Tag Archives: Marking

Patently-O Bits & Bytes by Lawrence Higgins

Although in the midst of final exams, Lawrence Higgins was still able to complete this week’s installment of Bits and Bytes – DC

Indiana University Maurer launches Center for IP Research

  • The Center for IP Research just launched and has named Mark Janis as the director of the center. The purpose of the center is support the study of all aspects of IP law and related fields. The center will promote a dialogue on IP law among scholars, judges, policymakers, practitioners and students. The center also has created an online journal titled IP Theory, which can be accessed through the site, or directly at iptheory.org. [Link]

2 millionth PCT application filed

  • Qualcomm filed the 2 millionth PCT application near the end of April, marking a significant milestone. The PCT makes it easier for companies and inventors to seek patent rights in multiple countries. A single international patent application under the PCT has legal effect in all 142 countries bound by the treaty. The PCT system, first launched in 1978 and up until recent was mostly used by the US and Europe. However, in recent years Asia has accounted for the largest number of PCT applications. [Link]

Nortel patent bidding update

  • Nortel has set up a database with details about the patents that potential bidders can access after signing an agreement to keep the information confidential.
    Qualified bidders will be required to submit offers for the patent portfolio by June 13, to participate in the June 20 auction according to the bidding rules. [Link] The next bidder must at least make a $929 million dollar bid, to outbid Google’s $900 million dollar offer. [Link]

Patent Jobs:

  • Ballard Spahr is looking for a patent attorney with 2-5 years of experience to work in their Atlanta office. [Link]
  • Ventana Medical Systems is seeking a patent attorney with at least 8 years of experience. [Link]
  • Klarquist Sparkman is searching for an IP litigation attorney with 1-2 years of experience to work in their Portland office. [Link]
  • University of Notre Dame Law School is seeking a Director of IP and Entrepreneurship Clinic. [Link]

Upcoming Events:

  • The 3rd Annual Corporate IP Counsel Forum will be held May 24-25 in New York. The Corporate IP Counsel Summit is the premier forum to hear about solutions to maximize IP assets, avoid costly litigation, create and maintain efficient infrastructure, fully integrate IP strategies into business plans, prepare for anticipated patent law changes, and much more. Guest speakers include Michael Bishop, Mony Ghose, Mark Costello, Michael Springs, Charles Kwalwasser, and Timothy Wilson. Patently-O readers will receive a $100 discount by using promo code FZA884. [Link]
  • The American Conference Institute (ACI) will hold a Hatch-Waxman Boot Camp July 18-19 in San Diego. ACI’s Hatch-Waxman Boot Camp has been designed to give counsel and advisors to brand name and generic drug critical insights into commercialization and the pre-approval process, and also provide an in-depth review of Hatch-Waxman and other IP basics relative to small molecules and biologics. [Link]
  • American University Washington College of Law will host the first annual Global Congress on Public Interest Intellectual Property August 25-27 in Washington DC. The Global Congress on Public Interest Intellectual Property will serve as a site for the sharing of research, ideas and policy proposals for how international intellectual property law should be constructed to better protect the full range of global public interest concerns. [Link]

     

Contact Lawrence.Higgins@patentlyo.com with leads for future Bits and Bytes.

Concentration of Patent Cases in the Eastern District of Texas

Patent litigator James Pistorino has emerged from the collapse of Howry as a partner at Perkins Coie. In a recent BNA article, Pistorino provided a brief analysis of patent complaints filed in 2010 with a focus on the Eastern District of Texas. In 2010, E.D. Texas held a slight lead in the absolute number of patent cases filed. Excluding false marking cases, 299 cases were filed in E.D. Texas compared with 255 in Delaware, 225 in the Central District of California, 180 in the Northern District of California, and 179 in the Northern District of Illinois. Pistorino argues that E.D. Texas’s slight lead in the number of cases filed masks the jurisdiction’s continued overwhelming popularity. In particular, he considered the number of defendants sued for infringement and found that in 2010 more defendants were sued in E.D. Texas than in Delaware, California, New Jersey, and Illinois combined. Figure 2 from the article highlights this conclusion. Based upon the data reported, Pistorino goes on to question “whether the forum shopping issue in patent cases (particularly in the Eastern District of Texas) has been solved and whether increased scrutiny of improper joinder of defendants is warranted.”

See James Pistorino, Concentration of Patent Cases in Eastern District of Texas Increases in 2010, 81 BNA Patent, Copyright & Trademark Journal 803 (2011) (Subscriber access only).

Confidentiality Designations in Federal Circuit Appeals

By Jason Rantanen

In re violation of Rule 28(D) (Fed. Cir. 2011) (precedential order) Download 11-m976 order
Panel: Dyk (author), Prost, and Moore

Patent litigations, by their nature, often invove commercially sensitive information.  Unsurprisingly, parties are frequently reluctant to reveal the innermost workings of their manufacturing processes or valuable financial data.  To preserve the confidentiality of this information, parties enter into agreed-upon protective orders that help ensure that their proprietary information is not disclosed outside the confines of the litigation.

The difficulty arises when it comes time for judicial resolution of the dispute.  Although parties can readily agree to keep materials they exchange among themselves confidential, once that information must be presented in court or placed into a judicial opinion, it is much more difficult to prevent public access.  In part this is due to practical realities (for example, although it is a possible approach, clearing a courtroom during a trial or hearing is a cumbersome process), but it is also due to the public's right of access to court proceedings, as recognized in Nixon v. Warner Commc'ns, Inc., 435 U.S. 589, 597-99 (1978).

The difficulty of maintaining the confidentiality of particular information becomes even greater when the lawsuit is on appeal.  Federal Circuit Rule 28(d) does permit the use of confidentiality markings in briefs, but in general the Federal Circuit has demonstrated a dislike for the overuse of confidentiality designations, especially when it would interfere with the preparation and dissemination of its opinions.

The Federal Circuit's view on confidentiality designations is particular apparent in a recent precedential order imposing a monetary sanction on Sun Pharmaceutical Industries, Ltd. and Caraco Pharmaceutical Laboratires, Ltd. (collectively "Sun") for the extensive use of improper confidentiality markings.  Sun  was apparently so concerned about revealing the contents of a confidential license agreement and proposed consent judgment that it marked vast swaths of its brief as confidential, including essentially all of its legal argument. 

Following oral argument, the CAFC issued an order instructing Sun to show cause why it should not be sanctioned for the violation of Rule 28(d).  In response, Sun attempted to justify its use of extensive confidentiality designations, an approach that did not sway the court.  Even leaving aside the question of whether the the agreements were properly designated, Sun's designations nevertheless fell far on the side of error.

Particular concerning to the court was Sun's designation of its legal arguments.  This type of material is generally afforded little, if any, protection:

The marking as confidential of legal argument concerning the propriety of a decision by the court is generally inappropriate given the strong presumption of public access to court proceedings and records. Rule 26(c)(1)(G) is limited to commercial information that has competitive significance. The marking of legal argument as confidential under Rule 26(c)(1)(G) cannot be justified unless the argument discloses facts or figures of genuine competitive or commercial significance. That is certainly not the case here, and there is no claim that it is.

Further, much of the material marked as confidential does not even disclose the nature of the triggering event. For example, legal argument regarding the preclusive effect of consent judgments was marked as confidential in the briefs submitted by Sun. See Addendum at i–ii. One of the most blatant examples of improper confidentiality markings involves case citations and parentheticals describing the cited cases which are used to support the proposition that “parol evidence should have been examined to resolve the ambiguity and determine the intent of the parties.” See id. at iii–iv.

Slip Op. at 14.  Due to the severity of the improper confidentiality designations, the CAFC imposed a sanction of $1,000 on counsel for Sun.  Although perhaps a relatively small monetary sanction, the CAFC rarely imposes such a penalty, suggesting that the conduct in this case was particularly troubling to the court.  For those interested in examples of improper confidentiality markings in Sun's brief, the court included an addendum containing relevant quotations.

Patent Reform Survey Results on the “Pulse of the Patent Bar”

Survey and Disclaimer: I thought that I had solved this, but the survey software that I used for last week's survey failed by allowing individuals to post multiple times and without recording their IP addresses. However, based on the diversity of responses, there are reason to believe that the survey results were not overwhelmed by multiple-voting. In addition, the divide between those for and against a first-to-file system mimics prior survey results. The survey was open for about 20 hours and received 500 during that time.

Results: The first chart below shows the almost even-split between those who support a first-to-file regime as compared with those who do not. Interestingly, most respondents had a strong opinion – with 70% expressing either strongly negative (voting "1") or strongly positive (voting "5"). Self identified patent prosecutors tended to show less support to first-to-file than self-identified patent examiners and patent litigators. Regardless of the level of support for the first-to-file regime, the vast majority of responses indicated support for retaining a filing grace period for an inventor's own pre-filing activities.

Most responses also indicated support for allowing third parties to submit prior art and commentary during prosecution and to limit false marking litigation. There was little support for special rules that would govern the litigation business method patents (such as limiting venue and providing for interlocutory appeals).

Perhaps most interesting, very few of the responses supported the use of "secret" prior art in analyzing the question of obviousness. As I have previously discussed, most countries around the world only use publicly available prior art to judge the question of obviousness or inventive step. Rather, around the world, prior art that was not publicly available at the time of filing is used only for novelty and priority issues. In the US, secret prior art is regularly used for obviousness analysis. The primary source of the secret prior art is currently defined under Section 102(e) of the Patent Act and covers patent applications that were pending, but not yet publicly available. Any true effort at international harmonization would deal with this issue as well. Several responses explicitly indicated that, if adopted, the US first-to-file regime to attempt to be uniform with Europe. "The hybrid approach will only complicate and cost more in lawyer fees"; "The SECRET PRIOR ART would be a total disaster !!! and make the US one of the least patent friendly jurisdictions on the planet."

040111_1723_PatentRefor2

Few responses offered support for giving the USPTO substantive rulemaking authority. However, there was strong support for greater fee setting authority. Examiners were most in-favor of heightened USPTO authority while patent prosecutors were the most wary.

Finally, as many know, the current reexamination system has been criticized because it only allows reexaminations based on patents and published documents. Responses showed a lukewarm support for broad post-grant review system that could reach "any patentability question."

Patent Reform 2011: House of Representatives Bill No. H.R. 1249

Representatives Lamar Smith, Bob Goodlatte, and Darrell Issa have introduced their version of the America Invents Act (AIA) to the House of Representatives. H.R. 1249. [AIA.pdf] The AIA closely tracks the Senate’s bill on comprehensive patent reform (S. 23) that was passed in the Senate earlier this year on a 95-5 vote. Parallel changes include a switch to a first-to-file system (with the retention of a limited one-year grace period); establishment of a modified inter partes reexamination and post grant opposition system; providing USPTO with fee-setting authority; neutering of the false marking provision; allowing pre-issuance submissions by third-parties; creating a supplemental examination system to correct inequitable conduct; and elimination of best mode failure as an invalidity defense.

The statute continues to include a substantial error in its codification of the grace period. Namely, the grace period only applies to “disclosures” and not to other commercialization activities such as sales and offers for sale.  In addition, it is unclear whether the grace period would apply situations such as the original public use case of Pennock v. Dialogue, 27 U.S. 1, 23, 7 L. Ed. 327 (1829).  In that case, the Supreme Court ruled that the inventor could not obtain a patent on its hose-making process because the inventor had sold the product (hoses) for several years before filing for patent protection. 

Some key differences from the Senate version that will lead to substantial debate include: 

  1. Details of the Post Grant Opposition Provisions…
  2. Prior User Rights: Whether “prior user rights” should be expanded to accompany the switch to a first-to-file regime. This issue arises when, for instance, a manufacturing company is using a particular process as a trade secret before another party invented and patented the process.  Under our current first-to-invent regime if the prior-user was sued for infringement, the patent would likely be invalidated under Section 102(g). See  Dunlop Holdings Ltd v. Ram Golf Corp., 524 F.2d 33 (7th Cir. 1975).  The invention-date priority contests of Section 102(g) are eliminated in a first-to-file system, raising the question of whether a non-patent-filing manufacturer should be given some prior user rights that would continue to allow these trade-secret uses. Currently, the patent statute also has a prior user right codified in Section 273. That section, however, is limited purely to business method patents. The proposed legislation would expand Section 273 to cover all patents.
  3. Special Business Method Proceedings, venue restrictions, interlocutory appeals, and attorney fee shifting.
  4. Automatic stay of litigation for inter partes reviews.
  5. Elimination of Tax Strategy patents (by considering the subject matter within the prior art).
  6. Codification of Knorr Bremse (failure to present advice of counsel cannot be used as evidence of willful infringement). 

Read the Bill: File Attachment: 033011_America Invents Act.pdf (266 KB)

False Marking: A Temporary Flash in the Pan

There are several reasons why the onslaught of false marking litigation should be seen as merely a temporary flash in the pan.

  1. Business Practices: For the past several decades, manufacturers and retailers had become lax in policing the false marking of their products. For the most part that laxity no longer exists. It is easy for a company to take steps to avoid false marking charges and the prospect of litigation now provides sufficient incentive.
  2. Legal Rules Requiring Pleading in Particular: In the case In re BP Lucricants, ___ F.3d ___ (Fed. Cir. March 15, 2011) (on mandamus), the Federal Circuit recently held that a false marking plaintiff must plead the their case with particularity under Fed. R. Civ. Pro. R. 9(b). Rule 9(b) states that “In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Here, the court held that a complaint must at least “provide some objective indication to reasonably infer” that the defendant had knowledge of the falsity. In the language of Exergen, the false marking plaintiff must provide detail on “the specific who, what, when, where, and how” of the alleged fraud. Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1327 (Fed. Cir. 2009). This heightened pleading requirement seems likely to result in a large number of cases being dismissed – unless the plaintiff has inside knowledge of the manufacturer’s decision making process.
  3. Other Legal Limitations: There continues to be ongoing uncertainty as to what evidence will really be required in order to prove that the manufacturer had intent to deceive the public. In addition, at least one court has held the false marking statute unconstitutional and the Federal Circuit is hearing that issue on appeal.
  4. Likely Low Fine: The courts have not developed any jurisprudence for calculating the fine – other than the obvious notion that the fine must be less than $500 per offense. It is quite likely that the fines eventually assessed will be low. Of course, the problem for defendants is the uncertainty.

False Marking Settlement Updates

Over 1,000 false marking lawsuits have been filed in the past two years. The flash of opportunism was triggered by recent court rulings that the statutory-authorized $500 fine per offence could be calculated on a per-article basis. Thus, the false-marking of one million paper cups could result in a maximum $500 million fine.  The false marking statute –  35 USC 292 –  sets a maximum fine but does not set a minimum.  Thus, it is also possible for a court to set the fine at well under a penny per offense.  

Although most of the lawsuits are still pending, about 180 settlements have been reached. Justin Gray of GrayOnClaims and the Foley firm has been tracking these settlements through the use of FOIA requests and has made the settlement information public. Although patent settlements are not usually publicly available, false marking settlements become public because of the punitive fine received by the US government.

Of the settlements reported thus far, the average value is $53,404 and median is $40,000. This takes the total settlement value to just under $10 million. The lowest settlement has been $500 and the largest $350,000. Of course, it may well be that the largest potential settlements are still pending.

As the chart shows below, settlements have been on the rise over the past few months.

PatentLawImage110

A few plaintiffs dominate the settlements. The top-five settlement plaintiffs are associated with over half of all settlements and settlement value. Patent Group LLC has settled the most cases thus far (37) while Promote Innovation LLC has the most revenue ($899,000). Patent Group LLC self identifies only as a Texas limited liability corporation represented by Ken Good of Tyler Texas. Promote Innovation LLC is also a Texas LLC represented by the Antonelli firm of Houston (former Weil Gotshal attorneys).

I pulled up the docket for Promote Innovation’s case against Roche. The complaint alleges that Roche falsely has continued to mark its ACCU-CHEK diabetes monitoring kits as covered by patents that were held unenforceable due to inequitable conduct back in 2005. See Roche Diagnostics Corp. v. Apex Biotechnology Corp, 374 F. Supp. 2d 673 (S.D.Ind 2005) (holding the patent and is progeny unenforceable).

Who is Suing for Patent Infringement?

Kyle Jensen and his group at PriorSMart maintain an incredible database of patent litigation. Last week Kyle provided me with some interesting data on patent filings over the past decade for one of my ongoing projects. I thought that I would present a snapshot based on PriorSMart’s information. The first table below looks at the top-25 filers of patent infringement lawsuits during the past ten years. The second table looks instead at the count of defendants who have been sued for that same time period. (At this point, the defendant-count has some duplication based on individual lawsuits that name both the parent and subsidiary companies as defendants).

 

Rank

Patent Plaintiff

Number of Cases Filed

1

Acacia

190

2

Laughlin Products

162

3

Pfizer

149

4

Monsanto Company

125

5

Ronald A Katz Technology Licensing

107

6

Patent Group (False Marking)

106

7

Novartis

104

8

Abbott Laboratories

103

9

Astrazeneca

80

10

Sanofi-Aventis

78

11

Oakley

77

12

Warner-Lambert Company

74

13

U.S. Philips

74

14

Mag Instrument

70

15

Merck

69

16

3M Innovative Properties Company

67

17

Cygnus Telecommunications Technology

64

18

Schering

64

19

Millennium

63

20

Eli Lilly And Company

61

21

Promote Innovation (False Marking)

60

22

Melvino Technologies

59

23

Teva Pharmaceuticals

58

24

AstraZeneca AB

54

25

Eon-Net

54

 

 

Rank

Patent Plaintiff

Number of Defendants

Non-Practicing Entity

1

Ronald A Katz Technology Licensing

1295

Yes

2

Acacia and Paul Ware

1100

Yes

3

Tillotson and Best Manufacturing Company

468

No

4

Laughlin Products

463

No

5

Geotag

454

Yes

6

U.S. Philips

406

No

7

Pfizer

399

No

8

Massachusetts Institute of Technology

297

Yes

9

Monsanto Company

295

No

10

Parallel Networks

274

Yes

11

Orion IP (Spangenberg)

269

Yes

12

Sanofi-Aventis

260

No

13

Electronics for Imaging (with MIT)

253

Yes

14

Abbott Laboratories

230

No

15

Melvino Technologies and ArrivalStar

226

Yes

16

Leon Stambler

218

Yes

17

Mag Instrument

212

No

18

Astrazeneca

203

No

19

PACid Group

194

Yes

20

Clear With Computers (Spangenberg)

193

Yes

21

Guardian Media Technologies

193

Yes

22

Warner-Lambert Company

187

No

23

Technology Patents

186

Yes

24

Honeywell International

183

No

25

Eli Lilly And Company

182

No

 

About 11% of all defendants sued for patent infringement during this time-period were sued by these 25 plaintiffs.

Patent Reform in the House of Representatives:

Earlier today, I testified in Congress before the House of Representatives Judiciary Committee’s Subcommittee on Intellectual Property, Competition, and the Internet. [Link] The IP subcommittee will have jurisdiction over any patent reform measures introduced to the House.  The other two witnesses were Professor Dan Burk (UC Irvine) and Andrew Pincus (Mayer Brown, representing BSA).  The focus of today’s hearing was on the changes that have occurred in patent law since the patent reform process began in 2004.  I.e., what is left for Congress to reform? Our written and recorded testimony is available online here: http://judiciary.house.gov/hearings/hear_03102011_2.html.

Questioning was extensive and included questions from subcommittee Chairman Goodlatte (R-VA), Vice-Chairman Watt (D-NC), and Representatives Conyers (D-Mich), Nadler (D-NY), Chu (D-CA), Reed (R-NY), and Adams (R-FL). Representatives Coble (R-NC) and Quayle were also in attendance.

My written Testimony Follows:

 

Committee on the Judiciary< ?xml:namespace prefix ="" o />

United States House of Representatives

Subcommittee on Intellectual Property, Competition and the Internet

 

Hearing

                                                                   

 “Review of Recent Judicial Decisions on Patent Law”

 

Prepared Statement of

Dennis Crouch

 

March 10, 2011

Washington, DC


 

I.                 Introduction:

 

We are likely nearing a turning point in a decade-long process of patent reform.  Although there is still clearly a strong demand for legislative measures, much has changed since the landmark FTC and NAS point-by-point criticisms of the patent law system were released in 2003 and 2004 respectively.[1] Likewise, much has changed in the six years since the Patent Reform Act of 2005 was introduced in the House of Representatives.[2]  Perhaps in response to these external pressures, the Federal Courts have taken a more active role in shaping patent policy from the bench and have particularly addressed many of the concerns raised by the various patent reform initiatives.

 

II.               The Rapid Developments in Patent Case Law over the Past Several Years:

 

In most areas of law, court-developed doctrines mature quite slowly.  Over the past decade, however, patent law has been a dramatic counter-example.  The courts have substantially altered many longstanding patent doctrines in the course of a few short years.[3]  Several factors combine to explain this phenomenon.  First, unlike most other federal legal questions appealed to regional Circuit Courts of Appeal, virtually all patent law related appeals from across the country are heard by the Court of Appeals for the Federal Circuit (the “Federal Circuit”).  The national reach of the Federal Circuit means that a ruling by the court has an automatic nationwide impact in much the same way that decisions by the United States Supreme Court have a nationwide impact.  However, unlike the Supreme Court, the Federal Circuit hears hundreds of patent cases each year.  Over the past ten years, the funneling of patent appeals to the Federal Circuit has resulted in the court hearing over four thousand patent infringement appeals in addition to its review of patent decisions from the United States Patent and Trademark Office (the “Patent Office”) and the International Trade Commission.[4]  The large number of cases provides the court with the opportunity to rapidly shift the law, even when each case presents only an incremental change. In addition to the means to effect change, it is apparent that both the Federal Circuit and the Supreme Court have taken an interest in shaping patent law policy.[5]  Finally, unlike many Federal statutes, the Patent Act as codified in Title 35 of the United States Code is a relatively sparse statute that leaves tremendous leeway for interpretation.

 

Over the past six years, the Supreme Court granted certiorari and issued a number of important patent decisions that:

 

·       Make it easier to invalidate (or reject) a patent on obviousness grounds, KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007) (eliminating technical hurdles for proving an invention obvious and instead applying a “common sense” analysis for assessing patentability); 

·       Make it more difficult for a patent holding company to obtain injunctive relief to stop ongoing infringement, eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) (holding that even an adjudged infringer should not be automatically enjoined from continuing to infringe; rather an injunction should only issue after consideration of the traditional four-factor test for equitable injunctive relief); 

·       Make it easier for a manufacturer to obtain a declaratory judgment of non-infringement, MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007) (holding that declaratory judgment (“DJ”) jurisdiction may exist even if the patent holder could not have sued the DJ plaintiff for infringement; apprehension that patentee will sue for infringement is not a necessary element for Article III jurisdiction); 

·       Solidify our understanding of the scope of patentable subject matter available for business method patents, Bilski v. Kappos, 130 S. Ct. 3218 (2010) (invalidating Bilski’s claimed invention – a method of hedging against the occurrence of bad weather – as an unpatentable abstract idea);  

·       Limit the doctrine of export infringement under 35 U.S.C. § 271(f), Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007) (holding that Microsoft could not be held liable for exporting software code because the exported source code does not qualify as a “component” under the statute); and  

·       Provide roadmaps for stronger patent licensing agreements, see Quanta Computer, Inc. v. LG Elecs., Inc., 553 U.S. 617 (2008) (patent “exhausted” under first sale doctrine because patentee did not restrict licensee’s sales to third party purchasers) and Ill. Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28 (2006) (holding that in antitrust tying cases, courts should not presume that a patent confers market power).

 

During this time, the Federal Circuit has also actively addressed patent reform issues with decisions that:

 

·       Attempt to implement venue reform in a way that limits unreasonable forum shopping, In re TS Tech United States Corp., 551 F.3d 1315 (Fed. Cir. 2009) (on writ of mandamus, ordering case transferred out of venue that had no meaningful ties to the patent infringement case);[6]  

·       Rationalize patent damage awards, Uniloc USA, Inc. v. Microsoft Corp., ___ F.3d ___, 2011 U.S. App. LEXIS 11 (Fed. Cir. 2011) (holding that the 25% Rule for calculating patent damages is “fundamentally flawed” and that total product revenue cannot be considered in the reasonable royalty analysis unless the Entire Market Value Rule applies.) and Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009) (requiring a proof that purported “comparable” licenses used for calculating a royalty rate are, in fact, comparable); Wordtech Systems, Inc. v. Integrated Networks Solutions, Inc., 609 F.3d 1308 (Fed. Cir. 2010). 

·       Limit enhanced damages, In re Seagate, 497 F. 3d 1360 (Fed. Cir. 2007) (limiting the potential for treble damages to cases where the adjudged infringer’s actions were at least “objectively reckless”) (see Chart 1); 

·       Expand the false marking doctrine, Forest Group Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009);  

·       Limit inequitable conduct pleadings, Exergen Corporation v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009) (requiring that inequitable conduct pleadings include “specific who, what, when, where, and how of [any] material misrepresentation or omission”); and  

·       Reject Patent Office substantive rulemaking authority, Tafas v. Doll, 559 F.3d 1345 (Fed. Cir. 2009).[7]   

 

PatentLawImage107

 

As we sit here today, the courts also have a number of important cases pending resolution. Among others, these include:

 

·       A challenge to the presumption of validity associated with issued patents, Microsoft Corp. v. I4I Ltd. P’ship, 131 S. Ct. 647 (2010) (certiorari granted on the issue of whether the presumption of validity associated with an issued patent must always be overcome with clear and convincing evidence);  

·       A challenge to the patentability of genetic material, See Ass’n for Molecular Pathology v. United States PTO, 2010 U.S. Dist. LEXIS 35418 (S.D.N.Y. 2010) (holding BRCA gene patents invalid for being directed to a law of nature); 

·       A Constitutional challenge to the False Marking provisions of the Patent Act, Unique Prod. Solutions, Ltd. v. Hy-Grade Valve, Inc., 2011 U.S. Dist. LEXIS 18237 (N.D. Ohio 2011) (holding the False Marking statute unconstitutional) and United States ex rel. FLFMC, LLC v. Wham-O, Inc., Fed. Cir. App. No. 2011-1067 (pending appeal challenging Constitutionality of the statute);[8]  

·       A question regarding the mens rea requirement for inducing infringement under 35 U.S.C. § 271(b), Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 458 (2010) (grant of certiorari);       

·       A major challenge to the implementation of the judge made law of inequitable conduct, TheraSense, Inc. v. Becton, Dickinson & Co., 374 Fed. Appx. 35 (Fed. Cir. April 26, 2010) (en banc order requesting briefing); and 

·       A challenge to patent ownership rights under the Bayh-Dole Act, Bd. of Trs. of the Leland Stanford Junior Univ. v. Roche Molecular Sys., 131 S. Ct. 502 (2010) (grant of certiorari).

                                                            

For better or worse, the courts have substantially shifted the playing field over the past six years. And, the cases currently pending and in the pipeline appear poised to continue this process.  Of course, the courts have limited power and cannot make statutory amendments or offer funding to the Patent Office.  It is safe to say, however, that the courts have addressed (or are addressing) virtually all of the legitimately raised patent reform issues that fall squarely within their purview.  Within this dynamic, an important ongoing role of Congress is at least to ensure that the courts are making the right policy choices.

 

III.              Administrative and Practice Changes that have Arisen Over the Past Several Years:

 

Patent Office Backlog: A key issue of patent law policy that has not been adequately addressed in the past six years is the growing backlog of patent applications pending at the Patent Office.  Although the current Patent Office management team is quite focused on reducing the backlog, their efforts have not been overwhelmingly successful to-date.  As seen in Chart 2 (below), the overall backlog of patent applications pending at the USPTO has increased more than 30% since 2005.  The forced delay is troubling for patent applicants because the exclusive patent right is only enforceable once the patent issues, and typically only against post-issuance infringement.  The multi-year prosecution delay is also troubling for potential competitors and customers because the patent right may eventually spring-forth to re-capture exclusive rights that had been in public use for years.

 

PatentLawImage103

 

Even more dramatic, is the twenty seven fold (~2700%) increase in the backlog of cases awaiting decision at the Board of Patent Appeals and Interferences (BPAI). (Chart 3).  The long and growing backlog of appeals more than doubles the expected duration of the patent prosecution process for the almost 50% of patent applicants that achieve at least a partial victory on appeal.

 

PatentLawImage106

 

These backlogs likely cannot be directly corrected by the courts. Instead, every effort must be made to ensure that the Patent Office is enabled and encouraged to right its own ship.  In the short term, the Patent Office will need to hire more examiners; re-work its failing information technology system; and apply effective negotiation theories to the examination process.  In the longer term, world patent offices must work-share when examining duplicate patent applications that have been filed in multiple countries.[9]  In addition, there are some relatively easy steps that can be taken to help ensure that patent applications are filed in a way that make them easier to examine.  This may include (1) requiring applicants to better delineate their invention and its purposes and (2) more rigorously enforcing the requirement that claims be clearly drafted in a way that relates to the invention as disclosed. 

 

Obviousness and the Backlog: The bulk of time spent in the patent examination process and in appeals to the BPAI revolves around the issue of obviousness.[10]  In other words, the backlogs can be largely attributed to time spent arguing the difficult issue of obviousness. Unfortunately, nothing in the proposed legislation does anything directly to alleviate this burden.  Although the process of examining patents for obviousness may seem to be one best left to the administrative agency, the Patent Office is bound to follow the examination processes laid out by the courts in KSR v. Teleflex[11] and Graham v. John Deere Co.[12]  Because so much time and energy is spent on this issue during the examination process, it may be one where increased substantive rulemaking authority would allow the Patent Office to create a more manageable approach to the statutory question. 

 

Foreign Inventor Influence on the US Patent System: Through a number of reciprocal international agreements such as Paris Convention, the US has promised citizens of other countries access to the US patent system.[13]  Under these agreements, an innovative Japanese company seeking exclusive rights in the US market could obtain US patent protection and enforce those rights in US courts against US competitors.  Despite this offer of rights, the bulk of issued US patent have always been based on US originated inventions.  This practical statistic meant that, historically, US patent reform primarily impacted US companies and US inventors.  Over the past six years, the statistic changed, and for the first time in history, the majority of US patents are now being issued on foreign-originated inventions. (Chart 4).

 

PatentLawImage105

  

For some, this decline in US-centric dominance of the US patent system will serve as a sign that US innovation could use additional encouragement.  In addition, however, the decline may signal a need to change our outlook on the role of patent rights in US policy. Certainly, the offer of patent rights encourages innovation and disclosure of new inventions.  However, this incentive is felt around the world – encouraging companies in Australia or Germany to innovate in their home countries in order to capture an exclusive slice of the US market.[14]  In this framework, patent reform is much more than a domestic policy issue. Rather, it becomes an issue of rooted in international trade and international relations.  This is not a new concept, but one that should be kept in mind as the legislation moves forward.

 

Rise in Patent Reexamination Filings: The US has two primary post-grant opposition processes already in place: (1) inter partes reexamination and (2) third-party requested (or prompted) ex parte reexamination.  Prior to 2005, it appeared that many potential defendants and accused infringers were reluctant to use the post-grant opposition processes.  That reluctance has largely evaporated – in part because of the USPTO’s successful implementation of a Central Reexamination Unit (CRU) composed of elite and highly trained patent examiners in sufficient quantity to have a high response rate.[15]  In addition, patent law professionals have seen that reexamination can be an effective and relatively inexpensive alternative to litigation.  At this point, high-dollar patent infringement lawsuits are usually associated with a parallel reexamination of the patents in-suit – so long as the defendant has a credible obviousness argument based on published materials.  Table 1, shows the rise in popularity of reexaminations over the past few years.

Table 1[16]

FY2000-2004

FY2006-2010

Percent Change in Number of Reexamination Requests

Inter Partes Reexamination Requests

53

903

1704%

Ex Parte Reexamination Requests

1,719

3,272

190%

A notable limitation of the current reexamination system is that reexaminations are only allowed to consider certain invalidity arguments (obviousness and anticipation) and apply a limited set of prior art (patents and printed publications).  Many countries offer broader latitude in their opposition proceedings, although some of those countries completely divide duties between the administrative agency (handling invalidity issues) and the court (handling infringement).[17]  The dramatic shift in usage of available post grant options gives me pause to consider whether the proposed reforms in 2005 offered a permanent solution to what was merely a temporary problem.

 

IV.             Identifying Elements of the Reform Measures that have not been Implemented:

 

A more straightforward approach to issues now before the Committee is to identify elements of prior patent reform measures that have not been addressed by the courts. These include:

 

(1)   Easing the USPTO’s ability to set fees for its services and to retain all fees collected;

(2)   Moving from a “first-to-invent” system to a “first-to-file” system;

(3)   Expanding prior-user rights;

(4)   Requiring that all patent applications be published by the USPTO;  

(5)   Allowing pre-issuance protests (or prior art submissions) by third parties;

(6)   Expanding the scope of post-grant reexamination or adding an additional post-grant opposition proceedings;

(7)   Eliminating the “best mode” requirement; and

(8)   Easing the rules for assignee submission of patent filings without the inventor’s express permission.

 

Each of these reform measures have their own potential benefits and detriments that vary according to the implementation approach chosen.

 

Thank you for this opportunity to present my remarks.

 

Dennis Crouch

March 10, 2011

 

 



[1] Federal Trade Commission, To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy, A Report by the Federal Trade Commission, October 2003; Nat’l Res. Council of the Nat’l Acads., A Patent System for the 21st Century (Stephen A. Merrill et al. eds., National Academies Press).

 

[2] Patent Act of 2005, H.R.2795.

 

[3] See William C. Rooklidge & Alyson G. Barker, Reform of a Fast-Moving Target: The Development of Patent Law Since fee 2004 National Academies Report, 91 J. Pat. & Trademark Off. Soc’y 153 (2009).

[4] Federal Circuit Statistics, Filings of Patent Infringement Appeals from the U.S. District Courts at http://www.cafc.uscourts.gov. 

 

[5] Polk Wagner & Lee Petherbridge, Is the Federal Circuit Succeeding? An Empirical Assessment of Judicial Performance, 152 U. Pa. L. Rev. 1105 (2004) (“since its inception, the [Federal Circuit]—with some assistance from the Supreme Court—has moved aggressively in support of its widely perceived mandate”); Paul R. Michel, Assuring Consistency and Uniformity of Precedent and Legal Doctrine in the Areas of Subject Matter Jurisdiction Entrusted Exclusively to the U.S. Courts of Appeals for the Federal Circuit: A View from the Top, 58 AM. U. L. REV. 699, 702 (2009); Craig Allen Nard & John F. Duffy, Rethinking Patent Law’s Uniformity Principle, 101 Nw. U. L. Rev. 1619 (2007); Dan L. Burk & Mark A. Lemley, The Patent Crisis and How the Courts Can Solve It (2009)

[6] The TS Tech decision appears to have had a major impact on patent venue jurisprudence. In the two years since the case was decided, its analysis has been followed by almost four dozen different courts.  See, for example, Promote Innovation LLC v. Leviton Mfg. Co., 2011 U.S. Dist. LEXIS 16294 (E.D. Tex. Feb. 17, 2011) (granting accused infringer’s motion to transfer venue from the Eastern District of Texas to the Eastern District of New York).

                                             

[7] The Tafas decision was vacated pending rehearing en banc and eventually dropped after the USPTO retracted its planned implementation of rules that would limit both the number of claims that an applicant could file per patent application and the number of continuation applications an applicant could file based on a single invention disclosure. See also, Arti K. Rai, Growing Pains in the Administrative State: The Patent Office’s Troubled Quest for Managerial Control, 157 U. PA. L. REV. 2051 (2009).

[8] Over 1,000 false marking claims were filed in 2009 and 2010.  False Patent Marking at http://www.falsemarking.net/cases.php.

 

[9] See Rai, Growing Pains at note 6.

 

[10] Dennis Crouch, Understanding the Role of the Board of Patent Appeals: Ex Parte Rejection Rates on Appeal, University of Missouri School of Law Legal Studies Research Paper No. 2009-16 (2009) at http://ssrn.com/abstract=1423922. (90% of BPAI appeals involve a question of obviousness).

 

[11] 550 U.S. 398 (2007).

 

[12] 383 U.S. 1 (1966) (setting out the process of the obviousness inquiry as used in both courts and the Patent Office).

 

[13]  Paris Convention for the Protection of Industrial Property, art. 2.

 

[14] See Commonwealth Sci. & Indus. Research Organisation v. Buffalo Tech., 542 F.3d 1363 (Fed. Cir. 2008) (Australian government entity suing on its US software related patent in the Eastern District of Texas).

 

[15] Gregory Novak, Concurrent Reexaminations as a Strategic Patent Litigation Defense Tool, 1020 PLI/Pat 797 (2010) (“since the inception of the Central Reexamination Unit (CRU), reexamination proceedings are producing favorable results [for the third-party] in a more timely manner”).

 

[16] Derived from USPTO Inter Partes and Ex Parte Reexamination Data (December 31, 2010) at http://www.uspto.gov/patents/stats/Reexamination_Information.jsp.

 

[17] To my knowledge, no one has studied the potential impact of increasing the scope of US reexamination practice or adding a broader layer of post grant opposition.

Patently-O Bits & Bytes by Lawrence Higgins

HigginsFalse Marking Statute Found Unconstitutional

  • The Northern District of Ohio has found that the false marking statute (35 USC 292) is unconstitutional. [Link] Judge Polster applied the Morrison sufficient control analysis, and held the false marking statute invalid because the government lacks sufficient control to enable the President to "take Care that the Laws be faithfully executed. This case will surely be appealed to the CAFC and maybe even the Supreme Court. [Link] Already on appeal to the Federal Circuit is FLFMC, LLC v. Wham-O. In that case, Wham-O has argued that the statute is unconstitutional.

Motorola sues TiVo for patent infringement

  • Motorola contends that TiVo is infringing on patents that they acquired when they bought Imedia Corporation that are related to digital video recorders (DVR's). Motorola claims that the Imdeia Patents were filed in 1995 while; TiVo filed Patents were filed in 1998. The patents that Motorola obtained from Imedia are patent #'s 5,949,948, 6,304,714, and 6,356,708. Motorola asserts that the TiVo patent #'s 6,233,389 and 7,529,465 claim the same technology as their patents. [Link]

Is the patent backlog decreasing?

  • USPTO Commissioner for Patents Bob Stoll recently reported that the total backlog awaiting first office action by examiners decreased in February to 718,857 from 721,831 in January. Stoll also noted that there is a decline in the first action pendency time to an average of 24.2 months for January 2011 from 24.6 months in December 2010. Currently the USPTO has received over 11,000 more patents as compared to this time last year. [Link]

Sony Playstation 3 consoles seized after patent infringement suit

  • LG has won a preliminary injunction in Europe against Sony in a patent infringement suit. [Link]The injunction states that no shipments of the Playstation 3 can be shipped into Europe for at least 10 days. Also LG has filed a similar request with the US International Trade Commission, seeking to bar import of the Playstation 3. The complaint to the USITC alleges that Sony infringed at least one or more claims in US patent #'s 7,701,835, 7,577,080, 7,619,961 and 7,756,398 relating to the playback of Blue-ray Discs. [Link]

Patent Jobs:

  • Halcyon Molecular is seeking an IP strategist for their Silicon Valley location. [Link]
  • Life Technologies is looking for a Patent Attorney with 4-8 years experience and an EE or physics background. [Link]
  • McGinn IP Law Group is seeking a Patent Attorney with a BSEE. [Link]
  • ST-Ericsson is looking for an IP Attorney with more than 7 years experience to work at their Santa Clara location. [Link]

Upcoming Events:

  • Northwestern Journal of Technology and Intellectual Property will hold its 6th annual Symposium on Friday March 4th from 9am-5pm. The Symposium will discuss "The Economics of Intellectual Property and Technology," the keynote speaker will be Michael Fricklas. [Link] (Free Event, however CLE credit available for $200)
  • Berkeley Center for Law and Technology will hold an event on March 10th entitled, "Beyond Piracy: Managing Patent Risks in the New China." Presenters include Sharon Barner, Robert Merges, and Robert Barr to name a few. [Link]
  • The USPTO and USWCC will hold a Women's Entrepreneurship Symposium on March 11th. The event will be held at the USPTO headquarters in Alexandria, Va. The keynote speaker will be U.S. Senator Mary Landrieu will be the keynote speaker. [Link]
  • The George Washington University Law School will host an Intellectual Property Panel Symposium on March 18th. Guest panelists are Bruce Sewell, Mike Jacobson, John Whealan and Chief Judge Radar will be the keynote speaker. [Link]

Patently-O Bits & Bytes by Lawrence Higgins

HigginsFalse Marking Statute Found Unconstitutional

  • The Northern District of Ohio has found that the false marking statute (35 USC 292) is unconstitutional. [Link] Judge Polster applied the Morrison sufficient control analysis, and held the false marking statute invalid because the government lacks sufficient control to enable the President to "take Care that the Laws be faithfully executed. This case will surely be appealed to the CAFC and maybe even the Supreme Court. [Link] Already on appeal to the Federal Circuit is FLFMC, LLC v. Wham-O. In that case, Wham-O has argued that the statute is unconstitutional.

Motorola sues TiVo for patent infringement

  • Motorola contends that TiVo is infringing on patents that they acquired when they bought Imedia Corporation that are related to digital video recorders (DVR's). Motorola claims that the Imdeia Patents were filed in 1995 while; TiVo filed Patents were filed in 1998. The patents that Motorola obtained from Imedia are patent #'s 5,949,948, 6,304,714, and 6,356,708. Motorola asserts that the TiVo patent #'s 6,233,389 and 7,529,465 claim the same technology as their patents. [Link]

Is the patent backlog decreasing?

  • USPTO Commissioner for Patents Bob Stoll recently reported that the total backlog awaiting first office action by examiners decreased in February to 718,857 from 721,831 in January. Stoll also noted that there is a decline in the first action pendency time to an average of 24.2 months for January 2011 from 24.6 months in December 2010. Currently the USPTO has received over 11,000 more patents as compared to this time last year. [Link]

Sony Playstation 3 consoles seized after patent infringement suit

  • LG has won a preliminary injunction in Europe against Sony in a patent infringement suit. [Link]The injunction states that no shipments of the Playstation 3 can be shipped into Europe for at least 10 days. Also LG has filed a similar request with the US International Trade Commission, seeking to bar import of the Playstation 3. The complaint to the USITC alleges that Sony infringed at least one or more claims in US patent #'s 7,701,835, 7,577,080, 7,619,961 and 7,756,398 relating to the playback of Blue-ray Discs. [Link]

Patent Jobs:

  • Halcyon Molecular is seeking an IP strategist for their Silicon Valley location. [Link]
  • Life Technologies is looking for a Patent Attorney with 4-8 years experience and an EE or physics background. [Link]
  • McGinn IP Law Group is seeking a Patent Attorney with a BSEE. [Link]
  • ST-Ericsson is looking for an IP Attorney with more than 7 years experience to work at their Santa Clara location. [Link]

Upcoming Events:

  • Northwestern Journal of Technology and Intellectual Property will hold its 6th annual Symposium on Friday March 4th from 9am-5pm. The Symposium will discuss "The Economics of Intellectual Property and Technology," the keynote speaker will be Michael Fricklas. [Link] (Free Event, however CLE credit available for $200)
  • Berkeley Center for Law and Technology will hold an event on March 10th entitled, "Beyond Piracy: Managing Patent Risks in the New China." Presenters include Sharon Barner, Robert Merges, and Robert Barr to name a few. [Link]
  • The USPTO and USWCC will hold a Women's Entrepreneurship Symposium on March 11th. The event will be held at the USPTO headquarters in Alexandria, Va. The keynote speaker will be U.S. Senator Mary Landrieu will be the keynote speaker. [Link]
  • The George Washington University Law School will host an Intellectual Property Panel Symposium on March 18th. Guest panelists are Bruce Sewell, Mike Jacobson, John Whealan and Chief Judge Radar will be the keynote speaker. [Link]

Patently-O Bits & Bytes by Lawrence Higgins

HigginsFalse Marking Statute Found Unconstitutional

  • The Northern District of Ohio has found that the false marking statute (35 USC 292) is unconstitutional. [Link] Judge Polster applied the Morrison sufficient control analysis, and held the false marking statute invalid because the government lacks sufficient control to enable the President to "take Care that the Laws be faithfully executed. This case will surely be appealed to the CAFC and maybe even the Supreme Court. [Link] Already on appeal to the Federal Circuit is FLFMC, LLC v. Wham-O. In that case, Wham-O has argued that the statute is unconstitutional.

Motorola sues TiVo for patent infringement

  • Motorola contends that TiVo is infringing on patents that they acquired when they bought Imedia Corporation that are related to digital video recorders (DVR's). Motorola claims that the Imdeia Patents were filed in 1995 while; TiVo filed Patents were filed in 1998. The patents that Motorola obtained from Imedia are patent #'s 5,949,948, 6,304,714, and 6,356,708. Motorola asserts that the TiVo patent #'s 6,233,389 and 7,529,465 claim the same technology as their patents. [Link]

Is the patent backlog decreasing?

  • USPTO Commissioner for Patents Bob Stoll recently reported that the total backlog awaiting first office action by examiners decreased in February to 718,857 from 721,831 in January. Stoll also noted that there is a decline in the first action pendency time to an average of 24.2 months for January 2011 from 24.6 months in December 2010. Currently the USPTO has received over 11,000 more patents as compared to this time last year. [Link]

Sony Playstation 3 consoles seized after patent infringement suit

  • LG has won a preliminary injunction in Europe against Sony in a patent infringement suit. [Link]The injunction states that no shipments of the Playstation 3 can be shipped into Europe for at least 10 days. Also LG has filed a similar request with the US International Trade Commission, seeking to bar import of the Playstation 3. The complaint to the USITC alleges that Sony infringed at least one or more claims in US patent #'s 7,701,835, 7,577,080, 7,619,961 and 7,756,398 relating to the playback of Blue-ray Discs. [Link]

Patent Jobs:

  • Halcyon Molecular is seeking an IP strategist for their Silicon Valley location. [Link]
  • Life Technologies is looking for a Patent Attorney with 4-8 years experience and an EE or physics background. [Link]
  • McGinn IP Law Group is seeking a Patent Attorney with a BSEE. [Link]
  • ST-Ericsson is looking for an IP Attorney with more than 7 years experience to work at their Santa Clara location. [Link]

Upcoming Events:

  • Northwestern Journal of Technology and Intellectual Property will hold its 6th annual Symposium on Friday March 4th from 9am-5pm. The Symposium will discuss "The Economics of Intellectual Property and Technology," the keynote speaker will be Michael Fricklas. [Link] (Free Event, however CLE credit available for $200)
  • Berkeley Center for Law and Technology will hold an event on March 10th entitled, "Beyond Piracy: Managing Patent Risks in the New China." Presenters include Sharon Barner, Robert Merges, and Robert Barr to name a few. [Link]
  • The USPTO and USWCC will hold a Women's Entrepreneurship Symposium on March 11th. The event will be held at the USPTO headquarters in Alexandria, Va. The keynote speaker will be U.S. Senator Mary Landrieu will be the keynote speaker. [Link]
  • The George Washington University Law School will host an Intellectual Property Panel Symposium on March 18th. Guest panelists are Bruce Sewell, Mike Jacobson, John Whealan and Chief Judge Radar will be the keynote speaker. [Link]

Patent Reform Act of 2011: An Overview

LeahyThe Patent Reform Act of 2011 (S. 23) was introduced on January 25, 2011 by Senator Leahy (D-VT) who was joined by eight co-sponsors (all from the Judiciary Committee) that include Senators Coons (D-DE), Franken (D-MN), Grassley (R-IA), Hatch (R-UT), Klobuchar (D-MN), Kyl (R-AZ), Lieberman (I-CT), and Sessions (R-AL). The bill was referred to the Senate Judiciary Committee which unanimously approved the bill. The House of Representatives will likely move more slowly. Although House Judiciary Committee chair Rep. Smith (R-TX) co-sponsored the similar Patent Reform Act of 2009, Rep. Issa (R-CA) is the “patent expert of Congress” and has only tentatively supported the reform bills in the past. [UPDATE –  Most Recent Version of S. 23 2/11/11]

PatentLawImage080First-Inventor-to-File: The reform measure would move the US further toward a first-to-file system. Each patent application would be given an “effective filing date,” and the patentability will be judged on whether any prior art was available prior to the filing date. One-year grace period would remain in effect, but only for the inventor’s own disclosures (and disclosures derived from the inventor). Obviousness will also be judged as of the effective filing date. Inventors will no longer be able to swear behind prior art nor will they be able to establish priority in an interference proceeding. A new creation in the bill is a “derivation proceeding” that would operate only in times where an original inventor alleges that a patent applicant derived the invention from the original inventor’s work.

PatentLawImage081Damages: Patent defendants have argued that courts often treat damages issues as afterthoughts with little procedural control. The proposed amendment would add specific procedures and checks on how a judge manages the damages portion of a case. The amended statute would require that a court “identify methodologies and factors that are relevant to the determination of damages” and that “only those methodologies and factors” be considered when determining the damage award. In addition, prior to the introduction of damages evidence, the court would be required to consider either party’s contentions that the others damage case lacks a legally sufficient evidentiary base. In addition, the statute would require a judge to bifurcate the damages portion of a trial if requested “absent good cause to reject the request, such as the absence of issues of significant damages or infringement and validity.” Oddly, the proposed statute seemingly bars a judge from amending the discovery schedule or any “other matters” based upon the trial sequencing.

PatentLawImage082Enhanced Damages: Although we often discuss enhanced damages for willful infringement, the current Patent Act is not explicitly limited to situations involving willful infringement. Rather, Section 284 simply states that “the court may increase the damages up to three times the amount found or assessed.” Over the years, Federal Circuit precedent has limited the statute to only situations where the infringer’s actions were at least objectively reckless. The amended statute would codify that holding with the words “Infringement is not willful unless the claimant proves by clear and convincing evidence that the accused infringer’s conduct with respect to the patent was objectively reckless. [I.e., that] the infringer was acting despite an objectively high likelihood that his actions constituted infringement of a valid patent, and this objectively-defined risk was either known or so obvious that it should have been known to the accused infringer.” The statute also makes clear that accusations of willful infringement must be pled with particularity (following FRCP 9(b)); that proof of knowledge of patent is insufficient to establish willful infringement; that a pre-lawsuit notice of infringement cannot itself establish willfulness unless the notification is fact specific in explaining the infringement; that the failure to obtain the advice of counsel (or to present that advice to the jury) “may not be used” to prove willull infringement or inducement of infringement; and that damages subject to trebling are only those accrued after the infringement became willful; and that in a “close case” there will be no willful infringement (here, the statute requires a judge to “explain its decision” and to make a decision prior to the issue being tried by the jury).

Third-Party Challenges to Patent Rights: The bill includes three expanded ways that a third party can use the USPTO to challenge a patent: Pre-Issuance Third-Party Submissions; Third-Party Requested Post-Grant Review; and Inter Partes Post Grant Review.

Pre-Issuance Third-Party Submissions: Under the amendment, third parties would be allowed to submit any printed publication along with a description of the relevance to the USPTO to be considered during the examination of a pending patent application.

Third-Party Requested Post Grant Review: A post grant review proceeding would be created (similar to our current reexamination proceeding) that could be initiated by any party. The review would allow a third party to present essentially any legal challenge to the validity of at least one clam. A major limitation on the post grant review is the request for review must be filed within nine-months of issuance.

Inter Partes Review Proceedings: Once the nine-month window for post grant review is expired, a party may then file for “inter partes review.” This new system would replace inter partes reexamination and would be limited to consideration of novelty & obviousness issues based on prior art patents and printed publications. (It appears that third-party requested ex parte reexamination would remain a viable option as well).

False Marking: A large number of false patent marking cases have been filed in the past year. The bill would eliminate those lawsuits except for ones filed by the US government or filed by a competitor who can prove competitive injury.

PatentLawImage083Oath: The bill would make it easier for a corporation to file a substitute inventor’s oath when the inventor is non-cooperative.

Best Mode: Although an inventor will still be required to “set forth” the best mode for accomplishing the invention, the statute would be amended to exclude failure of disclose a best mode from being used as a basis for invalidating an issued patent. The PTO will still have a duty to only issue patents where the best mode requirement has been satisfied.

Fee Setting Authority: The PTO would be given authority to adjust its fees, but only in a way that “in the aggregate” recover the estimated costs of PTO activities. Along this line, a new “micro” entity would be created that would have additional fee reductions.

Patent Suit Filings for 2010 Show a Slight Rise

By Jason Rantanen

Patstats.org, coordinated by Professor Paul Janicke of the University of Houston Law Center, recently released its analysis of patent suit filings for calendar year 2010.  Patstats reports that although the total number of patent cases filed in 2010 was 3,605 – significantly higher than the 2,744 cases filed in 2009 – much of that increase can explained by the 752 false marking cases filed in 2010.  If the false marking cases are excluded, the increase is closer to 4%.  Professor Janicke was kind enough to provide a set of historical data for context, which I used as the basis for the below graph.

Patent Suit Filings 1990-2010
Note that this chart only shows false marking cases for 2010, and thus assumes that there were not high numbers of false marking cases in previous years (for support of this assumption, see http://www.grayonclaims.com/false-marking-case-information/).  For additional analysis of patent suit filing data, as well as other interesting and useful statistics relating to patent litigation, see www.patstats.org.

Guest Post: Counting Defendants in Patent Litigation

PatentLawImage024Guest Post by Kyle Jensen of PIPRA.

I recently looked at some historical litigation trends and was surprised to learn that the number of patent lawsuits filed annually was roughly constant over the past decade. This year, of course, there are a large number of qui tam complaints being filed for false marking (largely by a small handful of plaintiffs); however, the number of infringement cases will not be dramatically different than 2009.

The relative constancy of litigation activity is a bit perplexing and certainly incongruent with the patent-system-gone-awry stories so commonplace in the popular media. I thought there was an "NPE problem" spinning out of control. I thought costs were spinning out of control. Well, they might be, but it's not reflected in increased lawsuit filings. I pulled back-data from PACER to produce the chart below, which shows the number of patent lawsuits and defendants in those lawsuits as a percentage of their levels in 1990.

There are some striking observations here. * The total number of patent litigations filed increased about 300% between 1990 and 2002, but has been nearly constant for the rest of this decade. (Many others have shown this previously. See, e.g. Shrestha, 2010) * The number of cases with more than one defendant followed a similar trend (data not shown). * The number of named defendants increased nearly 600% between 1990 and 2010.

In short, the number of cases filed per year is constant, but the number of defendants keeps growing.

I don't know why this is. The most obvious hypothesis is that it's driven by an increase in many-defendant filings by NPEs. That is, maximizing the ratio of defendants named to cases filed will 1) maximize potential revenue and 2) decrease costs for an NPE or contingency counsel. I can't think of many reasons that a practicing entity would behave similarly.

Numerous sources report that the number of NPE lawsuits is growing and now make comprise about 1/5th of all filings. For example, according to PatentFreedom, NPE lawsuits increased from less than 100 per year in 1998 to roughly 500 in 2009. (There were about 2,600 total cases that year). Also, Colleen Chien showed that in the IT sector NPE suits account for 1 in 6 cases. Given these statistics, it would be interesting to if those cases account for a disproportionate fraction of the named defendants. (This is somewhat more complicated to show.)

If the number of defendants is growing, costs are certainly growing as well. Assuming each case costs each defendant $1MM (many studies show it's higher), defendants would be spending an extra $400MM/yr on litigation each year.

Where's that money go? Certainly attorneys capture some of it. Below I've overlaid the number of attorneys assigned to patent litigations over the years. As you can see, the growth in attorneys outstrips both cases and defendants.

(All this data is available in PACER, so you can verify my numbers. Also the raw data are online. There are a few obvious caveats, e.g. I haven't removed cases in which multiple subsidiaries of the same company are named in the same suit. About me: I work for the Rockefeller-funded non-profit PIPRA where I teach scientists and entrepreneurs in developing economies about IP. I also own the website PriorSmart, which publishes a daily patent complaint alert. It's free, and includes PDFs of the pleadings. You can sign up here if you'd like to get it.)

Fujitsu Ltd. v. Netgear

By: Jason Rantanen

Fujitsu Ltd. v. Netgear (Fed. Cir. 2010)
Panel: Lourie, Friedman, and Moore (author)

Indirect infringement claims are particularly relevant in the context of industry-wide interoperablity standards, because frequently companies simply manufacture products capable of particular behavior while the relevant methods are actually carried out by end users.  Patent No. 4,974,952 raises an example of this issue.  The '952 patent claims a method of sending wireless messages involving fragmenting the messages in a particular manner.  Philips, the patent holder, contended that any product that complied with certain sections of the IEEE 802.11 standard infringed the asserted claims, and that by complying with the standard Netgear indirectly infringed the '952 patent (presumably by selling the accused products).

The district court granted summary judgment of noninfringement in favor of Netgear, determining that Phillips had failed to establish either contributory infringement or inducement.  On appeal, the Federal Circuit determined that the district court had erred on some points, but nevertheless affirmed summary judgment of noninfringment with respect to all but four products. 

Use of Standards to establish Direct Infringement: The court's discussion of the use of industry-wide standards to prove infringement may become the most widely-cited portion of this opinion.  After considering the parties' arguments, along with that of amicus Association of Corporate Counsel Intellectual Property Committee, the court held that:

[A] district court may rely on an industry standard in analyzing infringement. If a district court construes the claims and finds that the reach of the claims includes any device that practices a standard, then this can be sufficient for a finding of infringement. We agree that claims should be compared to the accused product to determine infringement. However, if an accused product operates in accordance with a standard, then comparing the claims to that standard is the same as comparing the claims to the accused product….An accused infringer is free to either prove that the claims do not cover all implementations of the standard or to prove that it does not practice the standard.

We acknowledge, however, that in many instances, an industry standard does not provide the level of specificity required to establish that practicing that standard would always result in infringement. Or, as with the ’952 patent, the relevant section of the standard is optional, and standards compliance alone would not establish that the accused infringer chooses to implement the optional section. In these instances, it is not sufficient for the patent owner to establish infringement by arguing that the product admittedly practices the standard, therefore it infringes. In these cases, the patent owner must compare the claims to the accused products or, if appropriate, prove that the accused products implement any relevant optional sections of the standard.

Slip Op. at 8-9. Applying this holding, the panel concluded that because the fragmentation feature in the 802.11 standard was optional, and (although present in the Netgear devices) was turned off by default, Phillips was required to prove that customers actually used the infringing feature. On this point, the Federal Circuit agreed with the district court that there was only evidence of actual infringing use with respect to four products.

Substantial Noninfringing Uses: The Federal Circuit applied the analysis of i4i v. Microsoft, focusing on the specific feature at issue.  Here, because the specific feature was infringing when it was activated, there was no substantial noninfringing use.

Material Part of the Invention: Phillips accused two classes of products: those that only fragmented messages and those that only defragmented messages.  Because the claims of the '952 patent were specifically drawn to the fragmenting steps, not the defragmenting steps, the district court concluded that the accused defragmenting products could not infringe.  Phillips argued that because fragmentation necessarily infringes the asserted claims, than the defragmenting products are useful only for infringement, and Netgear should be liable for them.  The panel rejected this argument: even though the usefulness of the claimed method would be lost without data receivers capable of defragmenting messages, the lack of defragmentation steps in the claims means that products that only defragment messages cannot constitute a "material part" of the invention. 

Mental State Components of Indirect Infringement: In analyzing the respective mental state components for contributory infringement and inducement of infringement, the panel found that Netgear's receipt of letters identifying the '952 patent and alleging infringement by any 802.11 compliant standard were sufficient to survive summary judgment.

Comment: my current research focuses on mental state issues in patent law, including in the context of indirect infringement.  In the near future, I'll discuss this subject in more depth. 

Other issues: In addition to the above indirect infringement issues, the Federal Circuit also concluded that the district court had erred in limiting damages based on the patent marking statute (35 U.S.C. § 287), because the claims covered a method and § 287 does not apply where the patent is directed to a process or method.  The Federal Circuit also analyzed the district's construction of relevant claim terms in Patent Nos. 6,018,642 and 6,469,993, and affirmed its grant of summary judgment of noninfringement of those patents.  The analysis in this section may be particularly relevant to those operating in the wireless technology area.

Follow-up comment: Michael Barclay also noted the importance of the standard-as-evidence holding on his blog, IPDuck.  See http://ipduck.blogspot.com/2010/09/federal-circuit-approves-use-of.html

False Marking Claims: Standing

By Jason Rantanen

Stauffer v. Brooks Brothers, Inc. v. United States (Fed. Cir. 2010)

Raymond Stauffer brought an action against Brooks Brothers claiming that bow ties sold by the defendant were falsely marked with patents that expired in 1954 and 1955.  Stauffer is a patent attorney who purchased some of the marked bow ties.  The district court granted Brooks Brothers' motion to dismiss for lack of standing, and subsequently denied the United States' motion to intervene.  Stauffer and the United States appealed.

Section 292 states:

(a) . . .
Whoever marks upon, or affixes to . . . any unpatented article, the word “patent” or any word or number importing that the same is patented, for the purpose of deceiving the public
. . .
Shall be fined not more than $500 for every such offense.
(b) Any person may sue for the penalty, in which event one-half shall go to the person suing and the other to the use of the United States.

(emphasis added).  This type of language is called a "qui tam" provision, by which the government  essentially asigns its rights to a private party (the qui tam "relator").  Because the relator is standing in the place of the United States, he or she must prove that the government, as opposed to the relator, satisfies the requirements for standing.  Central to this case was the district court's determination that Stauffer failed to sufficiently allege that the United States suffered an injury in fact from Brooks Brothers' alleged false marking. 

On appeal, the Federal Circuit concluded that the district court had erred on this point:

Congress has, by enacting section 292, defined an injury in fact to the United States. In other words, a violation of that statute inherently constitutes an injury to the United States. In passing the statute prohibiting deceptive patent mismarking, Congress determined that such conduct is harmful and should be prohibited. The parties have not cited any case in which the government has been denied standing to enforce its own law. Because the government would have standing to enforce its own law, Stauffer, as the government’s assignee, also has standing to enforce section 292.

Slip Op. at 9.

The panel rejected Brooks Brothers' reliance on Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992), which denied plaintiffs standing under a citizen-suit provision, as relating only to suits against the government itself.  It also rejected the argument that Stauffer's standing depends on whether the alleged injury is proprietary or sovereign, concluding that both types of injury are sufficient to confer standing on the government, and therefore on the relator. 

With respect to the Government's request to intervene, the Federal Circuit determined that the district court  erred in concluding that the government lacked an interest sufficient to intervene as a matter of right under Rule 24(a)(2).  The panel stated that:

Contrary to Brooks Brothers’ position, the government has an interest in enforcement of its laws and in one half the fine that Stauffer claims, disposing of the action would “as a practical matter impair or impede the [gov-ernment’s] ability to protect its interest,” and Stauffer may not adequately represent that interest….As an initial matter, Brooks Brothers does not contest the government’s assertion that Stauffer does not adequately represent the United States’ interest in this case.

Furthermore, the government would not be able to recover a fine from Brooks Brothers if Stauffer loses, as res judicata would attach to claims against Brooks Brothers for the particular markings at issue….Thus, even though, as the district court noted, “the issue of the government’s ability to bring an action pursuant to section 292” in general was not presented,[] the United States’ ability to protect its interest in this particular case would be impaired by disposing of this action without the government’s intervention. We there-ore reverse the district court’s decision denying the government’s motion to intervene.

Slip Op. at 15-16 (internal citations omitted).

Note: The Federal Circuit expressly declined to address several issues, including  the constitutionality of Section 292(b) (an issue that was raised by amicus Ciba Vision Corporation), whether section 292 addresses a proprietary or a sovereign injury, or both, and whether Stauffers alleged injuries to himself, or his asserted injuries to competition, give him standing.  In addition, in its remand the panel explicitly instructed the district court to consider Brooks Brothers' motion to dismiss pursuant to Rule 12(b)(6), which argued that the complaint fails to allege an intent to deceive the public with sufficient specificity.

Patently-O Bits and Bytes

If you are a law professor teaching a general course on intellectual property, you might consider a cheap text-book alternative:

  • Franklin Pierce Professor Tom Field freely gives-away PDF versions of his 470 page book titled Fundamentals of Intellectual Property.
  • Lewis & Clark Professors Joe Miller and Lydia Loren have started their own publishing company and offer their book titled Intellectual Property Cases and Materials for a suggested fee of $30.
  • Students who want a bound-book can take the document to Kinkos with a $20 bill.
  • [This semester, I am teaching Patent Law and have assigned the casebook by Merges & Duffy. Although not cheap, that book has the lowest cost per pound of any on the market.]

Recent Patent Law Jobs:

Some Recent Patent Lawsuits:

  • Allure Home Creation Co. Inc. v. Maytex Mills Inc. (D.Del.) — Patent covers a shower-curtain hook.
  • Simonian v. Mitchell-Vance Labs (E.D.Ill.) — False marking action against maker of “ScarAway” whose product packaging lists an expired patent.
  • AGA Medical Corp. v. W.L. Gore & Associates (D.Minn) – Patent covers a device that can be inserted via a catheter for blocking leakage of an internal body organ.
  • De Beers UK Limited v. Kohls & Adwar Casting (W.D.Mo.) – Design patents cover jewelry.

Patently-O Bits and Bytes

If you are a law professor teaching a general course on intellectual property, you might consider a cheap text-book alternative:

  • Franklin Pierce Professor Tom Field freely gives-away PDF versions of his 470 page book titled Fundamentals of Intellectual Property.
  • Lewis & Clark Professors Joe Miller and Lydia Loren have started their own publishing company and offer their book titled Intellectual Property Cases and Materials for a suggested fee of $30.
  • Students who want a bound-book can take the document to Kinkos with a $20 bill.
  • [This semester, I am teaching Patent Law and have assigned the casebook by Merges & Duffy. Although not cheap, that book has the lowest cost per pound of any on the market.]

Recent Patent Law Jobs:

Some Recent Patent Lawsuits:

  • Allure Home Creation Co. Inc. v. Maytex Mills Inc. (D.Del.) — Patent covers a shower-curtain hook.
  • Simonian v. Mitchell-Vance Labs (E.D.Ill.) — False marking action against maker of “ScarAway” whose product packaging lists an expired patent.
  • AGA Medical Corp. v. W.L. Gore & Associates (D.Minn) – Patent covers a device that can be inserted via a catheter for blocking leakage of an internal body organ.
  • De Beers UK Limited v. Kohls & Adwar Casting (W.D.Mo.) – Design patents cover jewelry.

Robert Matthews: When Multiple Plaintiffs/Relators Sue for the Same Act of Patent False Marking

Robert Matthews discusses the law controlling false-marking suits when multiple plaintiffs sue for the same act of false marking. Matthews extrapolates the case-law to make two primary points: (1) a false-marking defendant cannot be subjected to multiple penalties for the same act of patent false marking; and (2) based on the first-to-file tradition, federal comity, and standing principles, the second-filed suit should be dismissed. 

Cite as Robert A. Matthews, Jr., When Multiple Plaintiffs/Relators Sue for the Same Act of Patent False Marking, 2010 Patently-O Patent L.J. 95 at www.patentlyo.com/matthews.falsemarking.pdf.