Patenting by Entrepreneurs: The Berkeley Patent Survey (Part II of III)

Guest Post, Inventors, Inventorship, Patent, Survey, ,

Guest Post by Robert Merges and Pamela Samuelson, UC Berkeley School of Law; Ted Sichelman, University of San Diego School of Law

In our previous post, we discussed three major findings from the Berkeley Patent Survey—the most comprehensive survey to date in the United States, probably worldwide, on how patents are used by and affect entrepreneurs, startups, and early-stage high technology companies. As we noted in that post, the survey collected responses from over 1,300 companies less than ten years old (hereinafter, "startups") in the biotechnology, medical device, software, and hardware/IT sectors. In this post, we discuss three additional major findings. (For those interested in more information, a detailed discussion of the survey results is available here; a focused analysis on the drivers of startup patenting, here; and some background on the genesis of the survey, here.)

Our fourth major result is that our respondents—particularly software companies—find the high costs of patenting and enforcing their patents deter them from filing for patents on their innovations (see Fig. 1 below). Given the reported importance of patents to startups not only in the financing process, but also for strategic reasons—especially for increasing bargaining power—these cost barriers are worrisome.

Another of our survey questions revealed that the average out-of-pocket cost for a respondent firm to acquire its most recent patent was over $38,000. This figure is significantly higher than the averages for patent prosecution reported in the literature, which vary from a low of $10,000 to a high of $30,000.

Our respondents also offer a variety of other reasons for not patenting, including the ease of competitors designing around a potential patent and the belief that the innovation was not patentable (both of which are more salient for software companies) as well as the reluctance to disclose information in a patent and a preferred reliance on trade secrecy (which are more salient for biotechnology companies).

Figure 1. "For your last innovation you did not patent, which if any of the following influenced your company's decision?"

A fifth major finding is that although many respondents report licensing in patents from others, most of them did so to acquire technology, with fewer seeking licenses to avoid a lawsuit. So, while we find that 15% of technology companies licensed in at least one patent, there are industry differences.

Specifically, among biotechnology companies, while 37% had licensed in at least one patent, for their last license, 81% did so to acquire technology, and only 30% to (sometimes also) avoid a lawsuit. Among software firms, only 8% report taking at least one patent license, with 79% taking such a license to (at least in part) gain information or know-how. In each sector, less than 10% of companies taking licenses report licensing only to avoid a law suit.

When we restrict our focus to only venture-backed companies, inbound licensing is much more prevalent, with 37% of all companies licensing in a patent. However, there is once more wide variation from one industry to another. While 89% of venture-backed biotechnology companies licensed in at least one patent, only 12% of similarly-funded software companies had reported as much. Also, while only 3% of these biotech companies that had licensed at least one patent reported licensing in their last patent only to avoid a lawsuit, 22% of such software companies reported as much.

Last, we asked how much of a role patents play in the steps of the innovation process, from invention to R & D to the commercialization of products and processes. Somewhat surprisingly, the responses on the whole are rather tepid. For instance, biotechnology companies report that patents provide closer to a "moderate" than a "strong" incentive to engage in the innovation process. Among software companies, the results are even more striking, with them reporting that patents provide less than a "slight" incentive. These findings raise questions about the importance of patents to innovation for entrepreneurs and startups. Indeed, the results have spurred some vigorous debate in the blogosphere of late, and we devote our entire next post on Patently-O to discussing them in detail.

Patenting by Entrepreneurs: The Berkeley Patent Survey (Part I of III)

Guest Post, Inventors, Inventorship, Patent, Survey, , , ,

Guest Post by Robert Merges and Pamela Samuelson, UC Berkeley School of Law; Ted Sichelman, University of San Diego School of Law

Why do entrepreneurs and startup companies file for patents? Why not? How often do startups acquire patents from others? How important are patents in fostering innovation at startups? In helping them raise financing? In providing leverage in cross-licensing negotiations? Are entrepreneurs and startups subject to patent thickets?

These and many related questions were the subject of the Berkeley Patent Survey—the most comprehensive survey to date in the United States, probably worldwide, on how patents are used by and affect entrepreneurs, startups, and early-stage high technology companies. Funded by the Ewing Marion Kauffman Foundation—and conducted by us, along with Robert Barr (Executive Director of the Berkeley Center for Law & Tech and former VP of IP at Cisco) and Stuart Graham (then a professor at Georgia Tech's College of Management, and currently Chief Economist of the USPTO)—the survey collected responses from over 1,300 companies less than ten years old (hereinafter, "startups") in the biotechnology, medical device, software, and hardware/IT sectors.

In this first post of three, we briefly review three major findings from our initial analysis of the survey about the frequency of patenting among high-tech startups, why startups seek patents, and how they rate patents and other strategies for attaining competitive advantage. In the next post, we'll discuss some reasons startups give for not seeking patents and why they sometimes license-in patents from other companies. In the last post, we'll specifically address startup perceptions about the incentives that patents provide for engaging in innovation as well as the perceived importance of patents in securing outside investments. The investment incentive role of patents has been not only a subject of enduring interest in the patent field generally, but also an important topic of interest of late at the Department of Commerce and PTO. (For those interested in more information, a detailed discussion of the survey results is available here; a focused analysis on the drivers of startup patenting, here; and some background on the genesis of the survey, here.)

First, startups hold many more patents and applications than previously believed. Instead of asking companies how many patents and applications they actually hold—like we did—earlier studies solely used the PTO databases to determine portfolio size. Unfortunately, these databases are unreliable, because the assignee records—particularly for patents acquired from founders and third parties—are incomplete. Our more complete data shows that about 40% of our respondents hold patents or applications, with the figure rising to about 80% for startups funded by venture capital firms.

As expected, this figure varies widely by industry—for example, 97% of venture-backed biotechnology companies hold patents or applications, while only 67% of venture-backed software startups do. And among the general population of software startups responding, the rate was only about 25%. In terms of raw numbers, among biotechnology companies, those with patents and applications have about 13 on hand, with the number rising to about 20 for medical device companies, and falling to about 7 for software companies. In sum, many startups are filing for patents and hold greater numbers than previously believed, though most software companies have never filed for patents.

Second, startups report that they primarily file for patents to prevent against copying of their innovative products and services (see Fig. 1 below). This holds true across all industries and by a variety of other company characteristics, such as age and revenues.

Respondents also note that filing for patents to improve their chances of securing investment and generating a liquidity event (such as an IPO or being acquired) are between moderately and very important reasons to file. In addition, the respondents state that a moderately important reason to file patents is for strategic reasons, such as defending against and preventing patent lawsuits as well as increasing negotiating leverage.

Figure 1: Reasons to File for Patents

Our third major finding concerns startup executives' perceptions of the effectiveness of patents and other methods of providing competitive advantage. Interestingly, responses vary widely (see Fig. 2 below). Biotechnology companies rate patents as the most effective means of capturing competitive advantage, more effective than first-mover advantage (though the differences are not statistically significant), trade secrecy, reverse engineering, copyright, and other means. Software companies, on the other hand, rank patenting dead last in providing competitive advantage.

Figure 2: Measures of Capturing "Competitive Advantage" from Inventions

In sum, the 2008 Berkeley Patent Survey has found that startups are patenting more than previous studies have suggested; that patents are being sought for a variety of reasons, the most prominent of which is to prevent copying of the innovation; and that there are considerable differences among startups in the perceived significance of patents for attaining competitive advantage, with biotech companies rating them as the most important strategy and software companies rating them least important.

Our next post will delve into reasons high tech entrepreneurs gave for not seeking patents for recent innovations and for licensing of patents from other companies.

The Business Method Patent Art Units

Academic Studies, Patent, Patentable Subject Matter, Software,

By Dennis Crouch

In prior posts, I noted that the USPTO is issuing patents at an all-time-high-rate.  This increase is perhaps most dramatic in the art units that examine applications classified by the USPTO as "business methods."  This post explores the history and the numbers.

* * * * * 

The USPTO patent examiner corps is organized into small technology-specific groups known as art units.  Each art unit has a manager that reports to a technology center director.  About twenty art units have been classified as generally dealing with “business method” patents. (See list of art units).  I’ll call these art units “business method art units” for lack of a better term.  All of the patents issued from these art units are classified in class 705. And, these are the patents and applications that are most likely to be affected by the decision in Bilski v. Kappos (2010).

Under former PTO Director Jon Dudas, the business method art units received special attention.  Individual examiners were given free power to reject pending applications as unpatentable, but claims could not be allowed as patentable until being reviewed by at least a “second pair of eyes.”  Under Director Kappos and Commissioner Stoll, the second pair of eyes regime has been eliminated and, as might be expected, the number of patents being allowed in these art units has risen dramatically. Perhaps coincidentally, this rise also correlates with the Federal Circuit’s October 2008 decision in Bilski.

The following two charts respectively show the number and percentage of patents that issue from the business method art units for each quarter (three-month period) going back to January 2005.  (2010 Q3 only includes two-weeks worth of data). As a bit of perspective, since January 2005, more than 900,000 utility patents have issued. Fewer than 9,000 are associated with these business method art units.

PatentLawPic1033

PatentLawPic1034

As the charts show, the number of patents issued by the business method art units is on the rise — both in terms of absolute numbers and as a percentage of patents being issued. 

Most of the patents issuing from the business method art units are directed toward some type of computer software that helps solve a business problem. Newly issued U.S. Patent No. 7,747,465 is a typical example. The ‘465 patent claims a method and apparatus for determining the effectiveness of internet advertising. The claimed method does not explicitly recite any hardware except for a “manager console”, “dynamic sampling engine”, and “logic module.”  In response to a Section 101 rejection, the applicant amended its claims and then — without explanation — provided the conclusory argument that the application was “directed to statutory subject matter because the claims are either directed to statutory processes tied to a particular machine or directed to statutory apparatuses.”

One problem with studies of business method patents is that there is no accepted definition the term.  The 1998 State Street decision that jump-started business method patenting did not actually involve any method claims.  On the technology front, inventions that look like business methods are often examined in other art units. Rand Warsaw (Bernard Bilski's co-inventor) was issued a patent in 2004 on a method for providing energy efficiency changes based upon historic consumption and weather data.  That patent looks was examined by a non business method art unit in an entirely different technology center. (Patent No. 6,785,620).

Avid ID v. Crystal Import: En Banc Request Denied On Issue of Inequitable Conduct by Non-Inventor CEO

En Banc, Inequitable Conduct, Patent, Prior Art, statutory bar, ,

By Dennis Crouch

In Avid ID, the Federal Circuit denied Avid's motion for en banc rehearing on the issue of whether inequitable conduct exists when the non-inventor, non-attorney CEO of a company applying for a patent failed to submit information to the USPTO about pre-filing but non-invalidating trade-show exhibit of a prior version of the patented product. Judge Newman dissented.   

* * *

Avid Identification Systems v. Crystal Import Corp. (Fed. Cir. 2010).

In its original decision in this case, the Federal Circuit held that the president of Avid ID Systems was "substantially involved" with the prosecution of the asserted patent and therefore was subject to the duty of disclosure. The court went on to find that the president had failed that duty by failing to advise the PTO of a trade-show demonstration that occurred more than one-year before the patent application was filed. The inequitable conduct decision was important to the case because the trade-show demonstration of a prior product did not leave the patent invalid under the statutory bar of 102(b)/103(a).   

Avid requested rehearing en banc and that its case join with the pending TheraSense en banc case or, in the alternative, to stay the rehearing decision until after Therasense is decided. The Federal Circuit has denied Avid's motion for rehearing en banc.

Judge Newman dissented from the rehearing denial and would have stayed the case to await changes in the law of inequitable conduct:

The law as applied in Avid is subject to conflicting precedent, a conflict whose resolution is reasonably likely to alter the result. Thus it is prudent, and just, to hold Avid’s petition while the law is clarified. The court today has declined to do so, rendering the subject patent permanently unenforceable, although the patent was found valid on the same prior art that is the basis for its unenforceability.

. . .

This court held that Dr. Stoddard’s demonstration during the Livestock Committee trade show of what the panel calls “some of Avid’s technology,” and Avid calls a “precursor product,” was material to patentability and that Dr. Stoddard was required to assure that the patent examiner was informed. According to the panel opinion, the district court “found that the precursor product, while not invalidating, reflected the closest prior art, and thus was highly material to patentability.” Avid Identification Sys., Inc. v. Crystal Import Corp., 603 F.3d 967, 973 (Fed. Cir. 2010)(“Avid II”). While “closest prior art” has been discussed in the context of whether certain information is cumulative of that already presented to an examiner, see, e.g., AstraZeneca Pharms. LP v. Teva Pharms. USA, 583 F.3d 766, 773-75 (Fed. Cir. 2009), it has never been the law that information is “highly material” simply because it is “closest.” It is not disputed that whatever was demonstrated was not an invalidating disclosure of the patented invention, and not a sale or offer to sell the patented invention, for the jury found that the demonstration at the Livestock Committee was not invalidating. See Avid I, 2007 WL 2901415, at *1.

Dr. Stoddard, who is the president of Avid, is a veterinarian whose principal occupation is running an animal hospital; he is not an electronics engineer and not a chip designer and not an inventor of the patented device and not a lawyer. See Avid II, 603 F.3d at 970. On the undisputed fact that the challenged information is not invalidating, the court’s holding of inequitable conduct is sufficiently questionable to warrant a stay until this court resolves the larger issues before us, including the en banc Order’s query: “Should a finding of materiality require that but for the alleged misconduct, one or more claims would not have issued?” Order, 2010 WL 1655391, at *1. It is at least possible that the court will answer this question in the affirmative. Although I do not venture to guess how Therasense will fare overall, it is not unreasonable to expect that it may affect the Avid decision.

The Avid panel applied the former Rule 56 standard of materiality as stated in J.P. Stevens & Co. v. Lex Tex Ltd., 747 F.2d 1553, 1559 (Fed. Cir. 1984), although this standard was abandoned by the PTO in 1992. The information here criticized does not appear to violate the current Rule 56 standard, and Dr. Stoddard is not within the cadre upon whom is placed the obligation of understanding the patent law, as Judge Linn explained in his dissent. I must, respectfully, dissent from the court’s refusal to stay this appeal in view of the en banc proceeding in Therasense.

Documents:

Provisional Patent Applications

Patent, Provisional Patent Application,

The number of provisional patent application filings continue to rise.  Well over 100,000 provisional patent applications have been filed each of the past five years.

For many, provisional applications are seen as a low-cost mechanism for claiming a priority date and for delaying the eventual higher cost of drafting and filing a non-provisional application. (A Google search for “provisional patent” resulted in ads for “$99 provisional patent”, “$139 provisional patent”, etc.) Others (especially those in the pharmaceutical industry) use provisional applications as a way to claim an additional year of at the end of the patent term.

Many patent attorneys criticize the use of provisional applications as a low-cost pathway — arguing that approach leads to a false sense of security because the low-quality applications will be insufficient to satisfy the disclosure requirements for later priority claims.

I am working on a project that looks at how patent applicants are using provisional patent applications.  The heart of the project attempts to determine whether the provisional disclosure properly enables and describes the invention as eventually claimed. Those results are still pending. However, I thought I would present some preliminary information about the provisionals in our study.

Results: One of the low-cost benefits of provisional applications is that they have no formal requirements. Thus, a printed PowerPoint presentation, whitepaper, or circuit diagram could each serve as a provisional application.  Patent claims are not required. However, we’re finding that about 60-70% of provisional applications are filed with at least one claim.  About 50–60% really look like non-provisional patent applications.  Around 15% of the provisional applications are essentially a stack of presentation materials. Almost all of the provisional applications are computer generated (rather than handwritten).

 

 

Advanced Magnetic Closures v. Rome Fastener

Guest Post, Inequitable Conduct, Patent, Rantanen, , ,

By Jason Rantanen

Early this week, I wrote about Leviton, former Chief Judge Michel's last opinion on inequitable conduct before leaving the bench.  Advanced Magnetic Closures brings another perspective on the issue – this time in the form of a comment from the new Chief Judge about issuing inequitable conduct opinions while Therasense v. Becton, Dickinson is pending en banc.

* * * *

Fastener Advanced Magnetic Closures, Inc. v. Rome Fastener Corp. (Fed. Cir., June 11, 2010)

In Advanced Magnetic Closures, the court reviewed a district court determination that U.S. Patent No. 5,572,773 is unenforceable due to inequitable conduct by the alleged inventor.  The panel also reviewed the district court’s entry of attorney fees against both the patent holder (AMC) and its attorney. 

Inequitable conduct: The focus of the inequitable conduct determination was on the district court’s finding that the alleged inventor falsely claimed to the PTO that he was the inventor of the claimed magnetic fastener when, in fact, he was not.  Applying the Star Scientific standard, the panel concluded that the district court did not err by finding that “the single most reasonable inference able to be drawn from the evidence is that [the alleged inventor] intended to deceive the PTO.”  Slip Op. at 19 (internal quotations omitted). 

Attorney’s Fees: After concluding that the exceptional case determination was appropriate on the basis of both inequitable conduct and litigation misconduct (an issue that the appellant waived by failing to include it in its briefs), the court addressed the attorney sanctions entered against AMC’s attorney under 28 US.C. § 1927.  Applying Second Circuit law, the Federal Circuit concluded that the district court abused its discretion by sanctioning the attorney.  The court noted that attorney sanctions under 28 U.S.C. § 1927 require a finding of bad faith, as opposed to objective unreasonableness, and concluded that the district court’s single statement that the attorney “should have been aware” of the deficiency of AMC’s patent infringement claim was insufficient to rise to this level.  

Chief Judge Rader’s Concurrence: The most notable aspect of the opinion comes at the end, in the form of the new Chief Judge’s concurrence.  While Judge Rader agreed with the outcome of the appeal, he wrote separately to stress that “absent extreme facts such as those found in the present case, this court should refrain from resolving inequitable conduct cases until it addresses the issue en banc.”  He also provided the following interesting comment regarding Therasense:

“In Therasense, this court has been asked to address the transformation of inequitable conduct from the rare exceptional cases of egregious fraud that results in the grant of a patent that would not otherwise issue to a rather automatic assertion in every infringement case. The exception has become the rule. Generally, I would hold inequitable conduct cases until after this court reexamines whether to put the doctrine back into the exception category.”

Although no Federal Circuit decisions involving inequitable conduct have issued since Advanced Magnetic Closures, only a short time has passed.  It remains to be seen whether the Chief Judge’s proposed policy on inequitable conduct determinations will be followed for the coming months.

* * * *

For the sake of full disclosure, I note that I previously represented Abbott Laboratories in connection with the Therasense litigation.  I no longer represent clients, including Abbott.

Patently-O Bits and Bytes

Bits and Bytes, Patent,
  • PatentlyO068Todays Posts:
  • New Contributing Author: Jason Rantanen
    • My friend Jason Rantanen has agreed to become a contributing author on Patently-O for the next few months. He’ll be posting case reviews and other notes about once each week.  Jason and I were classmates at the University of Chicago School of Law. Before law school, Jason earned degrees in both Biology (Brown) and History (Brown, Chicago).  He clerked for Judge Bryson on the Federal Circuit and litigated IP disputes at the Munger Tolles firm in San Francisco.  This summer, Jason started on an academic path as a Visiting Scholar at UC Hastings School of Law. He may not want this shared, but Jason is also married to a patent attorney.
    • Posts written by Jason will bear his name.
  • Media Queue v. Netflix:
    • I recently posted on the push by Netflix for a legal shift that would allow successful defendants greater access to recover attorney fees. [Link] Nick Gross, the inventor and patent attorney at the heart of the lawsuit has now posted an article on his blog where he addreses “certain false statements and mischaracterizations raised by Netflix.” [Link] Nick Gross’s post provides an interesting history — especially regarding pre-litigation activities between the companies.

Patently-O Bits and Bytes

Bits and Bytes, Patent,
  • PatentlyO068Todays Posts:
  • New Contributing Author: Jason Rantanen
    • My friend Jason Rantanen has agreed to become a contributing author on Patently-O for the next few months. He’ll be posting case reviews and other notes about once each week.  Jason and I were classmates at the University of Chicago School of Law. Before law school, Jason earned degrees in both Biology (Brown) and History (Brown, Chicago).  He clerked for Judge Bryson on the Federal Circuit and litigated IP disputes at the Munger Tolles firm in San Francisco.  This summer, Jason started on an academic path as a Visiting Scholar at UC Hastings School of Law. He may not want this shared, but Jason is also married to a patent attorney.
    • Posts written by Jason will bear his name.
  • Media Queue v. Netflix:
    • I recently posted on the push by Netflix for a legal shift that would allow successful defendants greater access to recover attorney fees. [Link] Nick Gross, the inventor and patent attorney at the heart of the lawsuit has now posted an article on his blog where he addreses “certain false statements and mischaracterizations raised by Netflix.” [Link] Nick Gross’s post provides an interesting history — especially regarding pre-litigation activities between the companies.

Updated Statistics: Patent Application Pendency

Patent, Patent Applications

PatentlyO068

The above chart shows average application pendency for issued utility patents grouped by issue year. The chart presents three separate series that differ according to the filing-date used in the pendency calculation. The lowest data-series uses a traditional calculation that calculates pendency based on the actual US non-provisional filing date of the application in question without regard to any priority claims. The middle data-series calculates pendency based on the earliest US Priority claim. The highest data-series includes claims to both US and Foreign priority filings.

This chart is useful both for applicants and for third-parties considering moving forward with product development. Importantly, when a patent application is originally filed abroad, it usually take more than six-years before the first US patent is issued.

Leviton Manufacturing v. Universal Security Instruments

Inequitable Conduct, Patent,

By Jason Rantanen

In Leviton, Chief Judge Michel issued his last words as a judge on the subject of inequitable conduct, while Judge Prost provided some hints as to her views on the questions pending before the court in Therasense v. Becton Dickinson.

* * * * *

Leviton Manufacturing Company, Inc. v. Universal Security Instruments, Inc. (Fed. Cir. 2010) (Case No. 2009-1421)

The district court's inequitable conduct determination in this case arose from two patent applications Leviton filed in 2003 and 2004.  The applications contained virtually identical claims, but listed completely different inventors.  The first application (the "Germain application") was filed in October 2003 and claimed priority to a February 2003 provisional application; the second, which led to the '766 patent (the patent in suit), was filed in 2004 as a continuation of an application filed on August 20, 1999.  The prosecuting attorneys did not disclose the Germain application during the prosecution of the '766 patent.

After granting Leviton's mid-litigation motion to dismiss, the district court concluded that the case was exceptional based on inequitable conduct and vexatious litigation, resulting in an award of attorneys' fees.

  • Note: The majority treated the district court's inequitable conduct finding as a summary judgment, as there was no evidentiary hearing.  The dissent would have reviewed the factual findings under the clear error standard because they arose in the context of an exceptional case determination. 

Majority: Factual Issues Relating to Intent Precluded Summary Judgment of Inequitable Conduct
The majority, written by then Chief Judge Michel and joined by Judge Moore, concluded that summary judgment of inequitable conduct should be reversed.  With respect to materiality, they agreed with the district court that the Germain application constituted undisclosed material information.  Although the copying of the claims was not per se material under 37 C.F.R. § 10.23(c)(7) (which relates to the interference context), it was relevant to double patenting and inventorship.  They also agreed that the failure to disclose litigation involving the '766 patent's parents was material. 

On intent, however, the majority concluded that the district court's inference of deceptive intent was not the only reasonable one based on the record.  In particular, they noted that the explanation given by Leviton's litigation counsel was not unreasonable as a matter of law, thus precluding a grant of summary judgment.  Rather, it could only be found implausible following an evidentiary hearing.

Dissent: Summary Judgment Should Be Affirmed

In her lengthy dissent, Judge Prost indicated that she would reach the opposite conclusion on intent.  Particularly informative are her views on inferring intent.  First, she explicitly adopted the Larson Manufacturing requirement that an inference of intent "must be the single most reasonable inference able to be drawn from the evidence."  Dissent at 11.  Second, she gave her thoughts on plausible explanations, reasoning that the prosecuting attorney's explanation (that he did not believe the Germain application was material because it was not prior art) was implausible because a veteran patent prosecutor would know that prior art is not the only type of information that is material to the examiner.  Thus, she would "allow the district court to reject [the explanation] as "unreasonable" and "implausible" and therefore insufficient to create a genuine issue of material fact."  Dissent at 17.

  • Comment: Judge Prost's logic would appear to be applicable to any situation in which the prosecuting attorney's explanation was incorrect – which generally necessarily follows once materiality has been found.  All one needs to do is to point out that the attorney must necessarily have known better, and the explanation would be rendered implausible.

About Jason: After spending several years in practice as a patent litigator, Jason is now looking at law from the academic side and is currently a Visiting Researcher at UC Hastings. Although he does not currently represent clients, for the sake of full disclosure he notes that he has represented clients on both sides of inequitable conduct issues, including Abbott Laboratories in connection with the Therasense litigation.

Attorney Fees and Equal Treatment for Plaintiffs and Defendants

Attorney Fees, Infringement, Patent, Patent Cases 2010, ,

Media Queue v. Netflix (Fed. Cir. 2010)

This case involves a classic “improvement patent” scenario. Nick Gross was a longtime Netflix user when he came-up with the idea that the service should provide additional user notifications — such as when the movie queue runs dry. Just before filing suit, Gross and partners formed Media Queue as a holding company. Media Queue then sued Netflix, Blockbuster, and others for patent infringement. Nick is also a patent attorney and a nice guy. We met at a conference last spring.

After construing the claims, the district court dismissed the case based on its summary judgment finding of non-infringement.  The court, however, refused to award attorney-fees to the defendants because the case was not entirely frivolous or filed in bad faith.  Media Queue has appealed the summary judgment.  However, the more interesting aspect of the case is the counter-appeal by Netflix asking the Federal Circuit for an en banc hearing to on the issue of when a court may find an “exceptional case” and award attorney fees to the prevailing party. In particular, Netflix argues that the current law of attorney-fee awards is imbalanced in favor of the plaintiff-patentee.

35 USC 285 simply states that “The court in exceptional cases may award reasonable attorney fees to the prevailing party.”  Several decisions have held that a prevailing-patentee may obtain attorney fees based on a finding of willful infringement — i.e., that the accused infringer was aware of an objectively high likelihood that the patentee would prevail.  Willfulness can be found even when the defendant has a non-frivolous non-infringement of invalidity argument. On the flip-side, however, a prevailing-defendant (accused infringer) seeking attorney fees must show a seemingly higher standard of litigation misconduct or inequitable conduct.

The appeal asks the Federal Circuit to apply the Supreme Court precedent of Fogerty v. Fontasy, Inc. (1994) in holding that plaintiffs and defendants in patent cases are entitled to equal treatment in obtaining attorneys' fees.

The appeal is filed by Mark Lemley’s team at Durie Tangri. Amazon, Facebook, Microsoft, Oracle, Toyota, and others “frequent defendants” have filed briefs supporting en banc hearing.

Documents:

Requests for Continued Examination Continue to Rise

Patent, Patent Applications

PatentLawPic1019

The chart above shows Requests for Continued Examination (and the earlier CPA/R129 processes) as a percentage of the total number of non-provisional patent applications filed each year. 

Notes: The denominator here does not include RCE filings but does include continuations and CIP filings. Thus, the calculation is: (Number of RCEs)/(Number of Non-Provisional Filing). The denominator does include plant & reissue applications, but those numbers are negligible.

 

Patently-O Bits and Bytes: USPTO PPAC Morning Report

Bits and Bytes, Patent

Financial:

  • USPTO budget for FY2010 limited by Congress to $1.887 billion dollars. Projected collections for FY2010 is expected to be $200 million over that limitation. Under the current law, all of that money will be sent to congress. Congress has already allocated $100 million of that overage on other non-patent items. Thus, to get that money back at this point, Congress would need to take $100 million from another source.
  • Budget for FY2011 — requested budget of $2.3 billion that includes a bump for significant technology upgrades at the Office.

Backlog:

  • In January 2009, PTO had about 765k unexamined utility patent applications.  That number is now down to about 735k.  The PTO is pushing a 699k campaign to drive the number of unexamined cases under 700,000 this year.
  • The PTO has made 62 new “experienced” hires this FY. 

Patently-O Bits and Bytes

Bits and Bytes, Patent, ,

I worked with my former firm MBHB on a special Bilksi edition of their newsletter.

  • Snippets can be downloaded here: http://www.mbhb.com/snippets/bilski
  • Topics include:
    • Viewpoints on Life After Bilski v. Kappos 
    • With Bilski Having Come and Gone, It's Time to Get Back to Work 
    • Avoiding Abstract Claims by Broadly Defining the Problem 
    • A Critique of Bilski's Textual Analysis 
    • Questions Surrounding a Shift to an "Abstract Idea" Test
    • Bilski v. Kappos: Effects on Biotechnology Patents

Some New IP Blogs:

Old Stand-by IP Blog:

Patent Law Pro Bono and the Federal Circuit Bar Association

  • The Court of Appeals for the Federal Circuit handles several distinct types of cases.  The largest dollar-value cases typically involve patents.  The veteran and government personnel appeals are usually worth much less.  Many patent litigators have begun handling these lower-value appeals on a pro bono basis.  Professional representation in these cases helps insure that justice is served. In a recent ceremony, Federal Circuit Chief Judge Rader and CAVC Chief Judge Greene honored the volunteers for their service.  Four particular attorneys deserve special praise for their efforts: Ron Smith, Blair Taylor, Dion Messer, and Paul Eaglin (as well as Jim Brookshire of the FCBA).  Others who were recognized at the ceremony include: Mark Abate, Alan Anderson, Michelle Armond, Reynaldo Barcelo, Alyson Barker, Dawn Marie Bey, Elizabeth Brenner-Leifer, Carl Bretscher, William H. Burgess, John Bustamante, Kurt Calia, Mary Calkins, Steve Carlson, Virginia Carron, Yar R.Chaikovsky, Connor Civins, Bradley Coburn, David Cohen, Kristin M. Cooklin, Donald Curry, Steve Daniels, Lauren A. Degnan, Kirk Dorius, John Dragseth, Helen Dutton, Paul Eaglin, Geoffrey Eaton, Brian Edmunds, Sam Ernst, James Erwin, Cecilia Fex, Bob Fuhrer, Anthony Garza, Shane Glynn, Daniel Graham, Joshua Graham, Maximilian Grant, Frederick Hadidi, Thomas Halkowski, Jason Harp, Cathy Harris, Edmund Haughey, Nathan Henderson, Dan Herzfeld, Todd Hettenbach, Christopher Hower, Richard Hung, Christopher Ryan Johnson, Harold Johnson, Lawrence Kass, Lisa Kattan, Rudy Kim, Brian Kramer, Kevin T. Kramer, Deanna Kwong, Brad Lane, Steve Lauff, Lewis E. Leibowitz, Greg Lipper, Christopher Liro, John Livingstone, Christopher Longman, Doug Lumish, Chris Martiniak, Duane Mathiowetz, Aaron Maurer, Scott P. McBride, Scott McCaleb, Michael McCaleb, Ryan McCarthy, Richard McLaren, Dion Messer, John Molenda, Brian Pandya, Chad Pannell, Lee Perla, Matthew Phillips, Janet Phipps Burkhead, Thomas Puppa, George Quillin, Courtland Reichman, Edward Reines, Elizabeth Roesel, Elizabeth Rogers Brannen, Joshua Rothman, Adam Samansky, Jeff Schwartz, Beth Shaw, Chad Shear, William J. Simmons, Michael Sink, John Skenyon, Ronald Smith, Eric Sophir, Robert Stanley, Henry Su, Blair Taylor, Bryan Vogel, Keith Vogt, Daniel Volchok, Steven Warner, Scott C. Weidenfeller, Andrew Woodmansee, Jennifer Wu, and Hunter Yancey.
  • If you are interested in pro bono service, contact Nece Jordan at jordan@fedcirbar.org. 

 

Patently-O Bits and Bytes

Bits and Bytes, Patent, ,

I worked with my former firm MBHB on a special Bilksi edition of their newsletter.

  • Snippets can be downloaded here: http://www.mbhb.com/snippets/bilski
  • Topics include:
    • Viewpoints on Life After Bilski v. Kappos 
    • With Bilski Having Come and Gone, It's Time to Get Back to Work 
    • Avoiding Abstract Claims by Broadly Defining the Problem 
    • A Critique of Bilski's Textual Analysis 
    • Questions Surrounding a Shift to an "Abstract Idea" Test
    • Bilski v. Kappos: Effects on Biotechnology Patents

Some New IP Blogs:

Old Stand-by IP Blog:

Patent Law Pro Bono and the Federal Circuit Bar Association

  • The Court of Appeals for the Federal Circuit handles several distinct types of cases.  The largest dollar-value cases typically involve patents.  The veteran and government personnel appeals are usually worth much less.  Many patent litigators have begun handling these lower-value appeals on a pro bono basis.  Professional representation in these cases helps insure that justice is served. In a recent ceremony, Federal Circuit Chief Judge Rader and CAVC Chief Judge Greene honored the volunteers for their service.  Four particular attorneys deserve special praise for their efforts: Ron Smith, Blair Taylor, Dion Messer, and Paul Eaglin (as well as Jim Brookshire of the FCBA).  Others who were recognized at the ceremony include: Mark Abate, Alan Anderson, Michelle Armond, Reynaldo Barcelo, Alyson Barker, Dawn Marie Bey, Elizabeth Brenner-Leifer, Carl Bretscher, William H. Burgess, John Bustamante, Kurt Calia, Mary Calkins, Steve Carlson, Virginia Carron, Yar R.Chaikovsky, Connor Civins, Bradley Coburn, David Cohen, Kristin M. Cooklin, Donald Curry, Steve Daniels, Lauren A. Degnan, Kirk Dorius, John Dragseth, Helen Dutton, Paul Eaglin, Geoffrey Eaton, Brian Edmunds, Sam Ernst, James Erwin, Cecilia Fex, Bob Fuhrer, Anthony Garza, Shane Glynn, Daniel Graham, Joshua Graham, Maximilian Grant, Frederick Hadidi, Thomas Halkowski, Jason Harp, Cathy Harris, Edmund Haughey, Nathan Henderson, Dan Herzfeld, Todd Hettenbach, Christopher Hower, Richard Hung, Christopher Ryan Johnson, Harold Johnson, Lawrence Kass, Lisa Kattan, Rudy Kim, Brian Kramer, Kevin T. Kramer, Deanna Kwong, Brad Lane, Steve Lauff, Lewis E. Leibowitz, Greg Lipper, Christopher Liro, John Livingstone, Christopher Longman, Doug Lumish, Chris Martiniak, Duane Mathiowetz, Aaron Maurer, Scott P. McBride, Scott McCaleb, Michael McCaleb, Ryan McCarthy, Richard McLaren, Dion Messer, John Molenda, Brian Pandya, Chad Pannell, Lee Perla, Matthew Phillips, Janet Phipps Burkhead, Thomas Puppa, George Quillin, Courtland Reichman, Edward Reines, Elizabeth Roesel, Elizabeth Rogers Brannen, Joshua Rothman, Adam Samansky, Jeff Schwartz, Beth Shaw, Chad Shear, William J. Simmons, Michael Sink, John Skenyon, Ronald Smith, Eric Sophir, Robert Stanley, Henry Su, Blair Taylor, Bryan Vogel, Keith Vogt, Daniel Volchok, Steven Warner, Scott C. Weidenfeller, Andrew Woodmansee, Jennifer Wu, and Hunter Yancey.
  • If you are interested in pro bono service, contact Nece Jordan at jordan@fedcirbar.org. 

 

Federal Circuit Extends the Scope of 102(e) “Secret Prior Art”

Patent, Patent Applications, Patent Cases 2010, Prior Art, , ,

In an important case, the Federal Circuit has expanded the scope of so-called 102(e) “secret prior art.” Under the decision, a US patent or published application will be considered prior art as of the filing date of its qualifying provisional application.  The case is important because of the large number of provisional patent applications being filed each year.

* * * * *

In re Giacomini (Fed. Cir. 2010)

Giacomini’s patent application was filed on November 29, 2000.  In his search, the examiner found U.S. patent 7,039,683 (the “Tran patent”) and asserted that patent as prior art over Giacomini.  The Tran patent application was filed in December 2000 (after Giacomini) and issued in 2006. However, the USPTO asserted that the patent should be considered 102(e) prior art because it claims priority to a U.S. provisional application that was filed in September 2000.

35 U.S.C. 102(e)(2) bars patentability if

the invention was described in . . . a patent granted on an application for patent by another filed in the United States before the invention by the applicant for patent, except that an international application filed . . . shall have the effects for the purposes of this subsection of an application filed in the United States only if the international application designated the United States and was published under Article 21(2) of [the PCT] in the English language.

The question in this case is whether the 102(e) priority date for prior art reaches-back to the filing date of the provisional application. On appeal, the Federal Circuit agreed with the USPTO that the provisional filing date is the 102(e) priority date.

In the 1968 case of In re Klesper, the Federal Circuit predecessor court (the CCPA) held that the 102(e) follows the prior precedent of treating a prior art disclosure found in an issued patent as being disclosed as of the “filing date of the earliest U.S. application to which the patent is entitled, provided the disclosure was contained in substance in the said earliest application.”  The Federal Circuit agreed that this provision applies equally to provisional patent applications “ so long as the provisional application [provides] written description support for the claimed invention . . . in accordance with Section 119(e).”  Giacomini never argued that the provisional failed to describe the invention found in the prior art.

Therefore, the Tran patent “shall have the same effect,” [Citing 119(e)] including a patent-defeating effect, as to the claimed invention as though it was filed on the date of the Tran provisional. Accordingly, Giacomini, who filed his application after Tran filed his provisional application, cannot receive a patent covering the same subject matter under 35 U.S.C. § 102(e).

This decision follows the BPAI’s 2008 precedential of Ex parte Yamaguchi, 61 U.S.P.Q.2d 1043 (BPAI 2008). However, the decision is in tension with the Hilmer doctrine. In re Hilmer, 359 F.2d 859 (CCPA 1966) (a U.S. application’s 102(e) priority date does not extend to its Section 119 foreign filing date). Giacomini had argued that provisional applications should be treated like foreign filings rather than like non-provisionals because the priority statute for provisional applications is also found in Section 119 and becaues provisional applications lack the formality of non-provisionals. 

Note: US Court interpretations of 103(a)/102(e) offer a major difference between US practice and European practice. Namely, in the US secret 102(e) prior art is available to be combined as part of an argument for obviousness while in most European countries, the filing date of prior art is only important for novelty purposes.

Federal Circuit Splits on Validity of Means Plus Function Claim

CAFC, Claim Construction, Means Plus Function, Patent, Patent Cases 2010, ,

Telcordia Technologies, Inc. v. Cisco Systems pic-100.jpg (Fed. Cir. 2010)

Chief Judge Rader and Judge Prost sparred over the level of explanation necessary to ensure that a means plus function (MPF) claim is found definite. The Patent Act (35 U.S.C. 112 p6) permits claim limitations written as a "means or step for performing a specified function." The statute provides that an MPF "claim [limitation] shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof." However, the claim will be found indefinite and therefore invalid if the specification fails to include at least some structure that is clearly linked or associated with the claimed function. “The question is not whether one of skill in the art would be capable of implementing a structure to perform the function, but whether that person would understand the written description itself to disclose such a structure.” (Quoting Tech. Licensing Corp. v. Videotek, Inc., 545 F.3d 1316, 1338 (Fed. Cir. 2008)).

Telcordia's patent in this case is directed to a double-ring network that is designed to withstand either a line-cut or a failed node. One element of the claim requires a "monitoring means, associated with the first ring and the second ring, for evaluating the integrity of the multiplexed subrate communications on the first ring and the second ring."

Writing for the majority, Chief Judge Rader (joined by Judge Lourie) held that the claimed "monitoring means" had been properly described in the specification. The dissent cited the same precedent but could not find anything in the specification that links disclosed structures to the claimed function. In discussing the opinion, Foley's Hal Wegner described the opinion as "pitting the leader of the older generation [of Federal Circuit Judges] against a contender from the next generation."

Stats: About 15% of newly issued patent included at least one claim having an MPF limitation. And, of those patents that include an MPF limitation, about half recite fewer than five such limitations. It appears that attorneys are using MPF claim language primarily as a back-up. Longer claim-sets are more likely to include means-plus function language. Thus 21% of patents with above-average-sized claimsets (by character count) include a means-plus-function limitation while only 11% of patents with below-average-sized claimsets include an MPF limitation. Looking claim-by-claim, I found that only 3% of the recently issued patents include means-plus-function limitations in every independent claim. Patents with MPF terms are more frequently associated with non-assigned patents (usually individual inventors). Patents arising from certain countries are much more likely to include MPF limitations. The chart below looks at the most common foreign filing jurisdiction for priority claims and reports the percentage of US patents arising from those foreign filings that include MPF limitations. [More Data]

 

Statutory Guidelines for Inequitable Conduct

Amicus Brief, En Banc, Inequitable Conduct, Patent, ,

In TheraSense, the en banc Federal Circuit is looking to rewrite the rules of inequitable conduct. By both its name and historic precedent, inequitable conduct appears to stem from non-statutory doctrines of equity. However, as with other equitable doctrines (such as injunctive relief), inequitable conduct could be somewhat tamed by the language of the Patent Act. In his TheraSense amicus brief, Professor Hricik is taking a useful approach by focusing on the statutory basis for holding claims unenforceable.

Two provisions of the Patent Act come to mind. One is general and the other specific. The general statute is 35 USC 282(1). That portion of Section 282 identifies "unenforceability" as a defense to patent infringement. In TheraSense, the court's first goal should be to interpret the meaning of unenforceability as found in that statute.

The more specific provision is Section 288. It is Section 288 that allows a patentee to assert infringement of remaining claims even after some of the claims are found invalid. Section 288 sets a specific limit on this separability principle. Namely, separability of claims does not apply when an invalidated claim was obtained through deceptive intent.

Whenever, without deceptive intention, a claim of a patent is invalid, an action may be maintained for the infringement of a claim of the patent which may be valid. 35 U.S.C. §288.

Section 288 is not exhaustive in its approach. Rather, the statute is only explicit that the remaining claims of a patent can be asserted even after one of the claims was found invalid, so long as that invalid claim was not obtained with deceptive intent. The statute does not explicitly indicate the result when an invalid claim was obtained with deceptive intent or, for that matter, when a valid claim was obtained with deceptive intent. In his brief, however, Professor Hricik concludes that these statutes should be read to – at times – limit the Court’s ability to automatically render all claims of a patent unenforceable after a finding of inequitable conduct.

Contact Professor Hricik if you (or your firm / company) are interested in joining the brief.

Patently-O Bits and Bytes

Bits and Bytes, Patent

PatentLawPic1013PatentLawPic1014