Patently-O TidBits

Patent
  • ScreenShot024Foreign Patent Applicants and the New Rules: Based on the set of 2992 patents that issued on August 21, 2007, it seems likely that the PTO’s new claim filing limits will impact US applicants at a much greater rate than it would foreign applicants. Patents ever_assigned to US corporations are more than twice as likely to issue with more than twenty five claims than patents ever_assigned to foreign corporations.  Even more pronounced within the study, US owned patents are more than three-times as likely to have more than twenty-five claims than are Japanese owned patents.  (Ever_assigned patents are patents that have been assigned at least once to the referenced group.) (See side graph)
  • Niro v. Jackson: The famed Niro firm recently filed a declaratory judgment action against its former client alleging patent invalidity.  Niro wants the patent found invalid so that the firm can avoid malpractice charges arising out of patent infringement litigation. NiroVJackson.pdf
  • Quanta v. LGE: The Solicitor General supports Quanta’s petition for certiorari covering the first sale doctrine and contractual limitations of patent licensing. [QuantaCVSG.pdf (110 KB)][Background]
  • Race Specific Patents: Shubha Ghosh (SMU) has an interesting new paper examing patents that claim race-specific inventions. US Patent No. 6,465463, for instance, claims a drug with improved tolerence “in a black patient.”  Professor Ghosh argues that racial categories should be excluded from patent claims and from any nonobvousness analysis. [Read the Paper Here]

  • Patent Law Jobs: New Jobs in Chicago, Atlanta, Oregon, Missouri, Cambridge, Denver, and Maryland.

McFarling Petitions Supreme Court to Hear RoundUp Ready Patent Case

Patent,

Homan McFarling farms soybeans and other crops a few miles from my family’s farm in northern Mississippi.  Monsanto sued McFarling for replanting Monsanto’s patented GMO soybean seeds in violation of the “Technology Agreement.”

Soybean.USDAA Missouri jury found McFarling liable and awarded damages of $40 per seed-bag even though Monsanto typically charges only $6.50 license fee per seed-bag. On appeal, the CAFC found that the listed royalty rate did not provide any limit for the royalty calculation. Rather, infringement damages can properly include (a) the harm felt by Monsanto because of the infringement as well as (b) the additional benefits garnered by McFarling. In particular, these include: reputational harm due to rogue planters, potential lapses in monsanto’s database of planting techniques; bargaining power; as well as McFarling’s increased yield of $31 – $61 per acre.

Now, McFarling has petitioned the Supreme Court for a Writ of Certiorari with two questions (with subparts):

  1. In determining a “reasonable royalty” under the patent-damages statute, 35 U.S.C. § 284, may the factfinder award the patentee either:
    • (a) a hypothetically negotiated royalty that vastly exceeds the established royalty charged in the marketplace, or
    • (b) a royalty that includes damages to the patentee’s third-party distributors and is intended to force the infringer to disgorge his profits—even though Congress eliminated the equitable disgorgement remedy in 1946?
  2. Do the doctrines of patent exhaustion and patent misuse permit the purchaser of a patented good to use that good and dispose of its products as it sees fit, absent a valid contract?

Mark Lemley (Stanford) is McFarling’s attorney.

Notes:

Patents with More Than 25 Claims

Patent

The newly finalized claim rules would practically limit most patent applications to twenty-five or fewer claims. To get some sense of how this rule would affect current practice, I ran three separate searches:

ScreenShot020ScreenShot021ScreenShot019

  • Important Patents: Approximately 4400 of the patents issued between January 1, 2002 and August 1, 2007 have been involved with some type of patent litigation. 35% of these “important” patents have more than 25 claims.
  • Issued Patents: Approximately 3000 utility patents issued on Tuesday, August 21, 2007. 18% of those newly issued patents have more than 25 claims.
  • Published Patent Applications: Approximately 6600 patent applications were published on August 16, 2007. 27% of those newly published applications include more than 25 claims.

A troubling aspect of the new rules is their potential to have a disproportional impact on important patents.  (See “Valuable Patents” by Allison, Lemley, Moore, & Trunkey).

Dr. Tafas Files Declaratory Judgment Action to Block Implementation of Continuation Rules

Patent

Dr. Tafas invented a high throughput diagnostic microscope sold through his company, Ikonisys. He also has a patent pending on a method for improving automotive efficiency. Tafas protects these inventions through patents and has now sued the USPTO. Tafas asks the E.D. Virginia District Court for a declaration that the PTO’s newly finalized rules are in conflict with the Patent Act and are thus invalid.

Commentary: Tafas will likely lose here. On its face, the rule may operate within the laws because it allows Tafas to file his continuations if he has good reason to do so. The law certainly does not require the PTO to examine clearly repetative or bad-faith continuation filings. If applied lightly, the new rules would simply block those “bad” continuation filings and the good ones will pass through.  The better case will be raised by an applicant who is denied a continuation filing despite having a “good” reason for the additional filing.

Files:

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Seagate II

Patent

In Seagate, the CAFC raised the burden of proof for enhanced damages — Enhanced damages are now only available for willful patent infringement that is at least “objectively reckless.”  And, as a consequence, “there is no affirmative obligation to obtain opinion of consel” to avoid a willfulness charge.  This essentially moves potential treble damages from a negligence standard of due care to a more stringent standard. (See pair of graphs below).

PatentLawPic020PatentLawPic019

The question now on the minds of many patent attorneys: What role, if any, is there for the thick, formal opinions explaining in detail why a particular patent is invalid, unenforceable, and/or not infringed?

In Reexamination, PTO is Not Bound by District Court Claim Construction

Patent, Reexamination,

In re Trans Texas Holding Corp. (Fed. Cir. 2007)

Trans Texas holds two patents directed to a system of insulating both deposits and loans from inflationary and short-term interest rate fluctuations. In earlier litigation, a Texas district court construed various claim terms. Now, in reexamination, the PTO has taken a fresh look and offered its own interpretation of the claims.

Issue Preclusion (AKA Collateral Estoppel) traditionally blocks the same parties from relitigating the same issue in a later proceeding. CAFC caselaw has identified four elements of issue preclusion:

  1. Identity of the issues in a prior proceeding;
  2. The issues were actually litigated;
  3. Determination of the issues was necessary for the prior judgment; and
  4. The party defending against preclusion had a “full and fair opportunity to litigate the issues.”

Ex Parte Proceeding: Although reexamination is an ex parte proceeding, the CAFC considers the PTO to be a “party” as any other outcome “simply makes no sense.”

The PTO is plainly a party to these appeal proceedings, and if it were not treated as a party, there would be no basis for even considering the application of issue preclusion in the first place.

Since the PTO did not have an opportunity to litigate the issue in the Texas district court, it cannot be bound by that decision.

[T]he PTO was not even a party to the earlier district court litigation and cannot be bound by its outcome.

Obviousness affirmed.

USPTO Webcast on New Claims and Continuation Rules

Patent

On Thursday, August 23, 2007 at Noon (Missouri time), the USPTO will hold a webcast to introduce the new rules. The title of the seminar is “Clarity Moves Innovation.”

During this live, two-hour webcast, USPTO officials will explain the new rules and answer questions. The presentation and audio for this event will be streamed over the Internet. All participants need is a computer with an Internet connection, sound card, speakers and the ability to view Windows Media presentations.

Links:

  • Enroll for the Webinar [LINK].
  • Watch without enrolling [LINK] (Link will be available only at the appropriate time).
  • Submit questions beforehand [EMAIL] (no guarantee that they will be addressed).

Final Rule: Changes To Practice for Continued Examination Filings, Patent Applications Containing Patentably Indistinct Claims, and Examination of Claims in Patent Applications

Patent

Continuation Limitation: “The Office is revising the rules of practice to require that any third or subsequent continuing application that is a continuation application or a continuation-in-part application, and any second or subsequent request for continued examination in an application family, be filed to obtain consideration of an amendment, argument, or evidence, and be supported by a showing as to why the amendment, argument, or evidence sought to be entered could not have been previously submitted.”

Claim Limitation: “The Office is also revising the rules of practice to provide that an applicant must provide an examination support document that covers all of the claims in an application if the application contains more than five independent claims or more than twenty-five total claims.”

Patent Application Limitations: “The Office is also revising the rules of practice with respect to multiple applications that have the same claimed filing or priority date, substantial overlapping disclosure, a common inventor, and common ownership.”

Analysis to come: …

New Rules:

In re Seagate Technology:

Patent, Patent Cases 2007

In a rare unanimous en banc opinion, the CAFC has overruled its prior precedent — holding that willful infringement enhanced damages now requires “at least a showing of objective recklessness.”

Accordingly, to establish willful infringement, a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. 

This eliminates the “affirmative duty of due care” that has historically been created by notice of infringement.

Attorney Client Privilege and Work Product: When asserting an opinion of counsel in defense to a willful infringement claim, any waiver of privilege or work product materials does not (normally) extend to trial counsel.

Read the opinion

Continuation Rules to Issue August 21

Patent, , ,

After some persistence, the PTO revealed the substance of the new continuation rules to Dow Jones reporter Stuart Weinberg:

Applicants will have the right to file two so-called continuations and one request for continued examination. Applicants seeking additional continuations will need to explain why the request is necessary. Current practice allows applicants to file an unlimited number of continuations. . . . [The PTO also] plans to limit the number of claims an applicant may include in an initial application to 25. Applicants that include more than 25 claims will be required to include a prior-art search, a detailed report that explains how their invention differs from what’s already in the public domain. The new rules, which will be published on the PTO’s Web site Tuesday [August 21], are scheduled to go into effect Nov. 1.

…The number of continuation requests has been rising in recent years. In 2006, almost 30% of applications were devoted to continuation requests, up from 27% in 2005 and 25% in 2004, Peterlin said. . . . Peterlin alluded to misuse of continuations when discussing the pending rule changes. “What we have found is, sometimes, people engage in a little
post-filing research,” she said, adding that, while this may make good business sense, it doesn’t make for an effective patent system.

Although we have not seen the final rules, it appears that applicants will not be losing rights at the time the final rules are published. Rather, the new rules will become effective on November 1, 2007. Do expect the rules to be retroactive in that they will apply to pending applications.

Pre-view of rules via Venable Law Firm

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2007 Patent Litigation: Timing the Transition from Patent Issuance to Patent Litigation

Academic Studies, Patent

In the past, I have filed patent infringement lawsuits on the same day that the patent issued.  That highly aggressive strategy is not the only approach — many patentees delay years before filing suit.

In order to determine how long patentees usually delay before filing suit, I pulled-up all twenty-one hundred US patents that have been asserted in patent litigation or reexamination cases in 2007. (Restricted to lawsuits filed 1/1/2007 to 8/15/2007 notice of litigation had been filed with the USPTO). 

For cases filed in year 2007, the ‘average’ patent issued seven years ago in 2000. The median issue year was 2001 — a six year delay in filing.  The histogram below provides an idea of the distribution of the number of years between patent issuance and commencement of litigation for the 2007 lawsuits.

Although most lawsuits are filed by the time a patent is six years old, it is striking that about twenty-five percent of the patents in the 2007 lawsuits are more than a decade old.

ScreenShot016

Patent Public Advisory Committee (PPAC)

Patent

It is time again to nominate three new members to the USPTO’s Patent Public Advisory Committee. The PPAC is a group of nine individuals selected by the Commerce Secretary (on the advice of the PTO Director).  The committee’s purpose is to advise the PTO Director on the management of operations of the Office.  The nine-member PPAC is on a three-year rotating schedule.  Each year three new members are appointed. 

Nominations for this year’s appointment may be sent to PPACnominations@uspto.gov. Although formal nominations are required, I’m sure that the Chief of Staff would not mind receiving some informal suggestions as well.

Current PPAC Members:

  • Chair – Kevin Rivette (VP IBM IP Strategy, Author of Rembrandts in the Attic) 2006
  • Maximilian A. Grant (Latham & Watkins Partner)
  • Carl E. Gulbrandsen (Managing Director of WARF)
  • Dean L. Kamen (Inventor of Segway)
  • Gerald J. Mossinghoff (Former PTO Director, Oblon Spivak)
  • Lisa K. Norton (Associate at DLA PIPER)
  • Douglas Patton (Patton Design – Product Designer) 2006
  • M. Andrea Ryan (General Counsel TransForm Pharmaceuticals)
  • W. David Westergard (Patent guy at Micron) 2006

Notes: 

Patent Plaintiffs Continue to Push for Expanded notion of Joint Infringement.

Contributory Infringement, Patent, Patent Cases 2007,

AdvanceME v. RapidPay (E.D. Tex. 2007).

Traditionally, direct patent infringement requires a single actor that causes infringement of each element of the asserted patent claim. An agency doctrine allows for multiple actors acting under control of a single entity. However, the common law of patents has long resisted calls for liability for any looser form of “joint infringement.”

In AdvanceME, the Texas court provided additional dicta expanding our notion of circumstances where two separate entities can combine to infringe a patent even when neither entity infringes all claim elements. Here, the court finds that multi-actor infringement requires (1) that all elements of the claim be performed and (2) that there be a “sufficient connection” between the accused actors. “A showing of ‘agency’ or ‘working in concert’ is not required.” The sufficient connection could instead “be shown through a contractual relationship.”

According to the court, joint infringement is easier to prove when a patent claim includes steps performed by two entities. The patent at issue here involves claims that move money from a customer to a merchant then to a merchant processor which is directly infringed by the merchant and merchant processor.

The infringement finding is, however, moot as the patent was also found invalid as anticipated and obvious.

Notes:

  • Read the case

  • The issue of joint infringement is “squarely raised” in another case – BMC v. PaymenTech. [See Divided Infringement]. Oral arguments were held in that case in April, and a decision is expected by October.

  • The expanded joint infringement notion is supported by the CAFC’s recent On Demand decision where the court noted that “[i]t is not necessary for the acts that constitute infringement to be performed by one person or entity.”

  • See Cross Medical (“However, if anyone makes the claimed apparatus, it is the surgeons, who are, as far as we can tell, not agents of Medtronic. Because Medtronic does not itself make an apparatus with the “interface” portion in contact with bone, Medtronic does not directly infringe.”)

  • In PharmaStem, the CAFC did not decide the issue, but noted that the “viability and scope of [the theory of joint infringement] liability is a subject of considerable debate.”

  • Applied Interact, LLC v. Vermont Teddy Bear Co., Inc.  2005 WL 2133416 (S.D.N.Y.,2005), the district court noted that infringement by separate entities requires “some connection” between the entities.

  • Free Standing Stuffer, Inc. v. Holly Dev. Co., 187 U.S.P.Q. 323 (N.D. Ill. 1974), requires a “sufficient connection to, or control over” third party entities performing some of the elements.

  • Cordis Corp. v. Medtronic AVE, Inc., 194 F. Supp. 2d 323 (D. Del. 2002) (requiring close relationship between defendant and the doctors performing part of the patented process).

  • Shields v. Halliburton Co., 493 F.Supp. 1376 (W.D. La. 1980) (finding defendants liable for infringement based on the combined actions of two entities).

  • Sriranga Veeraraghavan, Joint Infringement of Patent Claims: Advice for Patentees, 23 Santa Clara Computer & High Tech L.J. 211 (2006),

Unavoidable Delay: Ignorance as an Excuse?

Patent

PatentLawPic012FemSpec (FemSuite) v. Dudas (N.D.Ca. 2007)

Dr. Johnson invented an inflatable speculum for gyne exams. After Dr. Johnson was diagnosed with malignant cancer, the PTO expedited examination and the patent issued a few months before Dr. Johnson committed suicide.  The son, Mr. Johnson (who had no experience with patents) became owner of the patent.  The PTO was not given forwarding address information, and the patent eventually expired due to failure to pay the maintenance fee. After the patent had expired, FemSpec (a Gyne product manufacturer) bought the patent rights.

Late Maintenance Fee: Congress has designated three time-periods for late maintenance fee repayments.

  • Within six months of due date: Late payment always allowed;
  • Within thirty months of due date: Late payment allowed if delay was unintentional;
  • Any time after that: Late payment allowed if delay was unavoidable. 35 USC 41(c).

After purchasing patent rights, FemSpec immediately filed its petition to accept late payment of maintenance fees due to an unavoidable delay – citing the following evidence: 

  • Dr. Johnson was suffering from terminal cancer and was prosecuting the patent pro se – and thus did not provide any instructions for maintenance fees to be paid by his heirs.
  • Even if he had provided a calendar notation of maintenance fees, his heirs would not have understood its meaning because of their lack of patent law experience.
  • Mr. Johnson (the heir) had no idea that a maintenance fee was due. And, because he moved, he did not receive any notice from the PTO regarding fees due.

For an unavoidable delay, however, the PTO requires due care in docketing the relevant dates and a showing that the applicant “treated payment of the maintenance fee as his most important business. In addition, the PTO requires a showing that the entire delay be unavoidable and that, despite all precautions, the patentee was “prevented from making the payment.”

Ignorance as an Excuse: On appeal from the PTO, the District Court noted “that there are situations in which ignorance of the requirements to pay maintenance fees may support a finding of unavoidable delay.” Citing In re Mattulath (D.C. Cir. 1912).  However, the ignorance excuse requires that the unrepresented patent holder make some “effort to inform himself of the legal obligations associated with owning a patent.” See California Med. v. Tecnol Med. (D. Del. 1995).  Complete ignorance of the fact that the patent exists can also create an avoidable excuse.

Petition to for late payment denied — Patent is expired.

Cite: FemSpec L.L.C. v. Dudas, 2007 U.S. Dist. LEXIS 8482 (N.D.Ca. 2007)

DC is Improper Venue for Appeal of PTO Petition by Foreign Patentee

Patent,

PatentLawPic011Michilin Prosperity v. Dudas (D.D.C 2007)

Michilin’s patented shredder is designed for handling both paper and CDs. Michilin’s claim 1 requires a “paper touch switch” and a “disc touch switch.” Claim 4, which depends upon claim 1, indicates a “single touch switch.”  Seeing a technical error, Michilin filed for a certificate of correction to transform claim 4 into an independent claim.  The PTO denied that request — indicating that a reissue may be the proper recourse. Michilin, a Taiwanese company, appealed the PTO’s denial to district court in the District of Columbia.

On appeal, the PTO quickly requested dismissal based on venue — arguing that the case must be brought in Virginia.

Venue Statutes:

  • 28 U.S.C. § 1391(e): Actions against a US Gov’t officer acting in his official capacity must be filed in a jurisdiction where (1) the defendant resides; (2) a substantial part of the claim arises; (3) the property is located; or (4) where the plaintiff resides if no real property is at issue.
  • 35 U.S.C. § 1(b): The residence of an official defendant is the “official residence” of the officer or agency.

The PTO’s Virginia headquarters is both Mr. Dudas’s official residence and the site of the denial of Michilin’s request. That, according to the court makes Virginia the only proper venue for an appeal of this case. Case transferred to E.D.Va.

Two failed arguments:

  1. Dudas is also an officer in the Department of Commerce, which is located in DC. This fails because Dudas is being sued in his capacity as Director of the USPTO.
  2. The patent is “located” in DC because Michilin had filed parallel patent infringement litigation in DC. This argument may have some weight, but failed here because that case had already been dismissed.

Cite: Michilin Prosperity Co. v. Dudas, 2007 U.S. Dist. LEXIS 55216 (D.D.C. July 31, 2007).

CAFC: Patent Attorney Has No Right to Defend Himself Against Charges of Inequitable Conduct

Patent, Patent Cases 2007, Patent Prosecution

Nisus Corp. v. Perma-Chink Sys. v. Michael Teschner (Fed. Cir. 2007).

Nisus Corp’s patent relates to a method of putting Boron in a tree to kill termites and prevent forest fires. After a bench trial, the patent was found unenforceable due to inequitable conduct.  Apparently, Nisus had failed to disclose material documents from a prior lawsuit involving closely related patents.  The court specifically mentioned Nisus’s former patent attorney, Michael Teschner, as one cause of the inequitable conduct.

Teschner sued to intervene in the case and clear his name, but the district court denied him the opportunity. On appeal, the CAFC likewise found Teschner without standing.

Appeal by Nonparty: Usually, a nonparty has no standing to appeal. However, an attorney that is formally reprimanded may appeal to the CAFC.  However, other (informal) “judicial criticisms of lawyers’ actions are not reviewable.”  The court’s comments regarding Teschner here do not rise to a formal reprimand, and thus offer no standing for appeal.

To allow appeals by attorneys, or others concerned about their professional or public reputations, merely because a court criticized them or characterized their conduct in an unfavorable way would invite an appeal by any nonparty who feels aggrieved by some critical statement made by the court in an opinion or from the bench. Treating such critical comments by a court as final decisions in collateral proceedings would not only stretch the concept of collateral proceedings into unrecognizable form, but would potentially result in a multiplicity of appeals from attorneys, witnesses, and others whose conduct may have been relevant to the court’s disposition of the case but who were not parties to the underlying dispute. Nor would it be appropriate to limit such appeals to attorneys, while forbidding others from appealing from critical court comments, as such a limitation would smack of special treatment for members of the bar and would be difficult to justify as a matter of principle.

Thus, a finding of inequitable conduct does not create any standing for an aggrieved prosecuting attorney to appeal.

Postscript: Mr. Teschner declined my offer for an interview, noting that the matter is still pending at the PTO. His lone statement is that he is “glad that the Federal Circuit found merit in [his] argument.”

Overall, has your company made money from the patent system?

Academic Studies, Articles and Publications, Business Developments, Patent

On August 7–8, 2007, I conducted a simple survey through Patently-O. [See Survey].  Readers were asked whether the patent system, taken as a whole, had been positive (made money) or negative (lost money) for their company.  The results below show the responses of 131 corporate employees who are all highly involved with their company patents.

The results here follow a predictable pattern: On average, pharmaceutical companies see patents as a profit center while software companies see patents as an overall loser.  (At 95%CI, Software & EE results each differ significantly from Pharm results).

PatentLawPic010

Notes:

  • Next time: Is this an important question?
  • The Survey [LINK]
  • Bessen & Meurer: Negative Return on the Patent System
  • On the process:
    • The above graph merges responses from small corporations with those from large corporations. It also excludes individuals at law firms, government entities, and educational institutions. 
    • Individuals responded to the question: “Overall, has your company made money from the patent system?”  There were three potential responses: “Clearly positive (made money”, “Unsure whether positive or negative”, and “Clearly negative (lost money).” For the graph above, these responses were converted to a simple numerical scale: 1, 0, and -1, respectively. The y-axis above ranges from -1 to 1.

Priority to Foreign Application Requires “Inventor’s Knowledge or Consent” at the Time the Foreign Application was Filed

Inventors, Patent, Patent Cases 2007, Priority Rights, Statutory Construction

PatentLawPic009Boston Scientific SciMed v. Medtronic Vascular (Fed. Cir. 2007).

SciMed’s patent application was originally filed by a European company (MinTec) in February 1994 as an European Patent Application. At that time, however, the inventors (Cragg & Dake) had not yet assigned rights to MinTec. Cragg assigned his rights a few months later. Dake did not assign his rights until 1996.

Medtronic has a US priority filing date of June 1994 on the same invention. In the interference, the question is whether a US patent applicant claim priority to a foreign application filed by an entity that was not acting on behalf of the US applicant at the time of filing? CAFC Answer: No priority unless foreign application was filed on behalf of the US applicant.

Under the court’s ruling here, 35 USC 119(a) provides a personal right to the inventor. Consequently, there must be a “nexus…between the inventor and the foreign applicant at the time the foreign application was filed.” That nexus requires at least “knowledge or consent” of the inventor.

“Indeed, as a matter of pure logic, an entity could not have filed a foreign application “on behalf of” an inventor without the inventor’s knowledge or consent; that the foreign application may have been filed in accordance with the laws of the country in which it was filed has no bearing here.”

Holding:

“[A] foreign application may only form the basis for priority under section 119(a) if that application was filed by either the U.S. applicant himself, or by someone acting on his behalf at the time the foreign application was filed.” (emphasis in original)

Notes:

  • This decision [LINK]: Scimed Life Sys., Inc. v. Medtronic Vascular, Inc., — F.3d — (Fed. Cir. 2007).
  • Final BPAI Decision: Patent Interference No. 104,192, Paper No. 187, 2001 WL 1339890 (B.P.A.I. July 21, 2001).
  • Trial Court Decision: Scimed Life Sys., Inc. v. Medtronic Vascular, Inc., 486 F. Supp. 2d 60 (D.D.C. 2006).