Proposed Amendment to Section 271 of the Patent Act

Patent, Patent Legislation

Last week, I wrote the Federal Circuit should re-hear the BlackBerry Case (RIM v. NTP).  Today, I propose a simple legislative change to move the debate concerning extra-territorial application of U.S. Patent laws to the legislature.

Section 271(a) of the patent act currently provides a definition of infringement.

Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.

Generally, in order show that a patent is infringed, the plaintiff must prove that the defendant (or his agent) performed each element of the claimed invention.  In this case, RIM was found liable for infringement for using a patented method.  However, as the diagram shows, RIM performs an element of its infringing activity in Canada. 

From my point of view, RIM should not be held liable for patent infringement because a portion of the patented method was performed on foreign soil, and the statute requires that the use take place within the united states.  The Court, however, read an exception into the statute — that internationally performed elements of the invention did not defeat an infringement charge so long as the "control and beneficial use" of the infringing system was within the United States. 

Rather than legislating from the bench, I would propose the following draft amendment that incorporates the rule created by the court in RIM. 

Proposed Amendment to 35 U.S.C. Section 271(j): Whoever without authority uses any patented invention, under the control and beneficial use of persons within the United States, shall be liable as an infringer so long as the preponderance of components of the invention are within the United States.

Does anyone have anything against my proposed legislation?

Update I: I have received several excellent comments on the proposed legislation. 

(i) A major issue is the "preponderance" language that requires a preponderance of components to be located within the United States.  This arises from the RIM v. NTP case where the court, in finding infringement, included as a factor that only one or two of the components of RIM’s system were located outside of the United States.  Preponderance is a little vague and subject to too much interpretation — so we need a better word.

(ii) Initially, I only included the "use" of a patented invention within the statute.  However, a reader asked that this be extended to include making and selling.  I agree that these actions should be included as well.

(iii) A colleague pointed out that the statute should be more clearly written to indicate that it is the patented invention that is under the control and beneficial use of persons in the U.S. 

Here is a new version of the Revised Amendment:

Revised Proposed Amendment to 35 U.S.C. Section 271(j): Whoever without authority makes, uses or sells any patented invention, where the patented invention is under the control and beneficial use of persons within the United States, shall be liable as an infringer so long as the clear majority of components of the invention are within the United States.

Update II:

CE Petit added more comments.  Rather than looking at the number of "components" of an invention he suggests looking at the number of elements of a given claim.  "This is particularly relevant when some or all of a claim concerns a process or an intangible. Since ‘elements of claims’ are parseable as a matter of law by the court."

Petit’s version III of the Proposed Amendment to 35 U.S.C. Section 271(j) looks like this:

New Revised Proposed Amendment to 35 U.S.C. Section 271(j): Whoever without authority makes, uses, or sells any patented invention, where the invention is under the control and beneficial use of persons within the United States, shall be liable as an infringer so long as the clear majority of the elements of an otherwise infringed claim of the invention are within the United States.

I wonder what our blogging legislative guru has to say on this issue?

Update III: A couple of clients contacted me directly with more ideas and edits for the proposed legislation.  Our newly edited version is here, with changes underlined. 

271(j): Whoever without authority makes, uses, or sells any patented invention, where the invention is under the control and beneficial use of entities or persons within the United States, shall be liable as an infringer so long as either (i) at least one key claimed element is within the United States or (ii) at least one key claimed step takes place within the United States.
271(j) Definitions: A Key Claimed Element or Step is one that if missing, makes the invention inoperable, or that makes the claim patentable in view of cited prior art.

Let me know if you think that we should include other changes.  Either leave a comment below or e-mail me (crouch@mbhb.com).

Update IV: The real trick here is, as Ken Hobday correctly pointed out, eliminating the potential for a company to set up computer servers in some foreign land, practicing claimed methods using those servers, and then simply providing a point of access through the internet to U.S. customers.  Any proposed legislation should be carefully examined to ensure that we capture this type of activity as infringement of U.S. patents. I’m not sure that the draft proposal is there yet.

Update V: Matt Buchanan made the point that we may be getting off-track.  He has a solution that is directly related to the "extra-territorial server farm" problem.

Matt’s Proposal — 271(j): Whoever without authority makes, uses, or sells any patented invention by providing persons located in the United States electronic access to a process performed by an extraterritorial computer shall be liable as an infringer notwithstanding the extraterritorial location of the computer so long as the provision of electronic access and the performance of the process is required by the claim at issue.

India Greatly Increases Patent Coverage

Patent, Patent Legislation

Chandra Joshi, an Indian associate of mine filled me in on the recent amendments to Indian patent law. The amendments not only make Indian law TRIPs compliant, but also rationalize the procedures for patent prosecution.  These changes now allow patents on products and remove provisions relating to EMRs (Exclusive Marketing Rights).

India, as you know, had so far permitted Patents only for processes and not products. With the new amendment to the Patent Act, it would now be possible to obtain Patents for product patents in Pharmaceuticals and Agro Chemicals. Under the Product Patent regime no new–use Patents would be granted.

The ordinance seeks to strengthen opposition proceedings by allowing for both pre-grant and post-grant opposition. The ordinance also seeks to simplify and rationalize the time-frame for process of patents. The time limit for giving requests for examination has been reduced to 36 months from 48 months earlier. Security provisions will also be tightened particularly for dual-use patent applications. Such patents will now be scrutinized by the patent office.

Further, software would continue to be copyright protected, embedded software that has technical applications can now be patented.

DDC Comment: I expect the change to have its greatest impact in the pharmaceutical area — up to now, India has been a pharma maverick — producing generics almost at-will.

35 U.S.C. Section 103 Amended to Encourage Cooperative Research

Patent, Patent Legislation,

The ‘Cooperative Research and Technology Enhancement Act (CREATE Act) of 2004′ easily passed both the House and Senate and has been signed into law by President Bush today, December 10, 2004. (see Thomas).  The purpose of the Act is to promote cooporative research — such as between a university and start-up company.  The main thrust of the new law is to exclude some prior art from obviousness (103) consideration if the invention arose from a joint research agreement.

What You Need to Know:

If you are involved in cooperative research, you need to have a joint research agreement to ensure that your work will not invalidate patents that you apply for sometime in the future.  If you already have a joint agreement, you may need to make amendments to the agreement to ensure that it qualifies under the new law.

In order to qualify under the law, currently pending applications should be amended to disclose the names of the parties to the joint areement.  You may also consider a broadening reissue if your claims were restricted by now excluded prior art.

Text of the Act:

Section 103(c) of title 35, United States Code, is amended to read as follows:

    (c)(1) Subject matter developed by another person, which qualifies as prior art only under one or more of subsections (e), (f), and (g) of section 102 of this title, shall not preclude patentability under this section where the subject matter and the claimed invention were, at the time the claimed invention was made, owned by the same person or subject to an obligation of assignment to the same person.

    (2) For purposes of this subsection, subject matter developed by another person and a claimed invention shall be deemed to have been owned by the same person or subject to an obligation of assignment to the same person if–

      (A) the claimed invention was made by or on behalf of parties to a joint research agreement that was in effect on or before the date the claimed invention was made;

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

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

          (3) For purposes of paragraph (2), the term `joint research agreement’ means a written contract, grant, or cooperative agreement entered into by two or more persons or entities for the performance of experimental, developmental, or research work in the field of the claimed invention.

        EFFECTIVE DATE

          (a) IN GENERAL- The amendments made by this Act shall apply to any patent granted on or after the date of the enactment of this Act. (Exception: The legislation does not not affect the right of any party in any action pending before the United States Patent and Trademark Office or a court on the date of the enactment of this Act to have that party’s rights determined on the basis of the provisions of title 35, United States Code, in effect on the day before the date of the enactment of this Act.

        MESSAGE TO RESEARCHERS:

        If you work collaborate on work with individuals from other legal entities, you need to have an agreement up front as to how that collaboration is going to be handled. Contact your patent attorney to ensure that the agreement is properly created to fall within the scope of the new law.

        BACKGROUND ON THE LAW:

        Texas Republican Lamar Smith introduced the legislation in 2003 to promote research between universities and the private sector.

        According to co-sponsor Senator Leahy, this Bill will circumvent the ruling in OddzOn Products, Inc. v. Just Toys, Inc. (Fed. Cir. 1997) (holding that non-public information may be used as prior art under certain circumstances), thus allowing more collaboration. Philip McGarrigle published an article in IDEA discussing the OddzOn Products. Brian Murphy disagreed with OddzOn Products in the Fordham IP Law Journal. Additionally, James Gambrell discusses the use of section 102(f)/103 prior art in the Federal Circuit Bar Journal.

        Analysis and discussion of the Act from the House Committee Report:

        In particular, Sec. 103(c) is amended to add a new paragraph that permits reliance on the provisions of 103(c) by parties that have not commonly assigned their rights to subject matter and the invention at the time a claimed invention was made. It does so by construing the phrase `owned by the same person or subject to an obligation of assignment’ in newly redesignated 103(c)(1), to include circumstances in which the parties have entered into a qualifying joint research agreement before to making the invention. The amendments made in this Act do not alter existing law governing inventions under 103(c) where the invention and the subject matter at issue are commonly owned or subject to an obligation of common assignment.

        A party who seeks to gain the benefit of the amended Sec. 103(c) must comply with certain conditions. First, the invention and the subject matter (i.e., prior art or information qualifying solely under 35 U.S.C. 102(f)) that is being excluded must be owned by, or otherwise subject to the control of, one or more of the parties to the joint research agreement. While the subject matter being excluded may pre-date the joint research agreement, the claimed invention must be made after the date of such agreement. Second, the invention must arise from work performed by or on behalf of the natural or legal persons that are party to the eligible joint research agreement. Third, the identities of the parties to the joint research agreement must be disclosed in the patent. This information may be included in the original application, through an amendment to the application, or added by an amendment to the patent (e.g., by a certificate of correction) pursuant to the amended law. The omission of the names of parties to the agreement is not an error that would justify commencement of a reissue or reexamination proceeding.

        Thus, by entering into a joint research agreement before making the claimed invention, disclosing the names of the parties in the patent application or amendment, and ensuring that the claimed invention resulted from activities under the agreement, subject matter developed by another person and the claimed invention will be deemed to be commonly owned.

        Section 2 also defines the term `joint research agreement’ as a `written contract, grant, or cooperative agreement.’ By doing so, Congress does not intend to prescribe the specific form of the agreement parties must use to benefit from this Act nor to require the writing be contained in a single instrument. Congress does intend the writing to demonstrate that a qualifying collaboration existed prior to the time the claimed invention was made and that the claimed invention was derived from activities performed by or on behalf of parties that acted within the scope of the agreement.

        The term `joint research agreement,’ used in section 2 of the Act, is not limited to joint research agreements under the Bayh-Dole Act (Sec. 200 et seq. of the Patent Code), but also includes other governmental or private sector cooperative research agreements, development agreements, and other transaction agreements, including Government Cooperative Research and Development Agreements (15 U.S.C. 3701a), and Department of Defense or National Aeronautics and Space Administration (NASA) `other transaction’ agreements (10 U.S.C. 2371, 42 U.S.C. 2473).

        USPTO News: Changes to 35 U.S.C. 103(c)

        Patent, Patent Legislation
        In addition to changes to the PTO Fees, Congress has also passed the "Cooperative Research and Technology Enhancement (CREATE) Act of 2004." The Act is now awaiting Presidenet Bush’s signature.  The purpose of the Act is to promote collaborative research.  As such, some previously considered prior art will be excluded from consideration if it arose from a joint research agreement.

        There may be a need for your clients to immediately make amendments in joint research agreements to make sure that they qualify under the new law.  Second, currently pending applications may be amended to disclose the names of the parties to the joint agreement.  In addition, in some cases, broadening reissues (granted in last two years) may be obtained if the narrowly issued claims were restricted because of now excluded prior art.

        — Dennis

        The text of the Act is listed below:

        AMENDMENTS TO 35 USC 103(c)

            “(c)(1) Subject matter developed by another person, which qualifies as prior art only under one or more of subsections (e), (f), and (g) of section 102 of this title, shall not preclude patentability under this section where the subject matter and the claimed invention were, at the time the claimed invention was made, owned by the same person or subject to an obligation of assignment to the same person.

            “(2) For purposes of this subsection, subject matter developed by another person and a claimed invention shall be deemed to have been owned by the same person or subject to an obligation of assignment to the same person if–

            “(A) the claimed invention was made by or on behalf of parties to a joint research agreement that was in effect on or before the date the claimed invention was made;

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

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

            “(3) For purposes of paragraph (2), the term `joint research agreement’ means a written contract, grant, or cooperative agreement entered into by two or more persons or entities for the performance of experimental, developmental, or research work in the field of the claimed invention.”.

           SEC. 3. EFFECTIVE DATE.

            (a) IN GENERAL.–The amendments made by this Act shall apply to any patent granted on or after the date of the enactment of this Act.

        Intellectual Property Association (AIPLA) calls for the creation of a post-grant opposition procedure

        Patent, Patent Legislation

        Michael Kirk, Executive Director of the American Intellectual Property Law Association, recently testified before congress and called for the creation of an effective post-grant opposition procedure in the Patent Office.

        Appearing at a congressional oversight hearing, Kirk pointed out that issued patents of questionable validity undermine the confidence of business and consumers. While the validity of such patents may be tested through litigation, reexamination, reissue, and interference proceedings, he observed that these options all suffer significant deficiencies. What is needed is a procedure that satisfies a competitor’s need for an adequate opportunity to challenge, the patent owner’s need for a prompt resolution of that challenge, and both parties’ need for an inexpensive proceeding.

        Calendar of AIPLA Events:

        Aug. 11-13: Practical Patent Prosecution Training for New Lawyers
        Hyatt Regency Crystal City, Arlington, VA

        Oct. 14-16:2004 Annual Meeting
        Grand Hyatt Washington, Washington, DC

        Charitable Contributions of Patents and other Intellectual Property

        Patent, Patent Legislation

        Yesterday, the Senate overwhelmingly passed S.1637 that limits tax deductions for charitable contributions of patent, copyright, trademark, trade name, trade secret, know-how, or software. The limit is the lesser of 5% of the market value (at the time of contribution) or $1,000,000. The House bill is in the Ways and Means committee.

        For more tax related news, see the TaxProf.

        Playwright Licensing and Antitrust

        Patent, Patent Legislation

        Senator Hatch recently inroduced the Playwrights Licensing Antitrust Initiative Act of 2004 in the Senate. (S. 2349). According to the Bill,

        the antitrust laws shall not apply to any joint discussion, . . . or agreement for the express purpose of, and limited to the development of a standard form contracting minum terms of artistic production and levels of compensation for playwrights.

        The Bill appears to essentially allow playwrights to collectively bargain against producers. Arthur Miller testified in favor of the legislation.

        His testimony came 48 years after he was cited for contempt for not cooperating with the House Un-American Activities Committee. He was also blacklisted by Hollywood for refusing to identify fellow artists with possible links to the Communist Party.

        (Article)

        Patent Office Funding III: Filing Fees

        Patent, Patent Legislation

        The patent office funding bill (H.R. 1561) seems to become law. Here are some of the proposed changes:

         

        Current Fees    

        Fees in Bill

        Filing Fee

        $770

        Filing: $300
        Search: $500
        Examination: $200
        Total: $1000

        Extra independent claims >3

        $86

        $100

        Claims >20

        $18

        $50

         

         

         

        Long disclosure

        $0

        $250 for ea. 50 sheets over 100

        Electronic Filing

        $0

        $225 discount

         

         

         

        Issue Fee

        $1330

        $1400

        Small entities retain 50% cut.

        More patent related legislation commentary is available here.

        Patent Office Funding II

        Patent, Patent Legislation

        Matthew Buchanan recently reported on the widespread support for the United States Patent and Trademark Fee Modernization Act of 2004.

        It’s very interesting that this bill is enjoying such broad support, considering that it represents a large increase in patent fees. Apparently, the anti-fee diversion provisions and the promises that USPTO will initiate further reforms once diversion ends are so attractive that a significant fee increase has become secondary. (Commenting on the IP Coalition letter (PDF)).

        Most patentees spend several thousand dollars on attorney fees but much less on patent office fees. If a modest increase in fees can either 1) increase patent office efficiency or 2) increase patent quality, then most of us will be happy. The patent office has been getting a bad rap lately, perhaps this funding will help turn the tide.

        See Part I.

        Citation of Unpublished Opinions

        Patent, Patent Legislation

        Litigants in appellate courts may soon be citing unpublished opinions if the Federal Rules of Appellate Procedure are amended to conform to a recent advisory committee recommendation. (article). Federal Circuit Chief Judge Robert Mayer has a problem with citing unpublished opinions because they are generally “not written with the extra care and concern for language” evident in published opinions. Federal Circuit Judge William Bryson also indicated that he would write opinions differently if he knew they could be cited. The Federal Circuit Judges have unanimously voiced their opposition (pdf) to the proposed changes.

        In the view of the judges of the Federal Circuit, the adoption of Rule 32.1, which will override our local rule, may adversely affect the administration of justice by skewing the allocation of judicial resources, delaying issuance of precedential opinions, increasing the issuance of judgments without an accompanying opinion, and harming litigants.

        J. Craig Williams’ opinion is that “citing an unpublished opinion is something like citing part of the law. It just doesn’t work.”

        Kerry’s Small Business Grant

        Patent, Patent Legislation

        Senators Kerry and Daschle have introduced a Bill in the Senate (S.1886) that includes a “Small Business Foreign Patent Protection Grant Fund.” The fund is intended provide funds to small businesses who are hoping to file foreign patent applications.

        To help small manufacturers and small R&D firms, we need to reduce trade barriers, so that they are able to sell their products and technologies in other countries. Small-business owners commonly cited the expense required to secure foreign patent protection as a significant barrier to their ability to operate in international markets. Part of encouraging the spread of their innovations into other countries is decreasing their vulnerability to big foreign corporations that can take their ideas when they try to sell their products around the world. Our small businesses need patent protection. However, the costs associated with filing such patents are often prohibitively expensive.

        (Link to Kerry’s speech discussing the Bill).

        Proposed Amendments to 35 U.S.C. 102(f) and 103(c)

        Patent, Patent Legislation

        Representative Smith (R Texas) talks on the Congressional floor about three recent Bills that have passed the House and are awaiting action in the Senate. Rep. Smith recently gave a speech to the ABA IP Section discussing the bills and other IP matters.

        One of the recently passed Bills is the “Cooperative Research and Technology Enhancement (CREATE).” Under the Bill’s proposed amendments, 35 U.S.C. 102(f) references will not be considered prior art or as evidence of obviousness under section 103. (Section 102(f) references show the subject matter to be patented was not invented by the one applying for the patent.)

        In addition, section 103(c) would be amended so that subject matter developed by another person and prior art under 102(e) or (g) will not preclude patentability if the subject matter and the clamed invention were, “at the time of the earliest filing date for which benefit is sought . . . owned by the same person or subject to an obligation of assignment to the same person.” The new law would not be retroactively applied.

        The parallel Senate Bill S.2192 was introduced by Senator Hatch (R Utah). You can read Senator Hatch’s introduction of the Bill. According to co-sponsor Senator Leahy, this Bill will circumvent the ruling in OddzOn Products, Inc. v. Just Toys, Inc. (Fed. Cir. 1997) (holding that non-public information may be used as prior art under certain circumstances), thus allowing more collaboration. Philip McGarrigle published an article in IDEA discussing the OddzOn Products. Brian Murphy disagreed with OddzOn Products in the Fordham IP Law Journal. Additionally, James Gambrell discusses the use of section 102(f)/103 prior art in the Federal Circuit Bar Journal.

        Taxing Patent Donations

        Patent, Patent Legislation

        Parallel Bills have been introduced in the House and Senate to limit income tax deductions for charitable contributions of patents and similar property by requiring a “qualified appraisal.” S2103 H3867

        Michigan State University provides some details for giving a charitable contribution of intellectual property as does giftlaw.com. Janal Kalis provides a story on changes made at the IRS regarding patent donations. According to the story, the IRS is cracking down because corporations were claiming greater donations than they were entitled to. Nipper provides more information and a link to the Intellectual Property Owners (IPO) commentary. The IPO has sent an open letter to Senator Grassley opposing the Bills.