Tag Archives: First to Invent

Expanding Post-Grant Business Method Reviews: S. 866

Patent, , , ,

By Dennis Crouch

Senator Chuck Schumer has proposed a short bill entitled the “Patent Quality Improvement Act of 2013.” S. 866. The purpose of the bill is to expand the scope of the transitional covered business method review. First, the S. 866 would eliminate the sunset provision of the bill making it permanent rather than transitional in nature. Second, the bill would expand the scope of covered business methods by eliminating the “financial product or service” limitation. This expansion should be seen as the next step toward expanding post-grant review to cover all patents throughout their lifespan.

Background: The American Invents Act created several new mechanisms for challenging patents through the Patent Trial and Appeal Board (PTAB). One of the most powerful of these is the new post-grant review (PGR) proceeding that allows patent challenges on any validity ground, including issues arising from 35 U.S.C. §§ 101, 102, 103 or 112.. However PGR is only available for first-to-file patents (i.e., patents relating to applications filed since March 16, 2013) and a PGR request must be filed within nine-months of the patent issuance. In addition to PGR, the AIA provides a special provision to allow expanded challenges of certain business method patents covered by the statutory definition. As with PGR, the covered business method review allows challenges for any validity ground. Although covered business method reviews are not limited by the timing requirement the statute does provide a set of important limitations.

Under the AIA:

  • Covered business methods are limited to those used in delivering “a financial product or service” and not be for a “technological invention.” The PTO rules provide that a “technological invention” is one that “recites a technological feature that is novel and unobvious over the prior art; and solves a technical problem using a technical solution.”
  • The Petitioner must either have been sued by the patentee or have Article III declaratory judgment standing in order to file the petition.
  • The transitional provisions are set to sunset after eight years.

The Patent Quality Improvement Act would expand the scope of Covered Business Methods in two manners: (1) by eliminating the sunset provision and (2) by eliminating limitation that covered business methods be directed toward a “financial product or service.” The new definition would read as follows:

IN GENERAL- For purposes of this section, the term ‘covered business method patent’ means a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or an enterprise, product, or service, except that the term does not include patents for technological inventions.

If bill passes, the PTO would then have the opportunity to provide its definitions for the terms used here. At its broadest, the provision would make-available business-method reviews for new any patent that includes at least one claim that itself does not include a “technological invention.” If that is the purpose, we should wholly rewrite the provision to make it clear and straightforward: “IN GENERAL – For purposes of this section, the term ‘covered business method patent’ means a patent that includes a claim that is not directed to a technical invention.”

The Current USPTO Fees for filing a covered business method review is $30,000. However, since these claims are all associated with actual disputes that fee does not likely represent the most significant barrier to filing. In the nine-months since CBM reviews became available, petitions have filed a total of 25 reviews against a total of 18 patents.

CLS Bank v. Alice Corp: Court Finds Many Software Patents Ineligible

Patent, , , , ,

by Dennis Crouch

CLS Bank v. Alice Corp. (Fed. Cir. 2013) (en banc)

In a much awaited en banc decision, the Federal Circuit has affirmed the patent ineligibility of Alice Corp’s claims to a computerized method, a computer-readable medium containing computer instructions, and a computer system that implements those instructions.  The ten-member en banc panel released seven different decisions. While none of the opinions garnered majority support, seven of the ten judges agreed that the method and computer-readable medium claims lack subject matter eligibility.  And, eight of the ten concluded that the claims should rise and fall together regardless of their claim type.

All of the judges recognized that the test for patent eligibility under section 101 should be “a consistent, cohesive, and accessible approach” that provides “guidance and predictability for patent applicants and examiners, litigants, and the courts.”  However, the judges hotly disagree as to the pathway that will lead to that result.

The leading five-member opinion written by Judge Lourie provides three guideposts for its analysis:

  • First and foremost is an abiding concern that patents should not be allowed to preempt the fundamental tools of discovery—those must remain “free to all . . . and reserved exclusively to none.” . . . [T]he animating concern is that claims should not be coextensive with a natural law, natural phenomenon, or abstract idea; a patent-eligible claim must include one or more substantive limitations that, in the words of the Supreme Court, add “significantly more” to the basic principle, with the result that the claim covers significantly less. Thus, broad claims do not necessarily raise § 101 preemption concerns, and seemingly narrower claims are not necessarily exempt. What matters is whether a claim threatens to subsume the full scope of a fundamental concept, and when those concerns arise, we must look for meaningful limitations that prevent the claim as a whole from covering the concept’s every practical application.
  • Next, the cases repeatedly caution against overly formalistic approaches to subject-matter eligibility that invite manipulation by patent applicants. . . . Thus, claim drafting strategies that attempt to circumvent the basic exceptions to § 101 using, for example, highly stylized language, hollow field-of-use limitations, or the recitation of token post-solution activity should not be credited.
  • Finally, the cases urge a flexible, claim-by-claim approach to subject-matter eligibility that avoids rigid line drawing.

Abstract Ideas are Disembodied Concepts: Alice Corp’s claims are drawn to methods of reducing settlement risk by effecting trades through a third party intermediary (a supervisory institution) empowered to verify that both parties can fulfill their obligations before allowing the exchange to be completed.  This essence, the method is a form of third-party escrow that helps overcome the risk of fraud and non-payment. In thinking about that method, the court determined that it is an abstract idea because it is a “disembodied” concept that is a basic building block of human ingenuity and untethered from any real-world application.  Lourie writes:

CLS describes that concept as “fundamental and ancient,” but the latter is not determinative of the question of abstractness. Even venerable concepts, such as risk hedging in commodity transactions, see Bilski, 130 S. Ct. at 3231, were once unfamiliar, just like the concepts inventors are unlocking at the leading edges of technology today. But whether long in use or just recognized, abstract ideas remain abstract. The concept of reducing settlement risk by facilitating a trade through third-party intermediation is an abstract idea because it is a “disembodied” concept, In re Alappat, 33 F.3d 1526, 1544 (Fed. Cir. 1994) (en banc), a basic building block of human ingenuity, untethered from any real-world application. Standing alone, that abstract idea is not patent-eligible subject matter.

After identifying the portion of the claim directed to an abstract idea, Judge Lourie then looked to see whether “the balance of the claim adds ‘significantly more.’” Answering that question in the negative, the court found the claims lack eligibility.

Writing in Dissent, Chief Judge Rader disagreed with the court’s decision. He writes:

I enjoy good writing and a good mystery, but I doubt that innovation is promoted when subjective and empty words like “contribution” or “inventiveness” are offered up by the courts to determine investment, resource allocation, and business decisions. Again, it is almost . . . well, “obvious” . . . to note that when all else fails, it makes sense to consult the simplicity, clarity, and directness of the statute.

As I start my next quarter century of judicial experience, I am sure that one day I will reflect on this moment as well. I can only hope it is a brighter reflection than I encounter today.

 


 

 

Allergan v. Sandoz: The Thin Line of Nonobviousness

Obviousness, Patent, , , ,

By Jason Rantanen

Allergan, Inc. v. Sandoz Inc. (Fed. Cir. 2013) Download Allergan v Sandoz
Panel: Dyk (dissenting-in-part), Prost (author), O'Malley

Allergan illustrates how thin the line between obvious and nonobvious can sometimes be.  Allergan owns several patents relating to its COMBIGAN combination ophthalmic drug treatment: Patent Nos. 7,323,463, 7,642,258, 7,320,976, and 7,030,149.  Representative claim 1 of the '463 patent states:

1. A composition comprising about 0.2% timolol by weight and about 0.5% brimonidine by weight as the sole active agents, in a single composition.

Sandoz sought to market a generic version of COMBIGAN, triggering Allergan to file suit under 35 U.S.C. § 271(e)(2)(A) alleging infringement of its four patents.  Sandoz stipulated to infringement of most of the asserted claims following claim construction and the district court subsequently found that all of the remaining asserted claims were not invalid after a bench trial.  Sandoz's appeal focused primarily on the district court's nonobviousness ruling. For purposes of the appeal, the asserted claims of the '463, 258, and '976 patents were treated as a single group (I'll refer to these collectively as the '463 claims, since that's how the court refers to them) with claim 4 of the '149 patent treated separately.

The '463 claims – obvious: On appeal, the court unanimously reversed the district court's determination that the claims of the '463 patent were nonobvious.  Both timolol (a beta blocker) and brimodine (an alpha2-agonist) were commercially available in their claimed concentrations at the time of the invention and were used to treat opthalmic conditions.  The primary prior art reference, DeSantis, expressly taught serially administering both a beta blocker, such as timolol, with a brimodine in a fixed combination.  It also provided "an express motivation to combine alpha2-agonists and beta blockers in order to increase patient compliance."  Slip Op. at 8.

So where did the district court go wrong?  First, the Federal Circuit held that it committed clear error by finding that "“while patient compliance may have created a need for fixed combination products, it did not motivate a person of skill in the art to develop fixed combinations with a reasonable expectation of success, because the FDA did not consider improving patient compliance as a factor in its approval decision.” Id. at 9, quoting district court.  While FDA approval may be relevant to the motivation inquiry:

There is no requirement in patent law that the person of ordinary skill be motivated to develop the claimed invention based on a rationale that forms the basis for FDA approval. Motivation to combine may be found in many different places and forms; it cannot be limited to those reasons the FDA sees fit to consider in approving drug applications.

The CAFC also concluded that the district court erred by over-relying on the recognized unpredictability in the formulation carts.  While unpredictablity is also relevant to the obviousness inquiry, it can be overcome simply by establishing that there was a reasonable probability of success.  Furthermore, Allergan's challenges in developing its commercial COMBIGAN product were not particularly probative of the obviousness inquiry because the relevant inquiry is whether a person of ordinary skill in the art would have a reasonable expectation of success in developing the claimed invention, not COMBIGAN (which contains many elements in addition to those embodied in the claims). 

In addition, the Federal Circuit concluded that the district court's factual findings on teaching away were insufficient to overcome the motivation provided by DeSantis and that the secondary considerations of nonobviousness did not weigh heavily in this analysis. 

Claim 4 of the '149 patent – nonobvious: While the full panel agreed on the obviousness of the '463 claims, it split over claim 4 of the '149 patent. Claim 4 states:

4. A method of reducing the number of daily topical ophthalmic doses of brimondine administered topically to an eye of a person in need thereof for the treatment of glaucoma or ocular hypertension from 3 to 2 times a day without loss of efficacy, wherein the concentration of brimonidine is 0.2% by weight, said method comprising administering said 0.2% brimonidine by weight and 0.5% timolol by weight in a single composition.

The underlined language is essentially the same as claim 1 of the '463 patent.  Central to the majority's conclusions was thus its treatment of the italicised language as a claim limitation: even though the creation of a single composition of 0.2% brimonidine by weight and 0.5% timolol by weight was obvious, administering it twice a day instead of three times a day without loss of efficacy was not.

The majority reached this because it was understood at the time of the invention that when brimonidine is dosed twice per day as opposed three times per day there is a loss of efficacy in the afternoon (the "afternoon trough") and Sandoz did not identify any "evidence in the prior art that would allow us to conclude that the addition of timolol to brimonidine dosed twice per day would eliminate the afternoon trough issue."   Slip Op. at 13.  Furthermore, even though it was "true that the prior art shows concomitant administration of brimonidine and timolol was dosed twice per day," that was insufficient to establish the obviousness of claim 4 because "this art does not show that there was no loss of efficacy associated with that treatment, let alone an elimination of the afternoon trough."  Id. at 14.

Judge Dyk's dissent:   Writing in dissent, Judge Dyk would have found Claim 4 invalid.  Judge Dyk's disagreement highlights the issue of whether a claim can nonobvious if it is drawn to an unknown – but inherent – property of an obvious invention.  "While a new and nonobvious method of using an existing (or obvious) composition may itself be patentable, [] a newly-discovered result or property of an existing (or obvious) method of use is not patentable."  Slip Op. at 18 (internal citations omitted).

In Judge Dyk's view, claim 4 includes only a single limitation (in this case, a step): "applying a fixed combination of 0.2% brimonidine and 0.5% timolol twice a day."  Given the prior art, [t]he method of applying a fixed combination of 0.2% brimonidine and 0.5% timolol twice a day would therefore have been obvious over the prior art." Id. at 19. 

This did not end the nonobviousness inquiry for the majority, however.  "The majority’s outcome appears to rest, therefore, on the notion that claim 4 was not obvious because it claims the result of twice-a-day dosing—avoiding “a loss of efficacy in the afternoon.”  Id., quoting Maj. Op. 13.  This is not a limitation: "[a]voiding a “loss of efficacy” is not a separate step, but rather a result of the claimed method. []. We should recognize in this case, as we did in Bristol-Myers Squibb, that '[n]ewly discovered results of known processes directed to the same purpose are not patentable.' Bristol-Myers Squibb, 246 F.3d at 1376."  Slip Op. at 19 (internal citations omitted).  

Consequences: It's worth noting that even though it prevailed in establishing the obviousness of the asserted claims of the '463 patent, Sandoz still cannot market its generic version of COMBIGAN: "The ’258, ’976, and ’149 patents each expire on April 19, 2022. Because we concludd that claim 4 of the ’149 patent is not invalid, the Appellants will be unable to enter the market until that date. Accordingly, we find it unnecessary to address the claims of the ’258 and ’976 patents."  Slip Op. at 15.

AMP v. Myriad Gene Patenting Oral Arguments

Patent, , ,

By Dennis Crouch

Association for Molecular Pathology v. Myriad Genetics, 12-398 (Supreme Court 2013) oral argument transcript.

The Supreme Court held oral arguments today in the much watched Gene patent case pending before the US Supreme Court. Myriad Genetics and the University of Utah own several patents covering particular isolated human genes, seemingly man-made complementary DNA that mimics the natural DNA sequence, methods for obtaining the DNA, and methods for using the DNA to test for disease. The major breakthrough made by the Myriad Scientists was to discover the naturally occurring sequence of DNA that codes for early-onset breast cancer. These are the so-called BRCA1 and BRCA2 genes. This was a huge breakthrough and has been applied to save many lives. However, historic patent law is clear that the mere information discovered is not patentable. That information could be classified as both a natural phenomenon and an abstract idea—both of which lack patent eligibility. So, instead of patenting the information, the researchers applied molecular biology tools (conventional at the time) to isolate the DNA, and create cDNA. It was those structures and methods that Myriad patented, although the innovative heart of each patent claim remained the particular unpatentable genetic sequence. A group of public-minded researchers and groups challenged the patents. Arguing on their behalf is Chris Hansen of the ACLU. Myriad called patent law expert Greg Castanias for its arguments. And, acting as amicus curae, Donald Verrilli argued on behalf of the US Government.

My take is that the court is likely to find cDNA patentable because of the man-made nature of the molecule and hold that purely isolated molecules will only be patentable if their function is significantly altered because of the isolation. This result depends upon the court buying Myriad's argument that cDNA is the equivalent of recombinant DNA whose sequence is designed by the inventors. One risk of the decision for patentees is that the court appears poised to place additional weight on the obviousness analysis. Here, it is also clear that the court does not trust the USPTO to make these determinations. As Justice Kagan mentioned "the PTO seems very patent happy".

AMP's attorney Chris Hansen began his argument with the strongest possible approach – arguing that Myriad's recognition that the BRCA genes "correlate with an increased risk of breast or ovarian cancer . . . [was] made by nature . . . [and] Myriad does not deserve a patent for it." Mr. Castanias disagreed – "What Myriad inventors created in this circumstance was a new molecule that had never before been known to the world."

A first focus of the argument was on whether the isolated DNA has a new function – different from that found in the human body.

JUSTICE ALITO: Isolated DNA has a very different function from the DNA as it exists in nature. And although the chemical composition may not be different, it — it certainly is in a different form. So what is the distinction?

MR. HANSEN: Well, I don't think it has a new function, Your Honor, with respect. I believe that what — Myriad has proffered essentially three functions for the DNA outside the body as opposed to inside the body. The first is we can look at it. And that's true, but that's not really a new function. That's simply the nature of when you extract something you can look at it better.

The second two rationales that Myriad has proffered are that it can be used as probes and primers. Three of the lower court judges found that full-length DNA, which all of these patent claims include, cannot be used as probes and primers. But more important, finding a new use for a product of nature, if you don't change the product of nature, is not patentable. If I find a new way of taking gold and making earrings out of it, that doesn't entitle me to a patent on gold. If I find a new way of using lead, it doesn't entitle me to a patent on lead.

As I mentioned, everyone recognizes that Myriad made a major advance in our understanding of human genetics. The focused then turned to how Myriad should be rewarded.

JUSTICE KAGAN: Mr. Hansen, could you tell me what you think the incentives are for a company to do what Myriad did? If you assume that it takes a lot of work and takes a lot of investment to identify this gene, but the gene is not changed in composition, and what you just said is that discovering uses for that gene would not be patentable even if those new — even if those uses are new, what does Myriad get out of this deal? Why shouldn't we worry that Myriad or companies like it will just say, well, you know, we're not going to do this work anymore?

MR. HANSEN: Well, we know that would not have happened in this particular case, Your Honor. We know that there were other labs looking for the BRCA genes and they had announced that they would not patent them if they were the first to find it. We also know that prior to the patent actually being issued, there were other labs doing BRCA testing and Myriad shut all that testing down. So we know in this particular case that problem would not have arisen.

But the point of the whole — the whole point of the product of nature doctrine is that when you lock up a product of nature, it prevents industry from innovating and — and making new discoveries. That's the reason we have the product of nature doctrine, is because there may be a million things you can do with the BRCA gene, but nobody but Myriad is allowed to look at it and that is impeding science rather than advancing it.

MR. HANSEN: [Further], taxpayers paid for much of the investment in Myriad's work. I [also] think you get enormous recognition.

SCALIA: Well, that's lovely.

MR. HANSEN: But I think that we know that that's sufficient. We know it's sufficient with respect to these two genes. We also know it's sufficient with respect to the human genome.

JUSTICE KENNEDY: But I just don't think we can decide the case on the ground, oh, don't worry about investment, it'll come. I just don't think we can do that.

The patented cDNA is not found in the human body, but instead was manufactured by the researchers by using a discovered enzyme to convert mRNA created in the body back in to the more stable DNA form.

JUSTICE SOTOMAYOR: [cDNA] is artificially created in the laboratory, so it's not bound in nature. It's not taking a gene and snipping something that's in nature. And yet you claim that can't be patented. The introns are taken out, the exons are left in, and they're sequenced together. Give me your brief argument on that. I read your brief, but it is not a product of nature; it's a product of human invention.

MR. HANSEN: There are two big differences between cDNA and DNA. The first is exactly the one Your Honor just discussed, which is that the introns, the noncoding regions, have been removed. That is done in the body, by the body. That's done in the process of DNA going to mRNA. What the scientist does who's creating the cDNA is they take the mRNA out of the body and then they simply have the natural nature-driven nucleotide binding processes complement the mRNA. So that if the mRNA has a C, the scientist just puts the corresponding nucleotide in there and nature causes them to bind up. The scientist does not decide -­

JUSTICE BREYER: I know, but I don't see the answer, because I gather, if I — if I've read it correctly, that when you have an R — the messenger RNA does not have the same base pairs. There's a U or something instead of an A or whatever it is.

MR. HANSEN: Yes.

JUSTICE BREYER: So when you actually look, if you could get a super-microscope and look at what they have with the cDNA, with their cDNA, you would discover something with an A, not a U. Is it AU? Is that the one?

MR. HANSEN: Yes.

JUSTICE BREYER: Okay. Okay. So — so you would discover something with an A there, you see, and you wouldn't discover something with a U there. And there is no such thing in nature as the no-introns AGG, whatever, okay? It's not there. That's not truly isolated DNA. But you can go look up the Amazon, wherever you want. Hence the question. Now, on that one, how? How is that found in nature? The answer is it isn't.

MR. HANSEN: Well, but I would suggest, Your Honor, that the question is not whether it is identical to something in nature. The question is whether there was a human invention involved, whether it is markedly different from what is found in nature.

JUSTICE SOTOMAYOR: But that goes to obviousness. That does not in my mind go to the issue of whether it's patent eligible. You may have a very strong argument on obviousness, but why does it not -­it's creating something that's not found in nature at all.

. . . CHIEF JUSTICE ROBERTS: But I — I thought the basic general approach here was we have a very expansive view of what is patent eligible and then we narrow things through things — issues like obviousness and so on. Why — wouldn't it make more sense to address the questions at issue here in the obviousness realm?

. . . . JUSTICE ALITO: This case has been structured in an effort to get us to decide this on the broadest possible ground . . . it's just about 101, it's not about any other provision of the Patent Act. Why should we do that?

. . . . JUSTICE BREYER: Ah. Then — then watch what you're doing. That's very, very interesting, because, really, we are reducing, then, 101 to anything under the sun, and — and that, it seems to me, we've rejected more often than we've followed it.

As it should, the discussion eventually worked its way to the patenting of ideas.

JUSTICE SOTOMAYOR: That's a failure of the patent law. It doesn't patent ideas.

MR. HANSEN: And it shouldn't patent ideas, and — but it also makes the point that isolated gene and the gene in the body are the same.

. . .

GENERAL VERRILLI: The claim that isolated DNA is a human invention rests entirely on the fact that it is no longer connected at the molecular level to what surrounded it in the body. But allowing a patent on that basis would effectively preempt anyone else from using the gene itself for any medical or scientific purpose. That is not true about a patent on cDNA. A patent on cDNA leaves the isolated DNA available for other scientists and other — and others in the medical profession to try to generate new uses. . . . [T]he position of the United States is that [as a conceptual matter] cDNA is patent eligible.

. . .

JUSTICE KAGAN: The first person who found a chromosome and isolated it, I think we can all say that that was a very useful discovery. And the question is, can you then — can the person who found that chromosome and isolated it from the body, could they have gone to the PTO?

A decision in the case is expected in June.

Double Patenting Problems when Inventors Move to a New Employer

Patent, , ,

By Dennis Crouch

In re Hubbell (Fed. Cir. 2013)

Hubbell is the third element of a trio of recent decisions that remind-us that conception and inventorship will remain critically important even after the US patent system fully-shifts to the first-to-file regime. See Dawson v. Dawson and Rubin v. General Hospital Corp. In thinking about these cases, innovative companies may want to consider their employment agreements and their rights to patents associated with post-employment developments.

US Patent law has always recognized inventors as the original patent owners. Conception of the invention imbues the inventor with an inchoate patent right that can then be fully realized by successfully completing the patenting process. As Judge Reyna writes “Inventorship is perhaps the most fundamental question in patent law. The instant an inventor conceives her invention is the moment in which vests her right to a patent, thus perfecting her constitutional right to exclude.” (Judge Reyna in Dawson writing in dissent). Ownership of that inchoate right is usually transferred to the inventor’s employer as required by the individual employment contract. Without such a contract, the inventor retains ownership rights. Although the America Invents Act shifts some weight away from the primacy-of-invention, it does nothing to change this fundamental precept that rights are created at conception and held by the inventor until transferred.

As was the case in Dawson, Hubbell involves a situation where the inventor moved from one employer (Caltech) to another (ETH Zürich). His first-filed patent application (as a joint-inventor) is owned by Caltech and the second-filed application (as a joint-inventor with different joint inventors) is owned by ETH Zürich. It turns out that ETH Zürich did a better job of getting a patent and that patent issued in 2002. The Caltech patent application is still pending and is the subject of this appeal.

Of the two applications, the Caltech application was both the first invented and first filed. That means that the later ETH Zürich cannot serve as prior art. However, the PTO rejected the Caltech application under the doctrine of obviousness-type double patenting. The doctrine of obviousness-type double patenting is not statutory but instead a judicially created equitable doctrine Normally, this type of rejection is not fatal because the patentee can file a paper known as a terminal disclaimer that both (1) disclaims any term of enforcement that extends beyond the other patent and (2) agrees to that both patents will be co-owned throughout their lifespan. The problem here is that the patents are not co-owned and Caltech cannot make that promise.

Caltech argued that the double patenting rejection should not apply because the two applications have different owners and different inventors. As an alternative, the university argued that the equitable solution is to allow it to file the terminal disclaimer without the co-ownership promise.

On appeal, however, the Federal Circuit affirmed the PTO’s decision – holding that obviousness type double patenting applies and that Caltech cannot receive its patent without linking ownership. Writing for the 2-1 majority, Judge O’Malley highlighted multiple-suit harassment problem that served as the originating policy concerns for the limiting doctrine – writing that “the MPEP standard is consistent with the rationale we have used to support application of obviousness-type double patenting rejections.”

Judge Newman dissented – arguing that obviousness type double patenting is not available when a patent has different owners, different inventorship, and no joint development agreement. And here, Newman argues, that we have different inventorship because the lists of joint inventors are not identical.

The court today not only finds “double patenting” when there is neither common inventorship nor common ownership, but having so found withholds the standard remedy of the terminal disclaimer, and simply denies the application. This novel ruling is contrary to statute and precedent, with no policy justification for changing the law.

Under Judge Newman’s theory the patent should issue on its merits or perhaps be subject to an interference or derivation proceeding.

= = = = =

The panel notes that the reason Caltech’s application took so because the university was playing games with continuation practice and claims that are almost identical to those at issue now were allowed back in 2003. Instead of taking that patent, Caltech filed a continuation and abandoned that allowed application.

= = = = =

We do have a (slightly) open question moving forward as to whether obviousness type double patenting remains as a viable doctrine following the AIA.

Dawson v. Dawson: Suing Yourself for a Patent

Patent

By Dennis Crouch

Dawson v. Dawson (Fed. Cir. 2013)

It's a fairly rare case where you sue yourself – especially when that occurs after your death. Dr. Chandler Dawson, now deceased, was a leading eye specialist and is the named inventor of the patent applications at suit in this case. While an employee at UCSF, Dawson began working on a topical azithromycin treatment for trachoma – some of Dawson's notes from UCSF include a statement that 0.5% solution might help overcome low-solubility problems. During the process Dawson sought help from folks at InSite Vision to actually make and test the treatment. And, very quickly, Dawson left UCSF and joined InSite. Later, InSite filed two patent applications naming Dawson as a co-inventor for the use of 0.1 to 1% azythromicin to treat the eye. The InSite applications were filed in 1999 and issued in 2001 and 2003 respectively. In 2007, UCSF filed two applications in Dawson's name (without Dawson's cooperation) claiming priority back to the 1999 (InSite) application date. The PTO then declared two interferences. There is a fairly substantial amount of money at stake because the patents are listed in the Orange Book as covering ophthalmic drops known as AzaSite. An infringement lawsuit is pending between InSite and Sandoz. See InSite Vision Inc. v. Sandoz, Inc., Civil Action 17 3:11-cv-03080-MLC-LHG (Complaint filed: 26 May 2011).

So, this case is largely a battle over patent ownership and that ownership depends upon whether Dawson's conception of the invention occurred early (while an employee at UCSF) or later (while an employee at InSite). The doctrine of conception has remained fairly steady for the past 120+ years requires proof of the "formation in the mind of the inventor, of a definite and permanent idea of the complete and operative invention, as it is hereafter to be applied in practice." Hybritech Inc. v. Monoclonal Antibodies, Inc., 802 F.2d 1367 (Fed. Cir. 1986) (quoting Robinson on Patents (1890)).

UCSF as Junior Party: In interference cases (and in future derivation cases) the most important factor is often designation of the "senior" and "junior" parties. Normally, the Senior Party is the party with the earliest effective filing date and the interference (derivation) begins with a presumption that the senior party wins unless unseated by the junior party. Here, we have a filing-date tie because applicants claim priority to the 1999 application date. However, the PTO has a longstanding practice of breaking that tie by saying that the junior party is the one with the latest filing date for its involved application. The UCSF actual application was not filed until 2007 and is thus the junior party.

In the interference, the PTO Board concluded that UCSF had failed to prove Dawson's conception while at UCSF. In particular, the Board held that Dawson "did not fully appreciate how [his] idea was to be implemented in actual practice. . . . What emerges from the facts of this case is that [while at UCSF] inventor Dawson had a general idea for a future research plan to come up with a composition for topical azithromycin to be applied to the eye to treat infection."

On appeal, a divided Federal Circuit has affirmed – holding that substantial evidence supports the Board's conclusion that the invention claimed was not conceived by Dawson as of that early date. The court did suggest that Dawson's lack of testimony in favor of UCSF was a critical factor in its decision.

No Patent Rights to Pre-Conception Innovations: An important take-away from the decision is that the prior employer has no patent rights associated with ideas and innovations that fail to rise to the level of inventive conception. Although this could likely be cured through particular contract language regarding ownership of further developments stemming from work began at the prior employer. This case puts power in the hands of entrepreneurial employees who are not bound by strong contractual limitations on their post-employment activities or patenting.

Writing in dissent, Judge Reyna argued that Dawson's conception occurred while at UCSF. In particular, Reyna walked through the evidence showing that Dawson had conceived of the a process for applying an effective amount of azithromycin to an eye to treat infection in a way that fit the interference count.

Inventorship is perhaps the most fundamental question in patent law. The instant an inventor conceives her invention is the moment in which vests her right to a patent, thus perfecting her constitutional right to exclude. . . .

The majority discounts Dr. Dawson's work at UCSF as failing to achieve a fully developed idea of the invention. This conclusion reflects a misapplication of the law of conception to the facts of this case. To demonstrate conception, the law does not require that Dr. Dawson develop a working physical embodiment of his innovative idea. Indeed,

Invention is not the work of the hands, but of the brain. The man that first conceived the complete idea by representing it on paper, or by clear and undisputed oral explanation, is the first inventor, and to avail himself of the rights or priority the law only requires that he shall use due diligence in embodying his idea in a practical working machine. The sketch need not be a "working drawing." The conception may be complete, while further investigation, and perhaps experiment, may be necessary in order to embody the idea in a useful physical form.

Edison v. Foote, 1871 C.D. 80 (Comm'r Pat. 1871). While conception thus requires "the formation, in the mind of the inventor, of a definite and permanent idea of the complete and operative invention," Mergenthaler v. Scudder, 11 App. D.C. 264 (D.C. Cir. 1897), it does not require reduction to practice. The point of time at which an invention merits protection under the patent law is neither when the first thought occurs, nor when a practical working embodiment is completed. Rather, conception occurs

when the 'embryo' has taken some definite form in mind and seeks deliverance, and when this is evidenced by such description or illustration as to demonstrate its completeness. It may still need much patience and mechanical skill, and perhaps a long series of experiments, to give the conception birth in a useful, working form. The true date of invention is at the point where the work of the inventor ceases and the work of the mechanic begins.

Cameron & Everett v. Brick, 1871 C.D. 89 (Comm'r Pat. 1871). Here, Dr. Dawson's WHO presentation manifested an inventive embryo which thereafter sought deliverance. In his presentation, he provided a description sufficient to illustrate the completeness of his invention. All that was left was the work of the mechanic—that is, reduction to practice. This Dr. Dawson was not required to do.

Responding to the dissent, the majority suggested that the outcome turns on the standard of review since the Board's factual determinations are affirmed based upon the very low standard of substantial evidence. See In re Gartside, 203 F.3d 1305, 1311-15 (Fed. Cir. 2000). The appellate panel does not deal with the reality that conception is a question of law presumably reviewed de novo on appeal other than its fully unsatisfying statement that "UCSF failed to meet its burden of proof as to the legal issue of conception." I ask the court – What is the burden of proof for questions of law?

Do the Wright Brothers Deserve a Patent for their Flying Machine?: Why Eliminating Software Inventions from the Patent System Makes No Sense.

Patent, , , ,

Guest Post by Martin Goetz

Imagine that the digital computer and the stored computer program (software) existed in the late 1800's. If so, there is a high probability that the Wright Brothers would have used a computer program to control the three-axis control system in their 1903 Flying Machine patent application. If they did, we would call the patent they received in 1906 a software patent. Further imagine that today's anti-patent zealots who preach that all software consists of abstract ideas, mental processes or mathematics were thrown back in time to the late 1800's. And finally imagine that they were successful in their stated goal to eliminate all software patents through an act of Congress. Had that really happened, the Wright Brothers would not have received a patent for what is recognized as one of the greatest inventions of the 20th century.

Think of all the great inventions in the 20th century. Many would have used a software program as they implemented and disclosed their inventions. Would we be better off today if there was no patent protection for those software inventions?

For the last 50 plus years, the nature of software and of software products has been significantly distorted by opponents of software patents. But their argument to eliminate all software patents makes no sense unless their goal is to eliminate the entire patent system.

Here's why it makes no sense….

Article 29 of the TRIPS guidelines covering "Disclosure Obligations" states "…An applicant for an invention shall disclose the invention in a manner sufficiently clear and complete for the invention to be carried out by a person skilled in the art and may require the applicant to indicate the best mode for carrying out the invention…." If the best mode includes software (a computer program), then that disclosure would describe the software through diagrams, flow charts, and descriptive text.

According to Wikipedia "there is no legal definition of a software patent". Let's look at two possible definitions.

Definition 1: If the definition of a software patent is that, if in the Disclosure of the invention, there is a description of a computer program (in whole, or in part) then the patent would be called "software patent". A "Software patent", under this definition, would be found in many industries, e.g., Software, Telecommunications, Manufacturing, Transportation, Appliances, Medical, Robotics—to name a few.

Said another way… In many industries inventions contain software programs as part of their disclosures. Take the Robotics/Medical Devices sector, where very sophisticated computer programs can control an artificial limb. How the artificial limbs are designed and constructed may be the invention. Or the invention may be how the computer program(s) interacts with the artificial limb. Or the invention may be a combination of both elements.

A more recent real life invention is the artificial retina, a robotics/medical device which offers partial vision for the blind. It's described as a camera, transmitter, and cable to video processor (software) connected to the brain.

So those that want to eliminate software patents, by design or by ignorance, would eliminate all robotic/medical device inventions where the disclosure includes a computer program.

Definition 2: Anti-Software patent zealots might argue that the definition of a "software patent" is when the disclosure of the invention only describes a computer program and a computer. And then their goal would be to have Congress change the Patent System to eliminate the issuance of "software only patents". But that would be catastrophic for the Software Industry, where many of their inventions are software only. This industry is made up of thousands of companies and is recognized as one of the top three manufacturing industries in the world .With annual worldwide revenues well over $ 300 Billion this industry needs (and wants) just as much patent protection as other industries.

Many software product companies can be thought of as high-technology manufacturing entities. Many of their products are state of the art, developed in a competitive, fast-moving environment that requires rapid response to meet user demand. Some of their products can be all software i.e., Google's search program or they could be a combination of software and hardware circuitry and/or devices i.e., Google's driverless car or the 3-D printer.

If the patent application contains a true invention it should be irrelevant whether or not the invention is disclosed as a "software only" implementation. The following are two examples of inventions from the Software Industry to illustrate my point of view

Back in November 2012 Microsoft stated in a press release "Microsoft researchers have demonstrated software that translates spoken English into spoken Chinese almost instantly, while preserving the unique cadence of the speaker's voice—a trick that could make conversation more effective and personal." Certainly the way Microsoft's researchers accomplished this complex translation is not obvious. And I have is little doubt that Microsoft will try to protect its research investment with a patent application. But its patent claims could not be that it invented "speech recognition" or "language translation", or even "voice to voice translations". Patents for Voice and Speech Recognition patents go back well over 30 years with IBM having over 200 speech recognition patents. And there have been language translation patents for many years But Microsoft could invent a new way to do voice recognition and language translations and at the same time retain the cadence of the speaker's voice. And, let's imagine, the invention would use a standard headphone and the headphone would not be part of the disclosure. Such a patent on that invention would be software only (and a computer) in its disclosure. But what if the invention needed a special set of headphones (a device), was integral to the invention, and was part of the disclosure? Is a speech recognition/translation/cadence and special headphone invention any more innovative than a "speech recognition/translation/cadence" software only invention?

In 2000, a renowned inventor, Ray Kurzweil received a patent named Reading System which Reads Aloud from an Image Representation of a Document. The patent disclosure shows a diagram of a monitor, scanner, speakers, and a PC computer composed of a processor, storage and a keyboard. The essence of the disclosure and the invention is a logic chart describing a machine system which interacts with a speech synchronizer and the various devices.

The first sentence of the abstract in the patent stated "a reading system includes a computer and a mass storage device including software comprising instructions for causing a computer to accept an image file generated from optically scanning an image of a document."

At that time, Ray Kurzweil's company, Kurzweil Educational Systems marketed a special purpose hardware/software system called the Kurzweil 3000 Reading Machine which was marketed to the blind and poor readers. They received a patent on this invention in 2000. Today the company sells a software only system called Kurzweil 3000 and continues to have the protection of the patent system through his original 2000 patent and with additional patents e.g., Reducing processing latency in optical character recognition for portable reading machine — another software only patent.

Few would argue that the Kurzweil 3000 Reading Machine was not an invention and not deserving of a patent.

What these zealots should be arguing is that many software patents issued by the US Patent Office, including most business-method patents, should never have been issued because of their obviousness. With that I heartily agree. To their credit, the Patent Office and the Courts are today grappling with how to recognize obviousness in a patent application. A very difficult challenge, to say the least.

But let's stop calling a true invention that includes a computer program in its disclosure a software patent. In fact, let's eliminate the phrase "a software patent" from our vocabulary.

END

Doctrinal Precedence Among the Hatch-Waxman Act, the Patent Act, and the Sherman Act

Patent, , , ,

Guest post by Professor Brett M. Frischmann (Benjamin N. Cardozo School of Law)

On March 25, 2013, the Supreme Court will hear oral arguments in Federal Trade Commission v. Watson Pharmaceuticals, Inc., a case concerning reverse payment settlements of patent litigation.  The court granted cert on the following issue:

Whether reverse-payment agreements are per se lawful unless the underlying patent litigation was a sham or the patent was obtained by fraud (as the court below held), or instead are presumptively anticompetitive and unlawful (as the Third Circuit has held).

In this brief post, I suggest a way to decide the issue in a manner that resolves the apparent tensions between the Hatch-Waxman Act, the Patent Act, and the Sherman Act. To my knowledge, the argument I make does not appear explicitly in the briefs, although Scott Hemphill made a related argument in his 2006 NYU Law Review article, Paying for Delay: Pharmaceutical Patent Settlement as a Regulatory Design Problem.

Hatch-Waxman should be given substantial priority in the analytical framework that courts employ when resolving antitrust claims about reverse payment settlements of patent litigation. Here is why. Both antitrust law and patent law are general-purpose, industry-agnostic legal regimes. Antitrust law regulates competition generally. It aims to sustain competition and constrain anticompetitive practices, and it does so with very general legal prescriptions that courts must apply in a wide range of different contexts. Patent law aims to encourage innovation by giving inventors the right to exclude others from a patented invention. Patent law also consists of very general legal prescriptions that the PTO and courts must apply in a wide range of different contexts. In both antitrust and patent, sector-specific, industry-specific, or even context-specific rules do arise over time in the courts or agencies. But the statutory law enacted by Congress is general-purpose.

Hatch-Waxman is special-purpose and industry-specific, and it also happens to be last-in-time. Congress enacted Hatch-Waxman to accomplish specific ends through specific means. Of course, Hatch-Waxman is a complex regulatory regime, and there are various tradeoffs reflected in the law that may have been necessary to get it passed. But Hatch-Waxman primarily aimed to induce competition in drug markets when such competition is feasible, and one of the central means for accomplishing this end is litigation over patent validity.1 Thus, Hatch-Waxman envisioned two particular types of competition—first, competition in courts between owners of drug patents and generic drug companies, and second, competition in drug markets between brand firms and generics. Reverse payment settlements stifle both types of competition.

What do I mean when I say that Hatch-Waxman should be given substantial priority in the analytical framework that courts employ when resolving antitrust claims about reverse payment settlements of patent litigation? The antitrust-patent interface has been the source of substantial consternation—how do we resolve tensions that might arise among competing legal principles and values? Regardless of how one comes out on how to resolve or understand the interface, it is largely irrelevant to this particular set of issues. Hatch-Waxman replaces general patent law in this context. As a result, it supplies the relevant principles and values, and it significantly narrows the range of relevant arguments that a court should entertain in an antitrust suit. Simply put, broad claims about principles and values derived from patent law should not carry much, if any, weight. For example, claims about the impact of reverse payment settlements, or their prohibition, on patent law's "incentives to innovate" are red herrings. Similarly, arguments about weak vs. strong patents are also red herrings because there is nothing in Hatch-Waxman itself that draws a distinction between weak and strong. (It is worth noting that even for "really strong" patents, litigation over patent validity also provides the public with greater certainty about the validity of those patents.) Finally, claims about the general judicial economy of encouraging settlement are also irrelevant because Hatch-Waxman directly employs litigation as a means to facilitate competition.

Antitrust scrutiny of reverse payment settlements of patent litigation need not get bogged down in discussions of patent law or judicial economy. Congress has spoken clearly and specifically and chosen to use patent litigation as a means to induce competition. Reverse payment settlements of patent litigation are precisely the sort of agreements that antitrust law directly regulates, usually through a rule that says such agreements are per se unlawful. An agreement not to compete in the forum specified by Hatch-Waxman is no different than competitors expressly agreeing not to compete in any other market; it looks like various types of cases where per se illegality is generally accepted as a legitimate rule (e.g., bid rigging, market division).

Accordingly, the Supreme Court could reasonably declare reverse payment settlements of Hatch-Waxman-based patent litigation per se unlawful. Alternatively, the Court could declare the settlements in question presumptively unlawful and then put the burden on the defendants to rebut the presumption.

Reverse payment settlements stifle both types of relevant competition noted above. Competition of the first type (competition in courts between owners of drug patents and generic drug companies) is always stifled. The same might be said about competition of the second type (competition in drug markets between brand firms and generics), although some argue that settlements sometimes may increase competition of the second type where a patent would be found valid (if actually litigated) because the settlement allows the generic company to enter the market earlier than otherwise would be the case. Presumably, the Court should choose between per se illegality and presumptive illegality based on its evaluation of this argument.

If the Court takes this latter route, the types of evidence and arguments relevant to rebutting the presumption should be limited substantially by Hatch-Waxman. As noted above, Hatch-Waxman specifies the types of relevant competition and if given the priority it deserves, it would preclude various generic arguments from being made.

===

FN1: As Scott Hemphill put it, "the Hatch-Waxman Act is a deliberate effort to promote consumer access through litigated challenges." See C. Scott Hemphill, Paying for Delay: Pharmaceutical Patent Settlement as a Regulatory Design Problem, 81 NYU L. Rev. 1553 (2006), available at http://ssrn.com/abstract=925919. He goes on: "Since litigation is the instrument by which the regulatory arrangement accomplishes its ends, it is difficult to argue that an end-run on the instrument is consistent with the scheme." Much of the argument I am making derives from ideas in Scott's article and conversations we have had over the years.

Doctrine of Equivalents: On the Rise Again?

Patent

By Dennis Crouch

Brilliant Instruments v. GuideTech (Fed. Cir. 2013), Majority Opinion by Judges Moore and Reyna with Judge Dyk dissenting in part.

 Shalom Kattan was a prolific inventor while an employee at GuideTech. When he left to form his own company, Brilliant Instruments, GuideTech threatened Kattan with charges of patent infringement. In 2009, Brilliant sued GuideTech for declaratory judgment of non-infringement. Patent Nos. 6,226,231, 6,091,671, and 6,181,649. In the litigation, district court judge Wilken sided with Brilliant and issued a summary judgment order of non-infringement. In a split decision, the Federal Circuit has reversed-in-part — holding that GuideTech still has an infringement argument under the doctrine of equivalents.

The patent statute defines direct infringement liability for someone who “makes, uses, offers to sell, or sells any patented invention” without authority of the patent holder. For more than 150 years courts have seen the “patented invention” as being roughly defined by the patent’s claims and infringement occurs when someone’s unauthorized activities include each element of a patent claim. Using its common law power, the Supreme Court long ago expanded the scope of infringement beyond the literal confines of claim elements in order to also capture “equivalents.” Thus, even if outside of the literal scope of a written claim, an accused infringer may still be liable if its activity is deemed equivalent to the claimed invention. In Warner-Jenkinson Company, Inc. v. Hilton Davis Chemical Co., 520 U.S. 17 (1997), the Supreme Court severely limited power of the doctrine of equivalents by ruling that the equivalents test must be done on an element-by-element basis rather than by focusing on the claim as a whole. In that case, the Supreme Court wrote:

In our view, the particular linguistic framework used [for the Doctrine of Equivalents] is less important than whether the test is probative of the essential inquiry: Does the accused product or process contain elements identical or equivalent to each claimed element of the patented invention? Different linguistic frameworks may be more suitable to different cases, depending on their particular facts. A focus on individual elements and a special vigilance against allowing the concept of equivalence to eliminate completely any such elements should reduce considerably the imprecision of whatever language is used. An analysis of the role played by each element in the context of the specific patent claim will thus inform the inquiry as to whether a substitute element matches the function, way, and result of the claimed element, or whether the substitute element plays a role substantially different from the claimed element. With these limiting principles as a backdrop, we see no purpose in going further and micromanaging the Federal Circuit’s particular word choice for analyzing equivalence. We expect that the Federal Circuit will refine the formulation of the test for equivalence in the orderly course of case-by-case determinations, and we leave such refinement to that court’s sound judgment in this area of its special expertise.

In this case, the claim at issue requires a shunt and a capacitor that is “operatively disposed in parallel” to a “first current circuit.” The accused product also includes a capacitor but it is actually within the first circuit rather than parallel to the first circuit. Thus, there was no literal infringement. However, the patentee’s technical expert analysis (available for the summary judgment) walked through the function-way-result test approved by Warner-Jenkinson and explained his opinion of infringement. The expert had explained:

[D]isposition of the shunt and the capacitor with respect to the [accused] first current circuit … is equivalent to the electrical disposition of the shunt and the capacitor with respect to the [claimed] first current circuit … because it performs substantially the same function (allowing the shunt to control the path of current flow to or from the first current circuit) in substantially the same way (wherein an electrical path from the first current circuit can be traced to either the capacitor or the shunt) to achieve substantially the same result (providing an electrical relationship wherein, e.g., the shunt can direct current to flow from the first current circuit to the second current circuit or from the first current circuit to the capacitor).

On appeal, the Federal Circuit found that that this “detailed application of the function-way-result test to the claim element and the allegedly equivalent feature of the accused product is sufficient to create a genuine issue of material fact for the jury to resolve.” (Like direct infringement, infringement under the doctrine of equivalents is a question of fact typically decided by a jury.)

One aspect of the doctrine of equivalents is the vitiation rule — stating that the DOE may not be used in a way that renders a claim term meaningless. However, almost since its introduction, the Federal Circuit has been rolling-back the doctrine. In the recent case of Deere & Co. v. Bush Hog, LLC, _ F.3d _ (Fed. Cir. 2012), the court wrote that

“Vitiation” is not an exception to the doctrine of equivalents, but instead a legal determination that “the evidence is such that no reasonable jury could determine two elements to be equivalent.” The proper inquiry for the court is to apply the doctrine of equivalents, asking whether an asserted equivalent represents an “insubstantial difference” from the claimed element, or “whether the substitute element matches the function, way, and result of the claimed element.” If no reasonable jury could find equivalence, then the court must grant summary judgment of no infringement under the doctrine of equivalents.

[T]he vitiation test cannot be satisfied by simply noting that an element is missing from the claimed structure or process because the doctrine of equivalents, by definition, recognizes that an element is missing that must be supplied by the equivalent substitute.

Vitiation is generally used when the claim element is the “polar opposite” of the accused equivalent. However, even there vitiation is simply a shorthand mechanism for saying that the two elements are “not insubstantially different.” Here, Judge Moore adds to the explanation from Deere:

The vitiation test cannot be satisfied merely by noting that the equivalent substitute is outside the claimed limitation’s literal scope. Rather, vitiation applies when one of skill in the art would understand that the literal and substitute limitations are not interchangeable, not insubstantially different, and when they do not perform substantially the same function in substantially the same way, to accomplish substantially the same result. In short, saying that a claim element would be vitiated is akin to saying that there is no equivalent to the claim element in the accused device based on the well-established “function-way-result” or “insubstantial differences” tests.

Judge Moore goes on to open the door for even polar opposites to be equivalents — noting that proving equivalents “will be more difficult when the accused structure has an element that is the opposite of the claimed element, especially where the specification or prosecution history highlights the differences.”

Applying these concepts to the facts of this case, we conclude that summary judgment must be reversed. The element at issue is: “wherein said shunt and said capacitor are operatively disposed in parallel with respect to said first current circuit.” … Everyone agrees that the capacitor in the accused device is not located in exactly the same place as the claimed capacitor, but is the change in location an insubstantial difference? We conclude that, viewing all factual inferences in favor of GuideTech, it has created a genuine issue of material fact which precludes summary judgment.

On remand, the equivalents question should then go to the jury.

In dissent, Judge Dyk argued that the expert report did not actually consider equivalents on a limitation-by-limitation basis as required by Warner-Jenkinson.

  

Constitutionality Question Looms as USPTO Implements Regime that favors a “Filers” over “Inventors”

Patent

Madstad Engineering, Inc. v. U.S. Patent & Trademark Office, 8:12-cv-01589 (M.D. Fla. 2013)

In 2012, Madstad filed a declaratory judgment action against the USPTO and requesting that the court find various aspects of the America Invents Act to be unconstitutional. Madstad's basic argument is that when the U.S. Constitution speaks of exclusive rights for "inventors" it should be interpreted to mean "first and true inventor." Under this analysis, the AIA fails because it purposefully rewards the first-to-file a patent application rather than the first-to-invent. The complaint argues:

A second 'inventor' is an oxymoron; that person merely rediscovers that which was already discovered by the first inventor. Thomas Jefferson, James Madison, and John Marshall all shared this understanding. . . . Congress is not authorized to award patents to the winners of races to file to the PTO. . . . Under the AIA, there is no effective statutory requirement that the applicant be an 'inventor' for a patent to be valid.

Madstad has also requested a preliminary injunction blocking implementation of the first-to-file provisions of the Act.

As we approach the March 16, 2013 implementation date, we can look for the plaintiffs to push the court again for a decision on its motion for preliminary injunction or perhaps a temporary restraining order (TRO) that would block implementation. Madstad is represented by Jonathan Massey.

CLS Bank v. Alice Corp: Oral Arguments Lead to More Questions

Patent, , , , ,

By Dennis Crouch

CLS Bank v. Alice Corp (Fed. Cir. 2013)

On February 8, 2013, the Federal Circuit held oral arguments en banc in this important subject matter eligibility dispute that focuses on the extent that software can be patented. Under Federal Circuit rules, en banc rehearings include all of the regular circuit court judges as well as any other judge who sat on the original panel. For this case, the nine regular members of the court were joined by Senior Judge Richard Linn who sat on the original panel and penned the opinion of the court that has offended so many anti-software-patent advocates. In the opinion, Judge Linn cabined-in the definition of “abstract” with regard to computer implemented inventions and also indicated that §101 should only be used to invalidate a claim when that result is “manifestly evident.” [UPDATED] With a ten-member panel the accused infringer (CLS Bank) needs six votes to overturn the original panel decision. With a ten member panel, six votes are needed to win. Since the original appellate decision was vacated, this appeal comes directly from the district court. As such, a five-five tie will affirm the lower court holding of invalidity.  While I suspect that Linn’s language putting Section 101 on the back burner will not survive, I suspect that at least some claims will be seen to pass muster under Section 101.

The parties are in relative agreement on many points. None of the parties seriously argue that software per se is patentable – apparently assuming that software apart from its computer implementation always embodies an abstract idea. All of the parties also agreed that a computer specially designed to perform a particular function can also be patentable. The dispute centers on what test should be used to determine when you have such a “specialized computer” and on whether Alice Corp’s claimed invention meets that standard.

Most notably absent from the oral arguments was any discussion of the meaning of an “abstract idea.” Of course it is the ambiguity in the definition of abstract idea that is causing most of the confusion regarding subject matter eligibility.

For decades, patent attorneys have known that software can be patentable if properly claimed in a way that directs attention away from the software nature of the invention. I suspect that the rule-of-thumb for patent eligibility will focus on complexity of the relationship between software and hardware. And, if that is the case patent attorneys will renew their reputation for taking simple ideas and making them appear quite complex.

Mark Perry represented the accused infringer (CLS Bank) and argued that one starting point for subject matter eligibility is the notion that a process accomplished “entirely in the human mind or made with pen and paper” cannot be patent eligible. Further, merely speeding-up that process by using a computer does not somehow transform the process into a patentable invention – “it simply accelerates the process.” The bulk of the questioning focused whether CLS had overgeneralized the claims. For instance, when Mr. Perry began reading from the patent’s invention summary he was stopped by Judge Linn who responded that every claim can be distilled to an abstract summary but “that’s not the way that we assess patent eligibility or patentability.”

Judge Moore focused the questioning on the CLS Bank claim that included the most physical structure. Claim 26 of the ‘375 patent reads as follows:

26. A data processing system to enable the exchange of an obligation between parties, the system comprising:

a communications controller,

a first party device, coupled to said communications controller,

a data storage unit having stored therein

(a) information about a first account for a first party, independent from a second account maintained by a first exchange institution, and

(b) information about a third account for a second party, independent from a fourth account maintained by a second exchange institution; and

a computer, coupled to said data storage unit and said communications controller, that is configured to

(a) receive a transaction from said first party device via said communications controller;

(b) electronically adjust said first account and said third account in order to effect an exchange obligation arising from said transaction between said first party and said second party after ensuring that said first party and/or said second party have adequate value in said first account and/or said third account, respectively; and

(c) generate an instruction to said first exchange institution and/or said second exchange institution to adjust said second account and/or said fourth account in accordance with the adjustment of said first account and/or said third account, wherein said instruction being an irrevocable, time invariant obligation placed on said first exchange institution and/or said second exchange institution.

Judge Moore rightly suggested that a computer by itself is clearly a machine and subject-matter eligible. She queried then, how can a more particular invention – the computer with particular functionality – be ineligible? Perry offered two responses. First, he argued that the claim here is really method claim masquerading as a machine claim – that method itself is an abstract idea and the addition of the computer hardware does not make the claims eligible. Further, Perry argued that the claims here are not directed to any particular computer but instead a generic system. Judges Moore and Newman then queried whether the real focus should be on obviousness. Perry admitted that the claims may also be invalid under Section 103, but that the Supreme Court has indicated that Section 101 is a threshold inquiry. In addition, he argued, Section 101 inquiries are often easy because they do not require substantial discovery.

Perry also suggested that the requirement for extensive particular hardware rightly favors companies like CLS Bank and Google who spend millions of dollars to build systems that actually work rather than companies like Alice who merely develop a “McKinsey Report” and file for patent protection.

With Ray Chen on the sideline pending confirmation of his Federal Circuit judicial nomination, Deputy Solicitor Nathan Kelley stepped up and primarily sided with CLS Bank – arguing that software per se cannot be patent eligible because it is an abstract idea and that merely connecting software to a computer is likewise patent ineligible. The oddball test suggested by the PTO borrows the separability concept from copyright law. In copyright, a useful article is only copyrightable if the original expression is at least conceptually separable from the utility of the article. The PTO argues that an inseparability requirement should be put in place for computer implemented inventions. Under that construct, a computer implemented invention that applies an abstract idea would only be patent eligible if the computer is inseparably and inextricably linked to the invention. In oral arguments, Kelley suggested that the approach requires the “fact finder” to “go deeper” in considering whether an inextricable link exists. Mr. Kelly did agree (on questioning from Judge Moore) that the focus in this process should be on the language of the claims.

What the PTO wants out of this is a practical test that its examiners can follow rather than just the notion of an “abstract idea.” I believe that the agency would have been better served if he had focused on that point rather introducing a new concept into the law that does little or nothing to resolve ambiguity.

Adam Perlman argued for the patentee (Alice Corp) and likewise did not defend software patents. Rather, Perlman argued that his client’s patents were technology-focused inventions that wove together software and hardware in a way that “creates a new machine” that clearly satisfies the requirements of Section 101.

There was some back and forth about preemption. Neither party mentioned this, but a point relevant to preemption is likely CLS’s allegations at the district court level that it did not infringe the patents.

The Federal Circuit will likely take a few months to decide this appeal. An important issue will be to see whether the court decides this case quickly or waits for the Supreme Court to release its decision in Myriad. Although not computer implemented, the outcome of Myriad case could impact the law here.

En Banc Arguments This Week

Patent, , , ,

by Dennis Crouch

On February 8, 2013 (this Friday), the Federal Circuit will sit en banc and hear arguments on two important patent cases. In CLS Bank v. Alice Corp the court will focus on the patenting of inventions implemented through software. The two particular questions highlighted in the en banc order are:

a. What test should the court adopt to determine whether a computer-implemented invention is a patent ineligible “abstract idea”; and when, if ever, does the presence of a computer in a claim lend patent eligibility to an otherwise patent-ineligible idea?; and

b. In assessing patent eligibility under 35 U.S.C. § 101 of a computer-implemented invention, should it matter whether the invention is claimed as a method, system, or storage medium; and should such claims at times be considered equivalent for § 101 purposes?

In addition to the parties, the Federal Circuit has also granted leave for the USPTO to participate at oral arguments. The USPTO’s brief focused on practical mechanisms for the process of determining § 101 eligibility. The agency wrote “the essential question under § 101 is whether the claim, properly construed, incorporates enough meaningful limitations to ensure that it amounts to more than a claim for the abstract idea itself . . . This Court should identify a non-exhaustive list of factors for district courts and examiners to consider in resolving that essential question on a case-by-case basis.”

The second patent case (argued first on the 8th) is that of Robert Bosch v. Pylon Mfg. In Bosch, the court is focusing on the “final judgment rule” that limits a losing party’s right to appeal until the district court judgment is finalized. Particularly, 28 U.S.C. § 1292(c)(2)  indicates that the Federal Circuit has jurisdiction over patent appeals once the case is “final except for an accounting.  The basic question on appeal is: Define “an accounting.”  The en banc order asks two particular questions:

a) Does 28 U.S.C. § 1292(c)(2) confer jurisdiction on this Court to entertain appeals from patent infringement liability determinations when a trial on damages has not yet occurred?

b) Does 28 U.S.C. § 1292(c)(2) confer jurisdiction on this Court to entertain appeals from patent infringement liability determinations when willfulness issues are outstanding and remain undecided?

In its brief of the case, the U.S. Government argued that “accounting” encompasses the damage award. As such, the Government argues that appeal is appropriate once liability is determined. 

At the Supreme Court, oral argument in Bowman v. Monsanto (patent exhaustion doctrine) is scheduled for February 19; and FTC v. Watson (reverse payment settlements) is scheduled for March 25. Arguments for Association for Molecular Pathology v. Myriad Genetics, Inc.
have not yet been scheduled.

Design Patent Litigation: Notice Pleading Requirements Remain Low

Patent, , ,

Totetowelby Dennis Crouch

Hall v. Bed, Bath & Beyond, Inc. and Nachemin, __ F.3d __ (Fed. Cir. 2013)

This design patent decision is interesting and important on several levels and so I have divided the post into two sections. This section focuses on the district court's clear error in dismissing the infringement lawsuit on the pleadings.  The second section will focus on the Federal Circuit's dismissal of the charges filed personally against the employees who caused the allegedly infringement.

The set-up here is interesting.  Mr. R.J. Hall designed a new product known as a “Towel Tote” that is basically an absorbent scarf with pockets on the ends.  [Buy one here.] After filing his design patent application, Hall sat down with Mr. Farley Nachemin at Bed Bath & Beyond (BB&B) to see whether the company would retail his product.  Instead of moving forward with Hall, BB&B mailed Hall's product to Pakistan and had it copied and manufactured for retail distribution back in the US.

When his patent issued, Hall sued BB&B as well as Nachemin and other executives for design patent infringement and a number of state-law business claims such as, false advertising, misappropriation, and unfair competition.  U.S. Design Patent No. D596,439.  The district court then dismissed the case on the pleadings –  finding that the complaint did not particularly identify the “new, original, and ornamental” features of the design patent. On appeal, the Federal Circuit rejects that decision and instead holds that, even under Iqbal and Twombly, a pleading does not require this level of information. Rather, following the law of utility patents, the court holds here that a proper design patent infringement complaint only requires the following five elements:

  1. An allegation of ownership of the patent;
  2. The name of the defendant;
  3. The patent number;
  4. A statement of the means by which the defendant allegedly infringes; and
  5. Relevant sections of the patent laws.

Citing Phonometrics, Inc. v. Hospitality Franchise Systems, Inc., 203 F.3d 790 (Fed. Cir. 2000).  In this case, the district court's ruling was well off-base because the design patentee need not prove the design's points of novelty even at trial since validity is presumed and infringement no longer relies on the points-of-novelty test.

In the litigation, BB&B had filed a counterclaim alleging that that Mr. Hall himself had violated the Lanham Act by telling the company his product was “protected by patent” even before the patent issued.  BB&B also alleged that the Hall committed false marking by continuing to mark his product “patent pending” even several months after the patent had issued.  On appeal, the Federal Circuit holds that these statements “cannot be viewed as even plausibly misleading.”  With regard to the the false marking claim, the court also adds that the defendant had failed to plead competitive harm, which is now a core element of false marking under the Leahy-Smith America Invents Act of 2011.

+ + + + +

Judge Newman wrote the majority opinion that was joined by Judge Linn.

Judge Lourie wrote in dissent – basically arguing that more deference should have been given to the district court's role of ensuring that the pleadings are clear enough.  Judge Lourie acknowledged legal mistakes of the district court, but also directed attention to a separate aspect of the district court decision. The district court wrote: “Rather than plead in a coherent fashion, making clear how the facts support a particular theory of infringement as to a given Defendant, Plaintiff has conflated all his facts, pleading without making any distinctions of any kind. This ambiguity in pleading is unacceptable.”   

Notes

  • As with most design patents, this one issued without substantive examination on the merits.  The application was filed in November 2008 and the first correspondence from the USPTO was a notice of allowance mailed in May 2009. The patent issued shortly thereafter.
  • Professor Tushnet has more on her site with more focus on the Lanham Act claims: http://tushnet.blogspot.com/2013/01/do-you-know-where-your-towel-is-and.html. 

AIA Technical Amendment Becomes Law

Patent, , , , ,

H.R. 6621, officially titled An Act To correct and improve certain provisions of the Leahy-Smith America Invents Act and title 35, United States Code was signed into law by President Obama on January 14, 2013 and, for the most part, the provisions of the law are now effective.

Here is the official summary:

  • Amends the Leahy-Smith America Invents Act (AIA) to make technical changes regarding the transitional program for covered business method patents and joinder of parties.
  • Applies, to any civil action commenced on or after enactment of this Act, the AIA's bar on using an accused infringer's failure to obtain the advice of counsel to prove that any infringement was willful or induced. (Currently, the bar would not take effect until one year after the AIA's enactment.)
  • Prohibits a nine-month waiting period for inter partes review from applying to issuances of first-to-invent patents ineligible for post-grant review. (Currently, the remaining first-to-invent patents to be issued prior to the effective date of the new first-to-file patent system have no avenue for review during the first nine months because they must wait nine months for inter parties review and are ineligible for post-grant review.)
  • Revises the filing deadline for inter partes review to be after the later of either: (1) nine months after the grant of a patent (currently, nine months after such grant or the issuance of a reissue patent), or (2) the termination date of any post-grant review.
  • Extends the time period for an applicant to file an inventor's oath or declaration, substitute statement, or recorded assignment until the date on which the issue fee for the patent is paid. (Current law permits a notice of allowance of a patent application only after such a filing.)
  • Makes provisions concerning travel expenses for employees of the U.S. Patent and Trademark Office (USPTO) and the payment of administrative judges effective as of September 16, 2011.
  • Modifies requirements and time periods for activities relating to patent term adjustments. Revises the patent extension period for certain international applications. Specifies that a civil action filed in the U.S. District Court for the Eastern District of Virginia is the exclusive remedy for challenging a USPTO decision on a request for reconsideration of a patent term adjustment determination.
  • Repeals a provision prohibiting the USPTO from accepting certain international applications designating the United States from anyone not qualified under specified application requirements.
  • Revises USPTO funding requirements to make all federal patent law fees available for expenses relating to patent processing and to permit patent and trademark fees to be used interchangeably to cover proportionate shares of the USPTO's administrative costs. (Currently, patent fees are used to cover administrative costs relating to patents while trademark fees are used to cover administrative costs relating to trademarks.)
  • Modifies requirements for applicants filing petitions to institute derivation proceedings and delineates the criteria applied to deem an application as an earlier application with respect to an invention relative to another application.
  • Sets forth authority for the Patent Trial and Appeal Board to conduct, and for courts to review appeals from, interference proceedings declared after enactment but before the effective date of certain AIA amendments replacing interference proceedings with derivation proceedings.
  • Modifies the original appointment terms for members of the Patent Public Advisory Committee and the Trademark Public Advisory Committee. Directs the Secretary of Commerce to designate, from among the appointed members, a Chair and Vice Chair of each committee.

Read the text:

  • http://www.gpo.gov/fdsys/pkg/BILLS-112hr6621enr/pdf/BILLS-112hr6621enr.pdf

Does License of Future Inventions Invoke Patent Law Based Court Jurisdiction?

Patent, ,

By Dennis Crouch

National Pasteurized Eggs v. Davidson (Fed. Cir. 2012)

010713_1547_DoesLicense1In yet another patent contract dispute, the Federal Circuit has transferred appellate jurisdiction back to the regional circuit. Here, it appears that the mistake was due to an error by the district court clerk who thought of the case as a patent case.

= = = =

National Pasteurized Eggs (NPE) filed the case in 2007 asking the New Hampshire district court to quiet title in several US and foreign patents. From the complaint:

By this action, NPE seeks a declaratory judgment of rightful ownership of three United States patents and two international patent applications and resulting foreign patents, as specified below.

Download Davidsoncomplaint.

The patents at issue all list Mr. Leon J. Davidson (LJD) as the inventor and involve methods of pasteurizing in-shell chicken eggs and treating eggs with anti-bacterial agents. See U.S. Patent No. 6,322,833.

Davidson founded the Pasteurized Egg Corporation (PEC). When he left the company in 2000, he signed an assignment and further cooperation agreement.  [Appendix to Complaint] PEC went bankrupt in 2003 and its intellectual property assets were purchased by National Pasteurized Eggs (NPE) who is looking to ensure all of the Davidson patents are assigned to the company. (Note – the Davidson's brand shown to the right is also owned by PEC).

In considering what rights Mr. Davidson retains, the agreement uses the term "inventiveness." The agreement states:

New processes or intellectual property ("inventiveness") developed prior to January 1, 2001 ("Old Inventiveness"), including a method for extending the shelf life of pasteurized eggs by treatment with antibacterial agents, shall be the property of PEC and LJD shall take such actions as may be reasonably required by PEC to assist PEC to complete the development, improvement, documentation, protection and patenting of such Old Inventiveness.

Inventiveness developed by LJD, whether in combination with "Old Inventiveness" or prior inventiveness, which results in protection from new patents or patent applications providing broader or improved protection, on or subsequent to January 1, 2001 ("New Inventiveness") shall be considered the property of LJD.

It is this poorly written agreement that has led to the legal conflict.

Davidson filed a number of patent applications following the 2001 agreement and argued that those applications involved new inventiveness. In its ruling, the district court sided with NPE – holding that the inventiveness associated with the primary disputed patent occurred prior to the 2001 date since testing had already begun on the new process.   Download Davidsonfinaljudgment.  It is this decision being appealed.

= = = =

After losing at the district court, Davidson filed a Notice of Appeal to the First Circuit. However, the district court clerk sent the docket and certificate to the Federal Circuit. On unopposed motion, the Federal Circuit has now transferred the case to the First Circuit.

In its order, the Federal Circuit suggested, but did not decide, that the First Circuit is the proper site of appellate jurisdiction. In this case, however, the transfer was required because the Fed. R. App. P. 3(d)(1) does not allow a district court clerk to unilaterally change the appellate court.

Fed. R. App. P. 3(d)(1) states that the clerk of the district court "must promptly send a copy of the notice of appeal and of the docket entries .,. to the clerk of the court of appeals named in the notice."

Because of the mandatory language of Rule 3(d)(1), we believe we must transfer this appeal to the First Circuit, i.e., the clerk of the district court was required to send the notice of appeal to that court. Although we do not address jurisdiction, the case appears to involve ownership of patents rights and contract interpretation. See Luckett v. Delpark, Inc., 270 U.S. 496 (1926).

The appeal will now be heard by the Court of Appeals for the First Circuit.

= = = = =

There is some chance that the Federal Circuit will see the case again – depending upon whether the First Circuit sees a substantial question of patent law buried in whether Davidson's new patents include some "inventiveness developed by LJD . . . subsequent to January 1, 2001."

Related articles
Federal Circuit Refuses to Hear Contract Dispute over Patent Assignment and Royalty Contract
Federal Jurisdiction over Patent Malpractice Cases – Supreme Court Shows Interest in Gunn v. Minton
Patent Malpractice Jurisdiction

Federal Circuit Refuses to Hear Contract Dispute over Patent Assignment and Royalty Contract

Patent, , , , ,

By Dennis Crouch

DeRosa v. J.P. Walsh & J.L. Marmo Enterprises (Marmo) (Fed. Cir. 2013) (nonprecedential)

In the face of Supreme Court scrutiny over its jurisdictional power, the Federal Circuit has taken a step back from its historic approach of expanding patent law jurisdictional reach.

DeRosa is the inventor of a cam-less chuck for use in a router. These have been available for some time with ordinary drills, but the large size and high rotation speed made the same type of assembly more difficult for a router. DeRosa’s provisional patent application was filed back in November 1998 and, at the same time, DeRosa assigned his rights in the invention and “further improvements” to Marmo in return for a promise that a promise that Marmo would manufacture and sell the device and that DeRosa would receive royalties on those sales.

In 2010, DeRosa sued Marmo in Virginia state court – alleging that the company had failed to live up to its continued contractual obligations to manufacture and sell the device. In the lawsuit, Marmo asked for both contract damages and a reversion of ownership rights in the patent. The case was first removed to Federal Court on diversity grounds and then removed to an arbitrator based upon the contract terms. The arbitrator found for DeRosa on breach of contract but held that Marmo was still the proper patent owner. That decision was confirmed by the E.D. Virginia District Court in an April 6, 2012 order.

On appeal, the Federal Circuit has refused to decide the case – holding that it lacks jurisdiction and that the proper venue is the Court of Appeals for the Fourth Circuit. The reason here is that the complaint did not raise any substantial questions of patent law but rather simply focused on the contract. Judge Bryson writes:

Causes of action based on contractual rights in a patent assignment or license agreement as a general rule do not arise under the patent laws. See Luckett v. Delpark, Inc., 270 U.S. 496, 502-03 (1926); New Marshall Engine Co. v. Marshall Engine Co., 223 U.S. 473 (1912). Marmo nonetheless argues that the appeal is properly before this court because the complaint specifically requests a restoration of ownership in patent rights.

That DeRosa’s complaint ultimately sought to restore ownership in the invention is of no great significance. The focus of the jurisdictional inquiry is whether the plaintiff “set up some right, title or interest under patent laws, or at least makes it appear that some right or privilege will be defeated by one construction, or sustained by the opposite construction of these laws.” Christianson v. Colt Industries Operating Corp., 486 U.S. 800, 807-08 (1988).

The complaint in this case did not turn on such a claim. The alleged harm stated was Marmo’s failure to abide by its “contractual and financial obligations under the contract” resulting in DeRosa not having received the “bargained for benefit” of “a steady flow of manufacturing business and the timely payment for the product.” Although a restoration of patent ownership is sought in the complaint, such relief is entirely premised on the claim that Marmo’s failure to fulfill its obligations under the contract warrants a remedy of rescission. As such, this case does not arise under the patent laws, and we do not have jurisdiction.

In Jim Arnold Corp. v. Hydrotech Systems, Inc., 109 F.3d 1567 (Fed. Cir. 1997), a case very similar to this one, this court held that a plaintiff seeking rescission of a patent assignment agreement in order to restore ownership rights in a patent could not meet the jurisdictional test set forth in Christianson. As in the present case, the plaintiff in Jim Arnold had no rights in the patent without judicial intervention and was thus left only to argue that ownership of the patents should be restored based upon a breach of contract claim. Because a plaintiff under such circumstances could at best only present a frivolous allegation of ownership of the patents at issue sufficient to confer jurisdiction under section 1338, we transferred the case to the regional circuit. Since the same outcome is warranted here, pursuant to 28 U.S.C. § 1631, we transfer the case to the Fourth Circuit.

The court ignored Marmo’s most compelling argument – that the action was implicitly a move by DeRosa to quiet title in his further improvements that he later patented and now manufactures through another source. Marmo argued that mapping the contracted-for improvements to the various patents necessarily requires a substantial consideration of patent law issues. The case will now move to the Fourth Circuit to see whether the arbitration award was properly confirmed.

= = = =

Minton v. Gunn: This term, the Supreme Court is considering Minton v. Gunn, a patent litigation malpractice case. Legal malpractice is ordinarily a state law claim. Here, however, the court is considering whether the malpractice action arises under the U.S. patent laws in such a way that would confer both federal jurisdiction at the district court level and Federal Circuit jurisdiction on appeal.

America Invents Act: The Leahy–Smith America Invents Act (AIA) expanded the scope of federal jurisdiction to include cases whose only substantial patent claim is filed in a compulsory counterclaim. See 28 U.S.C. § 1295(a)(1) as amended. However, that change in the statute does not impact this case because it only applies to civil actions commenced on or after September 16, 2011.

Notice of Arbitration Awards: 35 U.S.C. § 294(d) requires that a notice of arbitration award be filed with the USPTO. Under the statute, “[w]hen an award is made by an arbitrator, the patentee, his assignee or licensee shall give notice thereof in writing to the Director.” The submission is required to include a number of details as well as “a copy of the award” itself. Under the law, that award becomes a public record and part of the patent file. As a kicker, law states that “[t]he award shall be unenforceable until the notice required by subsection (d) is received by the Director.”

In this case, the notice of award was probably not required because the statute further limits its focus to arbitration of validity or infringement issues. Here, the dispute was over contract terms and ownership.

= = = =

EFF: Limit Software Patents

Patent, , ,

Guest Post by Julie Samuels.  Samuels holds an endowed chair at EFF aptly named the Mark Cuban Chair to Elimiate Stupid Patents.  EFF's brief in the CLS Bank case is available here: /media/docs/2012/12/eff–iso-cls.pdf. 

Since the Supreme Court’s 2010 Bilski ruling, the Federal Circuit has been consistent on only one point in its § 101 jurisprudence—and that’s on being inconsistent. In the face of the Federal Circuit’s failure to provide a workable § 101 standard, the Supreme Court issued its unanimous ruling in Mayo v. Prometheus, essentially telling the Federal Circuit to take the patentable subject matter inquiry seriously. Yet the Federal Circuit paid no heed when it issued ruled in CLS Bank v. Alice, all but ignoring the Supreme Court (for many of us court watchers, the Federal Circuit’s failure to address Mayo was shocking; even Judge Prost, in her dissent, admonished the majority for “fail[ing] to follow the Supreme Court’s instructions—not just in its holding, but more importantly in its approach.”).

So it really was no surprise when the Federal Circuit agreed to take CLS en banc. We, along with many others, hope that this case would provide the Court an opportunity to head the Bilski Court’s warning that:

The Information Age empowers people with new capacities to perform statistical analyses and mathematical calculations with a speed and sophistication that enable the design of protocols for more efficient performance of a vast number of business tasks. If a high enough bar is not set when considering patent applications of this sort, patent examiners and courts could be flooded with claims that would put a chill on creative endeavor and dynamic change. (130 S. Ct. at 3229).

As currently interpreted, § 101 leaves parties unable to discern a patent’s metes and bounds or assess its validity, making inadvertent infringement an unfortunate cost of doing business. This has led to a dangerous and dramatic increase in patent litigation, particularly surrounding business method patents or those covering software. For better or worse (and I think worse), the major uptick in these cases involved non-practicing entities. Some data that we included in our amicus brief filed in CLS Bank:

  • From 200-2002, NPE litigation accounting for only about five percent of patent litigation;[1] in 2007 that figure was 22 percent and in 2011 it was 40 percent.[2]
  • Litigation surrounding software patents has also greatly increased:

6a00d8341c588553ef017c34cf3367970b-pi[1][3]

  • For the first time in 2011, spending by both Apple and Google on patents exceeded the firms’ spending on new product research and development.[4]
  • NPEs now disproportionately target small companies; at least 55% of unique defendants sued by NPEs make under $10 million a year.[5]

These statistics are a direct result of the legal instability surrounding § 101. One way to stem this problem is to create incentives for those facing litigation (or litigation threats) to pursue their meritorious defenses of noninfringement and invalidity. Section 101 could play that role, in fact, the Mayo Court seemed to state as much: “to shift the patent-eligibility inquiry entirely to these late sections [§§102, 103, 112] risks creating significantly greater legal uncertainty, while assuming that those sections can do work that they are not equipped to do.” 132 S. Ct. at 1304.

 Yet no version of recent § 101 jurisprudence offers much hope of settling the law. Instead, we recommended in our brief (filed along with Public Knowledge) that the Federal Circuit take another route and adopt a stricter construction of § 112(f), as recently proposed by Prof. Mark Lemley. Specifically, instead of attempting to figure out whether a broad, functional claim is abstract or not, a court may first use § 112(f) to narrow the claim to the structures and their equivalents recited in the patent and then, if questions remain, make a § 101 inquiry.  

 While § 112(f) has traditionally been applied to apparatus claims, it’s clear that Congress intended it to apply to method claims as well. Despite this, software patents often do not detail actual algorithms or explain how to actually carry out the methods they attempt to claim; as such they should be indefinite under cases like Aristocrat Techs. v. Int’l Game Tech. If the claims do specify the algorithms, then the § 101 inquiry will be limited to those algorithms and their equivalents. These questions—of whether §112(f) applies; if it does, how the claims should be limited; and then if § 101 permits that narrowed claim—could all be accomplished at early stages of litigation, before expensive discovery and motion practice.

[1] James Bessen, Jennifer Ford and Michael Meurer, The Private and Social Costs of Patent Trolls, Boston Univ. School of Law, Working Paper No. 11-45, 2011 (“Bessen 2011”), at 6.

[2] Sara Jeruss, Robin Feldman & Joshua Walker, The America Invents Act 500: Effects of Patent Monetization Entities on US Litigation (2012) at 5, 25.

[3] James Bessen, A Generation of Software Patents, Boston Univ. School of Law, Working Paper No. 11-31 (June 21, 2011), at 19

[4] Zak Islam, Smartphone Industry Spent $20 Billion on Patents in 2011, tom’s hardware (October 9, 2012), http://www.tomshardware.com/news/Patents-Smartphone-Apple-Google-Motorola,18231.html

[5] Colleen Chien, Startups and Patent Trolls, Santa Clara Univ. School of Law, Accepted Paper No. 09-12 (September 28, 2012)

Countdown to March 16, 2013

Patent, ,

by Dennis Crouch

New patent applications filed three months from now will fall under the US new First-to-File regime created by the America Invents Act of 2011.  Those applications will no longer be able to claim invention-date priority, will have much more limited pre-filing grace period, will be subject to prior user rights and broad post-grant review, and can be invalidated by public uses and sales of similar inventions in foreign countries.  On the other hand, absent a derivation problem, secret prior invention or reduction to practice by a third party will no longer be relevant to patentability.

How are you preparing for this March 16, 2013 changeover?

CLS Bank v. Alice Corp: Software Patentability On the Briefs

Patent, , , , , ,

by Dennis Crouch

Briefing continues in the CLS Bank software patent case.  The accused infringer (CLS Bank) has filed its brief arguing that the Alice patent lacks any core inventive concept and therefore lacks subject matter eligibility under Section 101 of the Patent Act.  Briefs in support of CLS and those nominally in support of neither party have also been filed.  Alice will file its brief in January and I expect a set of additional briefs in support.  As in the Bilski case, Alice's asserted claim here is one that appears invalid on other grounds — namely obviousness.  However, the district court ruled on summary judgment (and before claim construction) that the claim was invalid as lacking patent eligiblity under Section 101.

The text of the asserted claim is below:

A method of exchanging obligations as between parties, each party holding a credit record and a debit record with an exchange institution, the credit records and debit records for exchange of predetermined obligations, the method comprising the steps of:

(a) creating a shadow credit record and a shadow debit record for each stakeholder party to be held independently by a supervisory institution from the exchange institutions;

(b) obtaining from each exchange institution a start-of-day balance for each shadow credit record and shadow debit record;

(c) for every transaction resulting in an exchange obligation, the supervisory institution adjusting each respective party's shadow credit record or shadow debit record, allowing only these transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place in chronological order; and

(d) at the end-of-day, the supervisory institution instructing ones of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions.

In its first opinion, the Federal Circuit reversed the lower court ruling – finding that the claim did not merely encompass an abstract idea but instead embodied a practical implementation that fits within the scope of patent eligible subject matter.  In a subsequent en banc order, the court asked that the parties focus on two particular questions of law: 

I. What test should the court adopt to determine whether a computerimplemented invention is a patent ineligible “abstract idea”; and when, if ever, does the presence of a computer in a claim lend patent eligibility to an otherwise patent-ineligible idea?

II. In assessing patent eligibility under 35 U.S.C. § 101 of a computerimplemented invention, should it matter whether the invention is claimed as a method, system, or storage medium; and should such claims at times be considered equivalent for § 101 purposes?

I have attempted to extract some core elements of each brief. I should note that all of these brief have much more nuance than is shown. I attempted to categorize the briefs filed on behalf of neither party. My approach was quite subjective and I am confident that others would have classified them in a different manner. 

Practical keys here are (1) whether subject matter eligibility is about the inventive concept or instead more focused on the scope of a well construed claim; (2) invention

Party Brief:

In Support of CLS (Defendant)

  • File Attachment: BSA Software Alliance–ISO CLS.pdf (169 KB) Business Software Aliance believes that software should be patentable, but not the software at issue here. 

    "Simple economics makes clear that, if patent protection for software were curtailed, the adverse consequences would be swift and severe. . . . Two factors are of particular significance—whether a claim can be implemented solely via a mental process or necessarily relies upon a machine for execution; and whether the claim uses an abstract idea or law of nature in a way that is novel, useful, and limited. When an invention falls short under both of these standards, it most likey is not patentable under Section 101. . . . Assessed under this framework, the software at issue here is not patentable. . . . It is plain that credit intermediation long preexisted computer implementation, and that it is a process that can be performed in the human mind, or by a human with pencil and paper. In addition, the computer aspect of the claims here does not add anything of substance to the mental process at issue. The computer implementation of the abstract idea is not limited in any fashion. And there is no suggestion that the process here is in anyway dependent upon computer technology to accomplish the directed end."

  • Download EFF–ISO CLS Patents are causing more harm than benefit. This is especially true for software patents that regularly include broad functional claims. However, Section 101 analysis is problematic because of its ambiguity. The EFF brief argues that the way to cure this is to more broadly interpret 35 U.S.C. § 112(f) (2012) so that functional software claims be given limited scope under the Federal Circuit's Means-Plus-Function doctrine. This approach stems from a recent article by Mark Lemley and fits directly within the avoidance doctrine that Professor Merges and I suggested in our 2010 article.
  • File Attachment: CCIA–ISO CLS.pdf (200 KB) Prometheus requires an inventive concept to pass 101.
  • File Attachment: Clearing House Ass'n–ISO CLS.pdf (819 KB)  Banking industry brief argues that "threshold" language means that "the Section 101 inquiry is the first step in the legal framework to determine patentability" and should be rigorously enforced.  
  • File Attachment: Google et al.–ISO CLS.pdf (982 KB).  Google acknowledges the difficulty with the abstract idea test because the term "abstract" is so difficult to define.  However, Google argues that the abstract ideas are much easier to identify individually than to define generally. This is roughly the same as know-it-when-you-see-it test for obscinity.  Google also writes that "abstract patents are a plague on the high-tech sector."
  • File Attachment: Stites Amicus Brief.pdf (262 KB) "The software patent game is a less than a zero sum game for the participants and has a large inhibiting effect on software innovation." Stites argues that the court should simply eliminate software patents.

 In Support of Neither Party, but Promoting a Stronger § 101 Requirement

  • File Attachment: British Airways et al–ISO Neither Party.pdf (191 KB) Supreme Court has rejected the "course-filter" "manifestly-evident" approach offered by the original CLS panel. Whether a claim fails under Section 101 can ordinarily be determined very early in a case and without and detailed claim construction.
  • File Attachment: Profs Hollaar & Trzyna–ISO Neither Party.pdf (217 KB) The only way to draw a clear and reasonable line on subject matter eligibility is to focus on its link to technology.
  • File Attachment: Juhasz Law Firm–ISO Neither Party.pdf (285 KB) "The test to determine whether a computer-implemented invention is a patent ineligible "abstract idea" should be whether steps that are central to the claim (i.e., not token extra-solution activity) have a "physical" or "virtual" link to a specific real or tangible object."
  • File Attachment: Koninklijke Philips–ISO Neither Party.pdf (549 KB) An applicant and patentee should have the burden of proving that the claimed software implementation is subject matter eligible.
  • File Attachment: Internet Retailers–ISO Neither Party.pdf (2454 KB) Simply rewriting a method claim as a system or storage medium cannot render the claim subject matter eligible. The Federal Circuit should empower district courts to make 101 determinations very early in cases – well before claim construction or the completion of discovery. "The savings to the parties in money and the courts in time are self-evident. And those savings are more likely to be obtained in precisely those cases in which the patents are least likely to be valid or valuable, cases brought under low-quality patents. Judicious application of Section 101 is likely to winnow out the worst patents at the lowest cost."

In Support of Neither Party, but Promoting a Weaker § 101 Requirement

  • File Attachment: IP Owners Ass'n–ISO Neither Party.pdf (301 KB) Software is generally patentable under Section 101. However, a claim "must describe the use of [a] computer with sufficient detail to avoid preempting other uses of the idea and the computer implementation must be a meaningful and significant element of the invention." A detailed claim construction is ordinarily necessary to determine whether that claim is directed to statutory subject matter.
  • File Attachment: CLS-Bank_v_Alice_USA-amicus-ISO-Neither-Party.pdf (311 KB) See this.
  • File Attachment: Sigram Schindler–ISO Neither Party.pdf (474 KB) The abstract idea test is sufficiently defined.
  • File Attachment: NY IP Law Ass'n–ISO Neither Party.pdf (735 KB) Efforts in some decisions to dissect the claim into old and new parts or computer and non-computer elements, should be rejected as squarely inconsistent with the Supreme Court's holdings in Diamond v. Diehr, 450 U.S. 175 (1981), and Bilski. "NYIPLA does not agree that method, system and storage medium claims should ipso facto rise and fall together. Rather, each claim (regardless of its type) should be considered independently as a whole to determine whether it is directed to patent-eligible subject matter."
  • File Attachment: IP Law Ass'n of Chicago–ISO Neither Party.pdf (1024 KB) Subject matter eligibility should be broad and flexible. IPLAC's test is similar to the government's factor's in its brief. However, the tone of the IPLAC questions suggest broader eligibility. When a claim includes a computer program, IPLAC would ask: "(a) Are the claims drawn to subject matter otherwise statutory, because if so, they do not become nonstatutory simply because they use a mathematical formula, computer program or digital computer. Diehr. (b) Are process claims, as a whole, without regard to the novelty of any element or steps, or even of the process itself, nothing more than a statutory process and not an attempt to patent a mathematical formula, because if so, they are not nonstatutory. (c) Do the claims implement or apply a formula in a structure or process which, when considered as a whole, is performing a function which the patent laws were designed to protect (e.g., transforming or reducing an article to a different state or thing), because if so, the claims are statutory. (d) Do the claims apply the laws to a new and useful end, because if so, they are statutory."
  • File Attachment: Conejo-Valley-Bar-Assn–ISO-Neither-Party.pdf (1589 KB) There is no need for a strong section 101 eligibility requirement because the other sections of the patent act do the work already.
  • File Attachment: IBM–ISO Neither Party.pdf (1624 KB) "In the exceptional case when the patent eligibility of a computer implemented invention is not readily apparent, the functional requirement of a computer counsels in favor of patent eligibility." Methods are different from systems and are different from storage media. As such, the subject matter eligibility issues are also different and thus, a system claim might be patent eligible while its parallel method claim may be ineligible.

AIA Technical Amendment (H.R. 6621) Moving Forward

Patent, , , ,

By Dennis Crouch

Representative Lamar Smith has put forward an amended version of H.R. 6621 (/media/docs/2012/12/BILLS-112hr6621-SUS.pdf). The amended bill removes the provision that would have crippled the value of pending pre-Uruguay Round Agreement Act (URAA). In my estimation about 200 of those applications filed prior to June 8, 1995 are still in prosecution at the USPTO. That change makes the bill less controversial and sets up easy passage in the House leadership has set the bill up for a voice vote this week, perhaps as early as Tuesday, December 18. At this point no opposition to the bill has been raised in Congress. To become law, the Senate would need to pass the bill before its December recess.

Important changes include the following:

Less Patent Term Adjustment: The current language of Section 154(b) suggests an applicant may begin accumulating PTA as of the filing date of an international PCT application that is later followed by a US national stage application. The proposed amendment would eliminate that option by clarifying that the PTA calculations only begin “commencement of the national stage under section 371 in an international application.” The change also provides that the PTO calculate PTA with the issuance rather than at the notice of allowance. This is obviously problematic for some because it blocks patentees from clearing-up PTA issues prior to patent issuance. See 35 U.S.C. 154(b)(3)(C). This also effectively limits the timing for administratively challenging PTA determinations to a two-month period. In my first read through of the Bill, I failed to recognize that the amendment would require an administrative challenge prior to filing a district court challenge. Thus, the two-month-from-issuance deadline becomes a fairly hard deadline for correcting PTA. The statute does not clarify what happens if the USPTO fails to decide the PTA challenge prior to the six-month deadline for filing a district court case. Courtenay Brinkerhoff has a nice post criticizing the provision here: http://www.pharmapatentsblog.com/2012/12/11/hr-6621-adds-new-roadblocks-to-patent-term-adjustment-appeals/.

Post-Grant Dead Zone: Once the AIA is fully implemented, an issued patent will be immediately challengeable through a post-grant review. Then, after a nine-month window, challenges will be available through inter partes review. However, the AIA has bit of an implementation issued because (1) post-grant reviews will only be available for patents issued on applications filed on or after March 16, 2013; (2) inter partes reviews are available for all patents, but only those that have been issued for at least 9-months; and (3) the old inter partes reexaminations are no longer available. This creates something of a dead zone in that for the next couple of years patents will not be challengeable through any inter partes system until 9-months after issuance. H.R. 6621 would eliminate that 9-month dead zone by allowing inter partes reviews to be filed at any time for applications with an effective filing date before March 16, 2013.

Delaying Inventor’s Oath: Section 115(f) of the AIA indicates that an either (1) an oath, (2) a substitute statement, or (3) sufficient assignment must be submitted prior to the notice of allowance of a patent application. The amendment would push that deadline back to be “no later than the date on which the issue fee for the patent is paid.”

Sharing Fees Between the Patent and Trademark Side: The AIA requires that, for the most part, fees collected on patents be used to cover “administrative costs of the Office relating to patents” while fees collected on the trademark side be used to cover “administrative costs of the Office relating to trademarks.” H.R. 6621 would eliminate that restriction and thus allow patent fees to pay for trademark operations and vice versa.

Derivation Proceedings: The AIA eliminated the ongoing viability of interference proceedings (although some will be pending for years) but created a new beast known as a derivation proceeding. H.R. 6621 would clean up the language for initiated a derivation proceeding under 35 U.S.C. §135(a). I need to think some about the language to understand the substance. I have created a rough mark-up of this language. (/media/docs/2012/12/CompareNewOldDerivation.docx).