Tag Archives: Abstract Idea

New 101 case… scares me…

Ethics,

I’m sure Dennis will do his usual magic, but Cyberphone Sys., LLC v. CNN Interactive (Fed. Cir. Feb. 26, 2014) is a prime example of the silliness of this judicial activism.  The case is available here.

Here is the claim:

A method, comprising:

obtaining data transaction information en- tered on a telephone from a single trans- mission from said telephone;

forming a plurality of different exploded data transactions for the single transmission, said plurality of different exploded data transaction[s] indicative of a single data transaction, each of said exploded data transactions having different data that is intended for a different destination that is included as part of the exploded data transactions, and each of said exploded data transactions formed based on said data transaction information from said single transmission, so that different data from the single data transmission is separated and sent to different destinations; and

sending said different exploded data transac- tions over a channel to said different desti- nations, all based on said data transaction information entered in said single trans- mission.

What’s my gripe?  First, the court says Section 101 “impliedly bars” certain subject matter. I won’t bore you by repeating the post below about the plain language and legislative history of that section, which shows no such language or intent.

More importantly, because the method claim — which expressly recites physical objects — “involves an abstract idea,” the court says section 101 is implicated.  The “abstract idea” is “using categories to organize, store, and transmit information.”

Okay… but someone identify for me a method claim that does not “involve” an abstract idea (or mental step or natural phenom or natural law or…).

Now, because the claim “involves” an “abstract idea,” the court says that it’s not enough that this abstract idea can’t be performed by a human being.  Instead, the court concludes that the claim covers the practical idea itself even though the claim is limited to organizing data and so on using telephones.  Why?  In part because you can use pretty much any telephone.

Okay… so what method claim is eligible?  If it “involves” an abstract idea (whatever that is), and uses “conventional” things, nope. Even if it changes the world… not eligible.

This sort of “reasoning” is not very helpful.

“Inventive Concept” and the Hot-Blast Cases

Patent, , , , ,

Guest post by Jeffrey A. Lefstin, Professor of Law, University of California, Hastings College of Law

As the Supreme Court prepares to take up Alice Corp. v. CLS Bank, a major question the Court may confront is to what extent an “inventive concept” is necessary for patent eligibility under § 101. In Mayo v. Prometheus, the Court suggested that “conventional and obvious” activity cannot transform a law of nature or abstract idea into a patent-eligible invention. The Court seemingly revived Parker v. Flook, which held that only “inventive applications” of abstract ideas are patent-eligible. But when the Federal Circuit heard CLS Bank, divided as the court was, both Judge Rader and Judge Lourie emphatically rejected the idea that Mayo demands “inventiveness” for patent-eligibility.

In both Flook and Mayo, the Supreme Court anchored the requirement for inventive application in Neilson v. Harford, the famous English case on James Neilson’s hot-blast smelting process. The Court in Flook and Mayo focused on this passage appearing in Baron Parke’s opinion for the Court of Exchequer:

We think the case must be considered as if the principle being well known, the plaintiff had first invented a mode of applying it by a mechanical apparatus to furnaces; and his invention then consists in this—by interposing a receptacle for heated air between the blowing apparatus and the furnace.

Flook took this language to mean that an underlying idea or discovery should be treated as part of the prior art; Mayo took it to mean that a claim is patent-eligible only if the application of a discovery or idea is inventive or unconventional.

However, a reading of the Exchequer’s full opinion tells the opposite story. Neilson’s patent was sustained because his application was entirely conventional and obvious. The defendant’s challenge in Neilson was primarily a scope of enablement argument: Neilson had disclosed that the blast should be heated before introducing it into the furnace, but disclosed next to nothing about the heating means. In refuting the defendant’s challenge, both the patentee and the judges of the Exchequer emphasized that the mode and apparatus for heating air were old and well known in the field, and represented no invention by Neilson.

So why did Baron Parke write that Neilson’s discovery – his ‘principle’ – should be regarded as “well known”? The court was wrestling with the question of whether Neilson had claimed a patentable manufacture, or the abstract principle that hot air was superior to cold. And if a manufacture, was Neilson entitled to reach the accused blast furnace, which employed a different heating apparatus? The Exchequer had faced the same questions seven years earlier in Minter v. Wells, involving a patent to an adjustable chair. The defendant in Minter had argued that the patentee was trying to claim a well-known principle of mechanics: the self-adjusting lever. Alternatively, if the claim was to the chair rather than the principle, the patent should be restricted to the inventor’s particular embodiment. Baron Parke concluded instead that the patentee had claimed the application of the self-adjusting leverage to an adjustable chair. Therefore, the patent was not drawn to an abstract principle, and might extend to other chairs embodying the same application but with a different arrangement.

Minter thereby established that a patent might claim the application of a well-known principle to new ends, and might extend beyond the exact machinery employed by the patentee. In the famous passage from Neilson, Parke was applying the same doctrine to Neilson’s patent – except that Neilson’s ‘principle’ was new rather than well-known. Neilson was a more difficult case because, given Neilson’s minimal disclosure, the scope of enablement was more dubious than in Minter. But a special jury verdict on that point ultimately carried the day for Neilson.

Neilson was only one of some twenty cases asserted by Neilson in England and Scotland. Other decisions following and interpreting Neilson leave no doubt that the case stood not for inventive application, but for the distinction between principles in the abstract and patentable applications. For example, in a case litigated the next year, Househill v. Neilson, the Court of Sessions stated:

The main merit, the most important part of the invention, may consist in the conception of the original idea—in the discovery of the principle in science, or of the law of nature, stated in the patent, and little or no pains may have been taken in working out the best manner and mode of the application of the principle to the purpose set forth in the patent.

Neilson was understood the same way in the Supreme Court’s landmark 19th-century opinions that discussed Neilson extensively, such as Le Roy, Morse, and Tilghman. Further, in late 19th-century and early 20th-century American cases and treatises, it was black-letter law that while abstract principles and discoveries could not be patented, a practical application was patent-eligible without the need for inventive application – subject to certain exclusions such as the ‘mental steps’ rule.

As I wrote about last year, the actual origin of the inventive application test was Justice Douglas’s opinion in Funk Brothers, in 1948. The dubious history of the inventive application test in the wake of Funk suggests we would have been better served by following Justice Frankfurter instead of Justice Douglas. For it was Frankfurter’s concurrence that embraced the spirit of Neilson and the historical tradition: the claims to bacterial compositions in Funk were unpatentable not because they added or changed little relative to a law of nature or natural phenomenon, but because the patentee was claiming the idea of compatible strains instead of his practical application.

I write about the hot-blast cases, and the history of the inventive application test, in an article available here.

The Value of Open Data for Patent Policy

Patent, ,

Guest Post by Christopher A. Cotropia, Professor of Law and Austin Owen Research Fellow, University of Richmond School of Law; Jay P. Kesan, Professor and H. Ross & Helen Workman Research Scholar, University of Illinois College of Law; and David L. Schwartz, Associate Professor and co-Director of the Center for Empirical Studies of Intellectual Property at Chicago-Kent College of Law

Harlan Krumholz, one of the nation’s leading medical researchers, recently wrote an important New York Times Op-Ed piece called Give the Data to the People. Dr. Krumholz praised Johnson & Johnson for making all of its clinical trial data available to scientists around the world. This included not only the conclusions in published articles, but also unpublished raw data. Companies are often reluctant to share raw data because their competitors may benefit. In the medical field, there are also patient privacy concerns. But releasing the raw data permits other researchers to learn from and build upon existing data. It also offers other researchers the ability to replicate and verify the findings of important medical studies. Dr. Krumholz concludes: “For the good of society, this is a breakthrough that should be replicated throughout the research world.”

We believe that Dr. Kumholz’s call for more publicly available data is applicable to empirical legal studies. It is especially critical, in our view, to the study of patent assertion entities (“PAEs,” which some refer to as patent trolls). There is an important public policy debate underway about the role of PAEs within patent law. There have been reports in the press about PAEs – including a high profile report by the President’s Council of Economic Advisors
– that relied upon confidential data. In his State of the Union address, President Obama called on Congress to enact patent reform legislation. The main basis for the reform is alleged abuses by “patent trolls.” Unfortunately, much of the raw data about patent litigation is not publicly available.

As academic researchers, we are interested in data about PAEs. We have previously studied and written an article about patent infringement lawsuits filed in 2010 and 2012. Because of the importance of the debate about PAEs, we released the raw data from our study to the public (here) to permit others to evaluate and study. Others have downloaded and commented on our data to us, and we have gone back and verified particular classifications in some instances. We believe more publicly available data is necessary.

Why is more information about PAE litigation not public? After all, the underlying data relates to litigation in the federal courts, and thus does not implicate privacy concerns like in the medical context. However, most of the raw data has been gathered and coded by private companies. For-profit businesses legitimately desire to use the information within their business and to prevent competitors and others from using commercially valuable information. That said, we believe corporate owners should release as much of the raw data (not merely descriptive statistics) as they can. To the extent that the raw data is not released or shared, society should be extremely cautious before relying upon it to make important public policy decisions.

Perhaps more importantly, we call upon academic researchers to gather and release more data. The data should be gathered and released in a form most useful to others. For instance, there is a debate about the definition of a PAE. Some believe that it excludes original owners – for instance, universities and individual inventors – while others believe PAEs include any non-operating company. Ideally, the raw data should be coded and released on a granular level. That way, future researchers can analyze the data relying upon different definitions, rather than only the definition used by the original researcher.

In sum, we ask that other researchers release more raw data on PAEs, which will permit both robustness checks on the results, as well as future empirical research on the topic. The time for more transparency has come.

The Paramount Interest in Seeing that Patent Monopolies . . . are Kept Within their Legitimate Scope

Patent, , ,

By Dennis Crouch

Courts have often identified patent rights as a form of monopoly. Perhaps this stretches back to the 17th century Statute of Monopolies that ended all letters patents and other government granted monopolies except for those covering novel inventions. Economists typically reject the categorization because modern patent rights by themselves do not create market power nor even the right to sell or use the invention. (Patent rights only grant the right to exclude others).

Interesting aspect of the Supreme Court’s decision in Medtronic v. Mirowski (U.S. 2014), is the way that the court subtly revives this prior form of thinking by quoting older precedent:

The public interest, of course, favors the maintenance of a well-functioning patent system. But the “public” also has a “paramount interest in seeing that patent monopolies . . . are kept within their legitimate scope.” Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U. S. 806, 816 (1945). A patentee “should not be . . . allowed to exact royalties for the use of an idea . . . that is beyond the scope of the patent monopoly granted.” Blonder-Tongue Laboratories, Inc. v. University of Ill. Foundation, 402 U. S. 313, 349-350 (1971).

Now, the use of the monopoly term here does not appear carelessly placed but instead intentionally designed to link patent rights with the monopoly problem. This connotation is important for the Court’s policy argument that, like monopolies, patent rights need to be controlled. This follows Thomas Jefferson’s famous thoughts against monopolies but eventual support for patent rights that were limited in both scope and duration.

In a recent article addressing this issue from a European perspective, Sven Bostyn and Nicolas Petit argue that continued rhetoric linkage of patents with monopolies is problematic and may well serve “a hidden bureaucratic agenda, that of limiting patent protection through the backdoor, by using ex post antitrust remedies to alter the protective – and innovation-incentivising – patent statutes adopted ex ante by elected democratic organs.” See Bostyn & Petit, Patent=Monopoly: A Legal Fiction (December 31, 2013). The Bostyn-Petit characterization is likely relevant to US policymakers as well. I looked through the few years of Federal Circuit cases that mentioned “patent monopoly.” Time and again the court used the phrase as part of its explanation why patent rights should be limited with the excepting being cases that quote the Georgia Pacific factors. See, e.g., LifeScan Scotland, Ltd. v. Shasta Technologies, LLC, 734 F.3d 1361 (Fed. Cir 2013) (Judge Dyk); CLS Bank Intern. v. Alice Corp. Pty. Ltd., 717 F.3d 1269 (Fed. Cir. 2013) (en banc; Judge Lourie opinion); Brooks v. Dunlop Mfg. Inc., 702 F.3d 624 (Fed. Cir. 2012) (Judge Prost); Ritz Camera & Image, LLC v. SanDisk Corp., 700 F.3d 503 (Fed. Cir. 2012); SanDisk Corp. v. Kingston Technology Co., Inc., 695 F.3d 1348 (Fed. Cir. 2012) (Judge Reyna in Dissent); Akamai Technologies, Inc. v. Limelight Networks, Inc., 692 F.3d 1301 (Fed. Cir. 2012) (Judge Linn in Dissent); Therasense, Inc. v. Becton, Dickinson and Co., 649 F.3d 1276 (Fed. Cir. 2011) (Judge Bryson in Dissent); Micron Technology, Inc. v. Rambus Inc., 645 F.3d 1311 (Fed. Cir. 2011) (Judge Gajarsa in Dissent).

SmartGene v. ABL: Foreshadow of the Supreme Court in CLS Bank?

Patent, Supreme Court, , ,

By Dennis Crouch

SmartGene v. ABL (Fed. Cir. 2014) (nonprecedential)

35 U.S.C. 101 is a foundational patent law statute that defines the scope of patent eligibility. The statute states that:

Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.

Section 101 is written in broad and open terms and has been seen as providing notice that patent law is not intended to be limited to any particular forms of technology.

In interpreting the statute, the Supreme Court has added an additional set of subject matter eligibility restrictions only nominally grounded in the statute. Most notable, these include proscriptions against the patenting of abstract ideas, natural phenomenon, and products of nature. Also excluded from eligibility are “mental processes.” It is somewhat unclear from precedent whether these mental processes are whole included within the abstract idea construct or whether instead there are some mental processes that would be excluded even though not considered abstract ideas.

Here, ABL’s patents cover a diagnostic method that basically pulls information from three separate knowledge bases, ranks the results and provides advisory information related to those results. As claimed these steps use a “computing device” to generate and provide the results. The patents also include computerized “system” claims; computer program claims; and sorage-medium claims that are all designed to facilitate the practice of the method. See U.S. Patent Nos. 6,081,786 and 6,188,988.

In 2008, SmartGene filed for declaratory judgment of invalidity and also filed a reexamination request with the USPTO. The PTO considered the prior art and confirmed patentability. However, the District Court ruled that all of the patented claims were invalid as ineligible under Section 101. Rather than walking through each claim of each patent, the District Court (1) first held that, for eligibility purposes, Claim 1 of the ‘786 patent (the method claim) was representative of all claims in the patents and (2) then found that claim ineligible under § 101. The district court wrote that the claim does “no more than describe . . . an abstract mental process engaged in routinely, either entirely within a physician’s mind, or potentially aided by other resources in the treatment of patients.”

On appeal, the Federal Circuit has affirmed in a non-precedential decision written by Judge Taranto and joined by Judges Lourie and Dyk. Famed eligibility defender Robert Sachs of Fenwick represented the Patentee whkle Fred Samuels (Cahn & Samuels) represented the DJ Plaintiff.

The Federal Circuit first considered the district court’s process in holding all claims from both patents ineligible based only upon consideration of one claim from one patent. The court affirmed the district court finding based upon a waiver principle.

On to the meat of the 101 analysis, the Federal Circuit began with a citation to CyberSource:

This conclusion [of ineligibility] follows from CyberSource Corp. v. Retail Decisions, Inc., where, based on earlier precedents, this court held that section 101 did not embrace a process defined simply as using a computer to perform a series of mental steps that people, aware of each step, can and regularly do perform in their heads.

The court went on to write that mental processes are not eligible nor are processes that use basic computer functionality to implement mental processes unless the invention specifies “new physical components” or other steps “defined other than by the mentally performable steps.”

For these princples, the court relied heavily on Supreme Court precedent of Benson, Flook, and Mayo as well as the appellate decisions of CyberSource as well as In re Grams, 888 F.2d 835, 840-41 (Fed. Cir. 1989) and In re Meyer, 688 F.2d 789, 794-95 (C.C.P.A. 1982).

The discussion of Mayo in the decision is interesting in the way that the court draws close parallels between the way laws of nature and abstract ideas should be interpreted:

Mayo demanded that, when a claim involves an abstract idea (or, in Mayo itself, a law of nature), eligibility under section 101 requires that the claim involve “enough” else—applying the idea in the realm of tangible physical objects (for product claims) or physical actions (for process claims)—that is beyond “well-understood, routine, conventional activity.” 132 S. Ct. at 1294, 1298, 1299. The claim here does not do so. It calls on a computer to do nothing that is even arguably an advance in physical implementations of routine mental information-comparison and rule-application processes. In this context, the concern about preempting public use of certain kinds of knowledge, emphasized in Mayo, is a grave one.

It appears from Myriad, that the process for determining the product-of-nature exclusion is somewhat different since there, the court allowed the patentee to obtain protection for a DNA sequence whose physical differences from the naturally occurring sequence were due to well-understood, routine, and then conventional laboratory processes.

Is a mental step an abstract idea?: The court punts on this question and instead writing that:

[M]ental processes and abstract ideas (whatever may be the precise definition and relation of those concepts) are excluded from section 101. Whatever the boundaries of the abstract ideas category, the claim at issue here involves a mental process excluded from section 101: the mental steps of comparing new and stored information and using rules to identify medical options.

The analysis here pessimistically fits the approach leading abstract idea jurisprudence that traditionally fails to explain the scope and bounds of the abstract idea category but finds that the particular invention in question fits within the category.

Judge Taranto: This decision is important because it was written by Judge Taranto. Although there was not tremendous doubt in his position, Judge Taranto did not participate in the CLS Bank en banc fiasco that resulted in no majority opinion. Judge Taranto’s participation would have likely shifted the balance in favor of a majority opinion ruling strongly against subject matter eligibility of software claims that do not add new “technology.”

Judge Taranto is also important because, of all the Federal Circuit judges, he likely best understands the pulse of the Supreme Court and I will not be surprised when the Supreme Court decision in CLS Bank parallels this one.

 

ALL the Facts: PAEs are Suing Many More Companies

Patent, , ,

Guest Post by James Bessen

Last summer, the President’s Council of Economic Advisers issued a report arguing that Patent Assertion Entities (PAEs) are responsible for a major harmful increase in patent litigation. That report was based, among other things, on roughly twenty academic studies.

But recently, David Kappos, former Director of the US Patent and Trademark Office, declared that, to the contrary, “the building is not on fire,” in an article titled “Facts Show Patent Trolls Not Behind Rise In Suits.” Kappos dismissed the academic studies as “unhelpful” and “badly distorted” because they did not make all of their underlying data publicly available. Instead he relied only on “facts” from a recent paper by three academics, Christopher Cotropia, Jay Kesan and David Schwartz (CKS) as well as a strained interpretation of one finding in a GAO report (which also did not make its underlying data publicly available).

The CKS paper does, indeed, identify a minor error in the President’s report affecting the period from 2010 to 2012. But the paper does not challenge the data showing that PAEs are responsible for a very large increase in the number of companies sued for patent litigation over the last decade. Nor does the paper’s “granular and transparent” data appear to make any significant difference despite the assertion that it calls prior research into “serious question”: CKS find more or less the same numbers of lawsuits as other studies using comparable definitions of PAEs, despite their claims to the contrary. The CKS paper makes a contribution and it is great that the authors are able to make their data public, but it is dangerous for policy makers to base judgments on highly selective “cherry picked” data that cover only two unrepresentative years or to dismiss a large number of careful studies just because they have not disclosed all of their data.

The CKS paper targets the claim in the President’s report that “Suits brought by PAEs have tripled in just the last two years, rising from 29 percent of all infringement suits to 62 percent of all infringement suits.” While this statement is factually correct, given the definition of PAE used, it could be easily misinterpreted. That is because that two year period from 2010 to 2012 also saw a significant change in the law: the America Invents Act, passed in 2011, has a joinder provision that prevents patent holders from suing multiple, unrelated defendants in a single infringement lawsuit. This is important because prior to this change, PAEs tended to sue more unrelated defendants in each lawsuit. In other words, the 29 percent figure for 2010 represented more than 29 percent of the distinct defendants, while the 2012 figure more or less does represent 62 percent of the distinct defendants. The 29 percent figure is too small for an apples-to-apples comparison.

Ideally, one would want to compare the number of unrelated defendants in different years in order to eliminate the bias introduced by the change in the joinder provision. To make a comparison of that sort, CKS collected patent lawsuit data for 2010 and 2012, categorizing each suit by the nature of the patent holder. A patent holder could be: (1) a University; (2) an Individual Inventor/Family Trust (e.g, GeoTag); (3) a large Patent Aggregator (e.g., Acacia); (4) a Failed Operating Company or Failed Start-up; (5) a Patent Holding Company that appears unaffiliated with the original inventor or owner; (6) an Operating Company; (7) an IP Holding Company affiliated with an operating company; or (8) a Technology Development Company (e.g., Walker Digital).

Although CKS are not the first researchers to categorize different types of NPEs, they seem to think no one else has done it correctly. Specifically, they claim that “Our most basic descriptive findings are inconsistent with and call into serious question the summary data provided by RPX, Patent Freedom, and other academics.” Kappos goes slightly further, completely dismissing all previous research studies, calling them “unhelpful at best, and more likely hurtful by representing as ‘data-driven’ a picture that is actually badly distorted.” However, these charges are simply not true.

Although Kappos claims that previous studies lack a “transparent and appropriately scoped definition of ‘patent troll,'” almost all the previous research papers have extensive discussions of how they identify PAEs. Moreover, using these definitions, it turns out that summary statistics from these sources are rather close to the corresponding estimates from CKS. For example, Patent Freedom counts “non-practicing entities” (NPEs) using a definition that corresponds roughly to CKS categories 2 through 5. RPX uses a definition that includes the first five CKS categories plus category 7 plus operating companies that sue outside of their industry (not counted in CKS). Feldman et al. count patent monetizers corresponding to CKS categories 2 through 5, and 7. We can compare the number of NPE lawsuits reported by these different sources to the roughly corresponding category totals reported in the CKS paper:

Estimates of Lawsuits Filed by NPEs

 

Estimate from Other Research

Estimate Using CKS Data For Corresponding Categories

Difference

2010

      

Patent Freedom

595

689

16%

RPX

765

733

-4%

2012

      

Patent Freedom

2,652

2,687

1%

Feldman et al.

2,956

2,710

-8%

RPX

3,054

2,745

-10%

 

Do these differences show that previous research is so inconsistent with the CKS estimates as to call that research into “serious question”? Hardly. First, there is no evidence of any consistent bias in the comparisons. Indeed, while some of the estimates are greater than the CKS estimates, the Patent Freedom data generate smaller estimates than the CKS data.

Second, the differences are small, especially considering that these different researchers use somewhat different concepts of what they mean by “patent troll.” Although reasonable people might disagree about which actors to include in their studies, the studies still provide helpful guidance about trends and the extent of patent litigation. But the crudeness of these measures means that 10 or 20 percent differences are not significant. Such differences are certainly no excuse to dismiss most of the prior literature on this subject.

More important, such differences are not economically important. For example, as we shall see, PAE litigation has increased by an order of magnitude over the last decade. A 10 or 20 percent difference does not change this conclusion. Nor does such a difference fundamentally alter estimates of the economic impact of PAEs. For example, one of my studies with Mike Meurer found that PAEs cost defendants $29 billion in 2011. If the true cost were $26 billion or even $23 billion, this would not change the conclusion that PAEs impose substantial costs on defendants. These findings cannot be dismissed, as Kappos does, just because he doesn’t have access to the underlying data.

CKS have not shown any actual evidence that their data are significantly inconsistent with other studies. Nor have they shown anything that calls other research into “serious question” despite the gravity of that charge. Nor have they shown any evidence of actual bias in the previous research. Kappos and CKS dismiss a large body of prior research without showing any substantive reason to do so. While much of the prior research is based on private data, researchers have checked these data against other sources. What matters in science is not the access to the data, but the replicability of the results. Without actual evidence of a bias or major inconsistencies across different data sets, there is no reason to dismiss these studies.

CKS’s findings do show that the figures cited in the President’s report are misleading, but, as we shall see, that evidence exists in other sources as well. Recall that we need to compare the number of unrelated defendants sued in different years. To address this, CKS count the number of parties to the lawsuit excluding the patentee, the “other parties” to the lawsuit. They find that between 2010 and 2012 the number of these other parties in lawsuits filed by non-operating companies changed little. For example, in categories 2 through 5 the number of “other parties” in PAE suits went from 5,515 to 5,554.

However, the number of “other parties” listed in lawsuit filings is not an accurate measure of the unique unrelated defendants. For example, a parent company will often be listed as a defendant along with one or more subsidiaries. Fortunately, Patent Freedom has done the hard work of tracking down unique operating company defendants (and, yes, our researchers checked their work) as have several of the other researchers.

Figure (Above): Number of operating company defendants in PAE suits.
Source: Patent Freedom

The Patent Freedom counts of unique NPE defendants are shown in the figure along with a trend line. The counts of defendants are much smaller than CKS’s “other parties.”

Several findings are apparent. First, there appears to be a surge in multi-party PAE lawsuits prior to passage of the America Invents Act in September 2011. Apparently, some PAEs wanted to get their suits in prior to the new joinder rules that made it more expensive to sue multiple parties.

Because of this surge, any comparison between 2010 and 2012 is bound to be highly misleading. In the Patent Freedom data, the number of unique defendants actually declined during this interval. But it is equally clear that 2010 and 2011 are exceptions to an otherwise steady, increasing trend from 2001 through last year. Claiming that patent trolls have not contributed to the rise in patent defendants by looking only at 2010 and 2012 is a serious misrepresentation.

Moreover, this finding of a large shift is supported by a large number of studies, including research by one of the CKS authors. Jay Kesan (with co-author Gwendolyn Ball) previously estimated that only 4 percent of patent lawsuits were filed by “patent licensing firms” at the beginning of the decade. To compare, the CKS data find that 21 percent of lawsuits were filed by patent licensing firms in 2010 (categories 3-5 and 7). That is a fivefold increase over the decade. The share of lawsuits grew to 45 percent of lawsuits in 2012, after the change in the joinder rule; if we add individuals & family trusts, such as the notorious GeoTag, then the share rises to 52 percent, over half of all patent lawsuits. So these data show not only a dramatic rise in the share of lawsuits filed by patent licensing firms, but also a large share of the lawsuits come from these parties in 2010 and even more in 2012. Given the earlier paper, does Professor Kesan really believe that this latest paper calls into “serious question” the findings of many other researchers that patent trolls have contributed substantially to the rise in patent litigation?

Nor does the GAO report contradict the basic trend seen here. Kappos asserts that the GAO found no “statistically relevant” change in the percent of lawsuits filed by trolls. Those words are very carefully chosen “lawyer words.” In fact, the GAO found a 40 percent increase in the PAE share of lawsuits from 2007 to 2011. However, that difference was not statistically significant given the small size of the GAO sample. The GAO also reported that the number of PAE defendants tripled during these years and PAEs accounted for half of the large increase in patent defendants during these years. The GAO report is entirely consistent with the other evidence that the share of PAE lawsuits and defendants have been rising.

Finally, the figure shows that the PAE litigation has continued to increase after the America Invents Act, more or less right on the trend line established since 2001. The Act has been touted as the solution to the problems of the patent system; the data from 2013 suggest otherwise.

The bottom line is this: based on the overwhelming weight of the evidence, including that in CKS itself, PAEs are filing dramatically more lawsuits against very many more defendants than they did at the beginning of the last decade. This is true despite the decline in defendants between 2010 and 2012; the GAO report further supports this finding. The conclusion based on all the evidence is that the building is indeed burning. Policymakers are right to take action.

= = = = = =

References

  • Allison, John R., Mark A. Lemley & Joshua Walker Extreme Value or Trolls on Top? The Characteristics of the Most Litigated Patents, 158 U. Pa. L. Rev. 1 (2009)
  • Ball, Gwendolyn G. Ball & Jay P. Kesan, Transaction Costs and Trolls: Individual Inventors, Small Firms and Entrepreneurs in Patent Litigation, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1337166
  • Bessen, James and Michael J. Meurer (2014), “The Direct Costs from NPE Disputes,” Cornell Law Review, v. 99(2), 387-424.
  • Bessen, James and Michael J. Meurer (2014 forthcoming), “The Patent Litigation Explosion,” Loyola University Chicago Law Journal, v. 45, 102-145.
  • Bessen, James and Michael J. Meurer (2013), “The Private Costs of Patent Litigation,” Journal of Law, Economics and Policy, 9, p. 59.
  • Bessen, James (2012), “A Generation of Software Patents,” Boston University Journal of Science and Technology Law, 18(2), pp. 241-61.
  • Bessen, James, Jennifer Ford, and Michael J. Meurer (2011), “The Private and Social Costs of Patent Trolls,” Regulation 34(4), pp. 26-35.
  • Chien, Colleen, Of Trolls, Davids, Goliaths, and Kings: Narratives and Evidence in the Litigation of High – Tech Patents, 87 N.C. L. Rev. 1571, 1572 (2009).
  • Chien, Colleen, From Arms Race to Marketplace: The New Complex Patent Ecosystem and Its Implications for the Patent System, 62 HASTINGS L.J. 297, 328 (2010)
  • Chien, Colleen (2013) Patent Trolls by the Numbers Santa Clara Univ. Legal Studies Research Paper No. 08-13 http://ssrn.com/abstract=2233041
  • Chien, Colleen, 2009. “Of Trolls, Davids, Goliaths, and Kings: Narratives and Evidence in the Litigation of High – Tech Patents,” North Carolina Law Review, 87, pp. 1571-1615
  • Chien, Colleen (2012) Patent Assertion Entities, Presentation to the DOJ/FTC hearing on PAEs. Washington, DC, December 10, 2012. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2187314 .
  • Chien, Colleen (2012) . “Startups and Patent Trolls.” Santa Clara University Legal Studies Research Paper No. 09-12 Working Paper Series, 2012.
  • Federal Trade Commission (FTC). “The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition.” March 2011.
  • Feldman, Robin, Thomas Ewing and Sara Jeruss. “The AIA 500 Expanded: Effects of Patent Monetization Entities” April 9, 2013. http://ssrn.com/abstract=2247195
  • Feldman, Robin (2013) Patent Demands & Startup Companies: The View from the Venture Capital Community, UC Hastings Research Paper No. 75 http://ssrn.com/abstract=2346338
  • Jeruss, Sara, Robin Feldman and Joshua Walker. “The America Invents Act 500: Effects of Patent Monetization Entities on US Litigation.” 11 Duke Law and Technology Review pp. 357-389 (2012).
  • Lemley, Mark A. “Are Universities Patent Trolls?” Fordham Intellectual Property, Media & Entertainment Law Journal 63, no. 1 (2008): 611-631.
  • Lemley, Mark A. “Software Patents and the Return of Functional Claiming.” Stanford Public Law Working Paper No. 2117302 Working Paper Series, 2012.
  • Lemley, Mark A. and Douglas Melamed. “Missing the Forest for the Trolls” Stanford Law and Economics Olin Working Paper No. 443, 2013.
  • Patent Freedom, Litigations Over Time, https://www.patentfreedom.com/about-npes/litigations/
  • Risch, Michael, 2012. “Patent Troll Myths,” Seton Hall Law Review, 42.
  • Shrestha, Sannu K. 2011. “Trolls or Market-makers? An empirical analysis of nonpracticing entities,” Columbia Law Review, 110, pp. 114-60.

Reading Patent Law

Patent, , ,

By Jason Rantanen

First, thank you for all the terrific comments I received in response to the Top 10 Patent Cases post.  There were some great ideas there and after substantial reflection I decided that my final list this year will be:

Bowman v. Monsanto, 133 S.Ct. 1761 (2012)
O’Reilly v. Morse, 56 U.S. 62 (1853)
Diamond v. Chakrabarty, 447 U.S. 303 (1980)
Egbert v. Lippmann, 104 U.S. 333 (1881); City of Elizabeth v. American Nicholson Pavement Co., 97 U.S. 126 (1878)
Graham v. John Deere, 383 U.S. 1 (1966); KSR v. Teleflex, 550 U.S. 398 (2007)
The Incandescent Lamp Patent case, 159 U.S. 465 (1895)
Phillips v. AWH, 415 F.3d 1303 (Fed. Cir. 2005) (en banc)
Graver Tank v. Linde Air Products, 339 U.S. 605 (1950)
Gorham v. White, 81 U.S 511 (1871)
Bonito Boats v. Thunder Craft Boats, 489 U.S. 141 (1989)

While it's hard to do justice to patent law with just 10 or 12 cases, because this is an Introduction to Intellectual Property class the amount of classroom discussion that can be devoted to individual cases is limited.  Additional cases are discussed in the mini-treatise the students read and I'll cover them in the lecture component as well.  Fortunately, I also teach Patent Law which allows a much more substantive exploration of specific issues in patent law.  Also, the above list is a combination of importance and teaching value: some cases are on there more because they're both reasonably significant and useful teaching tools.

Second, for those of you who are interested in textualism and claim construction, Landslide recently published my review of Justice Antonin Scalia and Professor Bryan A. Garner's Reading Law: The Interpretation of Legal Texts from a patent law perspective.  A copy of the review is available on Landslide's website and I've archived a copy on ssrn. 

I'll also note that Professor Tun-Jeng Chiang wrote to me yesterday to share that his recently published article The Interpretation-Construction Distinction in Patent Law, 123 Yale Law Journal 530 (with Lawrence B. Solum) relates to many of the issues that I discuss in the review, taking on in particular the "argument that the high reversal rate belies the certainty of textualism or suggests that claim interpretation typically involves hard cases from a linguistic standpoint."  While I ultimately don't agree with many of Professor Chiang's arguments, his work is always insightful and worth reading.  His article is available here.

Chisum on Patents: Abstract Ideas

Patent,

Don Chisum on the CLS Bank case:

The Supreme Court often intervenes to resolve splits among the various courts of appeal. Here a split exists within a circuit that the circuit itself is unable to resolve. The circuit judges’ varying interpretations of a body of recent and not-so-recent Supreme Court precedent riddled with fuzzy language and inconsistent results caused the split. Now, the Court has the opportunity (and the obligation) to clean up a mess that is, to a major extent, of its own making.

Read Chisum’s full write-up on the law of “abstract ideas” post-Bilski. /wp-content/uploads/2013/12/Supreme-Court-on-Computer-Software-Patents-1.pdf

A Computer Encompassing a Human

Patent,

By Dennis Crouch

Ex Parte Ciprian Agapi, 2013 WL 6039024 (PTAB 2013)

The PTAB continues to decide a large number of subject matter eligibility issues. In this case, IBM is attempting to patent a "computer implemented" method and system for producing, brokering, and distributing digital content. The examiner rejected the pending claims under 35 U.S.C. § 101 as encompassing (1) a human organism and (2) an abstract idea, either of which is sufficient to render the claims unpatentable. The method of claim 1 includes ten steps that basically follow the process shown in the flowchart below. Claims 22 and 23 offer the same substantive limitations in the form of a "machine-readable storage" and "computer-implemented system" respectively. The claims do provide for "computer implemented … distribution" and "digitally conveyable content" but do not otherwise claim any particular technological implementation.

In interpreting the claims, the PTAB basically found that the claim form was critical for its analysis. In particular, the Board found that the system claim (23) is unpatentable because it encompasses a human being or group of human beings.

[W]e agree with the Examiner that the claimed content systems encompass a human being or a group of human beings, when given the broadest reasonable meaning in light of the Specification. We see nothing in the meaning of system itself or the Specification that would preclude these systems from being reasonably construed as encompassing a human being or a group of human beings. Further, we note that the Specification describes embodiments where these systems include both humans and computers, as well as, embodiments where these systems are fully automated.

In considering the machine-readable medium claim (22) and the method claim (1), the Board found that neither "reasonably encompass" human beings. Rather, the one is directed to "an article … that causes a machine" to act and the other is directed to the "use [of] human interaction but [does] not encompass the humans themselves."

Regarding the abstract idea, the Board found that the method claim (1) failed the machine-or-transformation test since it neither required a "particular" machine and because the "mere manipulation or reorganization of data . . . does not satisfy the transformation prong." CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366, 1375 (Fed. Cir. 2011).

[Update] According to the examiner, the only claims that passed subject-matter-eligibility muster were those written in Beauregard form and directed to software stored on a machine readable device. However, [as LB correctly points out in the comments], the Board found cause to reject those as well – holding the claims are unpatentable because they closely track the unpatentable method and system claims. In addition, the Board also found the claims unpatentable as ineligible signals since the storage media could be a transitory signal.

http://e-foia.uspto.gov/Foia/ReterivePdf?system=BPAI&flNm=fd2011010208-11-12-2013-1

Guest Post by Prof. Risch: Functionality and Graphical User Interface Design Patents

Patent, , , ,

Guest Post by Michael Risch, Professor of Law, Villanova University School of Law

Read the whole draft here, forthcoming in the Stanford Tech. L. Rev.

Before I was a patent guy, I was a copyright guy, and I did much of my work and research in user interfaces. In the 1980’s and 1990’s, there was a lot of uncertainty about how user interfaces would be protected by copyright. The latest version of the Copyright Act had just become effective, and graphical user interfaces (GUIs) were just taking off. Following a lot of litigation, and despite seemingly contradictory appellate rulings and an equally divided Supreme Court in one case, things eventually settled down.

It is against this backdrop that I took great interest in the Apple v. Samsung case, which is in trial right now on damages issues. Buried in all the talk about rectangles with rounded corners and pinch to zoom is a graphical user interface design patent.

Fig 1

Several of Samsung’s phones infringed this patent. In my article, I consider the implications of design patents, functionality, and graphical user interfaces. This is a realm previously limited to copyright. The difference in protection is important because design patents do not traditionally allow the same defenses — like fair use — associated with copyright.

The article answers three emerging questions:

1. Aren’t GUIs something that should be protected by copyright only? Why should there be a patent? The answer is relatively simple: the law has, since 1870, contemplated dual protection. The article traces the history to explain why the law could have evolved differently, but simply did not.

2. Display screens change, both before and after sale. How can someone patent an ephemeral screen design? It also turns out that ephemeral designs have been protected for some time. Even so, the article proposes some limitations on the protection of GUIs that should address the special nature of GUI design patents.

3. There are many differences between Apple’s patent and Samsung’s product. How can Apple own the idea of square icons in a grid with a dock bar at the bottom? This last question is the most intractable: determining when a design is infringing, and the role that functionality should play in that consideration. The bulk of the article is dedicated to answering this question. 

To answer the third question, the article draws on lessons from prior copyright disputes about GUIs. It first suggests that courts must act as gatekeepers, rather than allowing juries to determine which elements to disregard as functional. It then develops economic factors that can help the court determine whether a design element is functional, and whether to allow reuse by a competing program.

While the economic factors, such as consumer switching costs, apply to both copyright and design patents, the legal doctrine to achieve economic ends will necessarily differ. As noted above, there is no fair use doctrine in design patent law. Even so, there is a form of filtration, and the article proposes that such filtration be expanded to exclude functional elements from infringement analysis. The full article is available here.

My second (belated) post about 101.

Ethics,

I don't believe 101 is a defense to infringement (as y'all know), but let's assume that it is.

Let’s start with the types of subject matter, which seems to be misunderstood by alot of people.  There are three categories of "ineligible subject matter," two of which are intangible, one tangible:  intangible abstract ideas and laws of nature (probably overlapping to some extent?) and tangible “natural phenomenon.”  To make this clearer, I’ll call that third category “natural products.”  (There are enormous definitional problems here:  why is the rate at which the body metabolizes a synthetic drug a “law of nature” being a glaring one, but let’s keep going.)

You know the basic types of claims or you wouldn’t be reading this.

With that framework, here is what the Supreme Court cases teach:  if a method claim is deemed to embrace intangible subject matter, or if a product claim embraces a natural product, the claim is at least suspect.  There’s a lot in that which we’ll get to in a moment, but that formula predicts the outcome of every Supreme Court case since 1952, plus Funk Brothers (which I have doubts survived the 1952 amendments to the Patent Act but that's for another day):

Case

Product claim?

Process claim?

Any ineligible subject matter, and if so what type?

Result

Comments

Funk

X

 

Natural product

No invention

 

 

          

 

          

Gottschalk

 

X

Intangible

No invention

 

Parker

 

X

Intangible

No invention

 

Diehr

 

X

Intangible

Invention

Because the process was tied to a particular application (not machine, but process), the subject matter was eligible.  Court almost looked at is like a product-by-process claim

Chakrabarty

X

 

 

Invention

Not natural product; but notice that if it had been…

Bilski

 

X

Intangible

No invention

 

Prometheus

 

X

Intangible

No invention

 

Myriad

X

 

To an extent, natural product

To extent natural product, no invention.

In dicta emphasized that a method claim would have been fine.

 Thus, there is a correlation between the use of a method claim and an intangible.  The reason for this correlation between claim type and the tangibility of the ineligible subject matter is, I suspect, that, absent unusual circumstances, a process claim using a natural product isn’t precluding all uses of the natural product, but a product claim on the natural product itself does so.  Vice versa with process claims claiming intangibles.

I hear the objections.  Some say that focusing on claim type will lead to clever drafting.  But, a method claim covering a use a tangible natural product won’t get the same coverage as a product claim, and vice versa. Clever drafting will only get you so far and what’s wrong with clever drafting, anyway?  But, I hear the objection. I’ll overrule it.

Now, so far, I think, this is relatively simple.  But it led me to what, I think, is an important insight:  a method claim to an intangible is the mirror image of a product claim to a natural product. That, I think, helps us to deal with some questions about how much is “enough” in the context of a method claim to an intangible—a serious and messy question.  (And, in my view as noted above, an unnecessary and unauthorized one, and a stupid one – how much is “enough” is 103!)

Let’s see what we can see.  A product claim on a new mineral found in nature is ineligible. The product claim is coextensive with the natural product, which is old, even if newly discovered. There’s plenty of dicta on that point, and Myriad so holds.  The legislative history of the 1952 act also shows that Congress wanted to bar these claims (though it expressly made clear that it wanted to permit claims to methods using “old” natural products). 

The converse of the foregoing is that a method claim coextensive with even a newly discovered intangible law or idea should not be eligible.  Let’s ignore the fact that that conclusion flies in the face of the statutory language that was added to overcome limitations on what was a “process” (“including a process, art or method which includes a new use of a known process, composition, manufacture, machine, or material….”).   Since the Supreme Court hasn’t seemed to notice that problem, we’ll skip past it, too.

 So we have some easy observations:  a product claim coextensive with a natural product is ineligible, as is a method claim coextensive with the abstract law or idea.

 Now, let’s deal with the other end of each spectrum.  The dicta in Myriad was that someone who discovers a natural product should go get method claims on it.  That would be fine.  So, a process claim is fine even though it mentions a natural product.  No news there.

What if someone discovers (which means “invent” under the 1952 act) an old intangible, including a natural product?  There’s no ready analog I can think of to a method claim mentioning a natural product:  it would be a product claim mentioning an abstract idea.  Although I’m sure they exist, they would seem to be a product-by-process claim (much like Diehr was analyzed, in my view).  So, a product by process claim should be fine even though it mentions an old intangible.

Now, let’s dig a little deeper into the muddy middle of these spectrums. Suppose my new mineral has a name (“Hricikite”), and a chemical structure.  If I merely claimed Hricikite in terms of its chemical structure, that fails.  The analog, I suggest, would be to try to claim an abstract idea by simply laying out its steps.  This was, perhaps, CLS Bank:  the claim basically broke down the abstract idea of an escrow into its constituent parts, much like the claim to the chemical structure did so with Hricikite.

 But in each case, this is “bad’ clever claim drafting.  Putting it aside, and I think we would agree, that beyond those efforts to use more words to claim the ineligible subject matter, it doesn’t take much to make a method claim mentioning a natural product eligible.  A new use for an old product is enough.  The statute says the same thing about processes. My key point:  If these symmetries hold true, that means that it also should not take much to make a method claim to an intangible eligible. 

I am probably missing a lot.  What do you think?

Oral Argument Recap: Lighting Ballast Control v. Philips

Patent, , , ,

Guest Post by Jonas Anderson, Assistant Professor at American University, Washington College of Law.

This morning, the Federal Circuit sat en banc in the case of Lighting Ballast Control v. Philips.  The case is the latest and most significant challenge to the court’s de novo standard of review in claim construction cases.  In taking the case en banc, the Federal Circuit asked the parties to brief three questions:

  • Should the Federal Circuit overrule Cybor Corp. v. FAS Techs. Inc., 138 F.3d 1448 (Fed. Cir. 1998) (in which the Federal Circuit held that “as a purely legal question, we review claim construction de novo on appeal including any allegedly fact-based questions relating to claim construction.”)?
  • Should the Federal Circuit afford deference to any aspect of a district court’s claim interpretation?
  • If so, which aspects should be afforded deference?

Both parties in this case agree that de novo review is not the appropriate standard of review for all aspects of claim construction.  The parties’ positions differ, however, as to the proper scope of appellate deference: Lighting Ballast argues that the court should completely abandon its practice of de novo review and afford deference to all aspects of claim construction decisions; Universal Lighting Technologies (the appellee), on the other hand, argues that deference is appropriate only in resolving “disputed issues of historical fact.”  The PTO echoes ULT’s stance.  In a recent paper forthcoming in the Northwestern University Law Review co-authored with Professor Peter Menell of Berkeley Law School, we argue that de novo review has already been replaced at the Federal Circuit with a more deferential standard, albeit informally.  We find evidence for out theory in the significant drop in reversal rate that has occurred over the past decade: from a high of 44% of terms in 2004 to 20% reversed in 2011.

Despite both parties arguing that Cybor should be modified to some degree and numerous Federal Circuit judges having expressed that belief in prior cases, the tone of the arguments today was certainly one of skepticism.  The three main topics addressed:

National Uniformity Concerns -  Judge Lourie’s initial question was whether deference would disrupt the national uniformity of patent law that the Federal Circuit was designed to achieve.  ULT admitted that the possibility of non-uniform claim construction decisions would be a negative outcome of overruling Cybor, but FRCP 52(a) is in tension with a pure de novo review of claim construction.  The acting Solicitor of the PTO, Nathan Kelley, closed his argument by addressing the non-uniformity concern.  Kelley argued that any non-uniformity that occurred in light of a lowered deference standard would be a benefit to the public because it would result in reduced patent scope in some parts of the country.  While that is obviously not ideal, Kelley’s point was that the concern should not be an overriding one for the court since any non-uniformity is a benefit, not a burden, to the public. 

Line-drawing Problems between Issues of Fact and Issues of Law – The issue that perhaps most captivated the Judge’s attention was whether a deferential standard was workable.  Judge Moore, perhaps one of the court’s most vocal critics of Cybor, was clearly troubled with the solution offered by ULT and the PTO.  She asked for a precise definition of a “historical fact” no less than three times, and never received an answer that satisfied her.  Because claim construction is ultimately an effort to decipher the meaning that a PHOSITA would ascribe to a claim term, she feared that every claim construction decision (other than when the patentee acts as his own lexicographer) would be considered a question of fact.  Despite the PTO and appellee’s repeated assurances that their preferred level of deference would amount to no more than a “small change” in the law, Judge Moore and others (including Judge Dyk, Lourie, and Reyna) seemed troubled by the potential implications of the change.  Judge Lourie asked whether every case would now involve litigants attempting to frame legal determinations as factual determinations.

The Impact of Stare Decisis – This issue, pursued extensively by Judge Taranto, seemed to take the litigants by surprise.  Judge Taranto repeatedly asked about the court’s ability to revisit a clearly established en banc precedent with no intervening Supreme Court case or other change in the law.  Neither side seemed to have a ready answer to his question.

Judge O’Malley, who was on the original panel decision, played a pivotal role in the argument, attempting to clarify the position of the PTO and ULT.  She interpreted their position as one in which a district court judge’s decision as to the historical meaning of a claim that was based on extrinsic evidence would be given deference, but if that interpretation runs counter to the Federal Circuit’s de novo review of the intrinsic evidence the district court’s decision would not impact the case.  This middle position was clearly not satisfactory to a number of judges.  In light of the skepticism, ULT’s counsel essentially backed away from his position that Cybor should be modified; on rebuttal he suggested that the court may well not want to modify Cybor. 

Ultimately, it will be interesting to see if the court decides to maintain the de novo standard or tries to find a way to disentangle factual issues from legal ones.  As a skeptical Judge Dyk quipped about the latter option, “let’s just experiment and see how difficult it would be.”  I sense that some on the court would like to make those distinctions (Judge O’Malley in particular), but I’m unsure whether enough votes exist to make the change.  I don’t think the court will gravitate to Lighting Ballast’s position of a pure legal error standard.  Characterizing all claim construction decisions as factual seems too radical of a departure to the court. Judge Lourie appeared taken aback when Lighting Ballast’s counsel suggested that the specification should be treated as parole evidence: “That is an extraordinary argument.”  Indeed, switching from de novo review to complete deference to all district court claim construction decisions appears, at this stage, very unlikely.

Ed.: You can listen to the oral argument here.

UK Take on Software Patent Eligibility: Claim Must include Feature that is both Technological and Innovative

Patent, , ,

By Dennis Crouch

Lantana Ltd. v. UK Comptroller General of Patents, [2013] EWHC 2673 (Pat)

Earlier this month, High Court Judge Colin Birss released a new opinion on the European view of software patentability as seen through the eyes of an English judge. The basic rule coming from the EPC is that "programs for computers . . . as such" are not patentable. EPC Article 52. This particular case arises from the refusal of the UKIPO (not the EPO) to grant a patent to Lantana. However, the UK Patents Act of 1977 implements Article 52 UK roughly follows the law set down by the EPO.

Digging in, the main subject-matter related question that the UK court asks in software related inventions is whether the invention offers an innovative technological contribution beyond the computer program itself. In HTC v Apple [2013] EWCA Civ 451 and Aerotel Ltd v Telco Holdings Ltd, [2006] EWCA Civ 1371, the UK Court of Appeals explained the four-step process for determining whether a particular claimed invention meets this technological contribution requirement. The steps are:

i) construe the claim;

ii) identify the actual contribution offered by the claimed invention;

iii) determine whether the contribution falls solely within the scope of excluded subject matter (i.e., programs for computers); and

iv) determine whether the contribution is actually technical in nature.

In those cases, the courts made clear that the technical contribution could be either a technological mechanism or a technological effect.

A key point in the US debate on patentable subject matter is whether the technological (or non-abstract) contribution needs to be innovative. In the UK/EPO, the answer is yes, that contribution must itself be innovative in the way that it makes a "contribution to the known art."

Here, Judge Birss followed anything but an integrative approach to patentable subject matter. Rather, the focus is on whether the elements of the invention that qualify as subject-matter-eligible (i.e., technological) also offer an innovative contribution. Lantana argued that this approach conflated the question of subject matter eligibility with those of novelty and non-obviousness. However, Judge Birss disagreed:

Mr Beresford [Counsel for Lantana] submitted that [Judge Birss's approach] conflicted with the acceptance by the examiner that the claim was novel and non-obvious. I do not agree. Those matters [decided by the examiner] apply to the claim as a whole, that is to say the entire combination of features. The point here is a different one, i.e. that the idea of an email message containing machine readable instructions as a contribution to the art in this case is wrong. The computers in the claim are not operating in a new way. . . .

The claim has been found to be novel and inventive by the examiner and in that sense it makes a contribution of some kind to the art [when examined as a whole], but the applicant has been unable to identify anything which this claim can fairly be said to contribute which has a technical character.

Thus, the focus here is on finding elements of the invention that are both innovative and have a technical character. Although Judge Birss did not cite to the U.S. case of Parker v. Flook, 437 U.S. 584 (1978), he could have so reach out for support. In Flook, the U.S. Supreme Court similarly pushed patent applicants for an inventive concept that itself is a practical application, writing:

Even though a phenomenon of nature or mathematical formula may be well known, an inventive application of the principle may be patented. Conversely, the discovery of such a phenomenon cannot support a patent unless there is some other inventive concept in its application.

I suspect that the rule supported by Judge Birss here is not too far removed from that which the current U.S. Supreme Court would also fashion if given the chance. However, the current USPTO does not require that particular elemental linkage.

One important result of this approach – well recognized by Judge Birss is that the scope of subject matter eligibility shifts over time. The Lantana case involves a particular use of email systems. If the patent had been filed in the early days of email and was able to introduce an a technological mechanism that was new at the time then the application would be subject matter eligible. However, the reality is that email systems were already very well known by the time Lantana filed its application. In Judge Birss' words, the technological aspect of the invention was "conventional." As such, there was no technological contribution to be found.

In the end, the result here is that Lantana's appeal has been dismissed with the UKIPO's judgment of nonpatentability still standing.

= = = = =

As an aside, Lantana is a small US based company and the listed inventor John Wysham is the company CEO. The US version of the application (Serial No. 12/867825) was abandoned after a final obviousness rejection.

= = = = =

More information from:

Surprise! The Law of Subject Matter Eligibility Remains Unsettled

Patent, , , ,

By Jason Rantanen

Accenture Global Services, GMBH v. Guidewire Software, Inc. (Fed. Cir. 2013) Download Accenture v. Guidewire
Panel: Rader (dissenting), Lourie (author), Reyna

It is difficult to think of an issue that has more deeply divided the Federal Circuit over the past few years than subject matter eligibility.  Accenture is the latest barrage and counter-barrage in this seemingly endless war.  Unlike Ultramercial v. Hulu, though, in which Judge Rader wrote the majority opinion and Judge Lourie concurred in the result, the forces arguing against subject matter eligibility of computer programs won today's battle. 

At issue in the case were claims 1-7 and 8-22 of Patent No. 7,013,284.  Claim 1 read:

A system for generating tasks to be performed in an insurance organization, the system comprising:

an insurance transaction database for storing information related to an insurance transaction, the insurance transaction database comprising a claim folder containing the information related to the insurance transaction decomposed into a plurality of levels from the group comprising a policy level, a claim level, a participant level and a line level, wherein the plurality of levels reflects a policy, the information related to the insurance transaction, claimants and an insured person in a structured
format;

a task library database for storing rules for determining tasks to be completed upon an occurrence of an event;

a client component in communication with the insurance transaction database configured for providing information relating to the insurance transaction, said client component enabling access by an assigned claim handler to a plurality of tasks that achieve an insurance related goal upon completion; and

a server component in communication with the client component, the transaction database and the task library database, the server component including an event processor, a task engine and a task assistant;

wherein the event processor is triggered by application events associated with a change in the information, and sends an event trigger to the task engine; wherein in response to the event trigger, the task engine identifies rules in the task library database associated with the event and applies the information to the identified rules to determine the tasks to be completed, and populates on a task assistant the determined tasks to be completed, wherein the task assistant transmits the determined tasks to the client component.

The district court (Judge Robinson, one of the ) held claims 1-7 (system claims) and claims 8-22 (method claims) invalid under 35 U.S.C. § 101.  Accenture appealed only claims 1-7. 

System Claims Ineligible Subject Matter: In an opinion authored by Judge Lourie, the majority agreed with the district court that the claims were patent ineligible subject matter.  The majority provided two bases for its conclusion.  First, "because the system claims offer no meaningful limitations beyond the method claims that have been held patent-ineligible" and second, "because, when considered on their own, under Mayo and our plurality opinion in CLS Bank, they fail to pass muster." Slip Op. at 10.

The majority first compared the system claims to the method claims that were conclusively invalid because Accenture failed to appeal them.  Relying on the plurality opinion in CLS Bank v. Alice, the majority concluded that the proper approach is to "compare the substantive limitations of the method claim and the system claim to see if the system claim offers a “meaningful limitation” to the abstract method claim, which has already been adjudicated to be patent-ineligible."  Id. Because the court found no additional "meaningful limitation" in the system claims, they were as patent ineligible as the method claims. 

The majority also concluded that the method claims were invalid under Section 101 even standing on their own.  Applying a preemption analysis to the abstract idea at the heart of the system claims, the majority concluded that the additional imitations did not "narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself."  Slip Op. at 15.  Furthermore, "simply implementing an abstract concept on a computer, without meaningful limtiations to that concept, does not transform a patent ineligible claim into a patent-eligible one."  Id.

Judge Rader's Dissent: Unsurprisingly, Judge Rader disagreed with the majority.  Central to his disagreement was the belief that the plurality framework relied upon by the majority in this case lacks precedential value.  "[N]o part of CLS Bank, including the plurality opinion, carries the weight of precedent.  The court's focus should be on Supreme Court precedent and precedent from this court."  Slip Op. at 20.  He also disagreed with the basic idea of the comparing the system claims to the invalid method claims, characterizing it as estoppel that will have the effect of "requiring litigants to appeal the invalidity of every claim or else risk the potential for estoppel or waiver of other claims."  Id. And Judge Rader would have concluded that, even on the merits, the claimed systems present patent-eligible subject matter.  "The claims offer “significantly more”  than the purported abstract idea, …, and meaningfully limit the claims’ scope."  Id. at 4, quoting Mayo v. Prometheus, 132 S.Ct. 1289, 1293 (2012).

Judge Rader also once again proclaims his view that the courts' approach to patent law's subject matter eligibility requirement is pure folly:

In conclusion, I note that prior to granting en banc review in CLS Bank, this court commented: “no one understands what makes an idea abstract.” CLS Bank Int’l v. Alice Corp., 685 F.3d 1341, 1349 (Fed. Cir. 2012), opinion vacated, 484 F. App’x 559 (Fed. Cir. 2012) (internal quotations marks omitted). After CLS Bank, nothing has changed. “Our opinions spend page after page revisiting our cases and those of the Supreme Court, and still we continue to disagree vigorously over what is or is not patentable subject matter.” MySpace, Inc. v. GraphOn Corp., 672 F.3d 1250, 1259 (Fed. Cir. 2012); see generally CLS Bank. Indeed, deciding what makes an idea “abstract” is “reminiscent of the oenologists trying to describe a new wine.” MySpace, 672 F.3d at 1259.

I take this opportunity to reiterate my view that “the remedy is the same: consult the statute!” CLS Bank, 717 F.3d at 1335 (additional reflections of Rader, C.J.). The statute offers broad categories of patent-eligible subject matter. The “ineligible” subject matter in these system claims is a further testament to the perversity of a standard without rules—the result of abandoning the statute.

Slip Op. at 23.  That said, Judge Rader's thoughts about indeterminacy should perhaps be taken with a grain of salt: his opinions indicate, after all, that he has very strong views that one side of the subject matter eligibility battle is right and the other wrong.

One other thing of note about this case: Mark Lemley – who has written a great deal about patenting of computer-implemented inventions, including a recent post on PatentlyO – was the lead attorney for the defendant.

Bits & Bytes from Jonathan Hummel

Patent, ,

RECENTLY 

#1. Minnesota becomes the first state to settle with a Patent Troll

Jennifer Bjorhus , of the Star Tribune reports that recently, the state of Minnesota reached a settlement agreement with MPHJ Technology Investments, LLC, a Delaware corporation. If the state discovers that any Minnesota residents or companies actually paid MPHJ Technology money for either a license or an alleged infringement, MPHJ will have to pay a $50,000 civil penalty and refund all money. Swanson’s office said it’s not clear how many Minnesota companies were targeted but estimated it to be hundreds.

 

#2.  The next phase in the Apple/Samsung Saga

Gene Quinn, at IPWatchdog, reports that Apple and Samsung, interestingly enough, wound up on the same side of the argument. See Apple, Inc. v. Samsung Electronics Co. (Fed. Cir., August 23, 2013).The two tech giants are arguing back against a district court decision to allow some sensitive information to become publicly available. Both parties filed motions to seal certain writings, and district Judge Lucy Koh denied the motions. Appeals joined at the Federal Circuit, that court issued an order staying the unsealing of certain documents.

 

#3. Intellectual Ventures opens a DC lobbying office

Christina Wilkie, at the Huffington Post, reports that Intellectual Ventures, the largest patent holding firm in the United States, is opening a lobbying office in the nation’s capital. This latest move for the Bellevue, Washington based patent holding firm will probably set a trend for other firms with similar business models. The recent outcry from the patent community and the general anxieties over firms with similar practices mean these companies are going on the offensive, trying to set the course for policy rather than react to it.

 

#4. New Zealand decides the software question

Reuven Cohen, for Forbes, reports that New Zealand has banned software patents. In a bill passed earlier today, the Government of New Zealand announced that software in the country will no longer be patentable. In taking the position, New Zealand joins many other nations. "For example, U.S. patent law excludes “abstract ideas”, and this has been used to refuse some patents involving software. In Europe, “computer programs as such” are excluded from patentability and European Patent Office policy is consequently that a program for a computer is not patentable if it does not have the potential to cause a “further technical effect” beyond the inherent technical interactions between hardware and software.”"

 

PENDING

#1. IBM Applies for a Virtual Shared Shopping Experience

Steve Brachmann, writing for IPWatchdog, reports International Business Machines’ recent application for a patent on a “a system for collaborative shopping” whereby users can see what is in other people’s carts and interact via computers and smartphones. The rise of online shopping in the past decade is marked, and this idea represents another way to make the often singular online experience more social.

U.S. Patent Application No. 20130211953

 

UPCOMING

1. October 4 Symposium and CLE on Resolving Patent Disputes

2. The World Congress 2nd Annual: Generic Top-Level Domain Names Summit

September 25, 2013 • New York City, NY

Tools to Protect Trademark Rights and Strategies to Prepare Your Company for the Launch of gTLDs

Event Website  |  Brochure  |  Set Reminder  |  Register

-       See more at: http://www.worldcongress.com/events/index.cfm?IndustryID=3#sthash.Km7egeE1.dpuf

 

3. ABA Trademark Fundamentals: Managing Your IP in a World of Social Media Sept. 12, 2013 Webinar/Teleconference

 

JOBS

Patent Prosecution Associate – Law Firm – Washington D.C.

-       Wenderoth, Lind & Ponack, L.L.P. is seeking a Patent Prosecution Associate to join our Mechanical group.

-       Wenderoth, Lind & Ponack, L.L.P. offers a competitive benefits package and an enjoyable work environment. Salary is commensurate with experience.

-       Apply on-line by e-mailing your cover letter, resume and transcripts to: recruiting@wenderoth.com.

IP/Patent Attorney – Law Firm – New York, N.Y.

-       Bruzga & Associates, a New York City boutique IP law firm seeks an associate patent attorney having an electrical engineering degree.

-       This is an opportunity to hone your advocacy skills, have meaningful client interaction, and significantly contribute to the firm, rather than just being a “cog in the wheels” of a big firm.

 

Contact jon.hummel@patentlyo.com with leads for future Bits & Bytes.

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October 4 Symposium and CLE on Resolving Patent Disputes

Patent, ,

Dear readers –

I want to invite you to join us here at the University of Missouri School of Law on October 4, 2013 for a Symposium focusing on “Resolving IP Disputes: Calling for an Alternative Paradigm.” The symposium is sponsored by the MU School of Law’s Center for the Study of Dispute Resolution as well as the Journal of Dispute Resolution (JDR). Professor Jim Levin and I are organizing the event. If you are planning to attend from out of town, please let me know and we can help with logistics. I expect for this to be a fairly small event with about 100 intellectual property and dispute resolution professionals in attendance in addition to a number of academics, students, and business folks. There is no fee to attend or to receive CLE, but it would help us if you register using the following link:

https://docs.google.com/forms/d/1hWoGc0DvHBDcc-wsO-06fphE8oRjWEbTESDLdLKqnPI/viewform

— Dennis (dcrouch@patentlyo.com)

= = = = =

Abstract of the Symposium

Patents now pervade the American business culture and marketplace. The number of issued patents continues to increase as does the intensity of enforcement. Most new products and services are covered by one or more patents – only some of which are owned by the manufacturer or service provider.

Patents have the potential of serving as tools for business transactions – a legal mechanism for capturing and transferring the value of innovation while allowing the resulting information to be spread widely. However, patent enforcement through litigation is incredibly expensive and time consuming. Litigation costs regularly exceed $10,000,000 in contested cases and lasts for years.

This year’s Journal of Dispute Resolution symposium explores alternative mechanisms for resolving patent disputes and for proactively transforming would-be disputes into cooperative business arrangements. At the same time, patents may be different from other private-law concerns. The power of patents to block use the use of useful articles creates a strong public interest in results that both encourage innovation without unjustly limiting access to information or ideas.

This symposium is sponsored by the University of Missouri School of Law and the Journal of Dispute Resolution, the flagship journal of the University of Missouri’s Center for the Study of Dispute Resolution.

= = = = =

Brief Agenda for the Symposium

Friday, October 4th

8:00 AM to 8:30 AM – Continental Breakfast and Coffee Reception Sponsored by Turner Boyd LLP

8:30 AM to 8:45 AM – Introductory Remarks

8:45 AM to 9:40 AM – 1st Panel– Disputes with an industry focus, including biotechnology and smartphone disputes: Dean Gary Myers (MU), Kevin Noonan (MBHB), Jorge Contreras (American University)

9:45 AM to 10:40 AM – 2nd Panel– Practical issues of resolving disputes before the USPTO: Anne Craig (Harvard), Matthew Smith (now with Turner Boyd), Jaron Brunner (DWT)

10:55 AM to 11:55 AM – Keynote: —Greg Gorder (Co-Founder of Intellectual Ventures)

1:20 PM to 2:15 PM – 3rd Panel—Transparency in in patent disputes and patent information: Yvette Liebesman (SLU), Dennis Crouch (MU), Bernard Chao (U Denver)

2:15 – Conclusion

2:20 – Reception Sponsored by the Biotech and Pharma Patent Blog Patent Docs

= = = = =

I look forward to seeing you there.

Federal Circuit Rejects Supreme Court Original and Exclusive Jurisdiction over State-vs-State Inventorship Disputes

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By Dennis Crouch

A highlight of this opinion is Footnote 1 of Judge Moore’s dissenting opinion that states “The majority baldly asserts that issues of patent ownership and inventorship are not sufficiently grand for the Supreme Court to resolve in the first instance. That is not our decision to make. It is for the Supreme Court to itself decide.”

= = = = =

University of Utah v. Max-Planck-Gesellschaft (Fed. Cir. 2013)

In 2011, University of Utah (UUtah) filed a federal lawsuit under 35 U.S.C. § 256 to correct the inventorship of U.S. Patent No 7,078,196. That patent is directed to Small Interfering RNAs (siRNAs) and methods of creating those molecules that are the current study of intensive genetic therapy research.

According to USPTO records, the patent is owned collectively by the Max-Planck Institute as well as MIT, the Whitehead Institute and the University of Massachusetts. Dr. Brenda Bass – a UUtah professor – alleges that Dr. Thomas Tuschl – a UMass Professor – incorporated her ideas into his patent but then did not name her as an inventor. All of these assignees were named as defendants in the complaint filed in Federal District Court.

The appeal raises interesting issues of civil procedure, federalism, and sovereign immunity. The 11th Amendment to the U.S. Constitution generally provides sovereign immunity to state governments from any cause of action in Federal Court brought by citizens of another state or country. However, the 11th Amendment does not provide for immunity in state-vs-state actions. Rather, the U.S. Constitution provides that “In all [Federal] Cases . . . in which a State shall be Party, the supreme Court shall have original Jurisdiction.” Art III, §2, cl. 2. Following the constitutional guidance, the jurisdictional statutory code provides that the “Supreme Court shall have original and exclusive jurisdiction of all controversies between two or more States.”

Rather than fighting the battle in District Court, UMass (a state institution) argued that the case brought by UUtah (another state institution) should be seen as a state-vs-state conflict that should go directly to the Supreme Court in the matter of first instance.

In order to avoid that result (but still reach the same result), UUtah dropped UMass as a defendant and instead list the leaders of UMass (including its president Robert Caret) as the defendants. Based upon that change, District Court Judge Saris held that the case should no longer be seen as a state-vs-state case and that, as a consequence, the Supreme Court did not have exclusive original jurisdiction. Judge Saris also found that correction of inventorship was not a “core sovereign interest sufficient to make this a dispute between States,” but that the case could proceed against the named officials under the Ex parte Young doctrine. Particular to this case is that the remedy demanded was an order directing the USPTO to correct inventorship rather than calling for any monetary or injunctive relief against the state.

Although the district court case is not final, the Federal Circuit took an immediate appeal under the Collateral Order Doctrine.

On appeal, the Federal Circuit has affirmed – finding that “UMass is not a real party in interest under the Supreme Court’s caselaw.” Although both the Constitution and Statute appear clear, the US Supreme Court has been reluctant to take cases such as this and has thus added requirements that the case be “serious,” “dignified,” and raising “important” federalism concerns. In addition, the Supreme Court has considered whether there are other avenues for relief. And, both of the competing states must be indispensable parties to the lawsuit.

On this notion, UMass argues that UUtah is seeking the property of UMass (i.e., its patent) and that is sufficient to make UMass a real party that cannot be “plead around.”

Agreeing with UMass, the Federal Circuit instead held that the case is about “inventorship” and the identity of the individual inventor of a patent is not a “core sovereign interest” that need be raised directly to the Supreme Court. In addition, the Federal Circuit agreed that the formal shift from suing the University to suing the University President in his Official Capacity was sufficient to evade the state-vs-state setup. Finally, the appellate panel found that UMass (a patent owner) is not an indispensable party to the case since its interests are being adequately protected by the other co-owners and its named officials.

In reality, UUtah UMass [Updated] likely does not want the Supreme Court to directly hear the case. Rather, the strategy here is that the University is largely betting on the likelihood that the Supreme Court would decline to exercise jurisdiction – effectively ending the case.

= = = = =

Writing in Dissent, Judge Moore vigorously disagreed with the majority’s holding.

The majority erroneously holds that a patent-ownership dispute between two state universities is not a “controversy between two or more States.” It then compounds this error and holds that a patent owner is not an indispensable party to an action that seeks to reassign title to the patents-in-suit. I respectfully dissent.

I. Subject Matter Jurisdiction

The district court lacks jurisdiction over UUtah’s claims against the UMass Officials because those claims raise a dispute between two States, Utah and Massachusetts. Article III of the U.S. Constitution vests the Supreme Court with original jurisdiction over cases in which a State is a party. As § 1251(a) expressly states: “The Supreme Court shall have original and exclusive jurisdiction of all controversies between two or more States.” There is no dispute that UUtah and UMass are instruments of Utah and Massachusetts, respectively, and that a suit between those institutions could only be brought in the Supreme Court. The majority, however, concludes that § 1251(a) does not apply here because UUtah elected to sue the UMass Officials rather than UMass. That conclusion is incorrect.

To determine if a suit implicates the Supreme Court’s exclusive original jurisdiction, we look “behind and beyond the legal form” of the claim and determine “whether the State is indeed the real party in interest.” Arkansas v. Texas, 346 U.S. at 371. The majority agrees with this general proposition but holds that the UMass Officials, not UMass, are the real parties in interest. I disagree.

This case involves a dispute between UMass and UUtah over who owns the rights to the Tuschl II patents. UMass is the assignee of the Tuschl II patents and UUtah “wants to own the patents.” UUtah is pursuing that interest through a correction of inventorship claim under 35 U.S.C. § 256 and a corresponding request for an order that UUtah owns the patents. … UUtah also alleges in its complaint that it “should be the sole owner or an owner” of the Tuschl II patents. It specifically requests that the court “order assignment of all right title and interest” in the patents to UUtah. Indeed, the majority recognizes (1) that UUtah specifically requested that the court assign it all rights to the Tuschl II patents and (2) that UUtah will obtain the rights to the patents if it prevails on its correction of inventorship claims. This is a dispute about ownership, plain and simple.

UUtah cannot recast the nature of this dispute by suing the UMass Officials as stand-ins for UMass. Indeed, the majority never holds that the UMass Officials have any interest in this proceeding. Nowhere does the majority suggest that the UMass Officials are “parties concerned” that may be subject to a correction of inventorship action under § 256(b). . . .

Section 1251(a) contains “uncompromising language”: the Supreme Court has original and exclusive jurisdiction over “all controversies between two or more States.” Mississippi v. Louisiana, 506 U.S. 73, 77, 113 S.Ct. 549, 121 L.Ed.2d 466 (1992). The majority errs when it concludes that § 1251(a) does not apply to this dispute because the “State has no core sovereign interest” in inventorship or patent ownership. Maj. Op. at 13–15. The majority’s “core sovereign interests” test is at odds with the plain language of the statute, which contemplates “all controversies” between states fall within 1251, not just those involving core sovereign interests. There is simply no basis to limit the statute in such a way.

Moreover, requiring a core sovereign interest to implicate the Supreme Court’s exclusive jurisdiction erodes the Court’s discretion to decide which controversies it will hear. The existence of the Supreme Court’s exclusive jurisdiction and its discretion to exercise that jurisdiction are separate concepts. The Court’s exclusive original jurisdiction extends to “all controversies between two or more States.” 28 U.S.C. § 1251(a). The Court, however, is not required to exercise its jurisdiction over every controversy. The Court tends to exercise its jurisdiction sparingly, depending upon the nature of the interest of the complaining State, the seriousness and dignity of the claim, and the availability of another original forum to resolve the dispute. Mississippi v. Louisiana, 506 U.S. at 76–77. The concept of a “core sovereign interest” has roots in opinions that address whether the Supreme Court will decide to exercise its jurisdiction over a dispute, not whether the Court’s exclusive original jurisdiction over the controversy exists. See id. at 77; Texas v. New Mexico, 462 U.S. 554, 570, 571 n. 18, 103 S.Ct. 2558, 77 L.Ed.2d 1 (1983); Connecticut ex rel. Blumenthal v. Cahill, 217 F.3d 93, 109 (2d Cir.2000) (collecting cases). The majority’s conflation of those two concepts strips the Supreme Court of its discretion to decide if a case is sufficiently serious to exercise jurisdiction over it. It reallocates that power to the lower courts—who will decide which subset of cases—those implicating core sovereign interest—will be presented to the Supreme Court. FN1

The majority finds support for its decision in the Second Circuit’s split decision in Cahill. With all due respect, even if we adopt the flawed logic of the majority in Cahill, this case would still fall within the Supreme Court’s exclusive jurisdiction in § 1251. The majority correctly recognizes that, generally, a State is the real party in interest if ” the effect of the judgment would be to restrain the Government from acting, or compel it to act.” Maj. Op. at 14 (quoting Cahill, 217 F.3d at 106). But the majority nevertheless concludes that UMass is not the real party in interest because a judgment to correct inventorship “will not require or restrain UMass from acting.” Id. at 13. This is not correct.

A judgment in UUtah’s favor will restrain UMass’s ability to act. If successful, UUtah will be declared sole owner of the Tuschl II patents and UMass will have no interest in them. UMass will not be able to license or assign the patents. And UUtah will be able to exclude UMass from practicing the inventions claimed in the patents. Patent rights are the quintessential right to restrain. The effect of this judgment will be to prevent UMass from exploiting the Tuschl II patents or the technologies they cover. This certainly “restrain[s] the Government from acting.”

UUtah alternatively requests that Dr. Bass be found to be a co-inventor. A finding that Dr. Bass is a co-inventor of the Tuschl II patents will result in UUtah co-owning those patents. The effect of the judgment would be that UUtah could practice or license the patents without UMass’s consent and without having to account to UMass. See 35 U.S.C. § 262. The judgment would thus restrain UMass from asserting its rights in the Tuschl II patents against UUtah or any of UUtah’s licensees. Again, this restrains UMass from acting.

The majority ignores these effects on UMass. Without explanation, the majority asserts that UMass will only be “more or less affected by the decision” and that transfer of the Tuschl II patents to UUtah will “not deplete the state treasury.” Maj. Op. at 15. This is incorrect. A correction of inventorship by the PTO will give UUtah an ownership interest in the Tuschl II patents by operation of law and dilute or revoke UMass’s property interest. Indeed, as the majority also recognizes, UUtah expressly asks the court to order the reassignment of the patents to UUtah. The central effect of a judgment in UUtah’s favor will be to deplete the assets of the current owners of the Tuschl II patents, one of whom is UMass. UMass is thus the real party in interest in this case.

This is a dispute between two state universities over who owns a valuable patent portfolio—a dispute over property ownership. As undesirable as it may be, we are bound to follow the plain language of § 1251(a): “The Supreme Court shall have original and exclusive jurisdiction of all controversies between two or more States.” It is up to the Supreme Court to decide if it wants to exercise its exclusive jurisdiction over this controversy. We should not contort the statute to avoid a perceived injustice FN2 that would result if the Court declined to exercise jurisdiction over UUtah’s claims.

UUtah initiated an action that seeks to obtain UMass’s interest in the Tuschl II patents. That is a controversy between two States and can only be brought in the Supreme Court. Accordingly, we should reverse the district court’s decision that it had jurisdiction over UUtah’s claims against the UMass Officials.

II. Indispensable Party

The majority’s holding that UMass is not an indispensable party to this action is incorrect. We have held that when a plaintiff brings a declaratory judgment action seeking to invalidate a patent or hold it not infringed, the patentee is both a necessary and indispensable defendant in that action. A123 Sys., Inc. v. Hydro–Quebec, 626 F.3d 1213, 1217–19, 1220–22 (Fed.Cir.2010); Enzo APA & Son, Inc. v. Geapag A.G., 134 F.3d 1090, 1094 (Fed.Cir.1998). It would be nonsensical to suggest that all patent owners must be joined in a suit seeking to invalidate the patent, but they need not be joined in a suit over patent ownership. Indeed, § 256(b) requires a court, before it orders a correction of inventorship, to provide “notice and hearing of all parties concerned,” i.e., those with an “economic stake” in the patent. Chou, 254 F.3d at 1359–60. We should apply our general rule that all co-owners must be joined in an action that affects their patent. See Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1467 (Fed.Cir.1998).

The majority instead holds that UMass is not an indispensable party because UUtah joined “all of the Tuschl Patent owners except UMass,” each of whom are “jointly represented by legal counsel.” Maj. Op. at 21. It is not enough that UMass and the named defendants “share the same overarching goal” of defeating UUtah’s inventorship and ownership claims. A123 Sys., 626 F.3d at 1221 (holding that absent patentee was an indispensable party when the named party had “overlapping” but not “identical” interests).

The majority deviates from our longstanding requirement that all patent owners be joined, citing an exception created in Dainippon Screen Manufacturing Co. v. CFMT, Inc., 142 F.3d 1266 (Fed.Cir.1998). It is true that, like Dainippon Screen, the named defendants here are represented by common counsel. But the majority omits the “highly relevant” facts from Dainippon Screen—the absent party was a wholly-owned subsidiary of the named party and was created by the named party to enforce the patents-in-suit. 142 F.3d at 1267–68, 1272–73. We allowed the suit to go forward because “the parties’ interests in the asserted patents were not just common, but identical.” A123 Sys., 626 F.3d at 1221 (discussing Dainippoin Screen ).

There is no party in this suit which represents UMass’s interest in the Tuschl II patents. Other defendants also have an interest in the patents, but they do not represent UMass’s interest. Indeed, their interests may well diverge. For example, the non-UMass defendants may choose to settle with UUtah in a way that diminishes UMass’s rights, such as stipulating that Dr. Bass is the sole inventor of the Tuschl II patents in exchange for ownership interests in the patents. That risks extinguishing UMass’s rights to the patents without UMass participating in the lawsuit.

The majority further claims that defendant Alnylam can represent UMass’s interest because UMass “handed sole and exclusive control of this suit over to Alnylam.” Maj. Op. at 21. That right, however, is conditional. If there is a conflict of interest, Alnylam loses its right to control UMass’s defense. Id. The agreement thus contemplates that Alnylam and UMass may not have identical interests. Because UMass does not have identical interests with any of the named defendants, it is an indispensable party in this case. I dissent from the majority’s contrary holding.

A few recent Section 101 cases at the PTAB

Patent, , ,

By Dennis Crouch

Patenting Software: Ex Parte Betts [Computer Associates], 2013 WL 3327142, Appeal 2010-004256, Application 11/132,649 (PTAB 2013) (“[W]e conclude claims 14-26 encompass software without physical embodiment, i.e., software per se, which is an abstract idea and not a “process, machine, manufacture, or composition of matter,” as required by § 101.”)

Patenting Software: Ex Parte Krause [HEWLETT-PACKARD], 2013 WL 3246398, Appeal 2010-012129, Application 10/442,401 (PTAB 2013) (Claims directed to an “end station” within a network having an “aggressive timer.” “Appellant contends that the Examiner erred in rejecting [the] claims … under 35 U.S.C §101 because the claims recite an “end station,” which is defined as hardware. Appellant’s argument does not cite evidence to rebut the Examiner’s interpretation that the claim encompasses either hardware or software. Accordingly, we decline to reverse the rejection.”)

Patenting Software: Ex Parte Barsness [IBM], 2013 WL 3362954, Appeal 2010-011009, Application 11/316,285 (PTAB 2013) (Claim directed to “computer-executable instructions tangibly recorded on a computer-readable media” construed to include “non-statutory, transitory embodiments.” “[W]e find the Specification states the invention is capable of being distributed in the form of a wireless signal when exchanged from one signal-bearing medium to another. This falls within a propagating electromagnetic signal per se and thus, is not directed to one of the statutory categories.”)

Patenting Software: Ex Parte Svendsen [Concert Tech], 2013 WL 3363110, Appeal 2011-001873, Application 11/837,876 (PTAB 2013) (Claimed media “control system” could be implemented as software. “As such, we are not persuaded by Appellants’ argument that the mere recitation of a “control system” (even if the Specification describes it as being associated with a memory) is sufficient to make the claims patent-eligible under 35 U.S.C. § 101 . . . as it does not play a significant part in the performance of the claimed steps.” In short, the broadest reasonable interpretation of the claim language leads us to construe the “control system” as being directed to a computer program per se, which, as drafted, renders the claimed subject matter not patentable under 35 U.S.C. § 101. See Gottschalk v. Benson, 409 U.S. 63, 72 (1972).”

Patenting Method that Could be Performed by a Human: Ex Parte Xu [HEWLETT-PACKARD], 213 WL 3363011, Appeal 2010-009107, Application 10/767,075 (PTAB 2013) (“[C]laim 1 as a whole is directed to a sequence of steps that can be performed by a person. Accordingly, claim 1 is drawn to patent-ineligible subject matter and invalid under § 101.”)

Patenting Device Attached to a Human is OK: Ex Parte Robert S. Bray, 2013 WL 3293616, Appeal 2011-013427, Application 11/686,054 (PTAB 2013) (“The claims recite a device positioned between two vertebrae not, for example, a human comprising a positioned device. The claims relate only to the correct placement of the device in the human patient, and as a whole, do not encompass a human organism. There is nothing in the statute, and we are unaware of any case, that categorically excludes such devices.”)

Subject Matter Eligibility Post-CLS Bank

Patent, , , ,

By Dennis Crouch

DDR Holdings, LLC v. Hotels.com, L.P., 2013 WL 3187161 (E.D.Tex. 2013)

In late 2012, jury agreed with DDR that its business method patents were being infringed upon and that the various defendants had failed to prove the claims invalid as either anticipated or obvious. The patents themselves are related to a method of “coordinated offsite marketing” of “internet websites.” U.S. Patent No. 7,818,399 and 6,993,572. The jury was not given the question of patentable subject matter under 35 U.S.C. 101. In a recent post-verdict ruling, Judge Gilstrap has also rejected Defendants’ Section 101 argument.

A typical claim in the patents is No. 17 from the ‘572 patent that reads:

An e-commerce outsourcing process comprising the steps of:

a) storing a look and feel description associated with a first website in a data store associated with a second website;

b) including within a web page of the first website, which web page has a look and feel substantially corresponding to the stored look and feel description, a link correlating the web page with a commerce object; and

c) upon receiving an activation of the link from a visitor computer to which the web page has been served, sewing to the visitor computer from the second website a composite web page having a look and feel corresponding to the stored look and feel description of the first website and having content based on the commerce object associated with the link.

In considering the claim scope, the Judge agreed with the patentee that the inventions embodied by the claims present “functional and palpable applications in the field of computer technology.” (Citing Research Corp). The judge also walked through the litany of “machine” elements required by the claims and concluded that the claim “also passes the machine-or-transformation test” and that conclusion strongly suggests patentable subject matter as “a useful and important indicator in the § 101 analysis.”

[The] claimed e-commerce outsourcing process requires [an] interaction between a data store storing a look and feel description of a web page and an activation of a link from a visitor computer to receive a composite web page. The method of an outsource provider also discloses a server that responds to activation by a web browser of a computer user by retrieving pre-stored data from storage, then generating and transmitting visual elements corresponding to the source page.

. . . .

As discussed above, the asserted claims disclose a specific set of physical linkages that involve a data store, server, computer, that together, and through the claimed interconnectivity, accomplishes the process of displaying composite web pages having the look and feel of the source web page. [Defendant] urges the Court to find the invention is only a business method of making two web pages look alike. While the ′572 and ′399 patents do, indeed, cover the concept of two web pages with visually corresponding elements, there is more to the asserted claims when considered as a whole. “Diehr emphasized the need to consider the invention as a whole, rather than ‘dissect[ing] the claims into old and new elements and then … ignor[ing] the presence of the old elements in the analysis.” Bilski. When the asserted claims are considered as a whole, the claimed invention lies in stark contrast to the facts of Bancorp. In Bancorp, the claimed “mathematical concept of managing a stable value protected life insurance policy” was found unpatentable as an abstract idea because mere mathematical computer was not dependent upon the computer components required to perform it. In contrast, the interactions and linkages of computer machinery to generate composite web pages in this case are integral to each of DDR’s asserted claims. Accordingly, the first prong of the machine-or-transformation test is satisfied. That being the case, this Court needs not address the transformation prong at this time.

Using the word “idea”: The word “idea” seems fairly abstract and thus potentially troublesome for a patentee. In this case, the inventor used the word “idea” repeatedly in his trial testimony. The defendants made the argument that the inventor’s language should serve as evidence that the claim is abstract. However, Judge Gilstrap rejected that argument as well:

The Court is also not persuaded that the inventor’s use of the word “idea” at least 25 times to describe his invention is evidence of unpatentable subject matter. The inventor’s testimony was given during a one week trial, and it is not unusual to explain a patent claim as a “gist” or “core idea.” Such testimony is not instructive that a claim is an abstract idea for purposes of § 101 patentability. Moreover, “all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas,” yet, “too broad an interpretation of this exclusionary principle could eviscerate patent law.” Mayo.

In all likelihood, the case will soon move to the Federal Circuit for review.

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Judge Gilstrap cited the recent fractured en banc decision in CLS Bank v. Alice only once and for the position posited by Judge Lourie that the statutory presumption of validity applies to the Section 101 analysis.

Did the Federal Circuit Just Adopt Functional Claiming Through the Back Door?

Patent, ,

Guest Post by Mark Lemley. Professor Lemley is the William H. Neukom Professor at Stanford Law School and a founding partner of the successful law firm of Durie Tangri where he litigates intellectual property cases.

In Ultramercial v. Hulu, decided on Friday, the Federal Circuit held that a series of steps for serving ads to customers over the Internet, phrased at a high level of abstraction, was patent-eligible subject matter under section 101.  Chief Judge Rader wrote the opinion, which Judge O'Malley joined.  Perhaps more surprising, Judge Lourie, who wrote the plurality opinion in CLS Bank, found the requirements of that test satisfied by these claims despite the lack of evident tie to any particular hardware device or limitation to any particular software algorithm.

Part of the explanation for the result in Ultramercial stems from the procedural posture of the case.  The district court had granted a motion to dismiss, reasoning that patentable subject matter is a pure question of law and so not dependent on factual conclusions.  The district court's position was defensible, given that every prior Federal Circuit opinion has called patentable subject matter a pure question of law.  But the majority goes out of its way to suggest that factual questions are likely to predominate in a section 101 inquiry, though the court is a bit vague on just what those factual disputes might be.  The court also suggests that claim construction will normally be required before resolving a 101 issue, but that here, the court was opting to construe the patent in the way most favorable to the patentee (that is, in the narrowest way possible) to evaluate 101 on a motion to dismiss.  Curiously, however, the court never explicitly tells us what that narrow construction is.

Then the majority does something very odd: it proceeds to discuss in great detail the technology disclosed in the specification but not mentioned in the claims.  The court clearly viewed Ultramercial's claims as patent-eligible because the specification contained detailed technical implementations and a complex flow-chart, even though none of those were included as limitations in the claim.

What is going on here? One possibility is that three of the most experienced patent judges in the country have forgotten the single most fundamental rule of patent law — that as Judge Rich put it, the name of the game is the claim.  But I doubt it. If a lawyer arguing before the court tried to read in limitations from the specification in claim construction or for infringement or validity, these judges would (quite properly) tear that lawyer apart for violating this fundamental rule and ignoring the language of the claim.  It seems unlikely that each of them simply forgot that it is the claims that define the invention.

A second possibility is that the court thinks that the rule that the claims define the invention simply doesn't apply to patentable subject matter: that as long as you have a specific idea somewhere in your specification we don't care what you claim.  But that seems equally unlikely.  To begin, it directly contradicts controlling Supreme Court precedent such as O'Reilly v. Morse, where the court held narrow claims patent-eligible but a broader claim ineligible.  Beyond that, it simply makes no sense.  The patentable subject matter rule is against patenting abstract ideas.  A claim that covers only an abstract idea doesn't somehow become less abstract simply because the patentee could have claimed a narrower, more tangible invention.  

There is a third possibility: that the court is implicitly construing the broad, functional elements of Ultramercial's method claim as means-plus-function claims under section 112(f), with the result that they are accordingly limited to the particular implementations in the specification.  Doing so would be consistent with approach I suggested in my article "Software Patents and the Return of Functional Claiming".  It would explain why the court said it was adopting the narrowest construction of Ultramercial's claims but then never told us what that narrow construction was.  And it is the only reasonable explanation for why the Federal Circuit would suddenly drop its focus on the language of the claims and start to talk about whether the algorithms in the specification were patent-eligible subject matter.

The court didn't explicitly say what it was doing.  I hope that its focus on the specification signals a narrowing construction that saved the claim from ineligibility.  That would be a major step forward for both patentable subject matter law and for reining in overbroad software patents.  And the alternative — that the court has decided that the scope of the claim doesn't matter anymore — would represent a major step backward.