Alleged Copyright Infringement by Patent Prosecutors

Copyright, Patent, Patent Cases 2012, Patent Prosecution

By Dennis Crouch

American Institute of Physics and John Wiley & Sons v. Schwegman Ludberg (D.Minn)

Publishers John Wiley & Sons and American Institute of Physics have asked the Minnesota District Court for leave to amend and narrow their complaint against the Schwegman law firm. The amendment would drop any allegation that submitting copies of copyright works to the USPTO constitute copyright infringement. The plaintiffs write that the amended complaint

does not allege that this unauthorized copying includes (i) making such copies of a copyrighted work for submission to the PTO as may be required by the rules and regulations of the PTO, (ii) transmitting such copies to the PTO, or (iii) making an archival copy of that work transmitted to the PTO for Defendants’ internal file to document what has been transmitted.

To be clear, however, the plaintiffs have not dropped their case, but continue to allege that other copies and transmission do constitute copyright infringement. Further, because Wiley does not have any proof of those other activities, it argues that the now unchallenged submission to the PTO serves as “evidence of broader use and circulation” sufficient to permit the complaint to move forward.

The newly amended complaint thus recites no factual basis other than the fact that Schwegman is a law firm that prosecutes patents and that, because Schwegman submitted copies of certain articles to the USPTO that it must have also made unauthorized copies. The complaint:

14. Upon information and belief, Defendants have engaged in Unauthorized Copying with respect to the copyrighted articles from Plaintiffs’ journals, including but limited to the articles identified on Schedule A.

15. Plaintiffs cannot know the full extent of Defendants’ Unauthorized Copying without discovery.

The amended complaint also adds a further list of obscure scientific articles that were submitted to the PTO by Schwegman and were allegedly copied internally in an unauthorized manner. The plaintiffs have not yet filed any proposed amendments in the MBHB case.

The USPTO intervened in these cases supporting the law firms. It appears that this amendment is meant to appease the USPTO so that it will fall out of the case – making the defendants look much less sympathetic.

Notes:

  • Despite its high-sounding name, the American Institute of Physics (AIP) is basically a publishing house struggling to survive.
  • Open Access: Depending upon pricing structure, access to a journal such as the Journal of Applied Physics costs as much as $15k per year.  Academic authors generally receive no compensation for publication and there is a growing movement amongst academia toward open access journals.  Almost all law reviews make their works freely available online.  This enforcement project may push the sciences in that direction as well.
  • See also:

    • Entire Market Value vs. Entire Market Base

    Damages, Patent, Patent Cases 2012

    By Dennis Crouch

    A few days ago, I posted an essay entitled Does the Entire Market Value Rule Make Sense when Applied to Apportionment Analyses? In the essay, I discussed contemporary changes in the entire market value rule that apply the rule even in the context of damage apportionment analysis. In relation to that, I'm enjoying Michael Greene's recent student note where he suggests a new naming convention that focuses the entire market value rule to its traditional role in limiting the equitable relief of lost profits. In the apportionment context, Greene would use a different name – the entire market base rule – for the doctrine limiting the use of the entire market as the base for calculating a reasonable royalty. In the second context, any limit on the evidence would be governed by Federal Rule of Evidence 403. See Michael A. Greene, All Your Base Are Belong to Us: Towards an Appropriate Usage and Definition of the 'Entire Market Value' Rule in Reasonable Royalties Calculations, 53 Boston College Law Review 233 (2012). Mark Lemley's 2009 article also provides an excellent introduction to the issue. Mark A. Lemley, Distinguishing Lost Profits from Reasonable Royalties, 51 Wm. & Mary L. Rev. 655 (2009). Funny tidbit – the Lemley article criticizes the Federal Circuit Lucent decision and, at the same time, the Lucent decision criticizes the Lemley article. Michael Greene tells the story:

    Amusingly, [the] Federal Circuit in Lucent cites to and gently criticizes the very Lemley article which itself criticizes the Lucent opinion as confused. Despite lacking access to a time machine, Chief Judge Paul Michel had in fact obtained access to a draft of Professor Lemley's forthcoming article that then turned around [in the final version] and criticized Judge Michel's opinion criticizing it.

    Sounds a bit like some blog comments I've seen.

    MPEP.USPTO.GOV

    Patent

    The USPTO has released a new version of the Manual of Patent Examination Procedure (MPEP) along with a reworking of the MPEP website to allow for better facilitate online access to the rules and regulations. The new site can be found at http://mpep.uspto.gov.  The new style is also designed to allow the USPTO to quickly modify various sections so that the MPEP “can be updated within hours, rather than months.”  A new version of the TMEP is also available for trademark prosecution at http://tmep.uspto.gov.

    Who Decides Obviousness: Judge or Jury?

    Obviousness, Patent, , ,

    By Dennis Crouch

    Kinetic Concepts and Wake Forest University v. Smith & Nephew (Fed. Cir. 2012)

    Wake Forest’s asserted patents cover a medical technique that uses suction to close a gaping wound.  In certain situations, the suction method – also called Negative Pressure Wound Therapy – is apparently better than stitches or – my personal favorite – super glue.  Smith & Nephew’s product has become popular – thus the lawsuit. My wife is an MD, so my usual wound therapy involves me saying “go see your momma.”

    The issue in the Kinetic appeal involves the question of obviousness and whether the ultimate question of obviousness should be decided by a judge or by the jury.  The Supreme Court has repeatedly stated that obviousness is a question of law based upon a set of underlying facts.  However, most district court judges allow the jury to decide the legal question of obvious. Further, few judges pose interrogatory questions to the jury regarding the factual underpinnings of their legal determination.

    Here, S&N proposed that the jury only be asked to resolve the disputed questions of fact outlined in the Supreme Court’s landmark 1966 decision Graham v. John Deere — questions such as the level of skill in the art and the scope and content of the prior art.  Under S&N’s proposal, the judge would then take those answers and form a conclusion on the ultimate legal question of obviousness.  The patentees responsive brief identified this process as “one of the worst suggestions of all time.” Here, the district court took a somewhat middle ground – deciding to give the legal issue to the jury, but also ask the jury to identify the underlying factual Graham factors.  In addition, the district court indicated that it would see the jury’s obviousness conclusion “as advisory.”  

    The court wanted some factual guidance from the jury, but was also wary of asking the jury to write its response in narrative form. (Why?) In the end, the jury was asked several yes/no questions about the scope of the prior art; the differences between the prior art and the claimed invention; and whether secondary indicia of non-obviousness existed. After eight days of deliberation, the jury returned its verdict. Samples from the verdict form are shown below.

     

    In its verdict, the jury concluded that the defendant had failed to prove the asserted claims to be obvious.

    On JMOL, the district court rejected the jury verdict and held instead that the differences between the prior art and the claimed invention were so minimal as to be obvious to anyone of skill in the art. This holding thus left the asserted claims invalid. On appeal, the Federal Circuit has reinstated the jury verdict upholding the patent and held that the “district court committed error by failing to defer to the jury’s factual findings and granting JMOL on obviousness.” Professor Jason Rantanen wrote on this earlier:

    Wake Forest, the patent holder, appealed a district court grant of JMOL of invalidity for obviousness of a claimed invention for treating difficult-to-heal wounds by applying suction (negative pressure). The CAFC reversed, holding that (1) the jury’s “advisory” opinion on the ultimate issue obviousness gave rise to implied findings of facts that the district court was required to accept provided that they were supported by substantial evidence, despite the presence of special interrogatories on the verdict form; (2) the jury’s implied findings of facts on the Graham factors were supported by substantial evidence; and (3) the ultimate conclusion of obviousness was that the claims were not obvious.

    In arriving at the ultimate (legal) conclusion of nonobvious, the Federal Circuit focused its discussion on the lack of a reason to combine the prior art references (itself a factual finding), referencing concerns about hindsight reconstruction. In a statement suggesting a technology-based limitation on the use of common sense, the court held that “although expert testimony regarding motivation to combine is not always required, the technology at issue here is not the type of technology where common sense would provide the motivation to combine these references.”

    The court’s usual approach to jury obviousness decisions typically begins with the jury’s ultimate conclusion of obviousness/nonobviousness and then works back to the factual determinations necessary to reach that conclusion. In the absence of a special verdict spelling out the factual determinations, the court presumes that the jury made those necessary factual determinations and will affirm the jury verdict so long as those facts were supported by substantial evidence at the trial. In Kinetic, there was a special verdict where the jury particularly identified some of its factual conclusions. However, even here, there were a number of factual determinations necessary to reach the nonobviousness verdict – and those are typically implied into the jury verdict. The basic conclusion of the Federal Circuit in this case was that Smith & Nephew’s obviousness argument was – at base – an attempt to challenge those underlying assumed factual determinations and, that challenge must fail because those determinations were supported by substantial evidence presented at trial.

    Smith & Nephew challenged this working-back approach as wrong on (at least) two levels. First, since obviousness is a conclusion of law, the adjudged infringer argued that it couldn’t be the basis for presuming particular factual conclusions that were not expressly decided by the jury. This is even further bolstered by the fact that the district court judge identified the jury’s conclusion on obviousness as ‘advisory.’ The appellate court rejected those arguments by relying on its own precedent supporting the working-back approach and by determining that the district court’s reference to the ‘advisory’ nature of the jury verdict had no meaning.

    The court went on to specifically indicate that it is proper to submit legal arguments to a jury:

    [I]t is neither error nor dangerous to justice to submit legal issues to juries, the submission being accompanied by appropriate instructions on the law from the trial judge. The rules relating to interrogatories, jury instructions, motions for directed verdict, JNOV, and new trial, and the rules governing appeals following jury trials, are fully adequate to provide for interposition of the judge as guardian of the law at the proper point and when necessary. There is no question that the judge must remain the ultimate arbiter on the question of obviousness. He or she exercises that role first in exercising the judge’s duty of giving proper instructions on the law to the jury before it considers its verdict. The judge exercises control on the question again when presented with a motion for JNOV or new trial. In no sense need the judge abdicate the guardianship role.

    R.R. Dynamics, Inc. v. A. Stucki Co., 727 F.2d 1506 (Fed. Cir. 1984).

    En Banc Rehearing: Now, Smith & Nephew is preparing to ask the Court of Appeals for the Federal Circuit to rehear the case en banc asking the Federal Circuit to give meaning to the legal nature of an obviousness conclusion and ensure that an accused infringer has a right to an independent determination by a judge on the ultimate question of obviousness.

    Notes

    Supplemental Examination: Inequitable Conduct Amnesty and Beyond

    Patent, , , , , ,

    By Dennis Crouch

    Introduction to Supplemental Examination: The new supplemental examination procedure is a creation of the America Invents Act (AIA) and is effective as of September 16, 2012. At its most basic, the new procedure allows a patent owner to seek a low-level review of an issued patent to make sure that it was properly issued based upon some newly submitted information. If – on initial review – PTO agrees that the patent is still viable despite the new information the USPTO will conclude the review and issue a certificate indicating that the information presented in the request does not raise a substantial new question of patentability. On the other hand, if the USPTO finds a substantial new question of patentability, then the USPTO will order a full (ex parte) reexamination.

    Inoculating Against Inequitable Conduct: Supplemental examination is often tied to inequitable conduct because the new statute indicates that a patent cannot be held unenforceable for failure-to-disclose (or mis-disclosure of) information during a prior examination once that information is considered in a supplemental examination. Professors Jason Rantanen and Lee Petherbridge have identified supplemental examination as an "amnesty program." They write in the Michigan Law Review that:

    New § 257 is thus a patent amnesty program. It encourages patent applicants to use any number of strategies that would never have been countenanced under pre-AIA law to obtain patents, and it offers to cure all but the most extreme through filing a supplemental examination request. For example, potential descriptions of a claimed invention in a prior art printed publication, or possible instances of prior patenting of the claimed invention by another, that are known to a patent applicant, and that might have a high probability of barring a patent or limiting claim scope, may not be disclosed during the initial examination. Similarly, sales and public uses that are known to a patent applicant and that may have a high probability of barring the patentability of a claimed invention may be withheld at least until supplemental examination if the applicant likes (and perhaps longer depending on an applicant's risk tolerance). Even the use of false data to obtain the patent in the initial examination can be exonerated by filing a supplemental examination request, which by the statutorily required process can be expected to produce a director's certificate within three months.

    Jason Rantanen and Lee Petherbridge, Toward a System of Invention Registration: The Leahy-Smith America Invents Act, 110 Mich. L. Rev. First Impressions 24 (2011).

    To be clear, the strategies identified by Rantanen and Petherbridge would violate the professional ethics of a patent attorney or patent agent who deliberately chose that strategy. The argument here is that the supplemental examination rules (coupled with Theresense, Excergen, and their progeny) provide a marginal incentive to applicants to avoid fully complying with the duties of candor and good faith in all dealings with the USPTO. They write "the analysis provided here relates to the marginal effects of a supplemental examination system." In the end, however, it is unclear whether the new incentive will actually change any behavior. I.e., will the availability of supplemental examination mean that some important evidence will now be buried that would have otherwise been disclosed?

    There are two statutory exceptions to the inoculation and both relate to times where the patentee waited too long to request the supplemental examination. The statute labels these prior enforcement allegations and prior allegations. Basically, the supplemental examination (and any subsequent reexamination) must be completed prior to the filing of a lawsuit where inequitable conduct may be raised as a defense. In addition, the supplemental examination must be filed prior to the inequitable conduct being alleged in a pleading or Paragraph IV certification. If the patentee fails either prong then the amnesty fails and a court will have power to adjudge the inequitable conduct.

    Timing of Declaratory Judgment Actions: The distinction between the two exceptions can be seen in the context of declaratory judgment (DJ) actions. DJ actions are regularly filed in cases where would-be accused infringers take the preemptive measure of asking a court to declare a patent not-infringed, invalid, or unenforceable. Most (but certainly not all) DJ actions filed in the past few years are primarily venue contests and are filed shortly after the original complementary infringement action.

    In thinking about supplemental examination amnesty in the context of DJ actions, it is easiest to begin with the understanding that, with two exceptions, the patent cannot be held unenforceable due to inequitable conduct once the patent properly passes through the supplemental examination amnesty program. In the ordinary infringement litigation filed by the patentee, one of the exceptions block the inoculation in cases where the litigation if filed prior to completion of the supplemental examination. This conclusion is based upon the statutory provision explaining that the inoculation "shall not apply to any defense raised [in infringement litigation] unless the supplemental examination, and any reexamination ordered pursuant to the request, are concluded before the date on which the action is brought." Notice here that the exception to inoculation specifically applies to "any defense." In the declaratory judgment context, the inequitable conduct allegation is not filed as a "defense" but rather as part of the complaint. This means that the § 257(c)(2)(B) exception does not apply to declaratory judgment actions. However, the § 257(c)(2)(A) exception will apply to declaratory judgment actions – leading to the conclusion that supplemental examination will provide amnesty against DJ inequitable conduct actions so long as the request for supplemental examination is filed prior to the filing of a DJ pleading that particularly alleges the inequitable conduct. Here, it appears that to satisfy the filing trigger, the request must meet the requirements set forth in the USPTO's implementation regulations. The USPTO will not grant a filing date to applications that fail to follow those guidelines.

    Timing of Supplemental Examinations. In the paragraphs above, I identified instances where the inequitable conduct amnesty is triggered by either the filing of a supplemental examination request or else the completing of the supplemental examination. In many cases, the difference between those two will be minimal. The USPTO has announced its intention to complete all supplemental examination reviews within three months. That interpretation follows the statutory guidance that "Within 3 months after the date a request for supplemental examination meeting the requirements of this section is received, the Director shall conduct the supplemental examination and shall conclude such examination by issuing a certificate indicating whether the information presented in the request raises a substantial new question of patentability." This three-month deadline means that the USPTO will likely be sticklers for the filing requirements and may also mean that the USPTO will frequently order reexamination. The major exception to this quick timeline is that the supplemental examination will not be considered complete for amnesty purposes if a SNQ is raised in a way that triggers the automatic reexamination.

    Statutory Provision Section 257: The new supplemental exam procedure is codified at 35 U.S.C. § 257 and reads as follows:

    § 257. Supplemental examinations to consider, reconsider, or correct information

    (a) REQUEST FOR SUPPLEMENTAL EXAMINATION.—A patent owner may request supplemental examination of a patent in the Office to consider, reconsider, or correct information believed to be relevant to the patent, in accordance with such requirements as the Director may establish. Within 3 months after the date a request for supplemental examination meeting the requirements of this section is received, the Director shall conduct the supplemental examination and shall conclude such examination by issuing a certificate indicating whether the information presented in the request raises a substantial new question of patentability.

    (b) REEXAMINATION ORDERED.—If the certificate issued under subsection (a) indicates that a substantial new question of patentability is raised by 1 or more items of information in the request, the Director shall order reexamination of the patent. The reexamination shall be conducted according to procedures established by chapter 30, except that the patent owner shall not have the right to file a statement pursuant to section 304. During the reexamination, the Director shall address each substantial new question of patentability identified during the supplemental examination, notwithstanding the limitations in chapter 30 relating to patents and printed publication or any other provision of such chapter.

    (c) EFFECT.—

    (1) IN GENERAL.—A patent shall not be held unenforceable on the basis of conduct relating to information that had not been considered, was inadequately considered, or was incorrect in a prior examination of the patent if the information was considered, reconsidered, or corrected during a supplemental examination of the patent. The making of a request under subsection (a), or the absence thereof, shall not be relevant to enforceability of the patent under section 282.

    (2) EXCEPTIONS.—

    (A) PRIOR ALLEGATIONS.—Paragraph (1) shall not apply to an allegation pled with particularity in a civil action, or set forth with particularity in a notice received by the patent owner under section 505(j)(2)(B)(iv)(II) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)(2)(B)(iv)(II)), before the date of a supplemental examination request under subsection (a) to consider, reconsider, or correct information forming the basis for the allegation.

    (B) PATENT ENFORCEMENT ACTIONS.—In an action brought under section 337(a) of the Tariff Act of 1930 (19 U.S.C. 1337(a)), or section 281 of this title, paragraph (1) shall not apply to any defense raised in the action that is based upon information that was considered, reconsidered, or corrected pursuant to a supplemental examination request under subsection (a), unless the supplemental examination, and any reexamination ordered pursuant to the request, are concluded before the date on which the action is brought.

    (d) FEES AND REGULATIONS.—

    (1) FEES.—The Director shall, by regulation, establish fees for the submission of a request for supplemental examination of a patent, and to consider each item of information submitted in the request. If reexamination is ordered under subsection (b), fees established and applicable to ex parte reexamination proceedings under chapter 30 shall be paid, in addition to fees applicable to supplemental examination.

    (2) REGULATIONS.—The Director shall issue regulations governing the form, content, and other requirements of requests for supplemental examination, and establishing procedures for reviewing information submitted in such requests.

    (e) FRAUD.—If the Director becomes aware, during the course of a supplemental examination or reexamination proceeding ordered under this section, that a material fraud on the Office may have been committed in connection with the patent that is the subject of the supplemental examination, then in addition to any other actions the Director is authorized to take, including the cancellation of any claims found to be invalid under section 307 as a result of a reexamination ordered under this section, the Director shall also refer the matter to the Attorney General for such further action as the Attorney General may deem appropriate. Any such referral shall be treated as confidential, shall not be included in the file of the patent, and shall not be disclosed to the public unless the United States charges a person with a criminal offense in connection with such referral.

    (f) RULE OF CONSTRUCTION.—Nothing in this section shall be construed—

    (1) to preclude the imposition of sanctions based upon criminal or antitrust laws (including section 1001(a) of title 18, the first section of the Clayton Act, and section 5 of the Federal Trade Commission Act to the extent that section relates to unfair methods of competition);

    (2) to limit the authority of the Director to investigate issues of possible misconduct and impose sanctions for misconduct in connection with matters or proceedings before the Office; or

    (3) to limit the authority of the Director to issue regulations under chapter 3 relating to sanctions for misconduct by representatives practicing before the Office.

    As mentioned above, the effective date of the new supplementary examination procedure is September 16, 2012 and applies to all patents.

    Costs and Fees for Supplemental Examination: The USPTO has indicated that its plans are to – for the most part – charge a fee for supplemental examination that is roughly equivalent to its expected cost for conducting the supplemental examination. In a prior post, Professor Rantanen explained: "The cost for filing a supplemental examination request remains steep: $5,140 for the initial request plus $16,120 for the ex parte re-examination fee. Both must be paid at the time of initial request, and the $16,120 will be refunded if no re-examination is ordered." In a proposed change in the fee structure, the USPTO has suggested that it lower the costs by a small amount and also allow for a 50% and 75% reduction in fees for small-entity and micro-entity patent owners. Those new fees will not be effective until early 2013.

    Regulatory Process: As instructed by the statute, the USPTO has promulgated a set of rules that more fully govern the process of supplemental examination.

    Other Purposes of Supplemental Examination: There are strong suggestions that supplemental examination may be useful outside of the inequitable conduct situation. In particular, patentees may want to ensure that defendants can't argue in court that the best references were never seen by the USPTO. Other patentees may rely on supplemental examination as a mechanism for entering reexamination without having to first admit that something is wrong with the patent. I'll save consideration of these strategies for a later post.

    Drew Curtis: How I beat a patent troll

    Patent

    Drew Curtis is the founder and administrator of Fark.com and recently gave a TED Talk where he expressly identifies patent trolls as “terrorists.” His solution – “don’t negotiate with terrorists.” According to Curtis, “patent trolls have done more damage to the United States economy than any domestic or foreign terrorist organization in history, every year.” The pejorative name calling needed to shift because it turns out that every kid wants to grow up to be a pirate.

    Pending Appeals Not Impacted by BPAI->PTAB Transformation

    BPAI, Patent,

    Today, the USPTO’s board of administrative patent judges changes its name from the Board of Patent Appeals and Interferences (BPAI) to the Patent Trial and Appeal Board (PTAB).  This transformation is required by the America Invents Act (AIA) and represents a further step in implementation of the new post-grant review trials as well as (eventual) elimination of intereference proceedings.

    I received a few e-mails from parties concerned about the how the transformation impacts already pending appeals. The new name has no direct impact on the thousands of ex parte appeals pending before the Board.  For these cases, the transformation really is simply a name change and there is no need for applicants to take any responsive action.

     

    Pre-Issuance Submissions

    Patent, , , ,

    Ex Parte Patent Prosecution: Most of the American legal system is designed to operate in an adversarial environment. Each side presents their arguments and pokes holes in opposing arguments. A disinterested judge then considers these arguments and makes a ruling. The system works well because a financial award is typically associated with winning the argument – this aligning of incentives encourages each party to identify and present the best possible arguments to the judge. Patent prosecution does not follow this model – especially at the initial examination stage. Patent prosecution follows an ex parte model where one party (the patent applicant) has a strong interest in receiving a patent but where there is no interested party on the other side. Instead, the patent examiner is tasked with both seeking to identify arguments against patentability and then also determining whether those arguments are sufficient. Interestingly, patentees often argue that this system is problematic because of the potential bias associated with an examiner judging the quality of her own arguments. Third parties who may suffer under the patent rights also argue that the system is problematic – though for a different reason. They argue that the non-adversarial nature of the system means results in insufficient push-back on patentability questions and thus that many patents issue that should not have issued.

    Third Party Intervention in the Prosecution Process in the Form of Preissuance Submissions: Up until now, there has been essentially no mechanism for a third party to participate in the original examination of a patent – that is changing (in a minor way) with the availability of third-party pre-grant submissions for pending patent applications. As of September 16, 2012, anyone has standing to submit documents to the USPTO that relate to pending patent applications.

    Allowing for the Submission of Any Printed Publication of Potential Relevance: Most commonly, I suspect that applicants will submit prior art that they have identified as relevant to the pending application. However, the new rules allow the submission of any printed publication. In particular, the statute provides that “Any third party may submit for consideration and inclusion in the record of a patent application, any patent, published patent application, or other printed publication of potential relevance to the examination of the application.” 35 U.S.C. § 122(e)(1). Thus, the printed publication is not limited prior art documents, but could relevant to other questions. Thus, for instance, a dictionary definition could be submitted for the question of indefiniteness; a court decision could be submitted for the question of patentable subject matter; a portion of the MPEP could be submitted on the question of improper revival; etc. The USPTO has suggested in its implementation regulations that documents prepared and published solely for the purpose of a pre-grant submission will not be accepted. I would argue, however, that restriction would violate the law passed by Congress and codified in 35 U.S.C. § 122(e) that only requires the document be a “printed publication of potential relevance to the examination of the application.”

    Guiding the Examiner with a Brief on the Merits: An important element of the new provision is that the preissuance submission must be accompanied by a brief explanation of why the various documents have been submitted. This is essentially a brief on the merits or skeleton argument akin to what would be filed by opposing counsel in litigation. As written, the law requires this submission in the form of “a concise description of the asserted relevance of each submitted document.” Thus, the brief might include a table that shows how the prior art relates directly to the invention claimed; explain how a particular term is unduly ambiguous; how already recognized prior art fits the claims; or how a claim as drafted improperly claims an abstract idea or product of nature. Now, to be clear, this is not litigation and is not an inter partes action. Once the documents and brief is filed, the third party no longer has standing to make any statements or arguments on the record. And, attempts to do so will lead to disciplinary action by the OED. That said, it appears that the USPTO is ready and willing to consider briefs that are accurate and get to the point – especially if done in a way that saves examiner time.

    Timeline for Submissions: There are some strict guidelines on the timing of preissuance submissions as goverened by §122(e)(1). That statute indicates that the submission must be:

    made in writing before the earlier of—(A) the date a notice of allowance under section 151 is [mailed]; or (B) the later of— (i) 6 months after the date on which the application for patent is first published … or (ii) the date of the first rejection under section 132 …

    35 U.S.C. § 122(e)(1). Thus, a submission may only be filed after an application is publication and cannot be filed in non-published cases. Unless a patent is issued very quickly, third parties have at least six months from publication to file a preissuance submission. In areas suffering under a long backlog delay, the submission could be filed much later – so long as it is filed before the first action on the merits. Under the USPTO’s implementation regulations, a restriction requirement on its own will not trigger the deadline.

    The best practices approach is to identify problematic applications as soon as possible following publication and create conservative docket for filing preissuance submission. Because of the statutory deadline, the PTO has indicated that it is unwilling to grant any extensions of time for delays in filing.

    Are you afraid?: Attorneys at Williams Mullen have urged caution to their clients – indicating that:

    [I]ssues remain as to whether it is advisable to prepare such submissions due to the deference that can be given to USPTO examination and the potential prejudice to raising the same prior art in a later proceeding. Third party submissions at this stage will require caution and careful consideration before filing. Moreover, it remains unclear as to what effect these submissions will have on the examination of existing applications.

    Williams Mullen is correct to urge caution, although I believe it is overstated. My view is that well written briefs submitted with the documentation will likely impact the prosecution by limiting the scope of the claim that eventually issues. This is a free submission that can be done anonymously (although your name would come out in litigation discovery) or through an organization. The most likely potential reward is that the claims will be narrowed before being attached with a presumption of validity that can only be overcome with clear and convincing evidence.

    The short statute governing preissuance submissions reads as follows:

    § 122(e) PREISSUANCE SUBMISSIONS BY THIRD PARTIES.—

    (1) IN GENERAL.—Any third party may submit for consideration and inclusion in the record of a patent application, any patent, published patent application, or other printed publication of potential relevance to the examination of the application, if such submission is made in writing before the earlier of—

    (A) the date a notice of allowance under section 151 is given or mailed in the application for patent; or

    (B) the later of— (i) 6 months after the date on which the application for patent is first published under section 122 by the Office, or (ii) the date of the first rejection under section 132 of any claim by the examiner during the examination of the application for patent.

    (2) OTHER REQUIREMENTS.—Any submission under paragraph (1) shall—

    (A) set forth a concise description of the asserted relevance of each submitted document;

    (B) be accompanied by such fee as the Director may prescribe; and

    (C) include a statement by the person making such submission affirming that the submission was made in compliance with this section.

    In house attorneys will likely want to try-out a few to test the effect before an important case comes again. Richoh’s App. No. 13/042,288 (Pub. No. 2012-0233658) offers a good place to start. The published application claims:

    1. A method for generating a log of stroke data, comprising:

    capturing stroke data from a user that inputs the stroke data into a portable computing device;

    identifying a location of the user;

    identifying acceleration of the user;

    generating a log of stroke data that includes a time of input; and

    generating a log of location and accelerometer history.

     

    P-T-A-B: Patent Trial and Appeal Board

    Patent, ,

    By Dennis Crouch

    Sunday, September 16, 2012 marks day-one for the new Patent Trial and Appeal Board (PTAB) that replaces the Board of Patent Appeals and Interferences (BPAI). Before moving forward, I would like everyone on board with the correct pronunciation is P-T-A-B and not P-Tab.

    James D. Smith is Chief Judge of the BPAI and appears to be posed to instantly become Chief Judge of the PTAB as part of the transition. Judge Smith recently offered the following remarks on USPTO Director Kappos' Blog:

    September 16, 2012 marks a momentous occasion for the Board of Patent Appeals and Interferences. On that day, we become the Patent Trial and Appeal Board (PTAB). In keeping with that change, the Board will open for business to accept petitions for some of the new America Invents Act (AIA) post grant proceedings using the Patent Review Processing System (PRPS), our new, web-based e-filing tool. We are extremely excited to take part in this historic transition.

    To commemorate the transition to the new Patent Trial and Appeal Board and as a demonstration of our desire to serve, the Board will be staffed during the entire 24-hour period of that first day. From early Sunday morning at 12:01 a.m., until late Sunday evening at 12:00 p.m., Board personnel will be available to assist the public with filing new cases. After opening day, Board personnel will be available during normal business hours, 8:30 a.m. to 5:00 p.m. Questions may be submitted by phoning 571-272-PTAB (7822) or by emailing Trials@uspto.gov. Feedback on the PRPS system is also welcome, and we have established a separate email box for receiving such feedback at PRPS-Suggestions@uspto.gov.

    As Chief of the Board, I am extremely happy of the many accomplishments made by the Board team toward meeting our AIA responsibilities. Many team members have worked tirelessly, preparing for the big day – September 16th, 2012. I would like to thank all those people involved, both internally and externally, for making September 16th a reality.

     

    The America Invents Act: One Year Later (Pt. 5)

    Patent, , , , , ,

    By Jason Rantanen

    Liveblogging the America Invents Act: One Year Later conference at the Indiana University Mauer School of Law. Warning and disclaimer: Quality may vary and these don't necessary reflect my opinions.

     

    Panel 3: What did the AIA accomplish? What did it omit?

    Mark Chandler (Cisco) – Not a patent lawyer; instead offers a high level perspective from tech industry. 

    Issues from his perspective: Predictability is a key, but certainty means different things to different people.  Uncertainty in his industry is uncertainty about damages.  Ranges of outcome that lead to total unpredictability about valuation. The patent system is an industrial policy; it needs to be pared with a good commercial law system where the court decisions are defined by good predictability of result.  But parties aren't willing to have fruitful negotiations because of uncertainty as to damages.

    Bad patents – very hard to overturn validity patents in court; estoppel provisions in inter partes reexamination made them a hard tool to use.  Also, backlog of patents. 

    Effect of these issues was an increase value of litigation gamesmanship over the value of innovation. This was the context in which they came to the table.  For his industry, uncertainty as to scope of rights/quality of rights was not as important as uncertainty over damages.  But this is not something that he believes can be fixed legislatively.  From the point of view of the technology industry, the AIA accomplished very little in terms of the uncertainty they care about.

    In terms of bad patents, he sees the mechanisms as positive.   On backlog, the funding provisions are excellent.

    Looking forward, he is skeptical of having Congress dive into the damages issues.  Change is coming from the courts.  Judge Rader is a major mover here.  Clean up the Georgia-Pacific factors is something he sees as coming. 

    Joinder provision – some judges, when confronted with the anti-joineder rule, are now consoldiating cases.  Work needs to be done here. 

    Rocelle Dreyfuss (NYU) – Act focuses with laser like attention on getting a patent, but largely ignores what is being done with the patents.  Her focus is on research exemptions.  Long been two exemptions: Common law exemption and limited statutory Hatch-Waxman exemptions.  Common law exemption has largely been undermined by CAFC, especially in Madey v. Duke and Embrex v. Service Engineering; most recently, Judge Lourie's opinion in AMP v. USPTO (Myriad). 

    Absence of such exception has become more worrisome over time.  Earlier studies indicated that scientists largely ignored patents.  More recent work has undermined this conclusion however.  Studies shown that less research conducted in areas where things are patented.

    Every foreign country has a substantial research exception.  Japan is a good example. 

    Can't you always do your research off shore?  But she'd like to see a strong research industry in the United States. 

    Overall effect of a lack of research exception has been to distort other patent law doctrines – examples: Supreme Court/Federal Circuit subject matter cases.  All these cases are based on the view that patents can impact future research.  To some extent, the Supreme Court's exhaustion and injunctive reliefs are based on a concern about what's going on down stream.  A well drafted research exception is better served than twisting these doctrines around to allow downstream research.

    Some believe (ex. Hal Wegner) that the common law will correct itself.  Judge Newman's language in this vein was been picked up by Chief Judge Rader in a recent opinion.  Wegner also argues that the fix would be relatively easy to accomplish with judge made law – drawing a distinction between research "on" versus research "with" a patented invention.  Other commentators would go back to the commercial/noncommercial distinction. She's doubtful these will work, however.  Rader's statement was part of a blistering dissent on an expansion of the statutory exemption; Judge Lourie's statement in Myriad was made just a month ago.  In addition, the fix isn't as simple as distinguishing between research "on" and "with"; actual research is actually far more complex – consider the use of diagnostic patents, which could be classified as either research on or research with. 

    Copyright law has long had a fair use defense; it could work in patent law.  But complex, so better done as a statute than as a common law rule. 

    John Duffy (UVA) – Likes: the new priority rule.  Never been a fan of first-to-file.  But this is not first to file – it's first-to-file or first-to-publicly disclose, which is a great change.  Best argument for first-to-file was administrative convenience.  Best argument for first-to-invent is that the lawyer shouldn't be part of the invention process.  New system takes the best of both: administrative ease (have to have publicly disclosed it) and you don't have to get a lawyer to do this.  Just have to get the rest of the world to follow us…

    A partial accomplishment: ending asymmetric judicial review.  Historically, applicants could obtain immediate judicial review of rejections, but competitors could not obtain immediate judicial review of grants.  This was not good.  AIA helps here, with its post-grant processes.  But it still leaves significant holes in the availability of judicial review.  Proposes that the PTO be subject to standard agency review – points to Exela v. Kappos, E.D. Va. (Aug. 22, 2012).  May be a supreme court opinion.  If the country goes to symmetric judicial review, that would be a very good thing.

    A partial accomplishment: curbing claim numerosity.  Patents have too many claims. Partial AIA solution: agency has power to set its own fees and thus could charge more for excessive claims. But sometimes there's a legitimate reason for large numbers of claims: legal uncertainty as to how claims will be interpreted.  Ultimate problem here: departed too far from traditional principles of claim construction.  We should instead focus on the invention – the contribution to the art – in interpreting claims.  261 U.S. 45, 63 (1923)

    AIA's worst blemish: fueling bureacratic inflation. 

    Gary Grisold (Senior Policy Advisory for the Coalition for 21st Century Patent Reform and former Chief IP Counsel at 3M) – AIA presented a great opportunity to improve the speed and efficiency of the patent system.  The playbook for improving the AIA was largely derived from the 2004 NAS Report.  Most of the recommendations of the 2004 report were put into play in the AIA.

    Goals: effective, global patent protection efficiently obtained, maintained and enforced encouraging innovation and commercialization of innovation.  Showed us some of the charts that they used when building support for the patent law. A lot of progress from 2007-2011.

    Process error – in the post-grant review, it allows the public to come in and be heard just after a patent is granted.  At some point, someone inserted "reasonably could have raised" judicial estoppel in PGR. Shouldn't be there.  Didn't realize that this happened, though.  Needs to be a technical correction to fix this.

    Patent claim construction – For PGR/IPR, should patent claims should be construed the same as in validity challenges under 35 USC 282(b) rather than broadest reasonable construction?

    What else might happen in the future?  Best mode – still there as an obligation; this creates a weird tension for the attorney and client.  Inequitable conduct – he believes that supplemental examination will have a lot of utility because firms will do extensive pre-litigation analysis.  Could go further with inequitable conduct, and lessen the effect even more, for the reason that it brings so much inefficiency into the process.  Experimental use exception – needs to be expanded.  Could expand prior user right.  Doctrine of equivalents is another opportunity for change.  Funding issues are always a concern – could be more secure. 

    Doug Norman (Eli Lilly) – Going to talk about how in-house counsel deal with specific issues.

    Move to first to file – won't preciptate a lot of change in their context, because for the past 40 years they've been living in a first-inventor-to-file world.  So their proceses have not had to change.  The change they feel is when they look at competitors' patents, they can better evaluate patent estates that they want to do a due dilligence study on. 

    Grace period and international harmonization – Europeans aren't necessarily ready to accept a grace period. Have a grace period in the US that is clear, crisp and objective.  And very simple.

    Fees  – important to point out that after a longrunning diversion of funds away from the PTO, the PTO has feesetting authority to move forward and build a new infrastructure.  It will cost users more, but if it leads to higher quality and faster service, it'll be worth it.

    IPR/PGR considerations – A huge unknown right now.  Hopes that patent judges really will be conservative on the issue of discovery.  Is a technical amendment over the "could have raised" estoppel in PGR possible?  He hopes so; otherwise, it will greatly constrain the use of PGR. 

    Inequitable conduct/supplemental examination – high point of the bill.  Thinks it will be used quite extensively, if for no other reason to have their own patents drawn into supplemental [think he means reexam] examination.  Plans on doing extensive due dilligence on patent estates they intend to acquire.  (comment – I suspect that in the pharmaceutical industry, there may be strong incentive to conduct extensive due dilligence.  I'm much less convinced this is the case in pretty much every other industry.).  He believes supplemental examination will be revolutionary, at least in the pharma/biological field.

    Favors statutory research exemptions and full repeal of best mode requirement.  Related a story that OED is going to take best mode very seriously. 

    John Vaughn (AAU): Universities and patent reform – University technology transfer plays an important role in technology innovation in this country.  Univerisity organizations worked together to present the view of the universities.  Two basic objectives: wanted to support those proposals that would enhance the US patent systems' ability to produce innovation, and wanted to support those proposals that would enhance the ability to licensed.  Very much shaped by 2004 NAS report. 

    First to invent to first inventor to file – three conditions: (1) effective grace period; (2) continuation of provisional applications; (3) strong inventor declaration (?)  Worked with Congress on these. 

    Patent certainty – university inventions inherently have uncertainty because of their early stage nature; adding other uncertainty further complicates that uncertainty.  Problem with statutory instructions on damages is that they would become a cost of doing business rather than something else. 

    Strongly supported the new post-grant proceedure.  Agrees with others about the estoppel provision.  Concern that with the estoppel provision, the procedure won't be used. But very concerned about proposals for second window, additional post-grant challenge that would allow a broad capacity to challenge patents throughout their life.  This was viewed as making patents more uncertain, which would make them harder to license.  Compromise: revised and changed inter partes.

    Debate over prior user rights.  Pre-AIA, only applied to business methods.  University community hated prior user rights – viewed it as a circumvention of the patent quid-pro-quo.  But at the end of patent reform, prior user rights was one of the primary obstacles at the end.  They worked out a compromise – a substantial expansion of prior user rights that sufficiently protect universities. 

    Viewed as accomplishments: FtF – will be helpful to everyone.  Post-grant review – great, problem with estoppel.  Third party submisison of prior art – very helpful.  Enhanced fee setting – very helpful, wished better anti-fee diversion language.  Supplemental examination – very helpful, better to get rid of inequitable conduct altogether.  Scope of grace period – concern over how it will actually be interpreted. 

    The America Invents Act: One Year Later (Pt. 4)

    Academic Studies, Patent, , , ,

    By Jason Rantanen

    Liveblogging the America Invents Act: One Year Later conference at the Indiana University Mauer School of Law. Warning and disclaimer: Quality may vary and these don't necessary reflect my opinions.

    Keynote speaker – Director David Kappos

    Director Kappos – Going to talk about what the USPTO is working on. 

    Satellite offices – USPTO has been around since around 1790; always had only one location.  First satellite office: Detroit.  That office now up and running, and first class of examiners is examining applications.  Hired about 12 judges there.  On time, below budget.

    Opening up three more offices.  Dallas-Fort Worth, Denver, Silicon Valley.  Denver location has been chosen already; doing site surveys for the other two locations.  Have vacancy notifications for hiring requests for judge out now; will be putting out hiring announcements for examiners soon.  Love to hire law school graduates.  In addition to hiring in Alexandria, there are going to be hiring opportunities in these areas.  Great place to start your career; but also a good place for a long term career.

    IP Critical to GDP and Jobs – conducted a recent study called "Industries in Focus" that reports on the importance of innovation/IP rights for the GDP.  Also a recent study by BIO that reports on the enormous contribution of universities to GDP through Bayh-Dole.

    AIA- AIA is a lot about balance between first inventors and follow-on competitors.  On Sunday, the first major piece of the AIA goes into effect.  Follow-on competitors are great – produce great products at great prices; produce innovations of their own.  The AIA isn't about advantaging anyone; it's about balancing both sides.

    Major tenets of AIA: enabling the patent system to work for everyone, in every industry. 

    Increase certainty of patent rights – includes backstop provisions, such as post-grant review;

    Remove or prevent low quality patents- no way, consistent with any cost-effective business methodology, that you can do a perfect job.  Also, courts have consistently not chosen the easy way out in terms of flexibility rather than hard, categorical rules.  PTO promulgates a lot of guidelines – useful, but not perfect. This is why post-grant is so important – when the PTO gets it wrong in the first instance, there's a backstop.

    Build a 21st century patent system – this leads to the world's first 21st century patent system.  This is not the most-cautious approach.  It's not a Swiss watch, it's innovation friendly.

    More than halfway done with implementing provisions of the AIA.  After Sunday, just the 18-month rules to go into effect. 

    Challenging fee-setting process is in progress.  Started this process with the academy, with IP-law economists.  They helped design a system that sets fees that are consistent with policy.  It will take several iterations, but he's serious about listening to the academy on this issue.

    2012 Fall Roadshow in progress this month.  Lots of good feedback from these. Notes that new forms (not samples) that are to be used starting Monday are now available on the USPTO website.

    Track One statistics – fast tracking of applications accompanied by a petition.  Now almost a year out from creation.  Average days to final disposition is 153.8 days.  About 5,500 applications so far.  Petition gets granted 96% of the time; 47 days to first office action. Of the 1716 final dispositions mailed, 867 allowances mailed.  Not a fast way to get a rejection; a fast way to get a patent if you should be getting a patent. Also, examiners want to pick up Track One first, because (1) it shows the applicant is serious; (2) probably an important innovation; and (3) applicant will be willing to engage with the examiner to get the job done.

    Unexamined patent application backlog – backlog is going down.  New narrative is "optimal inventory" – want to come to the right level of backlog/inventory.  What about unintentional consequences: when they changed a lot of the incentives, it sent backlog numbers in the right direction.  However, the consequence was that doing this unintentionally sent a message to examiners to sit on RCE's; this is what they're working on now.  Soon, the RCE backlog will go like the unexamined patent application backlog. 

    What is "inventory"?  The about of applications available fluctuates, but there needs to be work available to everyone to work on every day.  If the inventory gets too low, there are days when some people don't have enough work and others have too much.  So now the PTO needs to make sure that the inventor doesn't crash through the optimal inventory level.

    Forward looking pendency – now down in the 16 month range.  Goal is 10 months; not that far off from that goal.  Less than two years from now they'll be at the optimal level. 

    IP Awareness Assessment Tool – enables a non-lawyer to navigate a number of questions that adjusts the question to understand whether they might have possible issues in patent/trademark/trade secret areas.  Idea is to help small businesses understand when and how they need legal advice, and to navigate IP-issues before talking to a lawyer.

    The H-Word: Harmonization.  Of forms of IP, patent laws are the laggard in terms of harmonization.  Working with patent systems of other countries to continue moving towards harmonization, especially grace period.  This is an area where further industry and academy support would be very welcome.  Trading partners need to change their laws to adopt the grace period. 

    Social Enterprises: 2010-2011 – green tech pilot.  Totally maxed out.  This was the prototype for Track One.  Now they're working on the pro bono program.  A year into the program – have already issued patents, have inventors with products in the marketplace.  Launching in other cities.  By 2014, plan to have every region of US covered so that if you have a great idea, but not the resources to hire a patent attorney, you can get one through this system.  "No Invention Left Behind."  Looking to expand globally, with modifications.

    Patents for Humanity – currently running.  Lot of applications coming in; closes in mid-October.  Involves patents that are being used for humanitarian purposes.  http://patentsforhumanity.challenge.gov.  Gives access to accelerated PTO processes, including appeals.

    Education outreach – Put in place an education outreach to all kids in America.  Want to get positive, age-appropriate information out to kids of all ages so that they view themselves as innovators, they respect their innovations, they respect the innovations of others.

    Software patents – came to the PTO to try and help with this.  Been working on making sure the agency doesn't issue patents that it shouldn't.  Championed stronger disclosure requirements; 112 guidelines specifically directed to software; trained examiners on using these guidelines; rise in 112 rejections on software patents.  This is a specific area where they're trying to improve patent quality. 

    Question – how do you sort the good examiners from bad examiners?

    Answer: USPTO has a LOT of data.  They track the data down to the individual examiner level.  Allowance rates – too high/too low.  Prosecution efficiency – have a new measure called compact prosecution that looks at whether the prosecution gets done.  Quality – check when they grant and reject cases.  Some of the best examiners are taken off the line and used as quality assurance supervisors.  What they've been finding is that even as you improve throughput and quality, there will be pockets (art units, departments, examiners) who need some help.  Data is also being given to the examiners on a monthly basis.  Also focusing on art units that exhibit significant deviations to see if there's an issue. Seeing improvement.

    Bob Armitage – Thanked Director Kappos for the America invents Act.

    Inequitable Conduct: Federal Circuit Places another Nail in the Coffin

    Patent, ,

    By Dennis Crouch

    1st Media v. Electronic Arts (Fed. Cir. 2012)

    In a strong opinion, the Federal Circuit has rejected a district court holding of inequitable conduct in a failure-to-submit case. The appellate court held that the defendant had failed to prove that the failure to submit was a deliberate fraud on the PTO under the standard outlined in the court’s 2011 en banc Therasense decision.

    Individuals sufficiently involved with the prosecution of a patent application bears a “duty of candor and good faith dealing with the [USPTO], which includes a duty to disclose to the Office all information known to that individual to be material to patentability.” 37 C.F.R. § 1.56 (Rule 56). This duty is particularly applied to each inventor named in the application and “each attorney or agent who prepares or prosecutes the application.” A patent attorney’s failure to comply with the duty of candor can lead to disciplinary hearings by the USPTO’s office of enrollment and discipline (OED) and, as a rule, the USPTO refuses to grant patents “on an application in connection with which fraud on the Office was practiced or attempted or the duty of disclosure was violated through bad faith or intentional misconduct.”

    The fiercely adversarial litigation system in the US is comparably quite good at rooting out (and thus discouraging) fraud. Whenever a patent is being enforced, accused infringers scour the records and available evidence to look for any way failures to comply with Rule 56. When those failures rise to intentional and material misconduct, a court has the equitable power to hold the patent (and its patent family) unenforceable due to inequitable conduct in the prosecution of the application. Of course, attorney fraud is a serious charge, and even false claims create difficulties for the accused wrongdoer. As such, the courts have taken some steps toward limiting those types of claims. The two key recent cases on this point are Excergen and Therasense.

    Excergen: The Federal Rules of Civil Procedure (FRCP) as interpreted by the Excergen decision, inequitable conduct may only be alleged as a defense if it can be pled with particularity (as opposed to other types of claims that may be pled much more generally).

    Therasense: Under Therasense, inequitable conduct requires proof that the alleged wrongdoing was deliberately and knowingly wrong and that the result of the wrongdoing during patent prosecution impacted the issuance of the eventual patent and that each element be proven with clear and convincing evidence. In the failure-to-disclose situation, the court writes that a defendant must prove “that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it.”

    In 1st Media, the asserted patent was part of a family of applications that had been filed in various countries around the world. Three references used to reject the foreign applications were never submitted for consideration by the US examiners. Nevada district court Judge Mahan considered this issue and found that both the patent attorney and the listed inventor were at fault for failing to submit the references and held the patent unenforceable.

    On appeal, the Federal Circuit reversed – making clear (again) that in a failure-to-disclose situation, the defendant must prove that individuals with a Rule 56 duty “made a deliberate decision to withhold” the references. Further, that deliberate decision element must be proven with clear and convincing evidence and that proof cannot be inferred from the fact that the individuals had knowledge of the references and their materiality.

    A court can no longer infer intent to deceive from non-disclosure of a reference solely because that reference was known and material. Moreover, a patentee need not offer any good faith explanation for his conduct unless and until an accused infringer has met his burden to prove an intent to deceive by clear and convincing evidence.

    In the bench trial, Judge Mahan found the explanations given by the inventor and his patent attorney to lacking. On appeal, the Federal Circuit made clear that the burden is on the defendant to provide clear and convincing evidence.

    The court provided a nice quite for patent attorneys:

    Moreover, it is not enough to argue carelessness, lack of attention, poor docketing or cross-referencing, or anything else that might be considered negligent or even grossly negligent. To sustain a charge of inequitable conduct, clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference. Whatever one might conclude about Lewis’s and Sawyer’s conduct and interactions relating to the Bush reference, and the nature of Sawyer’s practice at the relevant time, the record does not support the inference that Lewis and Sawyer deliberately chose to withhold Bush.

    Because one element of the inequitable conduct charge is missing, the court concluded that it cannot be proven. Of course, “carelessness, lack of attention, [or] poor docketing” will still lead to malpractice claims.

    Notes:

    • In its opinion, the Federal Circuit foreclosed any possibility for the defendants to re-open their inequitable conduct charges for a rehearing. However, the judge has not yet determined validity. Thus, if the withheld references are truly material then we’ll see the jury hold the asserted claims obvious.
    • Beginning September 16, 2012, patentees will also be able to request a supplemental examination at the USPTO to ensure that any references that had been previously withheld do not impact patentability. However, if the USPTO finds that the previously withheld references create a major patentability question then the Office will institute a reexamination.
    • We now have a situation where inequitable conduct is quite difficult to prove – meaning that patent owners will rarely be harmed by a violation of the duty of candor and good faith dealing. Consequently, patent attorneys will faced increased pressure to push the boundaries.

    The America Invents Act: One Year Later (Pt. 3)

    Patent, , ,

    By Jason Rantanen

    Liveblogging the America Invents Act: One Year Later conference at the Indiana University Mauer School of Law. Warning and disclaimer: Quality may vary and these don't necessary reflect my opinions.

    Panel 2: Administrative Trials

    Michael Tierney (Lead judge of BPAI) – New Patent Trial and Appeal Board eFile system will go live at 12:01 am on Sunday, September 16.  They will also have folks available to answer calls starting on Sunday. 

    AIA trial proceedings will be a hybrid examination/trial-like process.  Relatively straightforward, step-by-step proceedings.  Trials will be completed within one year. 

    Who can practice: also a hybrid.  Lead counsel must be a practitioner registered with the PTO, but the board may recognize pro had vice counsel during a proceeding upon a showing of good cause.  A pro hac counsel is subject to the Office's Code of Professional Responsibility.  Requests should explain why there's good cause. 

    Proceedings are streamlined so as to make it possible to complete proceeding in one-year.  In addition, page limits have been imposed on the petition and arguments, but not the evidence.  Claim charts can be included as single-spaced. 

    Threshold standards for initiation:
    IPR: "reasonably likelihood" that petitioner would prevail as to at least one claim challenged.  This means >50% chance. 
    PGR/CBM: petition must demonstrate that it is "more likely than not" that at least one of the claims challenged is unpatentable.  This just means that it has to be a "close call" that one of the claims is unpatentable.  This does not mean that all non-frivolous arguments will result in a PGR/CBM proceeding.

    Inter partes review: discovery- allow parties to agree to discovery between themselves.  Also, mandatory initial disclosures, routine discovery, and additional discovery. In general, discovery will function ilke infringement proceedings – i.e.: parties exchange among themselves, then choose what to provide to the board.   

    Recommends starting with the practice guide if you want to understand the rules.  

    Jay Kesan (University of Illinois) – Examined post-grant review in Japan and compared to US.

    JPO has invalidation trial.  JPO does not have a threshold standard; grounds are very broad.  Anytimeime during the life of the patent. No estoppel under JPO proceeding.  Third parties that are not involved in the challenge can file another challenge on the same facts and evidence.  Scope in terms of the number of claims is not all that different.  Parties can file anonymously.  Takes about 8.7 months. Patent can be amended after the trial decision before the appeal – lots of opportunities to tweak the patent.  Just about anyone can request. 

    Costs: Rough estimate is about $200,000 for US proceedings.  In Japan, about $25k to $125k. 

    In Japan, about 7-10 times higher to litigate the case in district court.  Roughly about 2% of all patents are being challenged (300 out of 150,000 issued patents) are opposed using JPO invalidation. 

    Data over a decade shows that the litigation court decisions tend to be arrived at before the JPO decision.  In a large number of cases, there's an agreement the patent is invalid.  There is some disagreement in cases, however – about 20% of the time the JPO and district court reach opposite conclusions.  This is consistent with the rate of affirmence of the JPO by the high court (around 80%).

    Questions:
    Joshua Larsen (Barnes & Thornburg) – what parts of the new procedures will be most challenging for the judges to deal with? 

    Michael – not a whole lot of judges who had experience with inter partes, but they just hired a large number of people with significant litigation experience as judges. 

    Jay K – 60-80 pages is still a lot of stuff to go through.  If 2% of all the issued patents are subject to this process, thats a lot of workload. 

    Michael – there's still going to be ex parte reexamination.  There's also going to be full blown proceedings.  He wouldn't expect all 2% to go the reviews. 

    Josh – how is claim construction going to be handled?

    Michael – no Markman, but there's a requirement that the petitioner must explain what the claim means up front.  Tell us up front what you, as the petitioner, think the claim means and how the prior art meets the claims.  

    Jay K – thinks this approach is just fine.

    Jay Thomas – Is there a good balance between the litigation and the IPR process?  How are the parties going to figure out what patents will be challenged through post grant review?

    Michael – when he looks at the statistics, most inter partes reexaminations had ongoing litigation.  Often there are stays in these cases.  His expectation as they go forward is that they will follow the 1-year timeframe.  If this is the case, the district court judge will know that the PTO is committed to having a decision within that one-year framework.

    Jay K – If things were really ideal, if invalidity can be done relatively cheaply in the post grant proceedings, then this might save the parties some money in infringement litigation.    On the nine-month window, this is something that parties are going to need to figure out, maybe using proxies.

    Josh – what is the possibility of serial filings on the same evidence?

    Michael – I'm going to refer to 325(d).  The office may consider previous determinations in deciding whether to go forward.  If all the party is doing is submitting the same evidence again and again, the likelihood of going forward in low.

    Jay K – when he talked to practitioners in Japan, they said that this type of behavior was a waste of time.

    America Invents Act: One Year Later (pt. 2)

    Patent, , ,

    By Jason Rantanen

    Liveblogging the America Invents Act: One Year Later conference at the Indiana University Mauer School of Law. Warning: Quality may vary.

    Session 2: First to File/Supplemental Examination

    I spoke during this panel, so wasn't able to take down any notes during Q&A

    John Schaibley – Panel is going to discuss two changes under AIA: First to invent to First to File and Supplemental Examination.  Summarized the two changes.

    Jay Thomas (Georgetown) – thanks Bob for his hard work on the AIA; but he won't necessarily agree with everything Bob said. 

    When we teach 102, it's "the long march" – a lot of it is now gone.  Still going to be some complexity due to the prior user defense.  Also, what does "or otherwise available to the public."  What's the role of secret uses and sales prior to the date of filing. 

    Remember two cases: Egbert v. Lipman(sp?): you can have a public of one; Metallizing Engineering: a trade secret use is patent defeating.  New section 102(a) still has the term "public use" in it.  Early legislative history indicated a continuity of meaning.  But things changed.  "or otherwise available to the public" was added.  Some legislative history that says that this has to be true for all prior art. Note that "public" is still pretty broad.  Just because it's technically publicly accessible doesn't mean that it's necessarily easy to find.

    Also, keep in mind that these two cases were instances where the patent holder effectively tried to extend the date of filing.  Is it sound industrial policy to allow secret uses to not defeat patentability? 

    International harmonization: tried to move in that direction, but didn't completely succeed.  Example: safe harbor under new 102 is different as between US and Europe and Japan. 

    Short term issues: lots of filing before March 16, 2013.  Abolition of the Hilmer doctrine; lose ability to swear behind prior art references.  Storm surge is coming.  There's going to be a sharp distinction between old and new cases.  What to train the new examiners in?  Old and new or just new?  Constitutional challenges – probably dubious.  Employment assignment agreements – these will be important to look at.  And what about the technical corrections bill?  Likely to involve some huge changes of its own – dissatisfied parties are going to push for these. 

    Dana Colarulli (USPTO) – Probably agrees with Bob on most of the things he said.  But legislation only gets us a good portion of the way there.  There's more to do.  Specifically, implementing the provisions in the appropriate way through rules. The PTO is really trying to get the implementation right. Very much looking for comments and feedback on the proposed rules.

    International harmonization – huge step forward in restarting international harmonization discussions.  But doesn't go all the way there.  More work to be done. 

    Impact of the law overall – this is the most significant change since 1836.  A lot of these changes have been percolating for far longer than the five years up to the AIA.  First to file really goes back to 1966 with a report from Lyndon Johnson, then a 1992 report that made the same suggestion.  2004 National Academies of Science recommended as well.  First to file is both international harmonization and a best practice. 

    PTO's goals in drafting the rules.  Make the guidance clear and transparent.  Address examination issues raised by AIA up front. 

    On grace period – this is a critical issue.  It's a unique feature of US law, but it's not the same grace period as we had before.  There are going to be questions about how narrowly the grace period is going to be read.  USPTO has interpreted the the grace period to be very narrow.  There are many views about this issue. 

    Sales issue (ed. do they have to be public?) – legislative history conflicts.  Is Metalizing Engineering overturned or not? 

    Visit the USPTO's AIA implementation page – lots of good material there. 

    Nathan Kelley (USPTO) – How supplemental examination is supposed to work.  Purpose of supplemental examination is to immunize patentees against claims of inequitable conduct based on information that was not disclosed, inadequately disclosed, or incorrect information. 

    Supplemental examination lets just about all issues of patentability to be raised.  Talked about the mechanics of supplemental examination.  If, for example, the issue raised by the supplemental examination is a written description issue, that's what will go into reexam. 

    Could apply to patents that have expired because the statute of limitations on a patent (enforceability period) is six years. 

    Improper requests will not get into the PAIR system until they are granted. 

    Items of information are anything, as long as they're written.  Videos/oral testimony must include a transcript.   Can't give more than twelve items of information in any one request.  But you can make more than one request.

    Fees – about $5k for the request, plus upfront $16,000 for reexam that will be refunded if no ex parte reexam. 

    (I spoke about inequitable conduct post-Therasense and the effect on supplemental examination)

    During Q&A, question came up about PTO fraud enforcement.  PTO views supplemental examination as exactly that, not an inquiry into the intent of the parties.

    The America Invents Act: One Year Later (conference)

    Patent, , , ,

    By Jason Rantanen

    Liveblogging the America Invents Act: One Year Later conference at the Indiana University Mauer School of Law.   Warning and disclaimer: Quality may vary and these don't necessary reflect my opinions.

    Session 1:

    Mark Janis – opening remarks.  Hard to believe it's been a year act since AIA was signed.  Still at the beginning of understanding the AIA provisions.  Exciting times.  Lots of patent law thought leaders here today – Bob Armitage, Director K appos. 

    Come back in ten days for the next conference.

    Bob Armitage – wants to the the upbeat, inspirational speaker that we all need at 8:30 am. 

    Some things that need to be done with the AIA in terms of legislative correction of errors.  Suggests that different constituencies in patent law work together on this goal in the immediate future – before the next election.

    The AIA is the most profound change to the patent system since 1836 patent statute.  He's been involved in the process of patent reform for the last 30 years.  Shortly after he left law school, he realized that we had a law school that we had a patent system that didn't work very well.  Some of the things that we needed to do to improve the patent system was to eliminate first to invent, have a more transparent grace period, and eliminate recurring patent terms. 

    Sees the AIA as major constituencies coming together to move the patent system in the direction of transparency and objectivity.  If the implementation of the AIA goes well, this is the patent system we'll have.  A more predictable patent system.  Much of this comes down to invalidity defenses – under the AIA these are much simpler. 

    We were the last to the table in terms of modernizing our patent system.  Prior 1999, we really had a secret patent system. With the AIA, the patent system was opened up even further.  After AIA, there's no-fault correction of misnaming of inventors; the technical filing of an affidavit that mis-names the inventor is no longer a worry; best mode is no longer a concern for patent applicants; patent prosecutors are better off because of supplemental examination.  If they're deposed, and things arise, the patent holder can, in a pre-litigation context, go back to the patent office. (me: Query how this is viable, since depositions often arise during litigation.  Could make sense for a sequential litigant).

    Other big changes: deceptive intent removed throughout the application process; patent owner can seek the patent as the applicant; no more supplemental oaths. 

    Post-grant review: patents are now open to more challenges after the patent issues.  It's any issue of patentability that you can raise in court, you can raise in the PTO.  Why is this important?  This lets parties challenge patents the day patents issue, not six years down the road.  Challenging patents in court is expensive.  Post-grant review allows parties to resolve these issues in the matter of months, not years, at a fraction of the cost.

    Sees the AIA as increasing transparency, objectivity, predictability, simplification of patent system.  Patent validity is reduced to just four objective legal standard: sufficient differentiation from prior public disclosures and earlier patent filings of others; sufficient disclosure to identify the claimed embodiments and enable them to be put to a specific practical, and substantial use; sufficient definiteness to differentiate subject matter; sufficient concreteness to avoid excessively conceptual or otherwise abstract subject matter.  That's all there is to the patent law.  These are objective standards that don't require you to know anything about what the inventor did, thought, etc. 

    The national embarrassment of the first-to-invent system will now end. Example Gore-Tex case of why this was a problem.  Interference count practice was problematic.  It was an embarrassment and it's gone. 

    The AIA is an attempt to be a codification of the way Congress wants the law, not a codification of what the law is. 102(b) was a colossal mess because of the attempt to codify existing law.  Under the AIA, there are no new AIA patent law doctrines.  Legislative history says "apply as written."  Example: 102 – only new phrase is "available to public."  Apply as written – this means that prior art is that art which is publicly accessible (comment: this issue is one of the most debated issues in the new AIA).

    Who benefits from the AIA?  Those with the least resources, capital available.  It's a patent system optimized for small inventors, universities.  For those engaged in commerce of patents, supplemental examination allows for due diligence to be more effective, since it will allow the curing of inequitable conduct.

    Does the Entire Market Value Rule Make Sense when Applied to Apportionment Analyses?

    Patent,

    By Dennis Crouch

    I struggle to understand the mathematical logic in the debate over the recent expansion of the entire market value rule (contemporary EMVR) for calculating damages in patent cases. The entire market value rule is a tool that – in most cases – prevents a patent holder from using entire market value of a product as the starting point (i.e., the “base”) when calculating patent damages. In its newest incarnation, the court has rejected use of the entire market value of an infringing product as the starting point for damage apportionment. In his Patent-Damages blog, Fish & Richardson Partner Justin Barnes provides his bottom line:

    [I]f a product is not separable into constituent parts, the plaintiff is not necessarily entitled to a royalty base on that product (e.g., Outlook in the Lucent case), but that if a product is separable into constituent parts, the plaintiff almost certainly is not entitled to a royalty base on the overall product (e.g., [LaserDynamics and] Cornell).

    The entire market value rule makes sense when it is being used to stop a patentee from unduly claiming the bulk of the infringer’s profits. However, the absolute rule doesn’t make sense when the entire-product royalty base provides a fine starting point for calculating the value of the incremental benefit provided by the invention in suit.

    Patent damages are most often calculated as a percentage royalty rate multiplied by some “base price” of the infringing product and then multiplied again by the total quantity of infringing products. This approach is suggested by the Patent Act requirement that “the court shall award the claimant damages adequate to compensate for the infringement but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs.” 35 U.S.C. § 284.

    The contemporary entire market value rule debate focuses on what base price to use in a situation involving a patent whose innovation is directed toward a component of a larger product. In particular, the inquiry is whether the base price should be the price of the entire multi-component product or instead some price associated with the component itself. The name for the rule comes into play because the price of the entire product is also known as the “entire market value.” Unfortunately, the name for the rule masks an important element in the royalty calculus – that the percentage royalty rate is shifted downward anytime the base price is shifted from the component price to the price of the larger multi-component product. A patented innovation may have a large impact on the value of a particular component (and thus receive a high royalty rate). Of course, that component will fit within a larger product having many other valuable components. Because so many other factors contribute to the value of the multi-component product, the percentage of value that the patented innovation adds to the multi-component product will be considerably lower. So, as the base price moves toward capturing the entire market value, the percentage royalty rate drops.

    In a model with a few assumptions about rational behavior and spillover benefit allocation, the arithmetic works-out so that a small percentage royalty of the entire market value of a multi-component product is equivalent to the appropriate corresponding larger percentage royalty of the component of that product. In one scenario the patentee receives a small percentage of a large sales base and in the other case receives a larger percentage of a smaller sales base. As we drill-down to smaller component pieces, the two variables in question – percent royalty and price-per-unit – vary inversely such that the product of the two stays constant. Since the damage award is based upon the product of those two factors, the choice of whether or not to use the entire market value as a base should not impact the actual damage award. I.e., there is no mathematical sense behind a rule that favors one approach over the other. With a reasonable royalty, we are usually looking to find the infringed invention’s marginal contribution to the infringer’s activities. That marginal contribution will not vary regardless of whether base is the value of the entire product or the relevant component.

    Despite this simple analysis above, the courts have begun to severely limit the use of the entire market value in calculating reasonable royalties damages. The entire market value rule stops patentees from calculating damages based upon the entire market value of an infringing product to cases where the patented feature is the basis for customer demand. This is a shift in the law that may have begun with Lucent (2009) and Uniloc (2011). In the most recent case of LaserDynamics v. Quanta Computer, Inc., the Federal Circuit added-on to the rule by confirming that the royalty base used to calculate a reasonable royalty should be the “smallest saleable patent-practicing unit.” Further, the entire market value of a product can only be used when the patented feature is provide to be the “motivating factor” for the customer purchase of the product. Merely being a but-for or “important” cause of the purchase was insufficient. The Laser Dynamics decision is likely the first major patent decision written by Judge Reyna. For his conclusion, Judge Reyna relies heavily on 2009 decision by Judge Rader where he sat by designation as a district court judge in Cornell Univ. v. Hewlett-Packard Co., 609 F. Supp. 2d 279 (N.D.N.Y. 2009). In that case, Judge Rader wrote that “counsel would have wisely abandoned a royalty base claim encompassing a product with significant non-infringing components. The logical and readily available alternative was the smallest salable infringing unit with close relation to the claimed invention—namely the processor itself.”).

    Limits on using the entire market value for calculation have been traced back to the 1884 Supreme Court case of Garretson v. Clark, 111 U.S. 120, 121 (1884). In that case, the patentee was awarded only nominal damages because the patentee failed to prove that it had suffered any loss or that the infringer had profited from the patented mop head improvement. In rejecting the appeal, Justice Field wrote:

    When a patent is for an improvement, and not for an entirely new machine or contrivance, the patentee must show in what particulars his improvement has added to the usefulness of the machine or contrivance. He must separate its results distinctly from those of the other parts, so that the benefits derived from it may be distinctly seen and appreciated. The rule on this head is aptly stated by Mr. Justice Blatchford in the court below: “The patentee,” he says, “must in every case give evidence tending to separate or apportion the defendant’s profits and the patentee’s damages between the patented feature and the unpatented features, and such evidence must be reliable and tangible, and not conjectural or speculative, or he must show by equally reliable and satisfactory evidence that the profits and damages are to be calculated on the whole machine, for the reason that the entire value of the whole machine, as a marketable article, is properly and legally attributable to the patented feature.”

    The plaintiff complied with neither part of this rule. He produced no evidence to apportion the profits or damages between the improvement constituting the patented feature and the other features of the mop. His evidence went only to show the cost of the whole mop and the price at which it was sold. And, of course, it could not be pretended that the entire value of the mop head was attributable to the feature patented. So the whole case ended, the rule was not followed, and the decree is therefore Affirmed.

    Garretson. Now, one major difference between now and then is that in 1884 a patentee was still allowed to seek disgorgement of the defendant’s profits – something that is no longer allowed in utility patent law. Setting profits aside, Garretson appears allow use of the entire market value so long as the patentee explains the added value of the particular patented invention and how that added value contributes to the value of the whole product “so that the benefit derived from [the invention] may be distinctly seen and appreciated.” The driving factor in Garretson as in contemporary cases is to prevent overcompensation. However, the contemporary courts have not (and perhaps could not have) explained how the entire market value used as part of an apportionment analysis leads to overcompensation.

    We might consider the availability of evidence. In the usual case, the value-added by an invention may be easier to see and understand at the component level because there are fewer issues to consider. On the other hand, base price information tends to be better available when looking at the entire market value of a product because that is what customers purchase – rather than looking at the value (or profit) associated with an integrated component. In situations like these where there are various legal theories available, we usually let the parties decide how to present their case according to what they believe is the best and most convincing evidence. The usual approach to intellectual property valuation is to use a variety of methodologies in the hopes that there will be some convergence on a best estimate and this is one useful methodology. In the larger context of the hypothetical negotiation, it just doesn’t make any sense that neither party would have considered the price of the final product as part of their negotiations.

    Cognitive Bias: In many multi-component cases, the correct royalty rate will be <<1% of the market value. Economists would have no problem with that result, but jurors might. In particular, it may be cognitively difficult for a juror to award a royalty rate of <<1% of the base price because that number seems so small. Again, in our adversarial system we normally rely on opposing counsel to help juries through their cognitive difficulties. In the multi-component situation, what’s wrong with allowing the defendant to make the (seemingly easy and intuitive) showing that the accused product is based on thousands of innovations and equally important underlying patents that each deserve (and have received) their share of royalties and that the stacking problem means that royalties for the particular invention in question certainly could not be above say 0.002%. To avoid the small number bias problem, defendants can rescale their calculation to be something like $5 per thousand products sold. This provides a whole number base that we are all comfortable with.

    Law Professors Brian Love has a nice pre-2009 article on the entire market value rule and its role in preventing patentee overcompensation. Brian J. Love, Patentee Overcompensation and the Entire Market Value Rule, 60 Stan. L. Rev. 263 (2007). However, the analysis has changed somewhat since then.

    To be clear, I’m not arguing that the court should jettison the whole of the entire market value rule – just the post-2009 contemporary conception that applies the rule to prevent use of the entire product value base in an appropriate apportionment analysis.

    Notes:

    • Although none of them completely agree with my analysis, Professors Thomas Cotter (UMN), Amy Landers (UFL), and Brian J. Love (SCU) all provided very useful comments on this essay.
    • Although I’m critical here of the damage jurisprudence of the Federal Circuit, at the time it was important for the court to take some steps to control damage calculations. In the background, Congress was a debating patent reform package that included provisions that would have significantly altered patentee’s damages arguments and the FTC had argued forcefully for further restrictions on patent damages. The court’s decisions then relieved the political pressure so that those provisions were eventually removed from the patent reform bill that was passed as the America Invents Act in September 2011.
    • The LaserDynamics case is also important because of its repudiation of settlement data in the damage calculation – especially when the settlement came at a point where the defendant was in a strategically disadvantageous position.

    Patently-O Bits and Bytes: Transitions

    Patent

    By Dennis Crouch

    Joe Matal was instrumental in the 2012 passage of America Invents Act. At the time, Joe was counsel to the Judiciary Committee and, although on the republican side, Joe really was the in-house knowledge base for members of both parties. Joe recently wrote a major two-part article on the AIA and how it should be interpreted based upon the legislative history. He has recently joined the USPTO in the solicitor's office as an assistant solicitor. Another new USPTO employee is Mark Guetlich. Mark is stepping into what I see as an extremely important role leading external affairs for the patent side of the USPTO. Mark led Microsoft's international patent team for many years and most recently served as SAP's IP counsel based in Germany. Mark is a graduate of the University of Missouri as is the Microsoft Chief Patent Counsel Bart Eppenauer. Congratulations Joe and Mark!

    President Obama has made two excellent nomination announcements. George Washington University law professor F. Scott Kieff will be nominated to join the United States International Trade Commission (USITC) as a USITC member. George Mason University law professor Joshua Wright is being nominated to become a commissioner of the Federal Trade Commission. Both choices are interesting because Scott and Josh are claimed by conservatives as thought leaders for the republican party. However, both are known for digging into problems to find the best practical solutions rather than being driven by ideology. In their roles, both will make an impact on patent law. Congratulations to Scott and Josh!

    Beyond Question: RMail Challenges the Use of Subject Matter Eligibility as an Invalidity Defense

    Patent, , , , , , ,

    RMail v. Amazon.com and PayPal (E.D.Tx 2012)

    Over the past few weeks we have been having an interesting debate over whether subject matter eligibility under 35 U.S.C. § 101 constitutes as valid defense to patent infringement that may be raised in litigation. Section 282 of the Patent Act defines defenses available to an accused infringer and that statute has been interpreted to limit defenses available only to those that fit the statutory list. Thus, because improper revival of an abandoned patent application does not fit on the list, the Federal Circuit ruled that mistake by the patentee and USPTO could not be used to later invalidate the patent during litigation. One problem with Section 282 is that it is not a simple list of references, but is instead really a pointer to other sections of the Patent Act. Thus, an accused infringer can assert an invalidity defense based upon "any ground specified in [Sections 100-188] as a condition for patentability" as well as "any requirement of section 112, except that the failure to disclose the best mode." Now, we normally think of the doctrines of invalidity deriving from Sections 102 (anticipation); 103 (obviousness); 112 (written description; enablement; indefiniteness); and 101 (utility and subject matter eligibility). Now, Section 112 is clearly identified as a defense, and the patent act particularly identifies section 102 and 103 as creating the "conditions for patentability" required under Section 282. The lone outsider then is Section 101 whose status as creating conditions for patentability has not been established. Professor Hricik introduced this argument and began the statutory analysis in a post titled Are the Courts Correct in Their Assumption that a Patent Issued on Non-patentable Subject Matter is Invalid?. I continued the argument by considering its application to the new post grant review program in a post titled Can a Third Party Challenge Section 101 Subject Matter Eligibility in the USPTO's new Post-Grant Review Procedure?. Now, in RMail, lawyers are asking Judge Gilstrap (E.D.Tx.) to decide the issue.

    RMail's asserted patents are directed to a new way to authenticate service of electronic messages – i.e., to prove that an e-mail was actually sent and received without relying upon key encryption. U.S. Patent Nos. 6,182,219 and 6,571,334. Many of the claims are not limited to any particular "technology" except for various simple data structures. Instead, the claims simply focus on the sending and receiving of the various data elements in ways that could all seemingly be done offline using pencil and paper.

    After being sued, PayPal filed a motion for partial summary judgment – asking the court to rule those claims invalid under 35 U.S.C. § 101 as lacking subject matter eligibility.

    In response, RMail has argued that subject matter eligibility is not a proper invalidity defense permitted to be raised under Section 282 (in addition to providing arguments on the merits).

    VI. CONGRESS DID NOT PERMIT SECTION 101 TO SUPPLY A LITIGATION DEFENSE

    Rmail closes by asking the Court to recognize and apply all appropriate statutory barriers against entertaining Defendants' Section 101 defense. The entire jurisprudential "murky morass" of subject matter eligibility need not arise again in any litigation. Myspace, 672 F.3d at 1260 (using "murky morass" label). Rmail acknowledges that this argument is for the good faith extension or modification of existing caselaw. Courts until now have uniformly overlooked Congressional will on this question.

    Namely, while Section 101 analyses are appropriate in Patent Office application proceedings, this Court lacks any statutory basis for analyzing Section 101 issues as a litigation defense. Patent defenses are statutory. Under the Patent Act of 1952, only enumerated patent defenses exist. Aristocrat Tech. v. Int'l Game Tech., 543 F.3d 657, 661-63 (Fed. Cir. 2008). If an issue is not denominated an infringement defense within the Patent Act, then the Court lacks jurisdiction to address it. Id.

    . . . .

    It does not matter that the statutory misinterpretation has lasted so long, or so pervades conventional thinking. Even a long-term statutory misconstruction will not bar restoring the patent system to its statutory limits. See Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164, 177, 191 (1994). . . . Four recent Supreme Court cases arose in the USPTO administrative context, and are thus consistent with Rmail's argument: Benson, Flook, Diehr, Bilski. A fifth, Prometheus, admittedly arose within an infringement defense context. However, no one seems to have pointed out to the Supreme Court this important threshold issue of statutory construction, and statutory limitations on the powers of the federal courts. Prometheus thus does not bar this Court from issuing a correct ruling in the present adversarial context.

    PayPal's response is fairly weak – that the dicta of Aristocrat identifies Section 101 as a condition for patentability. (To be clear, the PayPal briefs are quite good – they just lightly treat this particular issue).

    The landmark 1996 Supreme Court case of Graham v. John Deere is interesting and sends somewhat mixed signals in its dicta describing the patent act. In that case, the court wrote that "The [Patent] Act sets out the conditions of patentability in three sections. An analysis of the structure of these three sections indicates that patentability is dependent upon three explicit conditions: novelty and utility as articulated and defined in § 101 and § 102, and nonobviousness, the new statutory formulation, as set out in § 103." The odd element of the Supreme Court statement is that it does not identify subject matter eligibility as a defense created by § 101. In Aristocrat, the Federal Circuit explained away the gap by noting "it is beyond question that section 101's other requirement, that the invention be directed to patentable subject matter, is also a condition for patentability." I guess that question is no longer unaskable.

    Docs:


    Patent Pendency Time Series and Why Care about Prosecution Delays

    Patent

    By Dennis Crouch

    In yesterday’s post, I provided a histogram of USPTO patent prosecution pendency for the most recent issued utility patents. I received a couple of e-mails asking for similar historic information. The chart above shows a time series of USPTO patent prosecution pendency for utility patents.

    To be clear, this is not a complete dataset. Rather, to create the chart I pulled up the group of utility patents issued on the first Tuesday of September for each year 1999-2012. Then, for each group, I identified the median pendency as calculated from the patent application filing date to the issue date and ignoring any priority claims. The median pendency is typically more time consuming to identify than is the arithmetic average. However, I believe it provides a comparatively better sense of the data in this case. Prosecution pendency tends to have a substantial skew allows a small number of patents with exceedingly long pendencies to shift the averages. Relying on the median eliminates that difficulty. Because of this ever-present skew, the median is always somewhat smaller than the average – perhaps making the situation look rosier than reality. However, I’m comfortable with this result that largely ignores the top .5% of patent pendency because those tend to be quite special cases. For fun, I also overlaid the names of the USPTO directors in office at the various points in the timeline.

    This chart is useful to me as a sign of hope. It wasn’t so long ago that the median pendency was hovering around two-years. And, all signs are that the pendency will drop over the next few years as thousands of new patent examiners find their footing. (This last bit about thousands of new patent examiners is intended to foreshadow a series of upcoming posts on the incredible rise in the number of patent examiners at the USPTO and an inquiry into what will happen with those examiners once the backlog is under control.)

    = = = = =

    Why should we care about patent pendency?: Reducing patent pendency has been a major goal of the Kappos directorship. However, it is probably useful to pause for a moment to consider whether we should care about pendency and backlog. Certainly we want to know and understand the delay in order to advise our clients on how to order their affairs. But, should we care whether the delay is relatively longer or shorter? In my view, the major harm of long delay is not felt by patent applicants, but rather by parties releasing new products who cannot rely upon parties who cannot rely on

    Most of the backlog delay occurs between the time that the patent application is filed and the mailing of the first action on the merits (FAOM). From a patentee’s perspective, that delay can actually be good. It allows the patent applicant to delay payment of certain fees (such as issue fees) and costs (such as attorney fees for prosecution) and provides the applicant with additional time to consider whether or not to pursue rights based upon the additional expected costs of patenting. When taking market developments into account, the delay also provides the applicant with time to adjust claim scope to better capture the market value of the invention. One potential problem with delays in prosecution is a reduction in patent term. However, the Patent Act generously compensates patentees for any term lost due to PTO delays (by adding additional time to the end of the term). Sometimes applicants have good reasons to want quick patent issuance. For those instances, the USPTO allows the applicant to pay a fee in order to skip the backlog queue. The so-called “track one” fee is a hefty $4.8k, but it is an option and my pre-AIA survey found that charge not unreasonable. At least in a somewhat simplified world, this $4.8k limits the per-application loss to applicants caused by the delay. I.e., if an applicant was going to be harmed by more than $4.8k due to the lengthy backlog, then the applicant can simply pay the fee to avoid that harm. This is a simplified world because, inter alia, applicants might not know from the outset that there is any benefit to a more rapid patent issuance.

    The real problem with the backlog is that the resulting prosecution delays create uncertainty for product developers and marketers – those that actually create new products and sell them on the market. The long pendency allows patent applicants to watch the market and shift patent rights to cover activity that was previously considered legitimately open. During that time, manufacturers simply cannot know whether their products will be covered by patents held by some third party. For many market areas, this greatly increases the risk that products legitimately released into the stream of commerce and placed in the hands of consumers will – some years later – become infringing because of third-party patents that eventually issue. Many of the policy justifications that support old statutory bar of 35 U.S.C. 102(b) would also discourage a system that allows this result.