Patent law professor Douglas Lichtman (and my good friend) has an interesting new short article (8 pages of text) about problems of “patent thickets.”
Theorists have discussed patent thickets as an example of problematic over-ownership — A.K.A. the tragic “anti-commons.” When a particular area of technology is blanketed by multiple patents owned by multiple parties, everyone blocks everyone else, and nothing gets done.
After all, the conventional literature on the tragedy of the anti-commons asserts that resources will be inefficiently under-used in the face of too many overlapping patent rights.
Lichtman turns this theory on its head and asserts that in actuality, a very thick thicket might result in less litigation. His idea is in a case of multiple overlapping patents, each patent represents only a small piece of the pie. And few patentees would be willing to go through litigation simply to recover such a small slice.
More patents means less money per patent holder. Less money, in turn, means less of an incentive for a firm to strategically delay in the hopes of being a patent holdout, and less of an incentive for an accidental patent holdout to actually bring suit.
A couple of weeks ago, I would have rejected Lichtman’s argument out of hand. Under the old rule, every patent holder had a right to force large settlements based on its hold-up threat through injunction. Now, post eBay, his ideas begin to make more sense. . .
This case involves a patented method of correlating a body protein level with a vitamin B deficiency. (U.S. Patent No. 4,940658). The claim in question (Claim 13) includes two steps: (1) assaying a body fluid for an elevated level of total homocysteine and (2) correlating an elevated level of total homocysteine with a folate deficiency. (paraphrased).
The patent holder won at trial and at the CAFC. The defendant, Metabolite, then brought its case to the Supreme Court arguing that the patent is invalid because it “claim[s] a monopoly over a basic scientific relationship used in medical treatment such that any doctor necessarily infringes the patent merely by thinking about the relationship after looking at a test result.”
Interestingly, the question presented is not firmly grounded in any particular rule of patent law. Rather, it implicitly raises issues of indefiniteness, enablement, written description, and patentable subject matter. (to name a few). However, the Supreme Court has given some indication that it is most interested in this case because of the issue it raises regarding the patenting of natural phenomena under Diehr.
LabCorp has filed its brief on the merits as have a number of third parties:
In Part I, Petitioner LabCorp’s stance is essentially that the law is correct, but that it has been misapplied in this case.
Claim 13 violates this Court’s longstanding rule barring patents on “laws of nature, natural phenomena, and abstract ideas.”
According to LabCorp, the claim involves “no actual invention beyond the scientific discovery it recites.” The claimed correlation is a scientific principle or law of nature, and its discovery alone cannot be patentable. The “trivial pre-solution” activity of assaying “cannot transform claim 13 into a patentable invention.” Here, Petitioner never strays far from the precedential pillars of Diehr, Chakrabarty, Funk Bros., and Flook.
In Part II, LabCorp goes on to argue that the claim is neither definite, enabled, nor adequately described. The Brief appears to ask the court to invalidate any claim that includes a “correlating” step unless the process of how to calculate a correlation is spelled out in the specification.
The Federal Circuit relied on the accepted dictionary definition of “correlate” as meaning “to establish a mutual or reciprocal relationship between.” But nothing recited in the claim or disclosed in the specification tells a practitioner how to actively “establish” a “relationship” between a particular test result and a vitamin deficiency. At most, the Patent discloses that such a scientific relationship
exists.
More is required for a valid claim. . . .
In the remaining sections of the Brief, Petitioner argues that, on policy grounds, a very broad claim hinders scientific and technological progress and that the lower court judgment should be reversed.
Solicitor General’s Amicus Brief for the U.S. GovernmentPDF (165 KB)
The Solicitor General with assistance from the PTO’s counsel has filed its brief that falls closely in line with its prior unsuccessful brief in opposition to the petition for certiorari.
In line with Petitioner, the Government agreed that the patent “appears to [impermissibly] claim all substantial practical applications of the natural relationship.” However, the Brief specifically states that this case should not be decided on an issue of whether a law of nature has been improperly claimed because the lower court record has not been developed on this issue. Directly addressing Petitioner’s part II, the Government argues that the specification does satisfy the requirements of 35 USC 112 “by describing, enabling, and claiming the method.”
Intellectual Property Owner’s Association (IPO) BriefPDF (97 KB)
IPO realized that the question presented for review in this case does not directly challenge the current standards for patentable subject matter. However, the Supreme Court has indicated an interest in considering whether the patent-in-suit claimed patentable subject matter.
IPO believes that the current standards for patentable subject matter, as set forth by the Court in
Diehr, correctly delineate between those innovations that should be eligible for patent protection and those that should not. Accordingly, IPO believes that this case should not serve as a vehicle for overturning or altering those standards. Rather, this case should reinforce the standards of Diehr and thus, support the expectation that innovations in yet unknown areas of technology will be eligible for patent protection.
Specifically, IPO argues that a broad scope of subject matter eligibility properly places research and development decision-making into the hands of individuals and private entities rather than in the judiciary. This “free market” approach “beset allocates research and development resources without judicial entanglement.” The requirements of novelty, nonobviousness, and description protect against over-reaching patents and warrant against further restricting patentability based on subject matter.
* NOTE: I was a coauthor of the IPO brief along with Paul Berghoff and Joshua Rich from MBHB as counsel for IPO. The IPO Board of Directors approved the Brief.
Affymetrix is a supplier of commercial DNA microarrays and “has an interest in ensuring that patents not issue on basic laws of nature so as to impede scientific progress in analyzing DNA and gene expression.” Affymetrix argues that the fact that “elevated levels of an amino acid in the blood correlated to a vitamin deficiency” is a natural phenomenon that leaves claim 13 unpatentable under current precedent.
Interestingly, Affymetrix argues that ambiguity of whether a claim impermissibly covers a natural phenomena should be resolved in favor of invalidity to avoid serious constitutional questions. (citing Feist).
PubPat argues that the CAFC has gone astray by over-reaching the permissible bounds of patentable subject matter. (Citing Alappat and State Street). Rather, PubPat would have the Court return directly to Flook.
According to Dave Simon, The First-to-File Provisions of the Patent Reform Act of 2005 Violate the Constitution’s Intellectual Property Clause.
The Patent Reform Act of 2005 proposes provisions that would change the granting of patents from the so-called first-to-invent system to a first-to-file system. The Intellectual Property Clause limits Congress to granting patents only to “Inventors”. A system enacted by Congress for granting patents to anyone other than a good faith inventor operates outside of the constraints enumerated in the Clause, and therefore is facially impermissible. The first-to-file provisions of the Act are violative of Article I, Section 8, Clause 8 of the United States Constitution.
Dave’s paper is premised on the assertion that an invention is only made once, and later independent inventions should not actually be considered inventions. Dave is not the first to make this argument — his paper, however, is easily accessible online. Download Dave’s paper. Ed Suominen, patent attorney in Scotsdale made the same argument back in 2001 in a paper published by the JPTOS. Download Ed’s Paper.
Of course, it is highly unlikely that any court would agree that a first-to-file system is unconstitutional. Ed agrees — “Eldred proved that Congress can pretty much do whatever it wants about IP as far as this Supreme Court is concerned.” Professor Mark Lemley gave his remarks in an e-mail:
I have to disagree with the claim that first-inventor-to-file is unconstitutional. Dave Simon’s reasoning is based on the idea that “inventor” means whoever thought of it first, not simply a person who thinks of it independently. But if that were true, (1) current US patent law would be unconstitutional in the circumstances in which it discounts invention in non-WTO member countries, and the system would have been unconstitutional throughout its history when it was limited to inventive activity in the US; and (2) copyright law would be unconstitutional because it treats any independent creator as an author. Both results seem unlikely to me.
If you are against a switch to first-to-file, I would not hang my hat on the constitutionality argument.
In the wake of the Lundgren case, the USPTO has released a set of interim examination guidelines for determining subject matter eligibility of patent applications. (Link). The guidelines will be used by examiners “in determining, on a case-by-case basis, whether a claimed invention falls within a judicial exception to statutory subject matter (i.e., is nothing more than an abstract idea, law of nature, or natural phenomenon), or whether it is a practical application of a judicial exception to statutory subject matter.”
The crux of the new guidelines is that an invention falls within the scope of 35 U.S.C. 101 “if the claimed invention physically transforms an article or physical object to a different state or thing, or if the claimed invention otherwise produces a useful, concrete, and tangible result.” The application itself should enable one of ordinary skill in the art to understand the utility of the invention.
Ex parte Lundgren, Appeal No. 2003-2088(BPAI 2005).
In a landmark decision, the Board of Patent Appeals and Interferences has issued a precedential opinion eliminating the Patent Office procedure of rejecting patents under 35 U.S.C. § 101 as outside of the “technological arts”
Our determination is that there is currently no judicially recognized separate “technological arts” test to determine patent eligible subject matter under § 101. We decline to create one. Therefore, it is apparent that the examiner’s rejection can not be sustained.
This decision will once again expand the role of business method patents by freeing them from being tied to a computer or other electronic device. At the same time, this decision widens the gap between the US and many other countries who are still debating patentability of software.
It is unclear at this point whether the PTO solicitor will ask the Federal Circuit to review this case.
The Majority Opinion:
Lundgren had claimed a “method of compensating a manager” that involved several steps of calculating a proper compensation based on performance criteria and then transferring payment to the manager. The examiner rejected the claims arguing that they were “outside the technical arts, namely an economic theory expressed as a mathematical algorithm without the disclosure or suggestion of a computer, automated means, apparatus of any kind, the invention as claimed is found non-statutory.”
A five member panel reviewed this action, and three signed on to the per curiam majority opinion that found the claim to “produce a useful, concrete, tangible result” without being a “law of nature, physical phenomenon or abstract idea.” Regarding the PTO “technological arts” test, the majority found that such a test does not exist under the law.
Rejection reversed, there is no judicially recognized “technological arts” test for patentability.
Dissent by Judge Smith:
Judge Smith dissented, arguing that the “technological arts” standard is simply the modern lexical equivalent to the phrase “useful arts” found in the US Constitution. He then argued that Congress does not have power to pass patent laws that expand beyond those “useful arts.”
While I do not question the power of Congress to pass laws to carry out this mandate, whatever law passed by the Congress cannot be applied in such a manner as to enlarge the constitutional mandate. Thus, any laws passed by the Congress to grant patents should be applied in a manner that is consistent with the constitutional mandate.
The dissent then implicitly calls for the Federal Circuit to review the case and explicitly calls fro Congress to “step in and clarify the limits of 35 U.S.C. § 101.”
Dissent by Judge Barrett:
In a 78 page dissent, Judge Barrett suggests a new test under section 101 that would require some transformation of physical matter.
Notes:
The BPAI holds its appeals in secret — and the Ex parte Lundgren opinion is yet to be officially released by the Board. I published this article on the case after receiving copies of the opinion from reliable sources. Opinion.v1; Opinion.v2.
The Semiconductor Chip Protection Act of 1984 (SCPA) fills a perceived gap between copyright law and patent law and is intended to provide an incentive for investment in novel chip layouts (mask works).
The SCPA grants the owner of a mask work the exclusive rights to reproduce the mask work and to “import or distribute a semiconductor chip product in which the mask work is embodied.” 17 U.S.C. § 905.
Altera sued Clear Logic for violation of its SCPA rights and won a $30 million+ jury verdict. On appeal to the 9th Circuit, Clear Logic argued that the district court misinterpreted the SCPA.
Specifically, Clear Logic argued that its chips were only similar to Altera’s registered mask at a level of abstraction, and that only those ideas that are “physically expressed in the mask work are subject to protection under the SCPA.”
However, the 9th Circuit affirmed the district court’s application of the SCPA — finding that “groupings” shown in the mask (a level of abstraction) were “physically a part of the mask work.” As such, the groupings are protectable.
The placement of logic groupings in a mask work is not an abstract concept; it is embodied in the chip and affects the chip’s performance and efficiency as well as the chip’s timing.
In concurrence, Judge Rymer suggested that “this is the type of case in which it might have been useful to have a court-appointed, independent expert [to provide n]eutral definitions and a common understanding of the underlying technology.”
The Metabolite Labs case is procedurally interesting because the Supreme Court appears to be focused in a question that is quite different from the one raised by Metabolite in its petition for certiorari. From a practical standpoint, this case has the potential to once again shatter our current notion of patentable subject matter.
In February, the Court invited the Solicitor General to file a brief expressing the views of the United States on the question of whether a medical diagnosis method patent is invalid as non-patentable subject matter under Diamond v. Diehr, 450 U.S. 175, 185 (1981) (holding that one cannot patent laws of nature, natural phenomena, and abstract ideas). The patent at issue claims a method of detecting a vitamin deficiency in a human body by using a device to determine whether there is an elevated amino acid level.
The court expressed its interest in the patentability question at a point that was too late for amicus to file briefs on the issue, however, some parties have been lobbying the office of the Solicitor General to submit a brief in their favor. The Public Patent Foundation, for instance, has issued a statement outlining its lobbying efforts asking the government to support the proposition that the method is unpatentable and invalid. Of course, to my knowledge, PubPat has never been publicly in favor of the validity of any patent.
In the opinion below, the CAFC (Rader, J.) affirmed jury verdict of indirect infringement and breach of contract, and affirmed the district court’s award of over $8 million in damages to Metabolite (including damages for willfulness). The dissent (Schall, J.) argued that claim interpretation had been mishandled. Metabolite Laboratories, Inc. v. Laboratory Corp. of America Holdings, dba as LabCorp., 370 F.3d 1354 (Fed. Cir. 2004) (read my summary). The question that the High Court is now considering does not appear to have even been addressed by the CAFC decision. The Court’s docket shows that the case has already been distributed for conference five times since January 1, 2005.
The SG is expected to file a brief in the case. However, even with SG support, the court is still unlikely to take this one up.
For general information, Professor Eileen Kane’s article on the patentability of Genes and DNA provides an excellent analysis of issues surrounding patentable subject matter. Kane argues that the genetic code should be characterized as a law of nature. Available at SSRN, 71 Tennessee Law Review 707.
LABORATORY CORP. OF AMERICA (LabCorp) V. METABOLITE LABORATORIES, ET AL. (on petition for cert at the Supreme Court 2005).
The Supreme Court moved a step closer to granting cert in the case by inviting the Acting Solicitor General to file a brief expressing the views of the United States on the following question:
Respondent’s patent claims a method for detecting a form of vitamin B deficiency, which focuses upon a correlation in the human body between elevated levels of certain amino acids and deficient levels of vitamin B. The method consists of the following:
First, measure the level of the relevant amino acids using any device, whether the device is, or is not, patented;
second, notice whether the amino acid level is elevated and, if so, conclude that a vitamin B deficiency exists.
Is the patent invalid because one cannot patent laws of nature, natural phenomena, and abstract ideas? Diamond v. Diehr, 450 U.S. 175, 185 (1981).
In the opinion below, the CAFC (Rader, J.) affirmed the jury verdict of indirect infringement and breach of contract, and affirmed the district court’s award of over $8 million in damages to Metabolite (including damages for willfulness). The dissent (Schall, J.) argued that claim interpretation had been mishandled. Metabolite Laboratories, Inc. v. Laboratory Corp. of America Holdings, dba as LabCorp., 370 F.3d 1354 (Fed. Cir. 2004) (read my summary)
The question that the High Court is now considering does not appear to have even been addressed by the CAFC decision. The Court’s docket shows that the case has already been distributed for conference five times since January 1, 2005.
In its petition for a writ of certiorari, LabCorp presented three questions to the Court:
1. Whether liability can be imposed for willfully inducing patent infringement under 35 U.S.C. § 271(b) based solely on evidence that a party has disseminated a basic scientific fact to others.
2. Whether an express limitation in a patent claim can be ignored so as to allow the patent to cover the exact opposite of what was claimed.
3. Whether a method patent setting forth an indefinite, undescribed, and non-enabling step directing a party simply to “correlat[e]” test results can validly claim a monopoly over a basic scientific relationship used in medical treatment such that any doctor necessarily infringes the patent merely by thinking about the relationship after looking at a test result.
The Court, however, appears to be interested only the extent that a basic scientific relationship used in medical treatment is patentable. LabCorp’s introduction provides a compelling story and sets the stage for the debate:
The holding of the Federal Circuit in this case is truly extraordinary. The court construed a patent to confer on respondents a legally-protected monopoly to bar any doctor in the Nation from even about a well-known scientific correlation. It then went even further, holding—in conflict with other Federal Circuit decisions—that petitioner LabCorp indirectly “induced” such infringement merely by publishing truthful information informing doctors of this basic scientific fact. And further compounding its errors, the Federal Circuit violated well-established tenets of patent law by expanding the patent beyond its express terms, and by upholding its validity.
Thanks to Jonathan Franklin at Hogan & Hartson and Glenn Beaton at Gibson Dunn for copies of the briefs and to appellate attorney Howard Bashman at How Appealing for the heads-up on the case.
There are lots of great cases on the Federal Circuit’s spring calendar. Several cases pending at either the Federal Circuit or Supreme Court that are ‘worth a special look,’ according to Hal Wegner. Here are some highlights of Mr. Wegner’s list, with my own comments.
LabCorp v. Metabolite, petition for cert submitted, Supreme Court has requested Solicitor General’s Opinion on Cert. The case involves a patentability question — whether Metabolite’s patented method of detecting vitamin B deficiency should be invalid as "because one cannot patent laws of nature, natural phenomena, and abstract ideas."
Purdue Pharma v. Endo, CAFC heard oral arguments in early November on the question of whether patentee’s conduct was ‘inequitable’ for failing to disclose that results used to establish patentability were prophetic rather than experimental. A decision is expected soon.
SmithKline Beecham v. Apotex, awaiting decision on petition for rehearing. This case now revolves around the question of whether use of an invention to confirm utility for FDA approval is an ‘experimental use’ that saves a patent from anticipation under 102(b).
Phillips v. AWH, awaiting en banc decision on claim construction methodology.
Eolas Technologies v. Microsoft, Federal Circuit decision awaited, hopefully discussing the scope of 271(f). The upcoming appeal of AT&T v. Microsoft presents the same ‘golden master disk‘ scenario as Eolas, and will become important if Eolas is decided on other grounds.
Independent Ink v. Illinois Tool Works, In January, the CAFC determined that, in an antitrust tying case, a patent presumptively defines the relevant market as the nationwide market for the patented product itself. There is some potential for cert in this case.
NTP, Inc. v. Research in Motion, Ltd., there is a good chance for a rehearing in this case involving RIM’s BlackBerry product. This case will be important in defining extraterritorial application of U.S. patent laws in the modern era of networked computing systems.
In re Fisher is not yet on the CAFC calendar. In this case, the BPAI affirmed a rejection for lack of utility and enablement (101 and 112 p1) because the specification lacked a specific teaching of a substantial utility. According to the decision, without a specific teaching of substantial utility, then virtually all chemicals would meet the requirements of section 101 as at least "useful in research."
Although not patent litigation, Sarah Stirland (one of the few reporters focusing on intellectual property) at the National Journal has written a nice article regarding the potential for legislation in the 109th Congress.
Each month I post a note discussing the academic side of patent law. My on-line sources for material are the SSRN electronic library, a few hard copy journals, and several more that are freely available on-line. Most of my material, however, comes from articles directly e-mailed to me from professors and law review editors. Please feel free to e-mail articles for February’s edition. (Include information on where the article is being published). — DDC
1) In a forthcoming paper, Professor Joseph Miller provides a new solution for making claim construction more predictable. His idea is to require that patentees provide certain additional disclosures up-front — Disclosures that will appear in express statements on the face of the patent itself.
Four additional patentee disclosures: (a) the field of art to which the claimed invention pertains; (b) all problems that the claimed invention helps solve; (c) a lexicon of all claim terms to which the applicant gives a meaning other than its accustomed meaning to people having ordinary skill in the pertinent art; and (d) a list of preferred objective reference sources, such as technical treatises and dictionaries (general or specialized), to which an interested reader should refer to learn about the ordinary meaning of the remaining claim terms to a person having ordinary skill in the art. [SSRN Link]
According to Miller’s approach, in any subsequent claim construction process, whether for licensing, design-around, or litigation purposes, parties would have the benefit of patents enriched with this new information. The paper will come out in March in the Lewis & Clark Law Review.
2) I just found out that an old college friend is quickly becoming a leader in the area of Patent-Antitrust law. In the recent Issue of the Richmond Journal of Law & Technology, Aaron Rabinowitz writes on Antitrust Liability for Refusals to Deal in Patented Goods. The article highlights the circuit split between the Ninth Circuit and the Federal Circuit over whether patent holders must have a business reason for refusing to sell or license patented products. In Kodak II, 125 F.3d 1195 (9th. Cir. 1997), the California based appeals court determined "that a patentee who refuses to license his patented invention to others without legitimate business justifications for doing so has violated antitrust law." However, CSU v. Xerox, 203 F.3d 1322 (Fed. Cir. 2000), the Federal Circuit held that a patentee may refuse to license or sell a patented invention without violation of the patent laws, regardless of his business justification.
3) Bill Burgess, a 3L at Penn has written an interesting comment on the "Failed Promise of Cybor" published in the UPenn Law Review.In Cybor, the Federal Circuit held that claim construction is a matter of law that is reviewed de novo by the Appellate Court. Bill makes the arguments that (i) the ‘bright-line rule’ of Cybor has resulted in less rather than more consistency in how claims are construed and (ii) Cybor is actually inconsistent with the Supreme Court’s Markman decision.
Professor Mark Lemley has promoted an idea of “rational ignorance” at the patent office. In his now famous article, Lemley argues that patent examiners should not attempt to completely search all prior art because such searches would be too expensive. Thus, according to Lemley, the patent office should issue patents even when there is a substantial likelihood that prior art could be found by mounting a more thorough search. Because the vast majority of patents are never litigated, Lemley argues that good cost saving measure is to perform a minimal search during patent prosecution and delay a more complete search until the time of litigation (if any).
In their recent article Professors Ghosh and Kesan take issue with Lemley’s results. Although they agree with proposition that the “USPTO cannot be omniscient,” Ghosh and Kesan question Lemley’s empirical bases.
But we question his basis for determining how much the USPTO should be expected to know and not know. This inquiry rests on an assessment of the social benefits of patents, not just on the private decision of the USPTO and its examiners. We would agree with Professor Lemley that simply devoting more time to patent review is not the solution. But Professor Lemley frames the debate as a choice between administrative restructuring and more extensive judicial review. He opts for the latter because so few patents are actually litigated, and therefore the benefits from reduced litigation are not justified by the increased costs in administrative review. We contend that such an argument ignores (in neither a rational nor an optimal way) the benefits of a patent system. It is far from clear that more extensive judicial review is more effective than some restructuring of the USPTO in terms of more careful scrutiny or more rigorous assessment and accumulation of the prior art. The judicial option is more dubious in light of the USPTO’s mandate of promoting progress and its practical purpose in resolving the revelation and appropriation problem. Professor Lemley provides an assessment of the private and social costs without proper attention to private and social benefits.
What Do Patents Purchase?: In Search of Optimal Ignorance in the Patent Office, with S. Ghosh, 40 HOUS. L. REV. 1219 (2004).
Conclusions: Improved prior art searching at the patent office can be accomplished through a combination of improved information systems and increased funding for Patent Examiners. There is certainly an optimal limit to searching by the patent office. However, we have been given no indication that the limit has been reached.
Update: LB Ebert has more criticism of Lemley here.
Currently, the Federal Circuit requires a “piercing of the corporate veil” for individual liability of corporate officers in a patent infringement suit. In a new manuscript, Lynda Oswald (Michigan) argues that the current standard is wrong and overly broad.
In adopting this piercing standard, the Federal Circuit has inadvertently and radically expanded the scope of individual officer liability and has exposed corporate officers to a form of strict liability for their corporation’s infringing activities. I propose instead a standard that parallels the “personal participation” standard of traditional corporate doctrine, which would ensure that culpable corporate actors are held liable in appropriate circumstances, but would avoid wholesale imposition of personal liability upon officers for the patent infringement of their corporations.
LabCorp v. Metabolite (on writ of certiorari). 
Altera v. Clear Logic (9th Cir. 2005). 