox (Fed. Cir. 2012)

Since 1979, Ms. Fox has been selling rooster-shaped chocolate lollypops. These sell well in my birthplace of Columbia South Carolina – home of the Gamecocks. Naturally, Fox calls her lollypops “Cock Suckers.”

The USPTO refused to register her trademark on the phrase – calling it scandalous since the common definition of a cocksucker is someone who performs fellatio. On appeal, the Federal Circuit has affirmed – holding that a double entendre nature of the mark does not cure its vulgarity.

So too the association of COCK SUCKER with a poultry-themed product does not diminish the vulgar meaning—it merely establishes an additional, non-vulgar meaning and a double entendre. This is not a case in which the vulgar meaning of the mark’s literal element is so obscure or so faintly evoked that a context that amplifies the non-vulgar meaning will efface the vulgar meaning altogether. Rather, the mark is precisely what Fox intended it to be: a double entendre, meaning both “rooster lollipop” and “one who performs fellatio.” . . .

We therefore see no reason why the PTO is required to prove anything more than the existence of a vulgar meaning to a substantial composite of the general public in order to justify its refusal. . . .

We recognize that there are “whimsical” and humorous aspects to Fox’s mark. But the fact that something is funny does not mean that it cannot be “scandalous.”

Toward the end of the opinion, the court attempted to offer some libertarian condolences to Ms. Fox – writing that

Nothing in this decision precludes Fox from continuing to sell her merchandise under the mark at issue. . . . If Fox is correct that the mark at issue “bring[s] [nothing] more than perhaps a smile to the face of the prospective purchaser,” then the market will no doubt reward her ingenuity. But this does not make her mark registrable.

Left unsaid is that, based upon the results of this decision, the market will also copy her ingenuity.

As an aside, the nice thing about the rule against scandalous marks is that you never have to worry about trademark infringement when cursing up a storm.

H.R. 6621 has passed in the House

December 19, 2012PatentDennis Crouch

Yesterday evening, the House of Representatives passed H.R. 6621, titled “To correct and improve certain provisions of the Leahy-Smith America Invents Act and title 35, United States Code.” The vote was 308-89. For the bill to become law, the Senate would need to take affirmative action before its December recess.

CLS Bank v. Alice Corp: Software Patentability On the Briefs

December 19, 2012PatentAbstract Idea, anticipation, Claim Construction, Federal Circuit En Banc, First to Invent, obviousness, Subject Matter EligibilityDennis Crouch

by Dennis Crouch

Briefing continues in the CLS Bank software patent case. The accused infringer (CLS Bank) has filed its brief arguing that the Alice patent lacks any core inventive concept and therefore lacks subject matter eligibility under Section 101 of the Patent Act. Briefs in support of CLS and those nominally in support of neither party have also been filed. Alice will file its brief in January and I expect a set of additional briefs in support. As in the Bilski case, Alice's asserted claim here is one that appears invalid on other grounds — namely obviousness. However, the district court ruled on summary judgment (and before claim construction) that the claim was invalid as lacking patent eligiblity under Section 101.

The text of the asserted claim is below:

A method of exchanging obligations as between parties, each party holding a credit record and a debit record with an exchange institution, the credit records and debit records for exchange of predetermined obligations, the method comprising the steps of:

(a) creating a shadow credit record and a shadow debit record for each stakeholder party to be held independently by a supervisory institution from the exchange institutions;

(b) obtaining from each exchange institution a start-of-day balance for each shadow credit record and shadow debit record;

(c) for every transaction resulting in an exchange obligation, the supervisory institution adjusting each respective party's shadow credit record or shadow debit record, allowing only these transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place in chronological order; and

(d) at the end-of-day, the supervisory institution instructing ones of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions.

In its first opinion, the Federal Circuit reversed the lower court ruling – finding that the claim did not merely encompass an abstract idea but instead embodied a practical implementation that fits within the scope of patent eligible subject matter. In a subsequent en banc order, the court asked that the parties focus on two particular questions of law:

I. What test should the court adopt to determine whether a computerimplemented invention is a patent ineligible “abstract idea”; and when, if ever, does the presence of a computer in a claim lend patent eligibility to an otherwise patent-ineligible idea?

II. In assessing patent eligibility under 35 U.S.C. § 101 of a computerimplemented invention, should it matter whether the invention is claimed as a method, system, or storage medium; and should such claims at times be considered equivalent for § 101 purposes?

I have attempted to extract some core elements of each brief. I should note that all of these brief have much more nuance than is shown. I attempted to categorize the briefs filed on behalf of neither party. My approach was quite subjective and I am confident that others would have classified them in a different manner.

Practical keys here are (1) whether subject matter eligibility is about the inventive concept or instead more focused on the scope of a well construed claim; (2) invention

Party Brief:

File Attachment: CLS En Banc Principal Brief.pdf (1920 KB)

In Support of CLS (Defendant)

File Attachment: BSA Software Alliance–ISO CLS.pdf (169 KB) Business Software Aliance believes that software should be patentable, but not the software at issue here.

"Simple economics makes clear that, if patent protection for software were curtailed, the adverse consequences would be swift and severe. . . . Two factors are of particular significance—whether a claim can be implemented solely via a mental process or necessarily relies upon a machine for execution; and whether the claim uses an abstract idea or law of nature in a way that is novel, useful, and limited. When an invention falls short under both of these standards, it most likey is not patentable under Section 101. . . . Assessed under this framework, the software at issue here is not patentable. . . . It is plain that credit intermediation long preexisted computer implementation, and that it is a process that can be performed in the human mind, or by a human with pencil and paper. In addition, the computer aspect of the claims here does not add anything of substance to the mental process at issue. The computer implementation of the abstract idea is not limited in any fashion. And there is no suggestion that the process here is in anyway dependent upon computer technology to accomplish the directed end."
Download EFF–ISO CLS Patents are causing more harm than benefit. This is especially true for software patents that regularly include broad functional claims. However, Section 101 analysis is problematic because of its ambiguity. The EFF brief argues that the way to cure this is to more broadly interpret 35 U.S.C. § 112(f) (2012) so that functional software claims be given limited scope under the Federal Circuit's Means-Plus-Function doctrine. This approach stems from a recent article by Mark Lemley and fits directly within the avoidance doctrine that Professor Merges and I suggested in our 2010 article.
File Attachment: CCIA–ISO CLS.pdf (200 KB) Prometheus requires an inventive concept to pass 101.
File Attachment: Clearing House Ass'n–ISO CLS.pdf (819 KB) Banking industry brief argues that "threshold" language means that "the Section 101 inquiry is the first step in the legal framework to determine patentability" and should be rigorously enforced.
File Attachment: Google et al.–ISO CLS.pdf (982 KB). Google acknowledges the difficulty with the abstract idea test because the term "abstract" is so difficult to define. However, Google argues that the abstract ideas are much easier to identify individually than to define generally. This is roughly the same as know-it-when-you-see-it test for obscinity. Google also writes that "abstract patents are a plague on the high-tech sector."
File Attachment: Stites Amicus Brief.pdf (262 KB) "The software patent game is a less than a zero sum game for the participants and has a large inhibiting effect on software innovation." Stites argues that the court should simply eliminate software patents.

In Support of Neither Party, but Promoting a Stronger § 101 Requirement

File Attachment: British Airways et al–ISO Neither Party.pdf (191 KB) Supreme Court has rejected the "course-filter" "manifestly-evident" approach offered by the original CLS panel. Whether a claim fails under Section 101 can ordinarily be determined very early in a case and without and detailed claim construction.
File Attachment: Profs Hollaar & Trzyna–ISO Neither Party.pdf (217 KB) The only way to draw a clear and reasonable line on subject matter eligibility is to focus on its link to technology.
File Attachment: Juhasz Law Firm–ISO Neither Party.pdf (285 KB) "The test to determine whether a computer-implemented invention is a patent ineligible "abstract idea" should be whether steps that are central to the claim (i.e., not token extra-solution activity) have a "physical" or "virtual" link to a specific real or tangible object."
File Attachment: Koninklijke Philips–ISO Neither Party.pdf (549 KB) An applicant and patentee should have the burden of proving that the claimed software implementation is subject matter eligible.
File Attachment: Internet Retailers–ISO Neither Party.pdf (2454 KB) Simply rewriting a method claim as a system or storage medium cannot render the claim subject matter eligible. The Federal Circuit should empower district courts to make 101 determinations very early in cases – well before claim construction or the completion of discovery. "The savings to the parties in money and the courts in time are self-evident. And those savings are more likely to be obtained in precisely those cases in which the patents are least likely to be valid or valuable, cases brought under low-quality patents. Judicious application of Section 101 is likely to winnow out the worst patents at the lowest cost."

In Support of Neither Party, but Promoting a Weaker § 101 Requirement

File Attachment: IP Owners Ass'n–ISO Neither Party.pdf (301 KB) Software is generally patentable under Section 101. However, a claim "must describe the use of [a] computer with sufficient detail to avoid preempting other uses of the idea and the computer implementation must be a meaningful and significant element of the invention." A detailed claim construction is ordinarily necessary to determine whether that claim is directed to statutory subject matter.
File Attachment: CLS-Bank_v_Alice_USA-amicus-ISO-Neither-Party.pdf (311 KB) See this.
File Attachment: Sigram Schindler–ISO Neither Party.pdf (474 KB) The abstract idea test is sufficiently defined.
File Attachment: NY IP Law Ass'n–ISO Neither Party.pdf (735 KB) Efforts in some decisions to dissect the claim into old and new parts or computer and non-computer elements, should be rejected as squarely inconsistent with the Supreme Court's holdings in Diamond v. Diehr, 450 U.S. 175 (1981), and Bilski. "NYIPLA does not agree that method, system and storage medium claims should ipso facto rise and fall together. Rather, each claim (regardless of its type) should be considered independently as a whole to determine whether it is directed to patent-eligible subject matter."
File Attachment: IP Law Ass'n of Chicago–ISO Neither Party.pdf (1024 KB) Subject matter eligibility should be broad and flexible. IPLAC's test is similar to the government's factor's in its brief. However, the tone of the IPLAC questions suggest broader eligibility. When a claim includes a computer program, IPLAC would ask: "(a) Are the claims drawn to subject matter otherwise statutory, because if so, they do not become nonstatutory simply because they use a mathematical formula, computer program or digital computer. Diehr. (b) Are process claims, as a whole, without regard to the novelty of any element or steps, or even of the process itself, nothing more than a statutory process and not an attempt to patent a mathematical formula, because if so, they are not nonstatutory. (c) Do the claims implement or apply a formula in a structure or process which, when considered as a whole, is performing a function which the patent laws were designed to protect (e.g., transforming or reducing an article to a different state or thing), because if so, the claims are statutory. (d) Do the claims apply the laws to a new and useful end, because if so, they are statutory."
File Attachment: Conejo-Valley-Bar-Assn–ISO-Neither-Party.pdf (1589 KB) There is no need for a strong section 101 eligibility requirement because the other sections of the patent act do the work already.
File Attachment: IBM–ISO Neither Party.pdf (1624 KB) "In the exceptional case when the patent eligibility of a computer implemented invention is not readily apparent, the functional requirement of a computer counsels in favor of patent eligibility." Methods are different from systems and are different from storage media. As such, the subject matter eligibility issues are also different and thus, a system claim might be patent eligible while its parallel method claim may be ineligible.

H.R. 6621 Hits a Temporary Snag

December 18, 2012PatentDennis Crouch

Rep. Lamar Smith pushed for a voice vote today for H.R. 6621. However quick passage was thwarted by the Orange County Republican Dana Rohrabacher. Rohrabacher’s concern regards revised section (m) of the Bill that would require the USPTO to provide a report to Congress of pre-URAA cases that are still pending at the USPTO (i.e., patent applications filed prior to June 8, 1995 that are still pending at the USPTO). The particular concern is that the report would publicly identify the names of the inventors concerned and thus be contrary to the law requiring information regarding those applications be kept secret until patent issuance. It is unclear whether Smith will push for a roll call vote later this week or instead again amend the bill to mollify Rohrabacher’s concern.

CAFC Obviousness Decision Trends and KSR

December 18, 2012Obviousness, PatentobviousnessJason Rantanen

By Jason Rantanen

Following up on Dennis's post earlier this morning, below I've provided a few charts showing the Federal Circuit's practice of citing KSR in its obviousness opinions. The data comes from a study of the court's post-KSR obviousness jurisprudence that I'm currently writing up; as a result, it only runs through April 30, 2012. The pattern is noticibly different from that of the BPAI/PTAB data that Dennis provided, both for all opinions involving obviousness and for just those arising from the PTO.

The first chart shows the rate at which the Federal Circuit cited KSR at least once in an opinion addressing obviousness. The rate at which the court cited KSR actually climbed a bit in 2011.

The next chart is a moving (lagged) average, which means that each point represents the average rate that the Federal Circuit cited KSR over the 20 preceding opinions. For example, the first point represents the average rate at which the Federal Circuit KSR in opinions 1-20 following KSR, the second point opinions 2-21, etc. The first data point thus corresponds with the Federal Circuit's 20th opinion on obviousness after KSR while the last data points corresponds with the Federal Circuit's 155th opinion after KSR.

The last chart follows the same format as the first chart, limited to appeals arising from the PTO.

BPAI/PTAB Obviousness Decision Trends

December 18, 2012Obviousness, PatentobviousnessDennis Crouch

The vast majority of BPAI/PTAB decisions focus on the question of obviousness. Basically, the Board is reviewing whether or not an examiner's obviousness rejection is proper. I created the chart above by using a simple text search for obviousness related terms within each BPAI/PTAB merits decision during the past six years and found that roughly 80-85% of Board decisions discuss obviousness to some degree. I previously tested this methodology against an actual reading of cases and found that my automated methodology correlates quite well. The results for the percentage of obviousness decisions are in blue. A subset of those cases are found in red and represent the percentage of Board merits decisions that cite to the Supreme Court's decision in KSR Int'l Co. v. Teleflex, Inc., 550 U.S. 398 (2007). That decision was important because it changed the law of obviousness as applied by the USPTO.

Apparent from the chart is the fact that the BPAI/PTAB is citing KSR much less frequently in 2012 than it did in 2008-2009. My hypothesis is that a smaller percentage of applicants are fighting about the law of obviousness and more are now focused on application of that law. Mixed into this is the reality that the Board is also writing shorter opinions — leaving less room for pesky citations.

Apple v. Samsung: Court Denies Permanent Injunction and Allows Samsung to Continue Selling Infringing Devices

December 17, 2012PatentDamagesDennis Crouch

By Dennis Crouch

File Attachment: Apple_Samsung_Injunction_Denied.pdf (145 KB).

If the Apple-Samsung patent infringement lawsuit had been litigated back in 2005, the parties would have likely settled by now. Ebay changed that calculus and now an adjudged infringer such as Samsung can afford to push cases and appeals further because there is little downside risk that a US court will actually force the company to stop distributing its well known and respected products.

In an order on December 17, 2012, Judge Koh denied Apple’s motion for permanent injunctive relief to stop Samsung from continuing to infringe Apple’s patents and trade-dress. Thus, Apple must be satisfied with the payment of money damages. Although major, the ruling is not unexpected since based both on the law (eBay) and the fact that the court previously denied Apple’s motion for preliminary injunctive relief based upon Apple’s failure to prove irreparable harm.

In order to be eligible for injunctive relief the prevailing party must show that it will suffer irreparable absent an injunction. A key to current irreparable harm doctrine is proof of the nexus between the infringement and the irreparable harm. I.e., that infringement of the particular features or designs protected by the patent right (as opposed to some other factor) will cause the loss of market share. Unlike infringement and damages, the issues associated with injunctive relief are all seen as equitable issues and therefore decided by the judge rather than a lay jury.

Here, Apple alleged three irreparable injuries: “(1) loss of market share; (2) loss of downstream and future sales; and (3) injury to Apple’s ecosystem.” The court found apple had proven injury, but apple failed to prove the causal nexus between the particular adjudged infringing acts and the irreparable harm. As it turned out, Apple did not even present an analysis of alleged harm on a claim-by-claim or even a patent-by-patent basis. In considering this, the court found that Apple’s had not proven that any of “its three [infringed] design patents covers a particular feature that actually drives consumer demand.” The same problem existed with the utility patent that was found infringed. Rather Apple’s proof was “simply too general.”

Many factors go into making a product easy to use, but the features for which Apple is asserting patent protection are very specific. A consumer may want a phone that is easy to use, but this does not establish that a tap-to-zoom feature, for example, or any given type of gesture, is a driver of consumer demand. Thus, Apple’s evidence of a survey showing the importance of ease of use as a general matter, PX 146.6, does not establish that infringement of any of Apple’s patents caused any harm that Apple has experienced. To establish the required nexus, Apple must make a showing specific to each patented feature. This, Apple has not done.

Without establishing a causal nexus between the proven harm and the proven infringement there is no room for justifying injunctive relief. Therefore Judge Koh denied relief. Apple has an immediate right to appeal this decision to the Federal Circuit even as the district court continues to decide additional post-verdict motions. To be clear, this is a major win for Samsung, but Apple still has a right to appeal and is sitting on a $1 billion verdict.

The court has also released its reasoning for denying the Samsung motion for new trial based upon juror bias. The motion was based primarily on interviews given by the jury foreman (Velvin Hogan) after the verdict. Samsung alleged that Hogan was biased and had lied during voir dire. File Attachment: Apple_Samsung_New_Trial_Denied.pdf (130 KB).

Patenting Software: Obama Administration Argues “Sometimes”

December 17, 2012PatentAbstract Idea, AIA Trials, Claim Construction, Federal Circuit En Banc, PGR, Subject Matter Eligibility, USPTO DirectorDennis Crouch

By Dennis Crouch

CLS Bank Int'l v. Alice Corp (Fed. Cir. 2012)

The US Government has filed its amicus brief in the pending en banc CLS Bank case that focuses on the patentability of software systems. Download CLS-Bank_v_Alice_USA-amicus-ISO-Neither-Party. The brief generally rejects the idea that software per se represents patentable subject matter but is favorable toward the patenting of computerized applications that either improve computer performance, use technology in a unique technological way, or transform the local environment.

Unlike some recent briefs, this has been filed with the support of both the USPTO and the DOJ. The brief suggests a claim-by-claim subject matter analysis that begins with claim construction and only then asks "whether the challenged claim, properly construed, incorporates enough meaningful limitations to ensure that it amounts to more than a claim for the abstract idea itself." The brief then lists a set of factors that the government sees as important in making that determination:

Is the computer only nominally or tangentially related to the performance of the invention?
Is the computer generically recited or, instead are specific, unconventional computer equipment or tools required?
Is the invention focused primarily on non-technological fields or does the invention improve the ability of a computer to function as a computer?
Is the computer used generically for its automation or communication functions or does the computer manipulate particular data in particular, specific, and useful ways?
Is the abstract idea merely described within a particular environment or is the abstract idea part of an invention that transforms its environment.
Are the computer related elements merely conventional steps described at a high level of generality in a way that would be employed by anyone wanting to apply the abstract idea.

Each of these determinations is riddled with problems as is the potential weighting in an overall abstract-idea analysis. However, the overall approach adds substantially to the the

The brief suggests that all claimed features can contribute to subject matter eligibility, but some caution should be used to not allow "mere 'drafting effort designed to monopolize [an abstract idea] itself'" (quoting Mayo). Regarding the product/process divide, the government writes that the form of the claim should not impact subject matter eligibility because those differences come from the "draftsman's art" rather than the invention itself.

Perhaps attempting to endear itself to the Federal Circuit, the brief implicitly criticizes Supreme Court patent decisions by arguing that "the §101 inquiry should focus on the actual language of each challenged claim, properly construed, not a paraphrase or parody of the claims. Unfortunately, the government does not have any Supreme Court precedent to back-up this argument.

As a final point, the government brief argues that the presumption of validity associated with patent rights lead to a conclusion that a patent can only be invalidated on subject matter eligibility grounds based upon "clear and convincing evidence." Reading between the lines, this seems to mean that any conclusions draw from the factors above must be proven with clear and convincing evidence. While §101 eligibility may be a question of law, the government additionally argues that it is a factual question as to whether "limitations recited in a claim do not, in practice, impose any meaningful limitations on their claim scope." Of course, prior to issuance or during post-grant review there is no presumption of validity.

AIA Technical Amendment (H.R. 6621) Moving Forward

December 17, 2012PatentAIA Trials, First to Invent, IPR, obviousness, PGRDennis Crouch

By Dennis Crouch

Representative Lamar Smith has put forward an amended version of H.R. 6621 (/media/docs/2012/12/BILLS-112hr6621-SUS.pdf). The amended bill removes the provision that would have crippled the value of pending pre-Uruguay Round Agreement Act (URAA). In my estimation about 200 of those applications filed prior to June 8, 1995 are still in prosecution at the USPTO. That change makes the bill less controversial and sets up easy passage in the House leadership has set the bill up for a voice vote this week, perhaps as early as Tuesday, December 18. At this point no opposition to the bill has been raised in Congress. To become law, the Senate would need to pass the bill before its December recess.

Important changes include the following:

Less Patent Term Adjustment: The current language of Section 154(b) suggests an applicant may begin accumulating PTA as of the filing date of an international PCT application that is later followed by a US national stage application. The proposed amendment would eliminate that option by clarifying that the PTA calculations only begin “commencement of the national stage under section 371 in an international application.” The change also provides that the PTO calculate PTA with the issuance rather than at the notice of allowance. This is obviously problematic for some because it blocks patentees from clearing-up PTA issues prior to patent issuance. See 35 U.S.C. 154(b)(3)(C). This also effectively limits the timing for administratively challenging PTA determinations to a two-month period. In my first read through of the Bill, I failed to recognize that the amendment would require an administrative challenge prior to filing a district court challenge. Thus, the two-month-from-issuance deadline becomes a fairly hard deadline for correcting PTA. The statute does not clarify what happens if the USPTO fails to decide the PTA challenge prior to the six-month deadline for filing a district court case. Courtenay Brinkerhoff has a nice post criticizing the provision here: http://www.pharmapatentsblog.com/2012/12/11/hr-6621-adds-new-roadblocks-to-patent-term-adjustment-appeals/.

Post-Grant Dead Zone: Once the AIA is fully implemented, an issued patent will be immediately challengeable through a post-grant review. Then, after a nine-month window, challenges will be available through inter partes review. However, the AIA has bit of an implementation issued because (1) post-grant reviews will only be available for patents issued on applications filed on or after March 16, 2013; (2) inter partes reviews are available for all patents, but only those that have been issued for at least 9-months; and (3) the old inter partes reexaminations are no longer available. This creates something of a dead zone in that for the next couple of years patents will not be challengeable through any inter partes system until 9-months after issuance. H.R. 6621 would eliminate that 9-month dead zone by allowing inter partes reviews to be filed at any time for applications with an effective filing date before March 16, 2013.

Delaying Inventor’s Oath: Section 115(f) of the AIA indicates that an either (1) an oath, (2) a substitute statement, or (3) sufficient assignment must be submitted prior to the notice of allowance of a patent application. The amendment would push that deadline back to be “no later than the date on which the issue fee for the patent is paid.”

Sharing Fees Between the Patent and Trademark Side: The AIA requires that, for the most part, fees collected on patents be used to cover “administrative costs of the Office relating to patents” while fees collected on the trademark side be used to cover “administrative costs of the Office relating to trademarks.” H.R. 6621 would eliminate that restriction and thus allow patent fees to pay for trademark operations and vice versa.

Derivation Proceedings: The AIA eliminated the ongoing viability of interference proceedings (although some will be pending for years) but created a new beast known as a derivation proceeding. H.R. 6621 would clean up the language for initiated a derivation proceeding under 35 U.S.C. §135(a). I need to think some about the language to understand the substance. I have created a rough mark-up of this language. (/media/docs/2012/12/CompareNewOldDerivation.docx).

Smith on Design Patents

December 16, 2012Patentdesign patentDennis Crouch

By Dennis Crouch

When I began writing Patently-O in 2004, design patents were largely thought of as akin to a pre-ball Cinderella: In rags, forlorn, and quite pitiful. Things have changed. Design patents are more valuable than ever and their trajectory continues to rise.

Matthew A. Smith (Foley) recently put together a short treatise on design patents (short for a treatise) and offered to publish Version 0.9 here as a preliminary draft for commentary. Coverage in the 82 page volume includes general background on the laws of design patents; design patent application preparation and prosecution; design patent enforcement; tests of design patent validity; and design patent remedies. As per his usual, Smith’s approach is to provide straightforward analysis in practical terms and with direct reference to the underlying sources of law.

Read it while its hot: Matthew A. Smith, Design Patents, Ed. 0.9 (Prelim. Draft) (Dec. 17 2012). /media/docs/2012/12/2012-12-17_design_patents.pdf [Updated]

Judicial Network of the Patent Trial and Appeals Board (PTAB)

December 16, 2012PatentUSPTO DirectorDennis Crouch

by Dennis Crouch

Here is an image from a project that I'm working on with PTAB/BPAI decisions. Each node (circle) represents one of the 160 or so PTAB judges that have participated in an ex parte patent appeal since January 2010. These are cases where a patent examiner has twice rejected a patent application and the applicant then asks for appellate review.

Node size varies according to the number of cases decided during the past three years. For the most part, smaller nodes represent newer judges. Connections between judges are created each time two judges sit on the same panel. I have also color-coded the judges according to their primary technology area. Thus, judges coded as red judge mostly cases from Technology Center 2100 (Computer Architecture, Software, and Information Security) while judges coded as orange mostly hear cases from Technology Center 1600 (Biotechnology and Organic Chemistry). (Tech Centers). There is extensive overlap between Tech Centers 2400, 2600, and 2800 and so I grouped those together and colored them green. Judges coded yellow had no discernable primary technology area.

As may be discernable from the chart, judges are much more likely to be empanelled with others in the same technology area. Mechanical engineers are especially separate and, for the most part, TC1600 judges only interact with themselves and TC1700 judges.* The result here is that, in the usual case, all three judges on a panel have the same technology focus.

Now, back in 2009 there were only about 80 judges on the entire board. That made technological specialization difficult. Since then the PTAB has doubled in size and is expected to continue to rapidly grow over the next year. One question that the USPTO will need to address is whether to double-down on technological specizlization or instead to take measures that ensure that the judges have a broader spectrum of experiences. The answer may well depend upon whether the appeals brought to the PTAB are more due to (alleged) (1) examiner errors in understanding the technology at issue or (2) examiner errors in understanding how to apply the law of patents. Those questions are ones that we'll save for another post.

Structuring a Privateering Contract

December 14, 2012PatentLicenses, VenueDennis Crouch

By Dennis Crouch

The world of patent deals and monetization schemes are difficult to report on because the details of most deals (and often all aspects of the deals) are kept secretly buried under binding confidentiality clauses. Patrick Anderson recently wrote about US Patent 6,081,835 and its unique ownership setup. The information on the patent ownership is now public through an interesting decision by Judge Ellis. Download SuffolkTech.EllisDecision. The patent is being asserted by Suffolk Tech against Google, and Google challenged Suffolk's standing to sue – claiming that the company did not hold complete rights to the patent. With that defense in mind, Judge Ellis explored the ownership structure.

It turns out that the patent was originally owned by British Telecom based upon an underlying UK invention. BT transferred its ownership interest to IPValue who immediately transferred rights to Suffolk Tech as part of the deal. It was already known that IPValue is a joint venture of Goldman Sachs, General Atlantic Partners and Boston Consulting Group.

In the invest-to-sue market, patent buyers rarely pay cash. Rather, in these deals the majority of compensation to the seller is at the back-end — after the purchaser has successfully licensed the patent rights. In this case, BT sold the patent (transferring title), but and received as compensation a contract right to "50% of the Adjusted Gross Proceeds derived from exploitation of the '835 Patent" with the additional caveat that IPValue's sale of the patent (other than to Suffolk) within one-year of the BT-IPValue deal would result in 90% of the proceeds going to BT. The contract also includes restrictions on fees to contingency counsel; a $10 buy-back clause if IPValue fails to bring in sufficient revenue; and a non-exclusive license-back to BT.

On the standing point, Judge Ellis found that the deal left Suffolk Tech with title, core rights to practice and enforce the patent, and "all other substantial rights" in the patent. "As a result of the assignments, BT retained only a non-exclusive license to practice the patent and the right to share in revenue from the exploitation of the patent." As such, Suffolk Tech can properly assert the patent without joining BT or IPValue as co-plaintiffs.

Joff Wild at iam has some interesting thoughts on the case as well:

It turns out that BT has decided that it does not want to get its hands dirty directly, so like countless others before it (including [Intellectual Ventures]) it has turned to a third party to do the heavy lifting. That is what the privateer model is all about. It is being used, in one way or another, increasingly frequently by operating companies in the US, which for whatever reason decide they would prefer not to become involved in patent monetisation programmes that may involve aggressive assertion. NPEs that I can think of off the top of my head which have had close relationships with operating companies at some time or another include: Rockstar, RoundRock, Acacia, MOSAID, Intellectual Ventures, Sisvel and IPCom. No doubt readers of this blog can think of many more. From where I sit it is a perfectly legitimate activity, aimed as it is at maximising the value of key corporate assets – which is exactly what companies are supposed to do. At least some, however, are a little coy about their arrangements; while it is becoming increasingly clear that US antitrust authorities, and perhaps those in Europe too, are going to take a much closer look at the whole privateer model.

The last line of Joff's statement will continue to raise interest in upcoming years.

USPTO Financial Tidbits

December 14, 2012PatentVenueDennis Crouch

by Dennis Crouch

The USPTO’s Chief Financial Officer Tony Scardino provided a few interesting bits of information in his PPAC presentation:

Final fee rules are expected to be finalized and implemented at least by April 1.
PTO’s estimated budget is $2.5 billion, but current revenue is below that target.
Sequestration beyond the fiscal cliff would potentially cut $240 million from the budget. [Corrected]

/media/docs/2012/12/121312-05-ocfo-update.pdf

Federal Circuit Rejects Due Process Challenge to AIA on False Marking Retroactivity

December 13, 2012PatentMarkingDennis Crouch

By Dennis Crouch

Ken Brooks v. Dunlap and US Government (Fed. Cir. 2012)

As expected, the Federal Circuit has rejected Brooks’ argument that the Leahy-Smith AIA’s retroactive elimination of his false-marking cause-of-action was unconstitutional. Brooks is a patent attorney operating out of northern California. He has no apparent relation with Dunlap other than his discovery that Dunlap’s guitar string winders were (allegedly) falsely marked with patent numbers that had expired and invalidated. Under the pre-AIA law, “any person” had standing to bring suit for false marking and collect 1/2 of any resulting fine (with the US government receiving the other half). 35 U.S.C. § 292 (2010). In response to a rash of several hundred false-marking claims, section 292 was amended to restrict private standing to only persons “who has suffered a competitive injury as a result of a [false marking] violation.” 35 U.S.C. § 292 (2012).

Brooks filed his lawsuit in September 2010 – one year before the AIA was enacted. However, the AIA includes a retroactivity clause stating that “[t]hese amendments . . . shall apply to all cases, without exception, that are pending on, or commenced on or after, the date of the enactment of this Act.” Based upon that change, the district court dismissed the case for lack of standing.

On appeal, Brooks offered a due process challenge — arguing that the Due Process Clause of the U.S. Constitution bars Congress from applying the AIA’s amendments to § 292 to pending qui tam actions. In general, there is no rule against changing the legal regime in a way that adversely affects particular parties who have conformed their actions to benefit from the prior rules. If the change constitutes a Fifth Amendment Takings then the government must provide compensation. And, the legal change would very likely be an improper ex post facto law if it criminalized past actions as felonies. Apart from these exceptions, a retroactive change in the law will be enforced so long as it passes the very low standard of rational basis review. As the Supreme Court wrote in 1984, the “burden is met simply by showing that the retroactive application of the legislation is itself justified by a rational legislative purpose.” Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717 (1984).

In considering the Congressional record, the Federal Circuit easily found a rational basis for the retroactive nature of the law, including eliminating “the perceived abuses and inefficiencies stemming from false marking claims that were initiated before the AIA was signed into law” and avoiding “a live question about the constitutionality of the then-existing qui tam provision.”

At bottom, Congress made a considered choice to modify the private cause of action in § 292(b) and apply that modification to pending as well as future cases. Given Congress’s legitimate concerns with respect to the cost and constitutionality of pending qui tam actions, we conclude that the retroactive application of amended § 292 to pending actions was a rational means of pursuing a legitimate legislative purpose.

Dismissal affirmed.

Coming Soon: A European Unified Patent Court (UPC) and Unified Patents

December 12, 2012PatentDennis Crouch

By Dennis Crouch

Europe has taken another major step toward actualizing a Unified Patent Court that intends to offer greater consistency in proceedings and judgments across the 25 participating member states. The new system passed by the European Parliament additionally creates an enforceable Unified Patent (European Patent) instead of requiring patent registration in each country. Risk-averse patentees will want to continue to obtain national rights in at least a handful of countries. However, for any given application, the Unified Patent appears to be an exclusive-alternative. Before it can become effective, least 13 EU member states need to ratify the package (including the big-three of UK, Germany, and France). The current forecast is that the first Unified Patent will be issued in 2014.

The setup for the Unified Patent itself appears straightforward. When the EPO grants a patent today, the owner really has a set of individual national patent rights that must be validated at the national level (with the payment of additional fees and translation costs). Under the new system, the patent right granted by the EPO will be enforceable via the court system described below without the national validation step. This approach saves the local fees and also translation costs. Under the rules, the patent must be filed in the English, German, or French language. No other translations of the application materials will be required. Spain and Italy could not suffer the language offense and will likely opt-out of the system. The EPO will set renewal fees with a discount for small entities.

In the agreed-upon enforcement system, a set of designated specialized trial courts in Paris, London, and Munich and potentially other locales will have exclusive jurisdiction over the enforcement of Unified Patents. It appears that an ordinary trial will be overseen by a tribunal of judges and have a "multinational composition." Judges will either be legally qualified (with patent litigation experience) or technically qualified. Those courts will have power to determine infringement as well as unenforceability. A specialized tribunal sited in Luxembourg will hear appeals and the Court of Justice of the European Union (CJEU) would remain the top court. The national courts will still be available to enforce national patents for a transitional period. After that, however, the UPC will apparently also be the sole judge of national rights.

This is a quite interesting development, but it is clear that European patent law will continue to be a mess for many years to come.

The unitary patent

A new highest patent court for Europe? Not as long as the Court of Justice of the EU is here

It Took 30 Years, but the EU Finally Agreed to a Unified Patent System

The Proposed Unified Patent Court for Europe: conditio sine qua non for a Unitary Patent or unavailing venture into the unknown?

Europe Achieves Historic Agreement on Unitary Patent

'Troll' warning as EU gets unitary patent scheme, after decades of failure

Mark-Up and Commentary on the Patent Law Treaties Implementation Act of 2012

December 10, 2012PatentDamagesDennis Crouch

By Dennis Crouch

I have posted a draft Mark-Up and Commentary on the Patent Law Treaties Implementation Act of 2012.

Download it here: patentlyo.com/PLT.pdf.

At this point, the mark-up is very much a draft. I will release a more final version once the bill is enacted. President Obama is expected to sign the bill into law at least by December 21, 2012.

The following is my introduction to the document:

* * * * *

On December ___, 2012, President Obama enacted the Patent Law Treaties Implementation Act of 2012, Public Law No 112-___ (S. 3486).

The new law is designed to implement two patent law treaties:

(1) The Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs adopted at Geneva on July 2, 1999 (“Hague Agreement”) and

(2) The Patent Law Treaty (“PLT”).

Both treaties were ratified by the Senate without opposition in 2006, and both are intended to simplify the formal obligations and reduce costs for American rights-holders when seeking patent protection outside the United States. A corollary result is that that treaty implementation also eases the obligations of foreign rights-holders when seeking patent protection within the United States.

The Hague Agreement

Implementation of the Hague Agreement creates an international design application that can serve as the basis for filing industrial design applications in countries around the world. The new provisions are codified in ten new sections of the Patent Act and a handful of amendments within the statute. See 35 U.S.C. §§ 381 – 390. In addition to the added statutory language, the USPTO is also required to “perform all acts connected with the discharge of its duties under the treaty.” 35 U.S.C. 382. One such obligation is to forward any international application to the International Bureau of WIPO who would then publish the application. Currently, most international design applications are filed directly with WIPO. However, it seems that the US structure will likely encourage applicants to file the international application in the US first.

The international design application is roughly the design parallel to the international utility patent application known as the PCT application. This should significantly reduce the cost of obtaining design protection in additional countries. Although the Hague Agreement is an important step, global industrial design laws vary widely. The next relatively small step toward harmonization would be to rationalize the various rules and laws regarding drawings in design patent applications. Drawings are especially important for design rights because those drawings typically define the scope of rights being claimed. At this point, harmonization on this front does not necessarily require further negotiations within the Hague Agreement but could instead be accomplished through bilateral and multilateral agreement between the various offices administering the design rights.

For domestic applicants, the new law extends the term of design patents by an extra year to 15-years as calculated from the design patent’s date of issuance. In the US, no maintenance fees are due and so design patents tend to remain in force for their entire 15-years unless subject to any terminal disclaimers.

International design patent applications are published soon after filing. However, an applicant can delay the publication for up to 30-months. Upon publication, those design applications will be considered prior art as of the application filing date. The publication will also create the prospect of provisional rights under 35 U.S.C. 154(d)(1) to allow a patentee to collect back-damages against unauthorized pre-issuance usage of the design by someone with actual knowledge of the pending application. For several reasons, provisional rights been only marginally useful for utility patent holders. However, there is some expectation that provisional rights will be more useful for design patent holders because (1) the patents more often cover products released on the market during the application period; (2) design inventions are more often copied but those copies easier to identify; and (3) design patents are more rarely amended during prosecution.

Patent Law Treaty

The Patent Law Treaty is a procedural treaty that is designed to limit formal and procedural requirements that countries can place on patent applicants and patentees. The Patent Law Treaty also provides a particular filing date standard.

The key change is that a utility application will now be given a filing date even if filed without claims. 35 U.S.C. 111. The quasi-requirement of drawings is also removed from the filing date requirement. Thus, the filing date requirement will now read as follows: “The filing date of an application shall be the date on which a specification, with or without claims, is received in the United States Patent and Trademark Office.” Id. Some applicants will rely upon this change to reduce the immediate transaction costs of moving from a provisional application filed without claims to a non-provisional application that previously required claims.

Purpose

This volume is intended to serve as helpful tool in understanding implementation of the new provisions of the law and should be especially helpful for those wanting to understand how the law has changed.

Patents for Humanity

December 9, 2012PatentUSPTO DirectorDennis Crouch

Senators Leahy and Coons have introduced the Patents for Humanity Program Improvement Act of 2012 (S. 3652). The bill is relatively minor and will be an uncontroversial extension of the Humanitarian Awards Pilot Program created by the Patent Office earlier in 2012.

A bit of background, the Patents for Humanity program is an incentive program intended to encourage the use of patented technologies to help alleviate poverty and suffering. The incentive is a bit like the (perhaps outgoing) charitable donation tax break. However, instead of offering a direct monetary reward the PTO has offered an accelerated examination certificate. According to the implementation rules, the certificate can be used to accelerate either an ex parte reexamination proceeding (including an appeal to the Board) or else an appeal to the Board (PTAB) in an ordinary application or reissue. A group of designated experts will soon be selecting the first group of up to 50 winners.

It is a bit unclear what this acceleration certificate is worth, but at least several thousand dollars and perhaps more – especially for someone going through ex parte reexamination or reissue. However, there is no guarantee that the winner will have a need to use the certificate.

The legislation provides a mechanism for an award winner to turn the accelerated examination award into cash. In particular, statutory provision states that "A holder of an acceleration certificate issued pursuant to the Patents for Humanity Program … or any successor thereto … may transfer (including by sale) the entitlement to such acceleration certificate to another person."

Regarding the Bill, Director Kappos writes: "If the bill is enacted, recipients of a Patents for Humanity award could sell their certificate on the open market, turning their good deeds into operating capital."

In a press release associated with the Bill, Senator Leahy writes:

Following a Judiciary Committee hearing in June, I asked Director Kappos whether the program would be more effective, and more attractive to patent owners, if the acceleration certificate were transferable to a third party. He responded that it would, particularly for small businesses. The Patents for Humanity Program Improvement Act of 2012 simply makes these acceleration certificates transferable.

Director Kappos described the Patents for Humanity Program as one that provides business incentives for humanitarian endeavors. All Senators should support both the approach and the objective.

This bill is uncontroversial and has a strong likelihood of passage as long as Senator Leahy pushes it forward and Representative Lamar Smith agrees with its importance.

Two events on Monday, December 10.

December 9, 2012PatentDennis Crouch

Two important events on Monday, December 10, 2012

FTC and DOJ will hold a workshop on patent assertion entities (PAEs) – also known as “patent trolls.” /media/docs/2012/12/agenda.pdf. The agencies are considering ways that additional regulation and/or antitrust enforcement could be used to control negative effectives of patent assertion. This conference also highlights the renewed focus on patents outside of the USPTO. (Free Webcast Available)
Also in DC, the IPO is hosting its annual conference on USPTO law and practice. I will be speaking on a design patent panel that will include a discussion of the role of the new Hague agreement and also changes in design patent practice highlighted by the Smartphone wars. http://www.ipoef.org/AM/Template.cfm?Section=Calendar1&ContentID=32154&Template=/CM/HTMLDisplay.cfm.

See you in DC.

Reissue Cannot Be Used to Remove Terminal Disclaimer

December 8, 2012PatentDennis Crouch

In re Yamazaki (Fed. Cir. 2012)

Yamazaki filed a terminal disclaimer back in 1996 linking his future Patent No. 6,180,991 to his prior Patent No. 4,581,476. However, after a substantial amendment in the case, Yamazaki filed a petition request to withdraw the terminal disclaimer. As the petitions office has been historically known to do, it took no action on the petition for some time. Meanwhile, the examiner allowed the case, Yamazaki paid the issue fee, and the '991 patent issued in 2001. Since the petition was never decided, the PTO files continued to indicate the presence of a terminal disclaimer. The PTO eventually dismissed the petition based upon its conclusion that a terminal disclaimer cannot be nullified after issuance. The impact is fairly drastic here – with a terminal disclaimer the '991 patent expired in 2003; without a terminal disclaimer the '991 patent would not expire until 2018.

In January 2002 Yamazaki filed a reissue application seeking to fix the terminal disclaimer. Appallingly, the USPTO did not act on the reissue until 2004 (after the prior patent had expired). After an in-person interview in 2005, the examiner agreed in writing that a Reissue application could be used to correct a terminal disclaimer. However, the PTO refused to take any action for two more years and then reversed course. Yamazaki then appealed in 2007 and the BPAI finally issued its decision in 2011. That decision – made by an expanded panel of seven Administrative Patent Judges – held that a Reissue could not be used to remove a terminal disclaimer.

On appeal, the Federal Circuit has affirmed – holding that the plain language of Section 251 coupled with Section 253 prohibit using a reissue to expand a patent's term.

In particular, Section 251 facilitates the correction errors through reissue, but states that once the correction is made USPTO will reissue the patent "for the unexpired part of the term of the original patent." Section 253 indicates that a terminal disclaimer made in writing to the USPTO is "considered as part of the original patent." With these two statutes in hand, the court found that expanding the term by eliminating the terminal disclaimer would contradict the explicit instructions given by the statutory provisions. (Although Section 253 is focused on issued patents, the court held that its interpretation should also apply to pre-issuance disclaimers).

The court paused for a moment to criticize the USPTO delays – calling them puzzling and undeniably unfortunate. However, in the end, those delays do not change the ultimate result.