Tag Archives: Licenses

Guest Post: Copyrights, Patents, and International Exhaustion

Copyright, First Sale / Exhaustion, Guest Post, Infringement, Patent,

By Professor Ryan Vacca

Last week, the Supreme Court heard oral arguments in Costco Wholesale Corporation v. Omega, S.A., to determine whether copyrighted works first sold in Switzerland and then imported into the U.S. infringed the copyright owner's right of distribution or whether the first sale doctrine (aka the exhaustion doctrine) applied to make the importation non-infringing.

The facts are fairly straightforward.  Omega is a watch company that manufactures watches in Switzerland.  Omega owns a copyright in a small visual image that is laser-engraved onto each Swiss-manufactured watch.  Costco, a U.S. warehouse retailer, acquired genuine Omega watches from a third party, who had purchased them from an authorized Omega distributor abroad.  Costco subsequently sold these watches in the United States.  Omega alleged that Costco's sale of these watches infringed its exclusive right to distribute copies of its copyrighted work under § 106(3) of the Copyright Act because § 602(a)(1) provides that:

Importation into the United States, without the authority of the owner of the copyright under this title, of copies … of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute copies … under section 106.

Costco argued that its sales in the U.S. were non-infringing under the exhaustion doctrine codified in § 109, which provides:

Notwithstanding the provisions of section 106(3), the owner of a particular copy … lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy.

As I blogged earlier and others have discussed here and here, the Court is wrestling with what the phrase "lawfully made under this title" means in § 109 of the Copyright Act.

Costco argues that goods manufactured abroad can still fall within this phrase whereas Omega argues that goods manufactured abroad are not "made under this title" unless the goods are made or sold with permission from the copyright owner to import the goods into the United States. At oral argument, the Justices quickly pointed out the difficulties in these two interpretations on both a textual and policy level.

In contrast to the formidable task before the Court in the copyright context, patent law takes a relatively easier approach to the international exhaustion issue. The seminal Supreme Court case on international exhaustion under patent law is Boesch v. Graff, 133 U.S. 697 (1890). In Boesch, the plaintiffs held a U.S. patent and German patent for an improvement to lamp burners. The defendants purchased burners in Germany from Mr. Hecht, who was authorized to make these burners in Germany because of Germany's prior user defense (Hecht was not authorized by the patentees). When the defendants imported these burners into the U.S., the patentees sued for infringement. The defendants argued that their legal purchase in Germany from Mr. Hecht permitted them to import and sell them in the United States. The Court disagreed and held that although Mr. Hecht had a right to make and sell the burners in Germany under German patent law, this had no effect on the U.S. patentee's ability to enforce its U.S. patent in the United States.

Over a century later, the issue of international patent exhaustion arose again in Jazz Photo v. ITC, 264 F.3d 1094 (Fed. Cir. 2001) and Fuji Photo Film v. Jazz Photo, 394 F.3d 1368 (2005), where the Federal Circuit reaffirmed the Supreme Court's holding in Boesch and clarified that the exhaustion doctrine would not apply even if the U.S. patentee or its licensees authorized the first sale abroad. In other words, even if the U.S. patentee permitted the first sale in a foreign country, a subsequent attempt to import such an item into the U.S. would still constitute infringement. In support of its holding, the Federal Circuit noted that the U.S. patentee's "foreign sales can never occur under a United States patent because the United States patent system does not provide for extraterritorial effect."

Based on the dialogue between the Justices and the attorneys in Costco, it appears that the Court may be uncomfortable limiting the exhaustion doctrine in the copyright context solely to situations where the first sale took place within the United States. They seem to be struggling to articulate a standard that allows some foreign sales to take advantage of the exhaustion doctrine while giving the phrase "lawfully made under this title" some meaning.

If, in the end, the rule announced by the Court in Costco differs from the holdings in Boesch and Jazz Photo, then what effect may this have on the future of patent law's exhaustion doctrine? Of course, the Court could maintain a dual approach, where copyright exhaustion and patent exhaustion are treated differently. However, if presented with an international patent exhaustion case, the Court could rely on its Costco holding and try to align the copyright and patent rules. We have seen the Court take this approach recently in MGM Studios v. Grokster, 545 U.S. 913 (2005), when it created a new theory of secondary liability in copyright law (the inducement theory) by relying, in large part, on patent law's recognition of this theory via statute in § 271(a) of the Patent Act.

Another possibility for harmonization of copyright and patent law is that the Court takes its cue from patent law and hold that exhaustion in the copyright context only applies when the copyrighted works were first sold or otherwise distributed in the United States. If this disrupts the policy concerns underlying the exhaustion doctrine, then Congress can always step in to resolve this issue.

Hyatt v. Kappos: Federal Circuit Opens Door to Post-BPAI Civil Actions

BPAI, En Banc, Enablement, Patent, Patent Cases 2010, , , , , , , , ,

By Dennis Crouch

Hyatt v. Kappos (Fed. Cir. 2010) (en banc)

Summary: In a 6-2-1 en banc decision, the Federal Circuit has reversed its prior precedent and held that a patent applicant must be allowed to introduce new evidence in a Section 145 civil action filed to challenge a USPTO refusal to grant patent rights and that the issues implicated by the new facts must be considered de novo.

[W]e hold that the only limitations on the admissibility of evidence applicable to a § 145 proceeding are the limitations imposed by the Federal Rules of Evidence and Federal Rules of Civil Procedure. Therefore, we hold that the district court applied the wrong legal standard for the admissibility of evidence in a § 145 proceeding and abused its discretion when it excluded Mr. Hyatt's declaration. . . .

The particular significance of a § 145 civil action is that it affords an applicant the opportunity to introduce new evidence after the close of the administra-tive proceedings—and once an applicant introduces new evidence on an issue, the district court reviews that issue de novo.

However, the Court also wrote that an applicant may still be barred from presenting new "issues" in the civil action and that, when no new evidence is presented, that BPAI findings and rulings should be given deference under the Administrative Procedures Act.

Impact: This decision could be seen as relieving some pressure on applicants to ensure that their cases for patentability are exhaustively presented to the USPTO's internal Board of Patent Appeals and Interferences (BPAI). The decision is especially important in light of the growing role of BPAI appeals in the ordinary course of patent prosecution. In its argument, the USPTO suggests that a strategic applicant may now choose hold-back some evidence from the BPAI appeal in order to overcome the APA deference if the case goes to the District Court.

Statute in Question: 35 U.S.C. § 145 creates a right to a "civil action" in Federal District Court against the USPTO Director whenever an applicant is "dissatisfied with the decision of the Board of Patent Appeals and Interferences in an appeal under section 134(a)." In the alternative, an applicant may appeal directly to the Court of Appeals for the Federal Circuit.

Background: Gil Hyatt is a well-known inventor and successful patentee. Hyatt filed a civil action in 2003 after the BPAI sustained written description and enablement rejections for seventy-nine of Hyatt's claims. The examiner had issued "2546 separate rejections of Mr. Hyatt's 117 claims" based on the doctrines of inadequate "written description, lack of enablement, double patenting, anticipation, and obviousness." The Board reversed all of the examiner rejections except for the § 112 p1 arguments. Complicating this case is the fact that the application's claimed priority date is 1975. Hyatt has aggressively pushed the bounds of USPTO practice. This decision is one of more than a dozen Federal Circuit decisions focusing on Hyatt's patent rights. When California pursued Hyatt for tax revenue for his patent licenses, Hyatt took the case to the Supreme Court and eventually won a $388 million judgment against the state of California for invasion of privacy.

After the Board affirmed a set of written description and enablement rejections, Hyatt filed a Section 145 civil action and included a declaration offering new evidence of enablement and written description. The district court excluded that inventor-declaration from evidence based on Hyatt's "negligence" in failing to previously submit the information to the PTO. In a 2009 panel decision, the Federal Circuit held that the district court had properly excluded the new evidence – holding that the district court may properly exclude evidence that Hyatt should have produced to the PTO. That opinion was penned by former Chief Judge Michel and Joined by Judge Dyk. Judge Moore wrote a vigorous dissent that supported a patent applicant's right to a full civil action including the right to submit additional evidence when challenging a PTO decision.

Judge Moore wrote the en banc decision that was joined by Chief Judge Rader and Judges Lourie, Bryson, Linn, and Prost. Judge Dyk dissented and was joined by Judge Gajarsa. Judge Newman Concurred-in-Part – arguing that the civil action should not give deference to PTO factual determinations.

A key to the majority decision is the notion that a Section 145 civil action is not an appeal, but rather a new, separate lawsuit filed to force the PTO to act. In its analysis, the court began with a focus on the 150-year history of the civil action right (and its predecessor Bill in Equity) and the reality that new evidence has always a part of those remedies. See, e.g., Gandy v. Marble, 122 U.S. 432 (1887) (explaining that the [predecessor] § 4915 suit in equity was "not a technical appeal from the Patent Office, nor confined to the case as made in the record on that office"). The court then reviewed the current text of the statute, implications of the APA, and various policy arguments before reaching its conclusions.

In a 37-page dissent, Judge Dyk argued that the majority made an improper leap from (1) the correct premise that new evidence should be admissible in the civil action to (2) the incorrect conclusion that the law provides no meaningful limits on the introduction of new evidence regardless of what was presented at the BPAI.

Notes:

Trademark Rights for Sound Recordings

Patent, Trademark

Carl Oppedahl lost his case to register the mark “patents.com.”  However, that setback did not dissuade him from continuing to push against trademark law limitations. 

Recently, the USPTO issued a trademark registration certificate for his “sensory mark.” The mark consists of a sixteen-second musical introduction that Oppedahl uses for his recorded lectures on patent law practice. 

During the trademark prosecution, the USPTO examining attorney initially suggested that "due to the length of the proposed mark, consumers may consider the sound to be a mere entertaining prelude to the sound recording, more suitable as a copyrightable work than as a trademarkable source indicator."  Oppedahl responded by pointing-out that the PTO had registered the THX sound recording [THX.MP3] which is apparently 25–seconds in length as registered.  I recently (and unsuccessfully) attempted to use a similar argument when pulled-over for speeding.  Apparently, I have no right to speed just because others speed without getting caught. 

The USPTO has registered a number of sound marks, including the NBC chimes in 1972.  Harley Davidson eventually withdrew its application to register a mark on the sound made by the roar of its V-Twin engine.  

 

Guest Post: An Interesting Preview of Myriad?

Patent, Patent Cases 2010, ,

By Professor Paul M. Janicke, University of Houston Law Center

The Myriad case from the Southern District of New York, involving patent eligibility of DNA isolates derived from naturally occurring DNA, drew a great deal of attention. The court basically held such isolates ineligible for patent coverage as being too similar to the natural substances, and hence barred by the product-of-nature case law. In the district court Myriad drew twenty-three amici briefs and a great deal of press attention. It is now on appeal at the Federal Circuit, where the first brief is due to be filed October 22. However, in a little-noticed partial dissenting opinion in another case, Circuit Judge Timothy Dyk has given a preview of his likely views on this important question.

The appellate case was Intervet Inc. v. Merial Ltd., decided by a Federal Circuit panel on August 4. The case involved DNA sequences encoding viruses harmful to pigs. According to the patent involved, knowledge of such sequences facilitates detection methods and production of vaccines against the harmful viruses. The patent specification gave full-length DNA sequences for five strains of these types of viruses, and a sequence for a similar but harmless pig virus for comparison purposes. The issues raised below and on appeal were: (i) whether the district court’s constructions of certain claim terms were correct; and (ii) whether a narrowing amendment made in the PTO while a claim was under prior art rejection foreclosed all access to the doctrine of equivalents for the territory between the original language and the amended language or left some of it open. No statutory subject matter issue was raised below or in the appeal.

The Intervet panel majority, consisting of Judges Prost and Bryson, decided those issues largely in favor of the patentee, Merial. Judge Dyk issued an opinion concurring in part and dissenting in part on the appealed questions. However, he also took the occasion to caution that the court’s decision in the case did not mean the court was acquiescing in the patent-eligibility of DNA, even in isolate form: “I write separately primarily to make clear that in construing the claims, we are not deciding that the claims as construed are limited to patentable subject matter.” He proceeded to address the main issue pending in Myriad, namely, whether isolates of DNA similar to DNA found in natural sources like humans or animals are eligible for patenting, or whether they run afoul of the Supreme Court’s pronouncements about products of nature in cases such as Funk Bros., Chakrabarty, and the recent Bilski decision. Judge Dyk indicated he did not think claiming the DNA in its isolated form was sufficient to distinguish it, for eligibility purposes, from the naturally occurring substance. He read the Supreme Court cases to require subject matter that is “qualitatively different” from the naturally occurring substance, and said it was “far from clear” that DNA isolates as claimed here met that test.[8] Perhaps foreshadowing his position in Myriad, he stated:  

The mere fact that such a DNA molecule does not occur in isolated form in nature does not, by itself, answer the question. It would be difficult to argue, for instance, that one could patent the leaves of a plant merely because the leaves do not occur in nature in their isolated form.

The impact of Judge Dyk’s views is difficult to predict. His is certainly an important judicial voice. However, he may not be on the panel drawn to hear the Myriad appeal, and the case may never be heard en banc. Moreover, these might not be Judge Dyk’s final positions on the issues. Only time will tell how this important case plays out. 

* * * * *

[1] Association for Molecular Pathology v. United States Patent & Trademark Office, 2010 U.S. Dist. LEXIS 35418 (S.D.N.Y. April 2, 2010). Myriad Genetics was a co-defendant and co-owner of at least one of the patents in this declaratory action and exclusive licensee under others, hence Myriad has become the popular name of the case.

[2] 2010 WL 3064311 (Fed. Cir. 2010).

[3] See U.S. Patent 6,368,601, col. 1, lines 6-10.

[4] Id. at *9.

[5] Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130 (1948).
[6] Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980). 

[7] Bilski v. Kappos, 130 S.Ct. 3218 (2010).

[8] Intervet, 2010 WL 3064311 at *11.

[9] Id.

Written Description: Description Must do more than Allow PHOSITA to “Envision” the Claimed Invention

Biotech, Enablement, Interference, Patent, Patent Cases 2010,

Goeddel v. Sugano (Fed. Cir. 2010)

When two inventors both claim rights to a single invention, the USPTO is charged with awarding rights to the “first applicant to conceive the invention, provided that [inter alia,] the invention is duly reduced to practice, actually or constructively.” A foreign-filed patent application can constitute constructive reduction to practice “provided that the requirements of §112 are met.”

Sugano filed its original human fibroblast interferon (hFIF) patent applications in Japan in 1979 and 1980 but did not file the claims for the US continuation-at-issue until the 1990s. Meanwhile, Goeddel filed its application in June 1989. In the interference, Goeddel argued that Sugano’s original filings did not provide sufficient disclosure to satisfy the written description requirement of 35 U.S.C. §112 (with respect to the claims being litigated in the interference).

The BPAI (Board) held that Sugano’s 1980 Japanese Application constituted constructive reduction-to-practice of the claims. On appeal, however, the Federal Circuit has reversed – holding that the disputed claims failed the written description test because claimed DNA sequence used to create an hFIF amino-acid sequence was not explicitly defined by the original application.

The Board erred in ruling that priority is established if a person of skill in the art could “envision” the invention of the counts. Sugano argues that this ruling is supported by Enzo Biochem, Inc. v. Gen-Probe Inc., 323 F.3d 956, 968 (Fed. Cir. 2002) and University of Rochester v. G.D. Searle & Co., 358 F.3d 916, 923 (Fed. Cir. 2004), but these cases do not hold that envisioning an invention not yet made is a constructive reduction to practice of that invention. In Enzo Biochem the court confirmed that depositing an actual sample may meet the written description requirement when science is not capable of a complete written description. Enzo Biochem, 323 F.3d at 970. In University of Rochester the court held that the description of the COX-2 enzyme did not also serve to describe all unknown compounds capable of inhibiting the enzyme. University of Rochester, 358 F.3d at 926-27. Precedent in evolving science is attuned to the state of the science, but remains bound by the requirement of showing “that the inventor actually invented the invention claimed.” Bradford, 603 F.3d at 1269; see Fiers v. Revel, 984 F.2d 1164, 1170 (Fed. Cir. 1993).

Sugano had argued that the specific DNA sequence coding for the amino acids was not necessary because a person of skill in the art could have identified the sequence and therefore, it was “unnecessary to spell out every detail of the invention in the specification.” The appellate panel rejected that argument – holding that the DNA itself should have been identified since the DNA sequence was claimed.

Notes:

  • Genentech owns Goeddel’s rights while the Japanese Foundation for Cancer Research owns Sugano’s rights. (Schering is a licensee).

Federal Circuit Holds-Line on Patent Misuse Defense

Doctrine of Patent Misuse, Infringement, Patent, Patent Cases 2010,

By Dennis Crouch

In a split decision, an en banc Federal Circuit has held that the non-statutory equitable doctrine of patent misuse should be narrowly applied. Here, the court held that an anticompetitive agreement between companies to suppress a given technology would not constitute misuse of a patent covering an alternative technology being promoted by the companies. Thus, the patents can still be enforced. Of course, companies following this pathway could still be liable for antitrust violations.

Princo Corp. v. International Trade Commission and U.S. Philips Corp. (Fed. Cir. 2010) (en banc)

The alleged patent misuse was associated with a CD-R/RW patent-pool arrangement between Philips and Sony. The two companies chose a particular method (Raamaker) of encoding location information on the CD to serve as the standard and then allegedly suppressed another method (Lagadec). (Both methods were covered by patents held by the companies.)

Princo argued here that creation of the patent pool licensing the Raamaker method and the suppression of the Lagadec method constituted patent misuse and should render the patents undenforceable.

Patent Misuse:     

The doctrine of patent misuse is … grounded in the policy-based desire to 'prevent a patentee from using the patent to obtain market benefit beyond that which inheres in the statutory patent right.' Mallinckrodt, 976 F.2d at 704. It follows that the key inquiry under the patent misuse doctrine is whether, by imposing the condition in question, the patentee has impermissibly broadened the physical or temporal scope of the patent grant and has done so in a manner that has anticompetitive effects. B. Braun, 124 F.3d at 1426. Where the patentee has not leveraged its patent beyond the scope of rights granted by the Patent Act, misuse has not been found. See Monsanto, 363 F.3d at 1341 ("In the cases in which the restriction is reasonably within the patent grant, the patent misuse defense can never succeed."); Virginia Panel, 133 F.3d at 869 (particular practices by the patentee "did not constitute patent misuse because they did not broaden the scope of its patent, either in terms of covered subject matter or temporally"). . . .

Given that the patent grant entitles the patentee to impose a broad range of conditions in licensing the right to practice the patent, the doctrine of patent misuse "has largely been confined to a handful of specific practices by which the patentee seemed to be trying to 'extend' his patent grant beyond its statutory limits." USM Corp. v. SPS Techs., Inc., 694 F.2d 505, 510 (7th Cir. 1982).

Recognizing the narrow scope of the doctrine, we have emphasized that the defense of patent misuse is not available to a presumptive infringer simply because a patentee engages in some kind of wrongful commercial conduct, even conduct that may have anticompetitive effects. See C.R. Bard, Inc. v. M3 Sys., Inc., 157 F.3d 1340 (Fed. Cir. 1998) ("Although the defense of patent misuse . . . evolved to protect against 'wrongful' use of patents, the catalog of practices labelled 'patent misuse' does not include a general notion of 'wrongful' use."). Other courts have expressed the same view. See Kolene Corp. v. Motor City Metal Treating, Inc., 440 F.2d 77 (6th Cir. 1971) (There is no such thing as "misuse in the air. The misuse must be of the patent in suit. An antitrust offense does not necessarily amount to misuse merely because it involves patented products or products which are the subject of a patented process." (citations omitted)); McCullough Tool Co. v. Well Surveys, Inc., 395 F.2d 230 (10th Cir. 1968) (the defense of patent misuse has been allowed "only where there had been a misuse of the patent in suit"). While proof of an antitrust violation shows that the patentee has committed wrongful conduct having anticompetitive effects, that does not establish misuse of the patent in suit unless the conduct in question restricts the use of that patent and does so in one of the specific ways that have been held to be outside the otherwise broad scope of the patent grant.

On appeal, the en banc Federal Circuit held that this case does not fit with other misuse precedent. "This case presents a completely different scenario from the cases previously identified by the Supreme Court and by this court as implicating the doctrine of patent misuse." In particular, the alleged misuse was alleged agreement to suppress "an entirely different patent that was never asserted." "Even if such an agreement were shown to exist, and even if it were shown to have anticompetitive effects, a horizontal agreement restricting the availability of Sony's Lagadec patent would not constitute misuse of Philips's Raaymakers patents or any of Philips's other patents in suit."

Reduced to its simplest elements, the question in this case comes down to this: When a patentee offers to license a patent, does the patentee misuse that patent by inducing a third party not to license its separate, competitive technology?

The court answered this question with a resounding "no" – such an action "would not fall within the rationale of the patent misuse doctrine as explicated by the Supreme Court and this court." In particular, the patent-in-suit there must be a direct connection between the patents-in-suit and the alleged misconduct.

Dissent: Judge Dyk (joined by Judge Gajarsa) wrote a 32-page dissent arguing that the patent misuse doctrine should be given teeth:

Evidently the majority thinks it appropriate to emasculate the doctrine so that it will not provide a meaningful obstacle to patent enforcement. . . . Indeed, the majority goes so far as to suggest that the misuse doctrine be eliminated entirely. I read the relevant Supreme Court cases and congressional legislation as supporting a vigorous misuse defense, clearly applicable to agreements to suppress alternative technology. The majority cabins the doctrine in contravention of this Supreme Court authority. I respectfully dissent.

Interval Licensing v. AOL, Apple, eBay, Facebook, Google, etc.

License, Obviousness, Patent,

Interval Licensing LLC v. AOL, Apple, eBay, Facebook, Google, Netflix, Office Depot, OfficeMax, Staples, Yahoo!, and YouTube (W.D. Wash. 2010).

Microsoft co-founder Paul Allen started Interval Research in 1992. During the 1990’s, the company filed for several user-interface related patents that were primarily intended to improve a computer user's online experience. The patents focus on what I might call “lightweight” usability ideas such as a occupying the peripheral attention of a user; organizing audio/visual for display in a browser; and alerting users to items of current interest.

When Interval closed its doors, the patents were transferred to Vulcan Patents LLC (presumably another Paul Allen company) and then to Interval Licensing which remains a Paul Allen company.

PatentLawPic1133

The patents are well drafted. Of course, even excellent drafting cannot cure obviousness problems. I suspect that the litigation will focus primarily on whether these inventions were obvious back when the patents were filed? In addition to arguing in court, I expect that the defendants will also appeal to the US Patent Office — asking the agency to take a second look at the patents via reexamination.

Take claim 1 of asserted Patent No. 6,757,682 (filed in 2000) as an example.

1. A system for disseminating to a participant an indication that an item accessible by the participant via a network is of current interest, comprising:

a computer configured to

receive in real time from a source other than the participant an indication that the item is of current interest;

process the indication;

determine an intensity value to be associated with the indication and an intensity weight value, and adjusting the intensity value based on a characteristic for the item provided by the source; and

inform the participant that the item is of current interest; and

a database, associated with the computer, configured to store data relating to the item.

I don’t have any prior art on hand, but the claim sure feels obvious (in hindsight)…

Of course, the system embodied in claim 1 above represents an important core feature of services provided by all of the listed defendants. (A similar story can be told of the other asserted patents.) Thus, if the patents are valid, the damage award could be quite large.

It may be important to note that the complaint does not suggest that any of the defendants copied the invention from Paul Allen's company or that the defendants even knew about the patents before today. Of course, a patentee does not have to show copying in order to prove patent infringement and back-damages can still be available even when the infringement occurred without knowledge of the patent. (Additional punitive damages may be awarded if the infringement was willful).

It will be interesting to see how the Supreme Court’s foray into patent law over the past four-years will impact this case. I look to three important decisions:

  1. In KSR v. Teleflex, the Supreme Court raised the patentability standard of nonobviousness — making it more likely that these patents will be held invalid as obvious.
  2. In Bilski v. Kappos, the Supreme Court held that certain business method inventions are not patentable. Some of the claims in the patents-in-suit may be susceptible to a similar attack. However, most of the asserted claims appear to be tied closely to a technological implementation in a way that may avoid problems under Bilski.
  3. In EBay v. MercExchange, the Supreme Court made it more difficult for patent holding companies (such as the plaintiff here) to obtain an injunction to stop ongoing infringement. Of course, it is unlikely that Interval actually wants to stop infringement — rather, the company is looking for a large license fee.

Final point: The vast majority of patent cases settle. Here, however, all of the parties have large amounts of cash-on-hand. In addition, some of the defendants are repeat patent infringement defendants. Those factors tend to make settlement less likely.

Guest Post: Patent Abstracts Are Not The Answer To Repatriating Jobs

Guest Post, Patent, Patent Legislation, ,

by Jeremy Kriegel of Marshall, Gerstein & Borun

In an effort to promote repatriation of jobs, H.R. 5980 was introduced on July 29, 2010. The Bill proposes replacing the 18-month publication of U.S. patent applications in their entirety with a requirement that the U.S. Patent & Trademark Office (USPTO) publish only the abstract of an application until it issues as a patent. This change would detrimentally impact the ability to monitor competitors’ pending applications (provided the full text of the applications were not otherwise still available via Public PAIR, an on-line resource provided by the USPTO that supplies free access to all patent documents exchanged between patent applicants and patent examiners upon publication of an application).

The proposed shift would potentially impact companies that have come to depend on access to published patent applications as a source of lawful competitive intelligence and freedom-to-practice planning.

With knowledge that only an application’s abstract will be made available to the public, it would likely just be a matter of time before applicants become more evasive in the drafting of patent abstracts. Even today, patent abstracts rarely provide meaningful detail as to the scope of the claims of a patent application, and are limited by USPTO regulations to 150 words or less. 37 CFR 1.72(b).

While a change to the statutory term of U.S. patents and a judicially-created “prosecution laches” defense eliminated most concerns over “submarine” patents (where an applicant would keep at least one of a chain of patent applications pending before springing an issued patent on an unsuspecting party or industry), limiting public access to only the abstract of a pending application would invite a return to such undersea tactics in patent prosecution.

To the extent publishing only the abstracts of patent applications has any potential to reduce the loss of American jobs, this protection is illusory in most situations. Many patent applications on products having significant commercial potential are filed not only in the United States, but also in foreign countries (and/or internationally under the Patent Cooperation Treaty). Most foreign countries already require publication of the entire patent application 18 months from the earliest priority filing date, so publishing only the abstract in the U.S. would merely invite interested third parties to search for foreign counterpart applications published in their entirety.

For applicants concerned about foreign competitors learning of the details of their inventions prior to issuance of their patents, U.S. patent law already provides an avenue even more secure than limiting publications of applications to abstracts as proposed in H.R. 5980. So long as an applicant agrees at the time of filing a U.S. application to forego foreign patent filings in countries that publish applications 18 months after filing, the application may include a request for non-publication. The USPTO will then maintain the entire application in secrecy until the application issues as a patent. The option of foregoing foreign filings in exchange for non-publication of a U.S. patent application was proposed to assuage concerns over the disparate impact pre-grant U.S. publication might have on small businesses. This was known as the Kaptur Amendment and was initially limited to “small entities” (i.e., entities with fewer than 500 employees, universities and independent inventors), but the small entity requirement was ultimately removed.

Alternatively, 35 U.S.C. Section 154(d) provides provisional rights to obtain a reasonable royalty for infringement occurring prior to the issuance of a patent, beginning as early as the date of publication of the application. Recovery of pre-issuance royalties requires the infringed claims ultimately issuing in a patent to be substantially identical to claims of the published application and requires actual notice to the infringer of the published patent application. If claims are substantially amended during prosecution, an applicant may, for a fee, electronically request republication of the application with the amended claims. H.R. 5980 would limit provisional rights to claims of published PCT applications that later mature into U.S. patents. Ironically, this disparity would favor foreign applicants of US patents (who typically file PCT applications prior to filing a US national phase application) over US inventors who opt not to file a PCT application. Foreign patentees in some situations would effectively have a longer term to collect patent damages than their US counterparts.

Another problem with the “Patent Protection” proposal of H.R. 5980 is that it runs contrary to commitments the United States made to Japan under the U.S.-Japan Letters of Agreement signed August 16, 1994 by then-Commerce Secretary Richard H. Brown and Japanese Ambassador Takakazu Kurizama. In exchange for U.S. commitments to publish applications 18 months after filing, expand the grounds for requesting patent reexamination, and permit increased third party participation in reexaminations, Japan agreed to eliminate dependent patent compulsory licenses, end third party pre-grant oppositions, and offer an accelerated examination procedure. It took five years for mandatory publication of applications to become law with passage of the American Inventors Protection Act of 1999.

Though mandatory publication of U.S. patent applications is barely a decade old, H.R. 5980’s bid to substitute abstracts for full publication of U.S. applications would return a cloak of secrecy to some U.S. patent applications. However, for patent applications also filed abroad, the reality is that corresponding applications filed in other countries would still be published in their entirety. Given the ubiquitous access to published foreign patent applications made possible by the Internet, publishing only patent abstracts in the U.S. would not provide a meaningful obstacle to foreign companies seeking to capitalize on U.S. ingenuity.

Jeremy R. Kriegel is a partner at Marshall, Gerstein & Borun LLP in Chicago. This article expresses the views of the author, and does not necessarily reflect the views of Marshall, Gerstein & Borun or its clients.

Attorney Versus Agent

Law Firm Practice, Patent

PatentLawPic1123As a continuation of the previous posts on patent attorney demographics, I looked at the status of registered US patent practitioners.  As the chart above demonstrates, more recently registered practitioners are less likely to be registered as patent attorneys. 

It is not surprising that a high percentage of recently registered practitioners are agents.  Many current patent agents will eventually become patent attorneys.  In addition, some practitioners never update their status even after becoming attorneys. However, I suspect that those factors do not explain the entire trend.

For those who do not know, an individual can become a patent agent upon passing the patent practitioner registration examination (patent bar exam).  To become a patent attorney, the individual must also be licensed to practice law in at least one US state.

  • Thanks to my research assistant Lawrence Higgins (2L) for helping obtain some of this data.

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

Guest Post, Inventors, Inventorship, Patent, Survey,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Figure 1: Reasons to File for Patents

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

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

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

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

Guest Post: Why Bilski Benefits Startup Companies

Amicus Brief, Guest Post, Patent, Patentable Subject Matter, Survey, , , ,

pic-98.jpg

I asked Professor Ted Sichelman to provide his thoughts on how the Bilski decision impacts start-up companies and their incentive to innovate. DC

By Ted Sichelman, University of San Diego School of Law

Before practicing law and becoming a professor, I founded and ran a small software company that sells speech recognition software to taxicab companies. After my company designed its technology, we filed for patents. Later on, when raising financing from angel and venture capital investors, they reviewed our pending applications carefully and considered them a way to stop potential competition. Indeed, in a recent survey of startup firms, the Berkeley Patent Survey—which I conducted with Robert Merges and Pamela Samuelson of UC Berkeley School of Law and Stuart Graham (now Chief Economist at the PTO)—startup executives reported that nearly 70% of venture capital firms and 50% of angel investors said that patents were important to their investment decisions. Relatively broad patentable subject matter assists startups in raising needed funds. As I have argued elsewhere, another reason for broad subject matter is that startups engage in substantial amounts of post-invention—but pre-commercialization—innovation that is not always technological in nature. For instance, many startups generate marketing, financial, legal, and other types of non-technological innovations during the costly commercialization process. Providing IP protection for these innovations not only can produce more of them, but also can help drive technology commercialization.

Assuming the Federal Circuit and the PTO do not go astray in implementing Bilski—which admittedly leaves many doors open to do so—the opinion will allow startups to continue to use patents to garner financing and will, hopefully, set an appropriate balance on the patentability of non-technological inventions. In particular, as I urged in an amicus brief with Professors Mark Lemley, Michael Risch, and Polk Wagner—Bilski rightly adheres to the 150-year old tradition that as long as the claimed invention is a machine, manufacture, composition of matter, or a process, only natural phenomena, laws of nature, and abstract ideas should be excluded from eligible subject matter.

One might contend that by allowing business methods—as well as software and other “intangible” innovations—to be patented, startup firms will encounter a greater “thicket” of patents, making it more difficult for them to enter particular markets. For example, an amicus brief in Bilski filed on behalf of “entrepreneurial and consumer advocates” argued that “if the PTO is permitted to grant broad business and service process patents, small start-up businesses would face an entirely new regime of business regulation – essentially requiring businesses to request private permits to operate from their competitors who have patents, independent of whatever technology the new business uses to compete.” Justice Stevens’ echoed this view by writing in his concurrence that business methods patents “can take a particular toll on small and upstart businesses.”

In actuality, under the Federal Circuit’s previous State Street Bank opinion, in operation for a decade prior to Bilski, the PTO regularly granted “broad business and service process patents” and there is little evidence that these patent-holders required startups to license them in any significant numbers. The Berkeley Patent Survey found that only 8% of the population of respondent software companies and 12% of venture-backed software companies had licensed-in even one patent. In sum total, a relatively low percentage, 0.6% and 3%, respectively, reported licensing a patent solely to avoid a lawsuit. And while Bilski ultimately holds that business methods are not per se unpatentable, the practical effect of the outcome will be to place unapplied business methods into the precluded “abstract idea” category. If implemented properly, such an approach will ensure that startups—and, indeed, larger and more established companies—are not unnecessarily subject to overly broad patents while maintaining robust incentives to innovate.

Ted Sichelman is an Assistant Professor at the University of San Diego School of Law, where he teaches patent law and other intellectual property courses.

Bilski, Kenny Rogers and Supreme Court Rule 46

Guest Post, Patent, Patentable Subject Matter, , , ,

by Professor John F. Duffy, George Washington University Law School

You got to know when to hold 'em, know when to fold 'em
Know when to walk away, know when to run                       
                                                       — Kenny Rogers in The Gambler
_____________________________

Kenny Rogers’ hit song The Gambler provides some wise strategic advice, valid not only in cards and but also in law and perhaps in life generally:   If “fold ’em” is an option, sometimes it is the best one. Supreme Court Rule 46 on “Dismissing Cases” provides petitioners in Supreme Court cases the opportunity to “fold ’em,” and in the days remaining before the Supreme Court delivers an opinion in its Bilski v. Kappos case, the most puzzling question in the case has become this: Why won’t the petititoners in Bilski fold?

From the perspective of the petitioners, the case for seeking dismissal seems overwhelmingly strong. In the months since the oral argument in Bilski, every Justice save Justice Stevens has delivered an opinion from the set of cases argued in the November sitting. Bilski remains the only case not decided from that sitting. Because only one case remains undecided and only one Justice has yet to deliver an opinion from that month, there is widespread agreement among those familiar with Supreme Court practice that Justice Stevens is writing the Court’s opinion in Bilski. Thus, the petitioners are now reduced to hoping that Justice Stevens, who once argued in dissent that all software should be outside patentable subject matter, will author an opinion that will be more pro-patent than the positions taken by all but one of the Federal Circuit judges.

But there’s more. Not only do petitioners have no realistic hope of winning anything in the case, they also have much to lose by persisting in the appeal. Petitioners—the named inventors in the application, Bernard Bilski and Rand Warsaw—and their firm WeatherWise have other patent claims, some issued and some pending, that pass the machine-or-transformation test but that may not pass whatever test Justice Stevens is busy constructing.

That’s a quick summary of the case for the petitioners seeking dismissal of Bilski. The details only make the case stronger. Then again, there is also a distinct possibility that petitioners’ side of the case may want to lose.

The Petitioners’ Chances for Victory: Nil.

Any rational consideration of persisting in a legal case should begin with a frank assessment of the chances for gain and loss.   I’ll begin with the chances for gain, for they are as close to zero as can be imagined.

Good poker players learn to read other players’ “tells,” subtle clues which give hints about the likely outcomes if the hand is played to completion. In Bilski, the Supreme Court has also given some awfully clear “tells” that do not bode well for the petitioners.

Most importantly, the assignment pattern of the Court’s opinions strongly suggests that Justice Stevens is writing the opinion. The assignment of opinions in the Court is typically done with two goals in mind: (1) to give each Justice the chance to author at least one majority opinion from each sitting; and (2) to average out the number of majority opinions written by each Justice. Twelve separate cases were argued in the November sitting, including Bilski. (This counts two cases—Graham v. Florida and Sullivan v. Florida—as effectively one case, as the two cases involved the same issue and were eventually decided the same day.) Every Justice has delivered a majority opinion from that month, with the exception of the Justice Stevens. Thus, most Supreme Court watchers would predict that the one remaining opinion from the month—Bilski—was assigned to Justice Stevens.

There is some uncertainty about this result, however. Pursuant to Supreme Court Rule 46, one of those twelve cases (Pottawattamie County v. McGhee) was dismissed two months after the oral argument, so the Justice assigned to write the opinion in that case is not publicly known. Still, Stevens still remains the most likely candidate to have been assigned the Bilski opinion because of the larger pattern of assignments from the Court’s first three sittings (September, October and November). During those three months, 26 cases were argued. If the Court were trying to average out the workload among the Justices, then every Justice save one should have been assigned three majority opinions to write.

By now, all Justices have delivered three majority opinions from those first sittings with the exception of Justices Stevens and Sotomayor. Justice Stevens has delivered only one majority opinion (a case argued in October); Justice Sotomayor has delivered two majority opinions (one each from October and November). It seems highly likely that Justice Stevens was assigned only two majority opinions to write from the first three sittings because Stevens was also writing the principal dissent in Citizens United v. FEC, the hugely important campaign finance case to which the Court gave expedited consideration.   (If, however, Justice Stevens was originally assigned three majority opinions, then he would have definitely been assigned Bilski.) Assuming Justice Stevens was assigned only two majority opinions, then the assignments to write majority opinions in Bilski and the now-dismissed Pottawattamie County case would have been distributed to Stevens and Sotomayor. Sotomayor would seem like the natural for Pottawattamie County, which involved the immunity of state prosecutors from civil liability, because Sotomayor served as a state criminal prosecutor under New York City’s Robert Morgenthau. Stevens, by contrast, was an antitrust lawyer before becoming a judge, and he has shown significant interest in patentable subject matter.

Another clue to the authorship of Bilski comes from the lengthy delay in announcing the opinion. As previously mentioned, Justice Stevens wrote the principal dissent in the Citizens United case, which was heard and decided on an expedited basis by the Court because of the case’s importance to the spring primary season. Stevens’ impassioned dissent in that case ran for 90 pages, and that opinion seems to have delayed the release Stevens’ other majority opinions. Indeed, for two months after the January decision in the Citizens United case, Justice Stevens was the only Justice on the Court not to have delivered any majority opinion during the entire Term.

If, as seems likely, Justice Stevens is writing the majority opinion in Bilski, that is an awful omen for the petitioners. Justice Stevens wrote the majority opinion for the Court in Parker v. Flook (1978), which created the enigmatic rule that certain forms of “post-solution activity” cannot transform an unpatentable principle into a patentable process. Justice Stevens is also one of the few Justices ever to attempt to draw bright-line rules for excluding whole fields from the patent system. His dissent in Diamond v. Diehr, 450 U.S. 175, 193 (1981), sought to promulgate “an unequivocal holding that no program-related invention is a patentable process under § 101 unless it makes a contribution to the art that is not dependent entirely on the utilization of a computer.” 450 U.S. at 219.

In addition to the Court’s fairly clear “tell” that Justice Stevens will deliver the opinion of the Court, there are other signs that the petitioners’ chances for ultimate success are nil. The oral argument did not go well at all for petitioners’ counsel (to put it mildly), and a significant portion of the government’s argument was devoted to arguing that the Court should not impose a more restrictive rule than that sought by the PTO (e.g., a complete ban on business method patents, whether machine implemented or not). See Transcript of Argument at 40-50. In addition, at the Federal Circuit, even Judge Rader—one of the two judges willing to take a more comprehensive view of patentable subject matter—stated explicitly that he would agree the petitioners’ claims were unpatentable as abstract ideas.

Finally, if more evidence were needed, there is the PTO’s extraordinary record of success at the Supreme Court in patent cases. Two recent articles, one by Colleen Chien of Santa Clara University and one of my own, have independently noted that, since the creation of the Federal Circuit, the government’s substantive positions on patent law have always prevailed at the Supreme Court. See Colleen Chien, Patent Amicus Briefs: What the Courts’ Friends Can Teach Us About the Patent System (2010); John F. Duffy, The Federal Circuit in the Shadow of the Solicitor General, 78 G.W.U. L. Rev. 518 (2010).   The petitioners in Bilski must hope that the Supreme Court will finally rule against the government, and in an opinion by Justice Stevens, stake out a much more pro-patent position than every judge on the Federal Circuit save one.

The Value of Dismissal.

The impossibly slim odds of winning would not matter to the petitioners if they had nothing to lose from persisting in the appeal. But petitioners Bilski and Warsaw have at least two pending patent applications on business methods for hedging risk. See U.S. Pat. App. 200030233323 A1 (Dec. 18, 2003); U.S. Pat. App. 20040122764 A1 (June 24, 2004). Furthermore, Petitioner Warsaw also is the named inventor on several issued claims in a patent assigned to the firm WeatherWise.   See U.S. Pat. No. 6,785,620 (2004). Many of the claims in that patent would seem to pass the machine-or-transformation test, as the claims cover “system[s]” that include various modules for storing and manipulating data. Some claims are also directed to a “computer-readable medium having stored thereon instructions,” which is a form of claim for covering business software that the government currently views as permissible but that could be jeopardized by an unfavorable Supreme Court opinion in Bilski.   

If the Bilski case were dismissed, a decision about patentable subject matter would be left for the future. From the standpoint of petitioners, the future would better for two reason. First, Justice Stevens would be replaced by a new Justice, likely Elana Kagan. That change has to favor those on the side of the petitioners since Justice Stevens takes a more restrictive view of patentable subject matter than many of the other Justices on the Court. By contrast, the Solicitor General’s Office under Kagan expressly endorsed the position (stated during the Bilski oral argument) that the Federal Circuit had correctly decided State Street Bank v. Signature Financial. See Transcript of Oral Argument at 44. The future also presents the possibility of a different case, with perhaps more attractive facts.

Dismissal: Still Time?

Supreme Court Rule 46.1 allows any case to be dismissed, even after the oral argument, by agreement of the parties. The Rule directs that, upon filing of such an agreement, the Clerk of the Court, “without further reference to the Court, will enter an order of dismissal.” Furthermore, Rule 46.2 allows petitioners unilaterally to seek dismissal by agreeing to pay all the court costs and fees due. (Such costs and fees are not attorneys’ fees but merely the minor costs associated with the appeal that are paid by the losing party in any case.) The grounds on which respondents may object to such a filing are strictly “limited to the amount of damages and costs in this Court alleged to be payable or to showing that the moving party does not represent all petitioners or appellants.” The Clerk of the Court is directed “not [to] file any objection not so limited.”

The Rule reflects a very clear policy that the Court will not plunge ahead to decide a case if the petitioners have decided to “fold ’em,” and that policy makes perfect sense from the Court’s perspective. The Supreme Court has plenty of cases to decide, and important issues eventually percolate back up to the Court if they really need to be decided. Indeed, in the November sitting alone, the Pottawattamie County case was dismissed even though argument had been heard two months earlier and the case involved an important issue about the scope of prosecutors’ immunity.

True, if the Solicitor General’s Office were unwilling to agree to the dismissal, it is unclear what would happen. At oral argument, however, the advocate for the Solicitor General’s Office emphasized that the government thought the Court should never have taken the case because it was an “unsuitable vehicle” to decide questions of patentable subject matter. Transcript of Argument at 48. Moreover, the Solicitor General’s Office is very much a repeat player at the Supreme Court, and thus the Office tends to be willing to follow not just the letter but also the spirit of the Court’s rules. Since those rules reflect a fairly clear policy that petitioners’ dismissals should not be opposed unless the petitioner either is not willing to pay costs or does not represent all petitioners, the Solicitor General’s Office seems unlikely to attempt to thwart dismissal where the petitioners comply with the conditions of Rule 46.

A Final Point: A Desired Defeat?

All of the above makes the crucial assumption that the petitioners in Biski want to sustain the patentability of business method patents such as their own. But that assumption may be wrong. The patent application at issue is no longer owned by Bernard Bilski, Rand Warsaw or even WeatherWise, the small start-up company that holds similar patent claims on hedging energy consumption risks and is merely a licensee of the patent application at issue in the case (see Paul Schaafsma news article noting the licensing relationship). As the petitioners’ briefs in the Supreme Court disclose, the real party in interest in the case is Equitable Resources Inc., renamed EQT Inc. during the pendency of the case. See Petitioners’ Reply Brief at (i). That corporation has market capitalization of $5.4 billion (see EQT Financial Report). A quick search of the PTO’s database does not show any issued patents owned by this corporation, and the company’s most recent annual report filed with the SEC makes no mention of patents or intellectual property. It is not at all clear that such a company really wants to have patent protection for innovative ways to manage energy costs or risks, or for any other form of business method. Large companies are often the targets of patent infringement litigation, and start-ups often see patents as a means to compete against established firms. Indeed, the Warsaw patent on hedging risk—which is assigned to WeatherWise, not EQT—could itself provide a reason why the petitioners’ side of the case would welcome defeat.

It remains a puzzle why the petitioners in this case are persisting in an appeal that seems not only doomed but also capable of establishing new and unpredictable restrictions to the scope of patentable subject matter. I had previously thought that “irrational exuberance” provided the best answer—that the Bilski petitioners were likely to remain unrealistically optimistic about their chances for success right up to the end. But the presence of a multibillion-dollar corporation controlling the litigation decreases the chances that the strategy is due to simple inventor over-optimism. Perhaps the entity controlling the petitioners’ side of the case is really quite wily, for there would be no cause to “fold ’em,” if the petitioners’ side would view thorough defeat as victory. That would explain much.  

Employee and Officer Liability for Inducing Infringement

Damages, Infringement, Patent, Rantanen

By Jason Rantanen, Visiting Scholar at UC Hastings School of Law

Wordtech Systems, Inc. v. Integrated Networks Solutions, Inc. (Fed. Cir. 2010)

In most patent cases, companies are the ones sued as alleged infringers. But sometimes individuals—particularly corporate officers—are also named as defendants.   While this often occurs when the company accused of infringing appears to be merely the officers’ alter ego, corporate officers can be liable for indirect infringement even when the corporate veil is not pierced.

In Wordtech, the patentholder (Wordtech) sued both a corporation (INSC) and the two principal employees of that corporation. A jury found the claims infringed both directly and indirectly by the corporation’s products, and awarded damages against all three defendants. The jury also returned a verdict of willful infringement of the asserted patents, and the trial judge trebled the jury’s damages award. The two employees appealed the verdict of liability entered against them, and all three defendants appealed the damages determination and district court’s denial of a motion for leave to amend their answer.

Individual Liability

Generally, the “corporate veil” shields officers from liability for tortious conduct occurring in the regular course of their employment, and the employees in Wordtech filed a motion for judgment as a matter of law (“JMOL”) based on this doctrine. The district court denied this motion, allowing the jury to find that the employees infringed the patents.

Individual Liability for Direct Infringement

On appeal, the Federal Circuit affirmed the denial of the motion for JMOL with respect to direct infringement because Wordtech presented substantial evidence during trial that the corporation was nonexistent under Nevada law and, even if it existed, the corporate veil should be pierced. However, the appellate court agreed with defendants that the lack of any instruction on corporate status constituted plain error, and remanded for further proceedings on personal liability for direct infringement.

Individual Liability for Indirect Infringement

The most interesting aspect of the opinion was the Federal Circuit’s ruling on the indirect infringement claims against the employees. Although the court addressed inducement and contributory infringement separately, it applied virtually identical reasoning to both.

The panel began by affirming the denial of the defendants’ Rule 50(a) and 50(b) motions based on the corporate veil theory, pointing out that “corporate officers who actively assist with their corporation’s infringement may be personally liable for inducing infringement regardless of whether the circumstances are such that a court should disregard the corporate entity and pierce the corporate veil.” Slip Op. at 12.   It applied the same reasoning to contributory infringement, concluding that “a corporation does not shield officers from liability for personally participating in contributory infringement.” Slip Op. at 14. Under these rules, the court rejected the individual defendants’ corporate veil defense as irrelevant to issues of inducement and contributory infringement.

Nevertheless, the panel concluded that the employees were entitled to a new trial due to flawed jury instructions, which asked only whether the accused product induced or contributed to infringement. Because a product cannot possess the necessary mens rea elements of inducement or contributory infringement, and there were no jury instructions that might have mitigated the error, the court vacated the verdict of liability.[1]

Damages

Addressing the issue of excessive damages in the context of its review of a denial of a motion for a new trial, the panel considered the evidence supporting the jury’s damages finding, which was based on a reasonable royalty under a hypothetical negotiation theory.   The panel reviewed the licenses Wordtech relied upon for the hypothetical negotiation and concluded that the verdict was not supported by the evidence and based solely on speculation and guesswork. This portion of the opinion is noteworthy for the court’s detailed discussion of the licenses and its rejection of them on an array of different grounds.

Denial of Motion to Amend

In a curious twist, the trial and subsequent appeal involved no substantive invalidity issues. This was due to defendants’ failure to raise an invalidity defense in their answer, apparently relying on the fact that a previous co-defendant school district had included the defense in its answer. After INSC and its two employees learned that the school district had settled with the patent holder, they moved to amend their answer to add invalidity defenses. The Federal Circuit declined to find that the district court abused its discretion in denying the motion, as it was filed months after the close of discovery despite the defendants’ prior knowledge of the invalidity defenses they intended to raise.

Notes:

 

  • Ultimately, the favorable result for the individual defendants turned not on the legal question of whether officers can be liable for patent infringement, but rather on flawed jury instructions. This suggests two lessons from this case: first, be aware of potential employee liability, especially for indirect infringement, and second, make sure your jury instructions accurately reflect the elements of the issues being presented to the jury.
  • Although the opinion describes the individual defendants as employees, the rules it applies refer to corporate officers. This may be reconciled by the fact that Wordtech presented evidence at trial supporting the conclusion that they were officers.   See Slip Op. at 11. Nevertheless, this opinion arguably could be used to apply indirect infringement claims to employees, provided that the necessary mens rea elements are present.

[1] The panel also noted that Wordtech failed to identify proof of elements required for contributory infringement, including the existence of any direct infringement corresponding to the alleged contributory actions. With respect to inducement, although the opinion is silent on who the officers were inducing to infringe, the patentee’s brief indicates that its theory was that the officers induced the corporation’s direct infringement, similar to the circumstances in Power Lift, Inc. v. Lang Tools, Inc., 774 F.2d 478 (Fed. Cir. 1985).

About Jason: After spending several years in practice as a patent litigator, Jason Rantanen is now looking at law from the academic side and is currently a Visiting Scholar at UC Hastings. His recent research focuses on the concept of mens rea in patent law.

Patently-O Bits and Bytes

Patent, , ,
  • Trademark / Antitrust: The Supreme Court has ruled against the National Football League (NFL) in an antitrust suit involving the NFL’s exclusive apparel licensing deal with Reebok/Adidas. The court held that the NFL was not a single business entity, but rather 32 separate business entities. Any antitrust violation involves an underlying market. Here, the supreme court identified that as the market for intellectual property: “Directly relevant here, the teams are potentially competing suppliers in the market for intellectual property. When teams license such property, they are not pursuing the common interests of the whole league, but, instead, the interests of each corporation itself.” In Princo, the Federal Circuit is now considering antitrust issues in the scope of patents and standard-setting organizations. [Read NFL v. American Needle] [Read about Princo v. ITC]
  • The Chisum Patent Academy is offering its second annual Intensive Patent Law Training Workshop in Seattle on July 29-31, 2010. See http://www.chisum-patent-academy.com. The workshop will focus on substantive patent law (patentability and enforcement) through analysis of critical Federal Circuit and Supreme Court decisions. [Syllabus for 2009 workshop]. New material for 2010 likely include business method patentability post-Bilski, written description requirement compliance post-Ariad, and the evolving landscape of inequitable conduct as reflected by the Federal Circuit’s recent grant of rehearing en banc in Therasense. The workshop is team-taught in seminar style (maximum of 10 students) by Donald Chisum, author of the treatise Chisum on Patents, and Professor Janice Mueller, author of Patent Law, 3d Edition (Aspen 2009). Chisum and Mueller have a combined total of over 40 years experience teaching patent law. The workshop’s coverage is geared for junior patent attorneys, summer associates, engineers, scientists, paralegals, information specialists, and attorneys experienced in non-patent fields who desire an intensive introduction to patent law. Eighteen hours of CLE credit have been applied for.
  • USPTO News:
    • The USPTO is further developing its patent prosecution highway and has eliminated the associated fee. [Link]
    • USPTO is on Facebook [Link][Me on Facebook]
    • Green Technology: The USPTO has expanded the number of technology classes that count as “green technology” and that are therefore eligible for expedited processing. [Link]

Kathy Bates on NBC as a former patent attorney. Best quote of the clip is 30–seconds-in.

 

 

Patently-O Bits and Bytes

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  • Trademark / Antitrust: The Supreme Court has ruled against the National Football League (NFL) in an antitrust suit involving the NFL’s exclusive apparel licensing deal with Reebok/Adidas. The court held that the NFL was not a single business entity, but rather 32 separate business entities. Any antitrust violation involves an underlying market. Here, the supreme court identified that as the market for intellectual property: “Directly relevant here, the teams are potentially competing suppliers in the market for intellectual property. When teams license such property, they are not pursuing the common interests of the whole league, but, instead, the interests of each corporation itself.” In Princo, the Federal Circuit is now considering antitrust issues in the scope of patents and standard-setting organizations. [Read NFL v. American Needle] [Read about Princo v. ITC]
  • The Chisum Patent Academy is offering its second annual Intensive Patent Law Training Workshop in Seattle on July 29-31, 2010. See http://www.chisum-patent-academy.com. The workshop will focus on substantive patent law (patentability and enforcement) through analysis of critical Federal Circuit and Supreme Court decisions. [Syllabus for 2009 workshop]. New material for 2010 likely include business method patentability post-Bilski, written description requirement compliance post-Ariad, and the evolving landscape of inequitable conduct as reflected by the Federal Circuit’s recent grant of rehearing en banc in Therasense. The workshop is team-taught in seminar style (maximum of 10 students) by Donald Chisum, author of the treatise Chisum on Patents, and Professor Janice Mueller, author of Patent Law, 3d Edition (Aspen 2009). Chisum and Mueller have a combined total of over 40 years experience teaching patent law. The workshop’s coverage is geared for junior patent attorneys, summer associates, engineers, scientists, paralegals, information specialists, and attorneys experienced in non-patent fields who desire an intensive introduction to patent law. Eighteen hours of CLE credit have been applied for.
  • USPTO News:
    • The USPTO is further developing its patent prosecution highway and has eliminated the associated fee. [Link]
    • USPTO is on Facebook [Link][Me on Facebook]
    • Green Technology: The USPTO has expanded the number of technology classes that count as “green technology” and that are therefore eligible for expedited processing. [Link]

Kathy Bates on NBC as a former patent attorney. Best quote of the clip is 30–seconds-in.

 

 

Patenting by Small-Entities

Patent

The number of small-shop innovators continues to dwindle. In a sample of recently issued patents,* only 20% claim “small entity” status. Of those, 30% (6% of the total) are held by the original inventors.** According to the PTO Rules, large universities and non-profits still qualify as for the small entity price-break so long as the patents-in-question have not be assigned or licensed to a non-qualifying entity. At least 12% of the small entity patents are assigned to universities or non-profits. These small entities include multi-billion-dollar operations including Battelle Energy Alliance, California Institute of Technology, Princeton University, and the Korean government funded ETRI. The remaining small entity patents are largely held by companies and partnerships such as Audible Magic, PixArt Imaging, and Alverix.

PatentlyO045US versus Foreign: Only 45% of the large-entity assignees are US based while 69% of the small-entity assignees are US based and 77% of the un-assigned patents include at least one US based inventor. (See Graph at Right).

  • * This data comes from a set of 1700 utility patents issued on April 27, 2010.
  • ** I.e., the USPTO has no assignment on record associated with the patent.

Difficulties Collecting Royalties

Patent

In the recent case of ClearPlay v. Max Abecassis and Nissim Corp (Fed. Cir. 2010), the patent holder (Nissim) struggled to collect its royalty payments even after the parties signed an agreement that settled their patent infringement dispute.

Nissim’s situation is not unusual. A recent report by the Invotex found that 86% of licensees underpay royalties. Most of the under-payment comes from (1) questionable license interpretations and (2) unreported sales of covered goods & services.

Although the report may be somewhat biased (Invotex makes its money by finding non-compliance) it does make clear patentees should plan to work as hard collecting royalties as they did winning the infringement lawsuit. This type of study may also be helpful for patentees seeking injunctive relief — especially if they can show that the defendant-in-question has underpaid royalties in the past.

Read the Report

Intangible Economy Blog

Guest Post: Update To Recent Patent Damages Article

Patent,

Guest Post By Michael J. Kasdan and Joseph Casino

In our March 3, 2010 article in the Patently-O Law Journal, Federal Courts Closely Scrutinizing and Slashing Damages Awards, we discussed recent shifts in the Federal Circuit’s reasonable royalty jurisprudence and concluded that the recent Cornell, Lucent, and Lansa cases “indicate an emerging trend to more carefully scrutinize the evidentiary and economic basis of reasonable royalty-based patent damages awards in the setting of the appropriate royalty base, the application of the entire market value rule, and the calculation of the appropriate royalty rate.” We also noted that contemplated legislative reforms in the area of patent damages may likewise “seek to put the burden on district court judges to act as ‘gatekeepers’ and to closely scrutinize the evidence that is relied upon to prove patent damages.”

1. Patent Reform Bill

Shortly after our article was published, the U.S. Senate announced a new “compromise” patent reform bill (full text available here), which includes a section addressing patent damages. Whereas prior versions of the patent reform bill which had been considered over the past years had contemplated introducing more specific statutory limitations on patent damages,[1] the current Senate compromise bill does not.

Rather, the approach taken in the current compromise bill is to statutorily emphasize the district court’s “gatekeeper” role over damages theories and evidence. While there is nothing new about district court judges acting as gatekeepers by conducting so-called Daubert hearings to determine whether to exclude expert testimony under Federal Rule of Evidence 702, including on damages-related issues, the proposed bill essentially makes conducting a thorough Daubert hearing on patent damages mandatory. In the section entitled “Procedure For Determining Damages,” it requires that “[t]he court shall identify the methodologies and factors that are relevant to the determination of damages, and the court or jury, shall consider only those methodologies and factors relevant to making such a determination.” In addition, in a section entitled “Sufficiency of Evidence,” it requires that “the court shall consider whether one or more of a party’s damages contentions lacks a legally sufficient evidentiary basis” and that “[t]he court shall only permit the introduction of evidence relating to the determination of damages that is relevant to the methodologies and factors that the court determines may be considered in making the damages determination.” We expect that this proposed reform bill will not alter the traditional role of the Georgia-Pacific factors, which have been used in the reasonable royalty analysis, or other established damages law. Thus, other than providing for a first review of the damages evidence by the judge before a case is sent to a jury, it is unclear whether the Senate’s proposal would have the effect of limiting damages. The substantive impact will greatly depend on how strict individual judges are when they conduct their Daubert hearings; and this will likely vary from judge to judge. But the recent Federal Circuit case law discussed in our prior article, as well as the additional case discussed below, does signal that the Federal Circuit is providing strong guidance as to the degree of scrutiny of the damages theories and evidence that district courts should undertake.

2. The IP Innovations Case

As many of our readers pointed out, Federal Circuit Judge Rader, who sat by designation in the Cornell case, also recently sat by designation in IP Innovation, LLC v. Red Hat, Inc. et al., Case No. 2:07-cv-447. (Based on his track record in the Cornell case, we are sure that plaintiff was none too pleased that Judge Rader was sitting by designation in their case, at least with regard to damages). In his March 2, 2010 ruling on post-trial motions in IP Innovation, Judge Rader again took the opportunity to illustrate his view of the type of careful scrutiny that district court judges should be giving to damages theories and evidence. The court excluded the testimony of plaintiff’s damages expert, because his damages theory on what would be a reasonable royalty, “improperly inflates both the royalty base and the royalty rate by relying on irrelevant or unreliable evidence and by failing to account for the economic realities of this claimed component as part of a larger system.” Slip. op. at 6.

In IP Innovation, the patents-in-suit related to particular features of the defendants’ Linux operating system software, specifically, the “multiple virtual workspaces and workspace switching features.” Plaintiffs’ expert had propounded a damages theory under the “entire market value rule,” in which he sought damages based on defendants’ total sales of the entire operating system software. Judge Rader excluded this testimony because the damages methodology did not “show a sound economic connection between the claimed invention and this broad proffered royalty base.” Id. at 3. Judge Rader first found that “the claimed invention is but one relatively small component of the accused operating systems” particularly in view of “the relative importance of other features such as security, interoperability, and virtualization.” Id. In addition, the court noted that there was no evidence in the record supported the notion that the claimed feature drove demand – “users do not buy the accused operating systems for their workspace switching feature.” Id. Indeed, plaintiffs’ expert did not make any effort “to even discern the percentage of users” who even used the feature. Id. at 4. Accordingly, the court found that “the record cannot support the unfounded conclusion that the often-unused feature drives demand for a royalty base of 100% of the operating systems as a whole.” Id. As in his decision in the Cornell case, it appears that in order to proceed under an entire market value rule theory, Judge Rader would require that the plaintiff provide specific evidence tying customer demand to the claimed feature, or a survey that addresses whether and to what degree the claimed feature drives demand.

In excluding the damages testimony, Judge Rader also rejected plaintiff’s argument that it was difficult to determine the value of the desktop switching feature relative to other features of the products based on the information produced in discovery and that the desktop switching feature “has no separate valuation, no aftermarket, and thus no way to value the accused feature separately.” The court found that the burden of proof lay with plaintiff and not with defendant: “IPI must show some plausible economic connection between the invented feature and the accused operating systems before using the market value of the entire product as the royalty base.” Id. at 4.

Finally, Judge Rader also addressed the evidentiary value of other license agreements. The court faulted plaintiffs’ expert for disregarding license agreements from years prior to the hypothetical negotiation date in favor of general industry data that was not at all linked to the specific technology of the patents-in-suit. The court found that “these [older specific] licenses are far more relevant than the general market studies” that plaintiff’s expert selected to rely upon.

Judge Rader’s recent active gate-keeping decisions, such as Cornell and now IP Innovation, as well as the Federal Circuit’s recent pronouncements in Lucent and Lansa, are even more significant and instructive when viewed in the context of the currently pending patent reform legislation, which specifically proposes addressing the issue of patent damages by having the courts act as stricter gate-keepers on damages theories and evidence.

[1]   For example, the 2007 Patent Reform Bill proposed limiting the amount of damages recovered as a reasonably royalty based on an attribution of “the economic value properly attributable to the patent’s specific contribution over the prior art” and statutorily limits the application of the “entire market value rule” to circumstances where the patentee has established that that the claimed feature is “the predominant basis for market demand” of an entire product.

Dr. Michelson Supports Patent Reform

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Gary Michelson forwarded the following letter which he has also mailed to members of Congress. Dr. Michelson became a billionaire as a result of a settlement of his infringement lawsuit against Medtronic.

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March 17, 2010

I am writing in regard to the patent reform legislation currently before you.

Abraham Lincoln had it right when he said the patent system was the engine of the American economy. Those few words inscribed by our founding fathers in Article I, Section 8 of the Constitution of the United States says it beautifully “to promote the Progress of Science and the useful Arts.”

All politics aside, one would be hard pressed to find support in our history that government can either tax its way out of a recession, or tax its way out of a budget deficit without crushing job formation -the most pressing economic problem of our time. History has shown that it is possible to have vibrant job growth and to simultaneously reverse deficit spending by growing the economy. You cannot increase productivity by simply telling the man with a shovel to dig twice as hard. But one person with a word processor can replace twenty people with typewriters. That is more work done for the same amount of effort, raises productivity and the standard of living, and makes businesses more profitable so they can employ more people. It may well be that in the 1990s, it was the permeation of computers throughout the business world that substantially contributed to the economic growth of those times.

I would submit to you that the next engine to produce that kind of economic growth is currently trapped in the patent office. The United States now competes economically against the rest of the world. We cannot afford to have technology, that if unleashed and nourished would fuel our economy, labor slowly through the patent office while the rest of the world races on.

Companies will not invest in uncertainty. The power of the patent gives small entrepreneurs and large companies alike the certainty that they require to invest their time and money. This creates jobs and frequently a better way of achieving the same result or a better result. Sometimes the better way is the thing itself.

The United States patent system is in desperate need of the reform legislation presently before you.

Some people have grabbed the pulpit and have claimed to speak for the individual inventor. But, grabbing that mantle for themselves and making such proclamations doesn’t make it so.

I have been an independent inventor for the last quarter century. I am the single named inventor on over 900 issued patents or pending applications throughout the world, and just shy of 250 issued patents in the United States alone. Many of the inventions contained in these patents have resulted in highly successful best of kind or entirely new products. One of my licensees estimated that their sales of products incorporating my technologies would exceed five billion dollars ($5,000,000,000.00) and affect the lives of millions of people. Imagine the number of jobs that must be created to design, manufacture, sell and service these previously non existent products.

I mentioned people’s lives effected. Let me be more precise. I am a board certified orthopedic surgeon fellowship trained in and specializing in spinal surgery. Recently the Paralyzed Veterans of America recognized me as the outstanding medical researcher in the field of spinal disorders. My inventions which are in the field of spinal disorders have made such procedures faster, safer, more effective and less expensive. On occasion they have freed people from wheelchairs, lifted them from disability, allowed them to return to being mothers and fathers and husbands and wives, and to go from welfare to work.

Presently we are blessed with a new Director of the United States Patent and Trademark Office (U.S.P.T.O.) who left a job that was the envy of the intellectual property world. He brought with him a unique understanding of ultra large scale information technologies and computers that is so essential to the present and future functioning of the Office, as well as an in depth working knowledge of best practices from the competitive world of free enterprise. This is what will be required to reinvigorate the Patent Office, and to clear up the massive three year backlog of 800,000 pending patent applications. However, the able and dedicated people who staff the patent office cannot effectively execute the people’s business with their hands tied behind them and lacking the resources to do so.

I strongly implore you on behalf of myself, independent inventors like me, and for the good of our country to support the patent reform legislation before you. And if upon reflection you recognize how truly vital the Patent Office is to the future of our country then I would ask you to do more and to consider the issue of “revenue diversion”.

The U.S.P.T.O. is unique in American government in that it costs the taxpayer nothing while providing the best dollar for dollar value in the intellectual property industry. The U.S.P.T.O. should have the authority to set its fees so that they are appropriate to the services provided and “in the aggregate” sufficient to fully optimize the functioning of that office, and to reasonably budget for the capital expenditures that will be required in the future for it to continue to do so.

There is an old saying that the best time to plant a shade tree was fifty years ago. The next best time is right now. Now is the time to act.

Thank you for your consideration of this vital issue. Please do not hesitate to contact me if I may be of service to you in this matter.

Sincerely yours,

Gary K. Michelson, M.D.

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Dale Carlson writes “Scrap the Patent Bill“