Tag Archives: Venue

Means-Plus-Function: Invalidity Needs Expert Testimony

Patent,

By Dennis Crouch

elcommerce v. SAP (Fed. Cir. 2014)

Facing another functional claim limitation case, the Federal Circuit here vacated the lower court holding that the means-plus-claims were invalid as indefinite for failing to teach sufficient corresponding structure in the patent specification. Particularly, the court here holds that, in this case, attorney-argument was insufficient to prove invalidity and rather than some amount of extrinsic evidence (such as expert testimony) was necessary to provide the necessary clear-and-convincing evidence.

Patent claims ordinarily recite particular “structure, material, or acts” as elements that both provide for the requisite inventive step and also materially limit the scope of rights. However, since 1952 the patent act has provided an express avenue for drafting patent claims using functional – instead of structural – limitations. Under 35 U.S.C. §112(f), a claim element “may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof.” To a lay reader, these means-plus-function claims appear quite broad. For instance a claimed “means for connecting elements A and B” seemingly covers any method or structure that accomplishes the claimed function. However, the statute itself requires that means-plus-function claims be given a much more limited scope. That is, the statute goes-on to say that a means-plus-function claim “shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.” Id. Thus, to know the meaning of a claimed “means for connecting,” we must look to the patent specification to see what particular connecting mechanisms were disclosed and the scope of the claim would be limited only to those disclosed structures and their equivalents. The result here is that means-plus-function claims typically have a scope that is much narrower than one might expect on the initial reading.

In recent years, a substantial number of means-plus-function claims have been invalidated as lacking definiteness under § 112(b). (I.e., invalid as indefinite). Courts follow the following logic: (a) The statute requires that a means-plus-function element be defined according to corresponding structure found in the specification; (b) If no corresponding structure is found in the specification then the term cannot be defined and (c) is therefore invalid as indefinite.

In this case, the asserted claims are directed to a system for monitoring a supply chain. Representative claim 37 in the case has nine-different means claim elements, such as a “means for monitoring” supply data; “means for extracting” supply data; “means for translating” the data into a common format; etc. As part of its claim construction, the district court found that the specification failed to include any structure for any of the claimed means and subsequently, that the claims were invalid and indefinite. One problem with the district court’s analysis is that it doesn’t come to terms with the reality that “structure” is to be seen in the eyes of one skilled in the art.

Now, the standards applied here are quite messy. We know that patents are presumed valid and, in Microsoft v. i4i, the Supreme Court explained that presumption may only be overcome with clear and convincing evidence. In a concurring opinion, Justice Breyer (joined by Justice Scalia) raised the point that the clear-and-convincing standard ordinarily applies to factfinding and questions of fact and not to questions of law. Justice Breyer writes: “Where the ultimate question of patent validity turns on the correct answer to legal questions—what these subsidiary legal standards mean or how they apply to the facts as given—today’s strict standard of proof has no application.” Ignoring that advice (sub silento), the Federal Circuit has ruled that indefiniteness must be proven with clear and convincing evidence. See TecSec, Inc. v. IBM, 731 F.3d 1336 (Fed. Cir. 2013)(Linn, J.). That conclusion draws its foundation from the 1987 Panduit decision stating that the presumption of validity is applicable to all validity challenges. Panduit v. Dennison, 810 F.2d 1561 (Fed. Cir. 1987) (Markey, J.). Drawing-in the claim construction issue, by statute, identifying the “corresponding structure” of a functional element is a claim construction issue. Such an element “shall be construed to cover the corresponding structure.” And, as patent litigators are well aware, claim construction is also a question of law.

In her opinion, Judge Newman does not address any of the aforementioned conflict except for the requirement that indefiniteness be judged with clear and convincing evidence. With that framework, the opinion notes that the only way “a general purpose judge could ascertain the position of persons of skill in the art and conclude that there is not a shred of support for any of the eleven interrelated means-plus-function claim limitations. . . . The burden was on SAP to prove its case, and in the absence of evidence provided by technical experts who meet the Daubert criteria there is a failure of proof. Attorney argument is not evidence.” Here, Judge Newman’s statement regarding “not a shred of support” goes beyond the clear-and-convincing standard, but her point is made – expert testimony is necessary here.

To be clear, the Federal Circuit does not expressly hold that expert testimony is always required. We do not of course hold that expert testimony will always be needed for every situation.” However, the court does not provide any explanation of when it might not be necessary.

In prior cases, the Federal Circuit has held that claim construction and indefiniteness findings can be made without expert testimony. See, e.g., Noah Systems, Inc. v. Intuit Inc., 675 F.3d 1302 (Fed. Cir. 2012); Default Proof Credit Card Sys., Inc. v. Home Depot U.S.A., Inc., 412 F.3d 1291, 1302 (Fed. Cir. 2005). The majority does not address these prior precedents. However, Judge Wallach does in his dissenting opinion.

The issue in this case is whether expert testimony is required to prove indefiniteness of a means-plus-function term when the specification contains no corresponding structure. This court answered “no” in Noah, explaining that expert testimony is not required where the specification contains no algorithm corresponding to each recited function. When there is an identifiable algorithm, however, expert testimony may be helpful in determining whether the algorithm is adequate corresponding structure in the view of a skilled artisan. Id. . . .

Indeed, indefiniteness is part of claim construction, both of which are questions of law. . . . Just as there is no requirement for expert testimony when construing means-plus-function claims to cover the corresponding structure, expert testimony is not needed to hold the claims indefinite when no structure is disclosed.

Judge Wallach’s point parallels what I discussed above – that these are questions of law where expert testimony does not appear to be a requirement. However, his perspective also appears lacking because he essentially ignores the requirement that these questions be viewed from the standpoint of one of skill in the particular area of technology.

Attorney Fees: Litigation Misconduct But No Fees Awarded

Patent, ,

By Dennis Crouch

Oplus Technologies, Ltd. v. Sears & Vizio (C.D.Cal.2014)

In an October 2013 summary judgment decision, Judge Pfaelzer found in favor of the defendants – holding that the Oplus asserted patents were not infringed (Patent Nos. 6,239,842 and 7,271,840) and also invalid as anticipated (Patent No. 6,239,842). That final decision is pending appeal at the Federal Circuit.

Most recently, the court denied Vizio’s motion for attorney and expert witness fees “pursuant to 35 U.S.C. § 285, 28 U.S.C. § 1927, and the Court’s inherent power.” However, that denial came only as part of a decision that walks through statements by Oplus and its attorneys (the Niro firm) that “were seriously contradictory and unreasonable” and their “manner and style” that were “offensive to the Court.” Particular noted misconduct included:

  • Oplus delayed the litigation by strategically amending its claims to manufacture venue.
  • Oplus misused the discovery process to harass Vizio by ignoring necessary discovery, flouting its own obligations, and repeatedly attempting to obtain damages information to which it was not entitled.
  • Oplus used improper litigation tactics including presenting contradictory expert evidence and infringement contentions as well as misrepresenting legal and factual support.

However, the Judge Pfaelzer also found that (despite summary judgment) that Oplus’s claims were not “objectively baseless.”

Although the misconduct was serious in Judge Pfaelzer’s view one reason for not awarding attorney fees was that Vizio’s was also guilty of delay and avoidance tactics. And, the court found that the inconsistencies in Oplus position actually helped make the Summary Judgment decision easier – probably saving attorney fees.

Ray Niro submitted a letter to Judge Pfaelzer that likely helped sway her decision not to award fees. In the letter, Ray Niro’s letter Niro apologized for “the conduct of one of our young lawyers” and that “could be understood as being arrogant to and disrespectful to the Court.” Niro indicated he has “taken remedial action” and would monitor the lawyer’s conduct throughout the next year. Niro also indicated that – although not an excuse or justification – that the mother of the lawyer who had spoken harshly to the court had been critically ill on the day of the hearing and had died four days later.

The case is interesting as an added element to the ongoing debate on awarding attorney fees. Two patent law attorney fee cases are pending before the US Supreme Court and several related bills are pending in Congress. Here, Judge Pfaelzer had no problem identifying litigation misconduct but applied her discretion to rule that attorney fees were not appropriate. In essence, Pfaelzer began with the presumption that ordinarily no attorney fees should be awarded and then found that there were not sufficient reasons to move from that starting position. At least some of the congressional proposals shift the starting-position so that the ordinary rule would be an award of attorney fees unless there are sufficient reasons to not award fees. I would guess that this is one of the cases that would flip under the proposed rules.

  • Scott Graham from The Recorder has more on the story here.
  • NiroLetter
  • OrderDenyingAttorneyFees
  • As luck would have it, Vizio was sued again this week. This time by Pragmatus Telecom who alleges infringement of several patents, including U.S. Patent No. 8,438,314.

Power Grab?: USPTO Says No Appeal (CW v. WARF Part V)

Patent, , , ,

By Dennis Crouch

Consumer Watchdog v. WARF, Reexam No. 95/000,154 (Fed. Cir. 2014)

Several years ago Consumer Watchdog (previously known as the Foundation for Taxpayer and Consumer Rights) filed an inter partes reexamination proceeding against a human-stem-cell patent owned by the Wisconsin quasi-government entity WARF. CW does not work with the technology, but filed the reexamination request as part of its public service mission.

In the reexamination, the USPTO confirmed that the patent was properly issued and CW subsequently asserted its statutory right to appeal. See 35 U.S.C. § 141.

Before delving into the appeal’s substance, the Federal Circuit halted progress on the case to particularly probe the question of whether the court has jurisdiction over the dispute – i.e., whether there exists a constitutionally sufficient “case or controversy” between the parties. At base, the question is whether any CW can claim the “injury in fact” that serves as a “hard floor of Article III jurisdiction.” See Summers v. Earth Island Institute, 555 U.S. 488, 497 (2009).

The Federal Circuit requested briefing from the parties as well as the USPTO and those have now been filed. Most importantly, the US Government (USPTO/DOJ joint brief) has sided with WARF with a conclusion that it would be unconstitutional for the Federal Circuit to fulfill the statutory promise (of a right to appeal) by hearing CWs appeal.

Potential Impact: Although the case is focused on CW as a non-profit, the potential outcome here is important for several reasons. Obviously, the ruling would disenfranchise public interest groups, not-for-profits, and industry organizations and instead provide full litigation rights primarily to parties with substantial likelihood of reaching collusive settlements that leaves would-be invalid patents intact. In an email to me, Dan Ravicher (CWs counsel) wrote:

Without a full and fair right to challenge patents at the PTO, including an equal right to appeal, the public interest community will have no avenue to rid the system of bogus patents, and we will be 100% reliant on commercial entities, which often do not have the same incentive to prove patents are invalid, as they, too, have bogus patents themselves.

Although somewhat hyperbolic, Ravicher’s comment raises real policy concerns.

At a more general level, the issue here represents an important shot in the battle for power and authority in the setting of patent law policy that is ongoing between the Patent Office and the Judiciary. The USPTO is newly emboldened with unreviewable authorities granted by the AIA; likely generous Chevron deference for those decisions that are reviewable; and has pushed for a statutory amendment that would eliminate the ability of a patent seeker to file a civil action to receive a patent. Adding to that list, this case appears to be headed in the direction of yet another non-appealable agency activity.

Mid-Level Injury: Although the US Government argues that CW lacks injury-in-fact, it also argues that the injury requirement in this situation is categorically less than what would be required for a declaratory judgment action in Federal Court. The US Government writes:

Organizations such as Consumer Watchdog, who cannot claim any concrete and particularized interest in the validity of the challenged patent, will normally lack standing to appeal. [H]owever, it does not necessarily follow that the same Article III inquiry that governs declaratory judgment relief in the district courts — under which judicial relief is normally available unless the declaratory plaintiff can show that the patentee has asserted infringement, threatened litigation, or otherwise affirmatively acted to impair the declaratory plaintiff’s freedom in the marketplace, see, e.g., Prasco LLC v. Medicis Pharmaceutical Corp., 537 F.3d 1329 (Fed. Cir. 2008) — will also govern appeals from PTO decisions in post-grant proceedings. . . .

Indeed, Congress enacted the AIA’s expanded procedures for post-grant patentability challenges partly in response to concerns that, under prior law, it was not reasonably possible for a company weighing whether to enter a particular market to test the validity of a potential competitor’s patent without first incurring the substantial costs and risks of developing a suitable — and potentially infringing — product.

. . . . Although such an interest would normally lack the immediacy required for declaratory judgment jurisdiction, the Supreme Court has explained that, in some circumstances, “[t]he person who has been accorded a procedural right to protect his concrete interests can assert that right without meeting all the normal standards for redressability and immediacy.” Lujan; Massachusetts v. EPA. Similarly, while a prospective interest in invalidating a competitor’s patent might normally implicate prudential considerations of fitness for judicial review, an explicit congressional authorization to appeal a particular category of legal determinations “eliminates any prudential standing limitations.” Raines. For these reasons, the Court could conclude in an appropriate case that the Article III inquiry governing direct appeals from the PTO differs from the inquiry that governs declaratory judgment actions in district court.

In the prior arguments, Dan Ravicher (for CW) raised an analogy to FOIA where the Supreme Court has allowed a seemingly noninterested third party to bring court challenges. The US Government brief argues that those cases as well as related fair housing cases are different and distinguishable because Congress created “substantive legal rights that entitle a party to receive concrete and individualized benefits — access to specific government records, for example, or freedom from racial discrimination in housing. A wrongful denial of those rights thus inflicts on the plaintiff a concrete and particularized injury-in-fact.”

In its responsive brief, CW argues that the statute creating the right of judicial review to requesters of agency action provides standing even if the requesters lack “statute-independent injury.” On that point, CW writes: “The government does not reference a single case in which a denied requester who cited a statute granting judicial review to such denied requesters needed to prove injury to show standing.” For its side, CW references FOIA cases as well as FEC and prior inter partes review cases that all fit this model.

Public interest groups such as PubPat, EFF, and others have shown their strength in the intellectual property law sphere and this is an important case from that regard. The importance is such that if the Federal Circuit sides against CW here to deny standing, I suspect that the Supreme Court will be ready to hear the case.

Briefs:

IP Law Professors Rise-Up Against Patent Assertion Entities

Patent, , , ,

By Dennis Crouch

A group of sixty US intellectual property law professors have signed a letter to Congress supporting anti-troll patent reform legislation. This effort was driven by Professor Love of Santa Clara and is also signed by Professors Bessen, Goldman, Ghosh, Lemley, Meurer, Samuelson, Sprigman, and others. [Download ProfessorsLetterOnTrolls].

A key introductory line from the letter:

Despite our differences, we all share concern that an increasing number of patent owners are taking advantage of weaknesses in the system to exploit their rights in ways that on net deter, rather than encourage, the development of new technology.

The basic argument is that patent litigation is expensive and frontloaded in such a way that "creates an opportunity for abuse" because early-state settlement is focused more on the cost of litigation rather than the value of the patent or its underlying technology. And, it is the recent "rise of patent assertion entities" that has "disrupted [the] delicate balance" of the patent system.

The professors propose the following six general reforms:

  1. To discourage weak claims of patent infringement brought at least in part for nuisance value, we recommend an increase in the frequency of attorneys' fee awards to accused patent infringers who choose to fight, rather than settle, and ultimately defeat the infringement allegations levelled against them.
  2. To reduce the size and front-loaded nature of patent litigation costs, we recommend limitations on the scope of discovery in patent cases prior to the issuance of a claim construction order, particularly with respect to the discovery of electronic materials like software source code, emails, and other electronic communications.
  3. To further protect innocent retailers and end-users that are particularly vulnerable to litigation cost hold-up, we recommend that courts begin to stay suits filed against parties that simply sell or use allegedly infringing technology until after the conclusion of parallel litigation between the patentee and the technology's manufacturer.
  4. To facilitate the early adjudication of patent infringement suits, we recommend that patentees be required to plead their infringement allegations with greater specificity.
  5. [To increase transparency and confidence in the market for patent licensing, we recommend that Congress require] patentees … to disclose and keep up-to-date the identity of parties with an ownership stake or other direct financial interest in their patent rights.
  6. [To increase transparency and confidence in the market for patent licensing, we recommend that] Congress consider additional legislation designed to deter fraudulent, misleading, or otherwise abusive patent licensing demands made outside of court.

Without a doubt, there is merit to the professors' case, although I bristle at the letter's broad-brush statements and overt stance that is pro-large-corporate-entity. I have a few thoughts regarding the specific suggestions:

(1): Anti-plaintiff fee shifting will have the obvious impact of altering the availability of contingency-fee counsel which may be the motivation of the suggestion. One problem is that almost every patent in litigation is amenable to a good-faith challenge on either invalidity or non-infringement grounds. Predicting winners and losers is a difficult prospect and this gives me little faith that the fee-shifting proposal will primarily target low-quality claims but instead will target risk-averse plaintiffs. The professors' suggestion here to reward non-settlement does not provide me with any confidence that overall litigation costs will be reduced. On the other hand, this proposal (especially if focused on invalidating patents) could serve as something like a bounty for attorneys to challenge bad patents and, as a consequence, would lessen the free-rider problem associated with a single company challenging a patent that is also being asserted against competitors.

(2) & (4): I agree that there is plenty room for reducing discovery costs and for raising pleading requirements without substantially harming patentee rights. However, one problem for both software and method patents is that some forms of infringement are difficult to truly pin-down absent discovery. Some work must be done on any particular proposals to ensure that the result is not a clear pathway unactionable infringement.

(3) Regarding customer lawsuits, we have a difficulty in line drawing because, for the most part, these are not simply customer lawsuits. Rather, the patents being asserted cover particular methods or systems that take advantage of a particular device on-the-market (such as a wireless router or flat-panel television). In this situation, the differences are such that the manufacturer and retailer typically refuse to honor their implied warrantee that the good is "free of the rightful claim … of infringement or the like." UCC 2-312(3). And so, the question is whether these use cases will fit within the definition. One reason for the downstream lawsuits is that downstreamers typically value the technology more than upstreamers with the result of greater damage award. (We know the downstreamers valued it more because they purchased it from the upstreamers). Since the exhaustion doctrine only allows a patentee to recoup at one point in the stream-of-commerce, it makes sense that they would focus on the highest valued user.

= = = = =

Text of the letter:

To Members of the United States Congress:

We, the undersigned, are 60 professors from 26 states and the District of Columbia who teach and write about intellectual property law and policy. We write to you today to express our support for ongoing efforts to pass patent reform legislation that, we believe, will improve our nation's patent system and accelerate the pace of innovation in our country.

As a group we hold a diversity of views on the ideal structure and scope of our nation's intellectual property laws. Despite our differences, we all share concern that an increasing number of patent owners are taking advantage of weaknesses in the system to exploit their rights in ways that on net deter, rather than encourage, the development of new technology.

Several trends, each unmistakable and well supported by empirical evidence, fuel our concern. First, the cost of defending against patent infringement allegations is high and rising. The American Intellectual Property Law Association estimates that the median cost of litigating a moderately-sized patent suit is now $2.6 million, an amount that has increased over 70% since 2001. These and other surveys suggest that the expense of defending even a low-stakes patent suit will generally exceed $600,000. Moreover, the bulk of these expenses are incurred during the discovery phase of litigation, before the party accused of infringement has an opportunity to test the merits of the claims made against it in front of a judge or jury.

The magnitude and front-loaded nature of patent litigation expenses creates an opportunity for abuse. Patent holders can file suit and quickly impose large discovery costs on their opponents regardless of the validity of their patent rights and the merits of their infringement allegations. Companies accused of infringement, thus, have a strong incentive to fold and settle patent suits early, even when they believe the claims against them are meritless.

Historically, this problem has largely been a self-correcting one. In suits between product-producing technology companies, the party accused of infringement can file a counterclaim and impose a roughly equal amount of discovery costs on the plaintiff. The costs, though high, are symmetrical and, as a result, tend to encourage technology companies to compete in the marketplace with their products and prices, rather than in the courtroom with their patents.

In recent years, however, a second trend – the rise of "patent assertion entities" (PAEs) – has disrupted this delicate balance, making the high cost of patent litigation even more problematic. PAEs are businesses that do not make or sell products, but rather specialize in enforcing patent rights. Because PAEs do not make or sell any products of their own, they cannot be countersued for infringement. As a result, PAEs can use the high cost of patent litigation to their advantage. They can sue, threaten to impose large discovery costs that overwhelmingly fall on the accused infringer, and thereby extract settlements from their targets that primarily reflect a desire to avoid the cost of fighting, rather than the chance and consequences of actually losing the suit.

To be sure, PAEs can in theory play a beneficial role in the market for innovation and some undoubtedly do. However, empirical evidence strongly suggests that many PAEs have a net negative impact on innovation. Technology companies – which, themselves, are innovators – spend tens of billions of dollars every year litigating and settling lawsuits filed by PAEs, funds that these tech companies might otherwise spend on additional research and design. Surveys also reveal that a large percentage of these suits settle for less than the cost of fighting, and multiple empirical studies conclude that PAEs lose about nine out of every ten times when their claims are actually adjudicated on their merits before a judge or jury.

The impact of these suits is made more troubling by the fact that PAE activity appears to be on the rise. Empirical studies suggest that at least 40%, and perhaps as high as 59% or more, of all companies sued for patent infringement in recent years were sued by PAEs. PAE suits were relatively rare more than a decade ago, and they remain relatively rare today elsewhere in the world.

More worrisome than these bare statistics is the fact that PAEs are increasingly targeting not large tech firms, but rather small business well outside the tech sector. Studies suggest that the majority of companies targeted by PAEs in recent years earn less than $10 million in annual revenue.

When PAEs target the numerous small companies downstream in the supply chain, rather than large technology manufacturers upstream, they benefit in two ways. First, for every product manufacturer, there may be dozens or hundreds of retailers who sell the product, and hundreds or thousands of customers who purchase and use the technology. Patent law allows patent owners to sue makers, sellers, or users. Suing sellers or users means more individual targets; some PAEs have sued hundreds of individual companies. And, more targets means more lawyers, more case filings, more discovery, and thus more litigation costs overall to induce a larger total settlement amount.

Second, compared to large manufacturers, small companies like retailers are less familiar with patent law, are less familiar with the accused technology, have smaller litigation budgets, and thus are more likely to settle instead of fight. In fact, many small businesses fear patent litigation to such an extent that they are willing to pay to settle vague infringement allegations made in lawyers' letters sent from unknown companies. Like spammers, some patent owners have indiscriminately sent thousands of demand letters to small businesses, with little or no intent of actually filing suit but instead with hopes that at least a few will pay to avoid the risk.

This egregious practice in particular, but also all abusive patent enforcement to some extent, thrives due to a lack of reliable information about patent rights. Brazen patent owners have been known to assert patents they actually do not own or, conversely, to go to great lengths to hide the fact that they actually do own patents being used in abusive ways. Some patent owners have also sought double recovery by accusing companies selling or using products made by manufacturers that already paid to license the asserted patent. Still others have threatened or initiated litigation without first disclosing any specific information about how, if at all, their targets arguably infringe the asserted patents.

In short, high litigation costs and a widespread lack of transparency in the patent system together make abusive patent enforcement a common occurrence both in and outside the technology sector. As a result, billions of dollars that might otherwise be used to hire and retain employees, to improve existing products, and to launch new products are, instead, diverted to socially wasteful litigation.

Accordingly, we believe that the U.S. patent system would benefit from at least the following six reforms, which together will help reduce the cost of patent litigation and expose abusive practices without degrading inventors' ability to protect genuine, valuable innovations:

  1. To discourage weak claims of patent infringement brought at least in part for nuisance value, we recommend an increase in the frequency of attorneys' fee awards to accused patent infringers who choose to fight, rather than settle, and ultimately defeat the infringement allegations levelled against them.
  2. To reduce the size and front-loaded nature of patent litigation costs, we recommend limitations on the scope of discovery in patent cases prior to the issuance of a claim construction order, particularly with respect to the discovery of electronic materials like software source code, emails, and other electronic communications.
  3. To further protect innocent retailers and end-users that are particularly vulnerable to litigation cost hold-up, we recommend that courts begin to stay suits filed against parties that simply sell or use allegedly infringing technology until after the conclusion of parallel litigation between the patentee and the technology's manufacturer.
  4. To facilitate the early adjudication of patent infringement suits, we recommend that patentees be required to plead their infringement allegations with greater specificity.

And finally, to increase transparency and confidence in the market for patent licensing, we recommend:

  1. that patentees be required to disclose and keep up-to-date the identity of parties with an ownership stake or other direct financial interest in their patent rights, and
  2. that Congress consider additional legislation designed to deter fraudulent, misleading, or otherwise abusive patent licensing demands made outside of court.

In closing, we also wish to stress that as scholars and researchers we have no direct financial stake in the outcome of legislative efforts to reform our patent laws. We do not write on behalf of any specific industry or trade association. Rather, we are motivated solely by our own convictions informed by years of study and research that the above proposals will on net advance the best interests of our country as a whole. We urge you to enact them.

Sincerely,

John R. Allison (Texas); Clark D. Asay (Penn State); Jonathan Askin (Brooklyn); Gaia Bernstein (Seton Hall); James E. Bessen (BU); Jeremy W. Bock (Memphis); Annemarie Bridy (Idaho); Irene Calboli (Marquette); Michael A. Carrier (Rutgers); Bernard Chao (Denver); Andrew Chin (UNC); Ralph D. Clifford (UMass); Jorge L. Contreras (American); Rebecca Curtin (Suffolk); Samuel F. Ernst (Chapman); Robin Feldman (Hastings); William T. Gallagher (Golden Gate); Jon M. Garon (Northern Kentucky); Shubha Ghosh (Wisconsin); Eric Goldman (Santa Clara); Leah Chan Grinvald (Suffolk); Debora J. Halbert (Hawaii); Bronwyn H. Hall (Berkeley); Yaniv Heled (Georgia State); Christian Helmers (Santa Clara School of Business); Sapna Kumar (Houston); Mary LaFrance (UNLV); Peter Lee (Davis); Mark A. Lemley (Stanford); Yvette Joy Liebesman (SLU); Lee Ann W. Lockridge (LSU); Brian J. Love (Santa Clara); Glynn S. Lunney, Jr. (Tulane); Phil Malone (Stanford); Mark P. McKenna (Notre Dame); Michael J. Meurer (BU); Joseph Scott Miller (Georgia); Fiona M. Scott Morton (Yale); Lateef Mtima (Howard); Ira Steven Nathenson (St. Thomas); Laura Lee Norris (Santa Clara); Tyler T. Ochoa (Santa Clara); Sean A. Pager (Michigan State); Cheryl B. Preston (BYU); Jorge R. Roig (Charleston); Jacob H. Rooksby (Duquesne); Brian Rowe (Seattle); Matthew Sag (Loyola Chicago); Pamela Samuelson (Berkeley); Jason Schultz (NYU); Christopher B. Seaman (W&L); Carl Shapiro (Berkeley); Lea Shaver (Indiana); Jessica Silbey (Suffolk); Christopher Jon Sprigman (NYU); Madhavi Sunder (Davis); Toshiko Takenaka (Washington); Sarah Tran (SMU); Jennifer M. Urban (Berkeley); Samson Vermont (Charlotte)

Enforcing Injunctions: Perhaps Not so Powerful

Patent, ,

By Dennis Crouch

NCube (ARRIS Gp) v. SeaChange (Fed. Cir. 2013)

Injunctive relief is a powerful mechanism for stopping ongoing patent infringement and for forcing settlement by placing large hold-up costs on adjudged infringers who are locked-into maintaining their technology profile. In the area of multi-component systems, many accused-infringers and academics argue that the hold-up costs of injunctive relief sets-up an imbalance of power that results in a windfall settlement for minor-component patentees. The prototypical case is where an injunction is ordered to stop sales of a complex product based upon the finding that one of the many components infringes a patent.

The decision here offers a counterbalance based upon the recognition that product specifications and production methods are continually updated and modified. Major modifications may result in a new product version, but more minor changes regularly implemented without direct customer notification.

Here, the ARRIS patent covers a system of delivering streamed video that have been purchased online. Patent No. 5,805,804. A jury found that SeaChange’s ITV product was infringing and the district court entered a permanent injunction – enjoining SeaChange from using or selling the ITV product or “any devices not more than colorably different therefrom that clearly infringe the Adjudicated Claims of the ‘804 patent.” Although stated within the same paragraph here, it actually took four years for the court to order the permanent injunction following the jury verdict. The delay took into account post-verdict motions and briefing and then an appeal to the Federal Circuit where the verdict was affirmed.

By the time the injunction order became effective, SeaChange had modified its ITV system in order to avoid infringement. This approach is common. In essence, when an injunction issues regarding a minor component of a product, the outcome is normally not to cease manufacturing and sales but rather to modify or “patch” the product design and thus avoid the injunction. It’s also common that the work-around is – from the patentee’s point of view – still within the coverage of the patent.

After a failed settlement attempt, ARRIS filed a contempt motion asking the district court to stop the sales. However, the district court refused and that refusal has been affirmed on appeal the Federal Circuit. Rather, in order to stop the new product ARRIS would need to file an entirely new federal lawsuit.

Contempt motions are actually difficult to win. The basic rule is that the party seeking to enforce the injunction must provide clear and convincing evidence that the accused activity falls within the injunction. For new product designs, the courts only allow contempt when the new product is “no more than colorably different” than the one found to be infringing. See TiVo v. EchoStar (Fed. Cir. 2011) (en banc).

Here, the modification was to basically take a ClientID out of a particular table stored on the system and instead stored elsewhere on the system. Although the ClientID still performs the same function, the change “is a significant change to the system.”

The result then is that ARRIS only avenue for enforcement is to file a new infringement lawsuit.

Mandamus granted ordering E.D. Texas to Transfer Case to Ohio

Ethics

Picking the best available venue for a suit is a part of competent lawyering, and for a variety of reasons the Eastern District of Texas has been an oft-chosen site to sue.  The Federal Circuit (and Congress) have sought to narrow the ability of patentees to sue in that court, as is well known.

Thus it is of note to me that the Federal Circuit granted a petition for mandamus review and held the district court had abused its discretion in not transfering the case to Ohio.  The decision, In re Toa Techns., Inc., is here.

I have no view on the actual merits, but mandamus relief is an extraordinary remedy, and venue under 1404(a) a discretionary matter, meaning the grant of a petition should be extraordinarily rare.  The Federal Circuit may be broadening the mandamus doctrine to acomplish some good, but that also may have unintended consequences in other areas.  If something "as discretionary" as this can be reviewed and changed on mandamus, no doubt a lot of other things can to.  It may be an opportunity for lawyers to "appeal" other issues, and also affects analysis of a venue decision — it may not stick.

Some things to ponder.

 

 

Government Shutdown & Patent Law Practice

Patent
  • Federal Courts (including the Federal Circuit) are continuing to operate on remaining budget surplus;
  • USPTO is continuing to Operate on Remaining Revenues, although the agency is taking cost cutting measures and the 18th Annual Independent Inventors Conference has been cancelled.
  • The FDA is largely closed and is not accepting filings that require FY2014 fees.
  • FTC is closed and has postponed its patent troll investigation until further notice; and
  • USITC has closed and is postponing its patent infringement investigations until further notice (all case deadlines are tolled).

 

FTC on Patent Trolls

Patent

By Dennis Crouch

The Federal Trade Commission has decided to move forward with a full study of patent assertion by companies who are in the business of buying and then asserting patents. In FTC lingo, these are referred to “Patent Assertion Entities” or PAEs. From the agency:

PAEs are firms with a business model based primarily on purchasing patents and then attempting to generate revenue by asserting the intellectual property against persons who are already practicing the patented technologies. The FTC is conducting the study in order to further one of the agency’s key missions—to examine cutting-edge competition and consumer protection topics that may have a significant effect on the U.S. economy.

In addition to seeking voluntary information, the FTC proposes to use its subpoena power of to require the assertion entities to provide information to the agency and address the following questions:

  • How do PAEs organize their corporate legal structure, including parent and subsidiary entities?
  • What types of patents do PAEs hold, and how do they organize their holdings?
  • How do PAEs acquire patents, and how do they compensate prior patent owners?
  • How do PAEs engage in assertion activity (i.e. demand, litigation, and licensing behavior)?
  • What does assertion activity cost PAEs?; and
  • What do PAEs earn through assertion activity?

http://www.ftc.gov/opa/2013/09/paestudy.shtm

Amending the America Invents Act 2013

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By Dennis Crouch

One aspect of the Goodlatte discussion draft legislation is a series of “Improvements and Technical Corrections to the Leahy-Smith America Invents Act.” The AIA was passed in September 2011 and is gradually being fully implemented across the US patent system. The further changes here are fairly substantial, although buried within the proposed bill itself. The following post offers some explanation of the provisions with only a few comments on the policy implications.

1. REPEAL OF CIVIL ACTION TO OBTAIN A PATENT

For several years, the PTO has been pushing to weaken or eliminate the “civil action” option that is currently available to patent applicants who are refused a patent. The current system allows a patent applicant to file a federal lawsuit that asks a district court to order the PTO to issue a patent covering the claimed invention. The civil action approach allows for extensive presentation of evidence, live witness testimony, and an ultimate decision by a district court judge. And, since the civil action is not an “appeal” per se, substantial deference is not given to prior factual findings by the PTO (as long as the applicant presents its own evidence on point). The civil action approach is not widely used because of the expense of pursuing a district court claim. However, it has been a very successful approach for a number of patent applicants. Under the new provision, the only avenue for challenge an adverse PTO decision on the merits of an application would be through appeal to the Court of Appeals for the Federal Circuit.

2. POST GRANT REVIEW ESTOPPEL SUBSTANTIALLY NARROWED

The current estoppel rules of post-grant review indicate that a petitioner will be estopped from latter asserting in-court that the challenged patent “invalid on any ground that the petitioner raised or reasonably could have raised during that post-grant review.” The amendment would substantially narrow the estoppel to cover only grounds that the petitioner actually raised.

This change would result in Post-Grant review being much more of a parallel option rather than an alternative option to challenging patent validity.

3. CONSTRUING CLAIMS DURING POST-GRANT and INTER-PARTES REVIEW

The proposal would require that the claims under review be construed in the same way that they would be construed by a district court rather than using a “broadest reasonable construction.” The statute as written requires that the PTAB construe “each claim of the patent in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent.” However, that method is somewhat different than what has been ruled as the law by the Federal Circuit.

4. CODIFICATION OF DOUBLE PATENTING DOCTRINE

The statute would create a new statutory provision that is intended to codify the obviousness-type double patenting doctrine. This ensures that the doctrine is carried through into the AIA. I have not parsed through the new provision to see if it does what they say it does:

35 U.S.C. §106 that reads as follows:

A claimed invention of a patent issued under section 151 (referred to as the ‘first patent’) that is not prior art to a claimed invention of another patent (referred to as the ‘second patent’) shall be considered prior art to the claimed invention of the second patent for the purpose of determining the non-obviousness of the claimed invention of the second patent under section 103 if—

(1) the claimed invention of the first patent was effectively filed under section 102(d) on or before the effective filing date of the claimed invention of the second patent;

(2) either—

(A) the first patent and second patent name the same inventor; or

(B) the claimed invention of the first patent would constitute prior art to the claimed invention of the second patent under section 102(a)(2) if an exception under section 102(b)(2) did not apply and, if applicable, if the claimed invention of the first patent had not been effectively filed under section 102(d) on (but was effectively filed before) the effective filing date of the claimed invention of the second patent; and

(3) the patentee of the second patent has not disclaimed the rights to enforce the second patent independently from, and beyond the statutory term of, the first patent.

5. EXPANDING THE SCOPE OF COVERED_BUSINESS_METHOD REVIEWS

The AIA creates an option for third parties to attack patents on non-technological “covered business method” innovations through the use of a new post-grant review proceeding. Through the review program, third parties can raise any ground of invalidity and can use this approach to pre-AIA patents. The amended provision would appear to sweep-in virtually all software-type patent claims.

Under the changes, the 7-year sunset provision would be removed; the expansive definition of business methods found in SAP America, Inc. v. Versata Dev. Group, Inc., CBM2012-00001, 12 Paper 36 (January 9, 2013), would be codified; and the “non-technological” requirement would be clarified/expanded to make clear that a claim’s recitation of technological features does not make the claim technological “if it is readily apparent that the recited [technological] feature is anticipated by or obvious in light of the prior art.”

6. SHRINKING PATENT TERM ADJUSTMENT

The bill proposes a clear rule that no PTA can be awarded for any delays that occur following the filing of a Request for Continued Examination (RCE). This would reduce the patent term for a substantial portion of patents and the bill indicates that the recalculation would be retroactive against any patent application still pending at the time of enactment.

7. OVERTURNING OF GUNN V. MINTON

Although not a statutory change, the bill would make the “clarifying” statement that:

CLARIFICATION OF JURISDICTION.—Congress finds that the Federal interest in preventing inconsistent final judicial determinations as to the legal force or effect of the claims in a patent presents a substantial Federal issue that is important to the Federal system as a whole.

This provision has the potential of bringing patent malpractice claims back under Federal Court jurisprudence. And, to the extent that patent licenses depend upon the scope of a patent claim, licensee disputes would also be heard in Federal Courts.

Contract Dispute: When Paying to Settle a Case Counts as Revenue

Patent,

Jang v. Boston Scientific (Third Circuit 2013)

Dr. Jang is an inventor on BSC’s stent patent no. 5,922,021. Jang’s contract requires BSC share 10% of royalty revenue with Jang, including “any recovery of damages” from infringers with a $60 million cap. The question in this case was whether a prior settlement with Cordis involved such a recover of damages.

In that prior 2003 case, Cordis and BSC countersued one another. A jury found that Cordis infringed the Jang patent and that BSC infringed Cordis patents. However, the parties settled before the court calculated or awarded damages. The settlement involved a payment of $1.725 billion from BSC to Cordis. BSC admitted that the settlement agreement represented the net difference between its expected damages and those it owed Cordis. In essence, the fact that Cordis infringed the BSC/Jang patent reduced the amount that BSC owed to Cordis. However, BSC argued that it did not owe Jang anything because BSC did not receive any damages or revenues in the deal. The district court sided with BSC on the pleadings on appeal, however, the Third Circuit reversed – finding that Jang’s case should move forward. In particular, the appellate panel held that (1) the cash-offset qualifies as a “recovery of damages” and (2) that “BSC violated the implied covenant of good faith and fair dealing by structuring a settlement to thwart the agreed purpose of [the contract provision].”

A cash offset is the functional equivalent of a cash payment. . . . Courts have long recognized the equivalence of a debt offset and a cash payment through the common-law “right of setoff.” . . . In this case, BSC made money on the Jang patent. It lost money on Cordis’ separate claim. That its gain and loss were consolidated to produce one net payment does not change the fact that the Jang patent produced a monetary gain for BSC.

The real question is whether that gain qualifies as a “recovery.” We see no reason why it should not; it makes no difference to BSC’s bottom line whether it receives a check for the Jang infringement claim or reduces its debt by the same amount.

Writing in dissent, Judge Barry argued that the language of the contract was clear and contemplated damage recovery, not offsetting claims.

Although the case involves patent law it is at heart a contract dispute. Thus, the appeal was heard by the regional circuit court rather than the Federal Circuit. In a prior dispute over the same contract, the Federal Circuit claimed appellate jurisdiction apparently based upon the fact that a quasi-infringement analysis was required to settle the dispute. Under Gunn v. Minton, that case (if heard today) would not likely be heard by the Federal Circuit.

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A large number of patent assignment deals similarly involve substantial “upside.”  If one of the parties to the deal is a litigation expert then the the other party may well assume that full enforcement of the deal will also require litigation.

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

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By Dennis Crouch

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

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

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

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

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

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

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

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

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

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

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

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

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

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

I. Subject Matter Jurisdiction

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

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

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

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

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

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

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

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

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

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

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

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

II. Indispensable Party

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

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

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

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

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

The PATENT Jobs Act of 2013

Patent

By Dennis Crouch

Reps. Honda, Lofgren, and Eshoo (All D-Ca) have collectively introduced the Patents and Trademarks Encourage New Technology (PATENT) Jobs Act of 2013 with the sole purpose of exempting the USPTO from the sequestration process for FY2014-2021. As I noted in my recent congressional testimony, the greatest impact of the America-Invents-Act has been increased funding at the USPTO and the resulting improved ability of the Agency to address the workload requirements. Although all of the USPTO's expenditures are matched by user-fee revenue, the sequester has been applied to the agency in a way that guarantees that a portion of every user-payment to the PTO is spent on general federal expenditures rather than for patent examination.

Both the AIPLA and IPO are strong supports of the proposed bill.

Does Profit-Distribution to Professors Spoil Princeton’s Non-Profit Status?

Patent

By Dennis Crouch

Like many universities, Princeton University (my Alma Mater) receives millions of dollars in patent royalty revenue. By agreement, some of that money goes directly to individual inventor/professors as an equity-type profit distribution compensation. In an interesting lawsuit, a coalition of local citizens has partially challenged the private university’s New Jersey Non-Profit status based upon this profit-sharing arrangement and other commercial activities of the University. The basic idea here is that Princeton should be paying local property taxes on facilities used for commercial profit-making. In the plaintiff’s words, “under the law they are not even entitled to a tax exemption because they are engaged in commercial patent licensing, and the school give out a percentage of profits to faculty. Under the law in New Jersey, if a nonprofit gives out profits, it is not entitled to an exemption at all.” The case is now moving forward after the NJ court denied Princeton’s motion on the pleadings.

Guest Post on Using the Antitrust Laws to Police Patent Privateering

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Editorial by David A. Balto.  Mr. Balto is an antitrust attorney in Washington D.C. whose representations include high technology firms.  In addition to his practice, Mr. Balto was formerly a policy director of the Federal Trade Commission, attorney-adviser to Chairman Robert Pitofsky, and an antitrust lawyer at the U.S. Department of Justice.  He has also published research and authored scholarship for Google on technology policy topics.

Using the Antitrust Laws to Police Patent Privateering

By David Balto

In the ongoing debate over patent assertion entities, increased attention is being paid to “patent privateering”: the practice of operating firms transferring patents to non-practicing entities in order to bring patent litigation against their rivals. As I explained in a recent article:

“Privateering is the practice by which established operating companies arm trolls with patents and deploy them to engage in expensive, incessant litigation against competitors. This Trojan horse approach allows companies to accrue the benefits of the egregious troll conduct without incurring any of the risks. And more often than not it is used as a competitive weapon to try to raise costs and dampen competition from rival operating companies.”

Firms like Google, BlackBerry and Red Hat recently filed comments with the Federal Trade Commission and Department of Justice, explaining the substantial concerns that patent privateering raises from a competition perspective.

This begs the question: is there an antitrust solution to the privateering problem?

A recent article by Mark Popofsky and Michael Laufert provides a thoughtful roadmap on how the antitrust laws can be used to police privateering. It’s a must-read for businesses and policymakers concerned that patents are becoming strategic tools for anticompetitive conduct.

In the current patent ecosystem, large operating companies accumulate patents in part for defensive purposes.  Those companies are unwilling to use their patents in certain strategic fashions because they fear that the same will be done to them.  These patent portfolios help assure patent peace because they assure that any strategic conduct will be met with a similar response – so-called mutually assured destruction.

Popofsky and Laufert outline three concerns around privateering transfers to PAEs that upset that balance. Privateering lets operating companies evade “[mutual assured destruction] or reputational constraints to raising rivals’ costs” and “FRAND or other licensing commitments,” and provides a method for “strategic outsourcing to PAEs to hinder rivals.”  Essentially, privateering companies are use PAEs because they have the incentive and ability to engage in strategic conduct that is prevented by current market forces.

The article gives a prime example of these concerns: the well-reported patent transfer from Nokia and Microsoft to patent troll MOSAID. After the failure of Nokia’s open source Symbian mobile operating software, Nokia joined forces with Microsoft and adopted its Windows Phone 7 platform. Nokia had originally supported open source software and made numerous FRAND commitments, but these commitments became a hindrance when Android (open source) became Nokia’s chief competitor. Microsoft and Nokia orchestrated a transfer of 2,000 of Nokia’s patents, 1,200 of which were standards essential patents (SEPs) with FRAND commitments, to MOSAID for a nominal fee. As part of the deal MOSAID has to pay Microsoft and Nokia 2/3 of the patent royalties and meet strict “royalty protection provisions and milestone payments calculated to maximize . . . revenue.”

The MOSAID transfer exhibits all three of the anticompetitive concerns. MOSAID has the incentive and ability to engage in strategic patent litigation.  Nokia could not assert these 2,000 patents without breaking patent peace and risking counter-suits for patent infringement. MOSAID can use these patents without fear because MOSAID does not practice in the industry and immune to countersuits. The transfer also allows Nokia to evade a FRAND commitment not to charge more than 2% total royalty for all the wireless SEPs in Nokia's portfolio. MOSAID did not make this promise, and even if it honored Nokia's promise and only charged 2% for the 1,200 SEPs MOSAID received the total fees could still double for competitors.

Nokia later transferred portions of its SEP portfolio to patent trolls Sisvel and Vringo. These transfers could potentially quadruple the licensing cost of these SEPs. MOSAID also can’t collect royalties from “third parties implementing certain Microsoft software in their mobile devices.” However, MOSAID must meet revenue expectations or it risks activating a default provision in the transfer contract that would allow Nokia to take those patents back for only $10,000. This creates serious strategic interests for MOSAID to aggressively target Microsoft and Nokia’s rivals.

Fortunately, Popofsky and Laufert offer several ways to challenge these troubling transfers to patent trolls under the existing antitrust laws. This outsourcing of patent litigation might “form part of a scheme to maintain or obtain monopoly power” in violation of Section 2 of the Sherman Act which prohibits monopolization. A plaintiff would have to prove that transfers to patent trolls are a part of an exclusionary strategy to obtain or maintain monopoly power by raising rivals costs. The first part of the strategy is to create patent-holdup by making FRAND commitments to get patents into a standard and then evading those FRAND commitments through transfers to patent trolls. The second part of the strategy is to raise licensing fees by arming patent trolls that have no incentive to negotiate license rates because they have no risk of patent counter-suits or injury to their reputation. If proven, a private plaintiff could receive an award of treble damages and the government can secure injunctive relief.

The transfer can also be challenged under Section 7 of the Clayton Act which prevents mergers and acquisitions if they are likely to substantially lessen competition or tend to create a monopoly. Patent acquisitions can be challenged under Section 7.  The article notes that the Department of Justice has already used this power in 2011 to prevent Microsoft from acquiring Novell’s patents to which Microsoft already had a license. This agency action was made to prevent a transfer whose only logical purpose was to attack open source software. The government can continue to use its Section 7 power to block transfers to patent trolls and it can challenge these transfers before they inflict harm.

The Section 7 power should be fully explored.  The National Restaurant Association and Food Marketing Institute have suggested that the agencies need to increase their scrutiny of patent transfers to PAEs and they offer an important tool.  They suggest that the FTC and DOJ adopt regulations to make more of these transfers reportable under the Hart Scott Rodino Act. This would give the agencies far stronger tools to fully investigate and challenge these transfers.

The transfers could also be challenged as a restraint of trade under Section 1 of the Sherman Act. Michael Carrier has commented that the MOSAID transfer “could present a Section 1 concern similar to a pooling arrangement the Supreme Court declared per se illegal in Singer Manufacturing Co.” Transfers running afoul of Section 7 can also "be recast as violations of Sherman Act Section 1."

Finally, the FTC can also challenge transfers that seek to dodge FRAND and other commitments through Section 5 of the FTC Act. The FTC has already done this in a consent order with N-Data Solutions. The FTC Act gives the Federal Trade Commission the power to prevent "unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce."

The Popofsky/Laufert paper should be required reading for the regulators at the FTC and DOJ. Well conceived enforcement actions against transfers to trolls would be one of the most effective ways to deal with the growing privateering problem.

Sample Civil Procedure II Exam

Patent

In CivPro II (a 2-hour course), we covered civil procedure issues related to class actions, discovery, summary judgment, JML, new trial, appellate jurisdiction, and preclusion. Here is the two-hour exam. – Dennis

052213_1918_SampleCivil1=====

Dent sued Baker in the United States District Court for the Eastern District of Missouri alleging patent infringement. After receiving the complaint, Baker had his production manager (Morgan) review the product sales history. Morgan delivered an internal memorandum to Baker indicating that Baker sold 10,000 allegedly infringing sunglasses in the past year for a total revenue of $85,000. The report was marked "Confidential."

a) What information regarding the sales must Baker include in his initial disclosures under Rule 26(a)? (5 points)

b) Under what circumstances would a Court Order Baker to turn over the report to Dent? (10 points)

c) Assuming that the court has issued what Baker believes is an erroneous order forcing Baker to turn-over the report to Dent. Can Baker appeal that order? (5 points)

= = = =

After trial, a jury returns a verdict for Dent and against Baker (finding infringement). Dent then sues Campbell in the same court also alleging patent infringement.

d) Can Dent assert either claim preclusion or issue preclusion in the case against Campbell? (10 points)

= = = =

In the patent case against Campbell, patent infringement must be proven by a preponderance of the evidence. During discovery, Dent's expert provides testimony that Campbell's products infringe the patent while Campbell does not provide any competing evidence of non-infringement. Dent then moves for summary judgment of infringement. In response, Campbell only argues that a jury will find the expert testimony untrustworthy.

e)     Should the court order summary judgment? (15 points)

= = = =

The United States later brings a criminal prosecution against Baker for criminal counterfeit in United States District Court for the Western District of Missouri.

f) Can the US Government assert either claim preclusion or issue preclusion in the case against Baker? (5 points)

= = = =

Assume that Dent lost the lawsuit against Campbell based on a jury finding that Dent's patent was invalid. Thus, there is one case where the patent was enforced (against Baker) and another where the patent was found invalid (against Campbell). Dent then sued Haseltine in Federal Court in the Eastern District of Texas again alleging infringement of the patent.

g)     Can Haseltine rely on either claim preclusion or issue preclusion in the case against Dent? (10 points)

h)     How can we know if the court was correct to send the question of validity to a jury rather than have that question be decided by the judge? (5 points)

= = = =

The patent right is later fully and finally revoked by the US Patent Office. This means that the knock-off versions are actually legal to manufacture and sell in the US. In reaction, Vincent then files a class action lawsuit on behalf of all sellers of knock-off versions of Dent's sunglasses. The complaint alleges unfair competition based upon Dent's assertion of invalid patent rights and demands that the court force Dent to stop all enforcement activity and compensate businesses who suffered under the enforcement strategy. Vincent's information shows that there are more than 1,000 companies that stopped selling knockoffs because of Vincent's enforcement activities even though Baker, Campbell, and Haseltine were the only entities actually sued.

i)     What are the two most likely sections of Rule 23 that would be used to deny class certification in this case? (15 points)

Hispanic National Bar Association IP Institute

Patent

In a program sponsored by Microsoft, the Hispanic National Bar Association is setting up an IP Institute for the Summer 2013(July 7-12).

The IP Law Institute will select up to 25 law students from law schools throughout the country to participate in a week- long IP law immersion program. The costs of travel, lodging, meals, and materials will be covered by the IP Law Institute. The IP Law Institute will provide substantive instruction, hands-on practical experience, writing workshops, visits to U.S. government institutions related to IP law (U.S. Patent and Trademark Office, U.S. International Trade Commission, U.S. Court of Appeals for the Federal Circuit), briefings from leading IP practitioners and congressional and executive branch authorities, and networking opportunities, that will give participants a broad understanding of IP law practice, as well as provide contacts and avenues for potential employment. The IP Law Institute will be anchored by a briefing on issues in an active patent litigation case followed by attending live oral arguments on the same case before the U.S. Court of Appeals for the Federal Circuit (“CAFC”). Attendees will also receive a rare behind the scenes tour of the court and meet CAFC Judges and law clerks. The Honorable Jimmie V. Reyna from the CAFC will host the group at the court and will speak to the students about IP law and the court’s role in its development.

Candidates must be law students in good standing at an ABA accredited law school and have a demonstrated interest in intellectual property law as a potential practice area. Candidates are required to complete an online application that will include a personal statement, résumé, transcript and, at their option, professional and academic references. Selection criteria will include an evaluation of interest; academic record; dedication and commitment toward accomplishing goals; professional and faculty recommendations; and previous technical/scientific-related educational and employment background (if applicable). No one factor is dispositive and students with no technical or scientific background are encouraged to apply.

http://www.hnba.com/hnba-microsoft-corporation-launch-bold-initiative-hnbamicrosoft-ip-law-institute

Welcome Back Fee Diversion: USPTO Likely to Begin Sending Collected Fees back to Treasury

Patent,

By Dennis Crouch

Many agencies within the Federal Government are suffering under sequestration that effectively cuts budgets by about 5% for the rest of the fiscal year. In March, I reported that the USPTO would not be forced to cut its spending because the collected fee revenues were already under budget. It seems that result is not sitting well with other federal agencies who would prefer to see more equal suffering. Under orders from the White House, it appears that the USPTO will now be forced to reduce its spending – essentially using fee revenues as the base from which to cut.

Robert Budens sent around an email raising some alarm regarding USPTO funding. Budens heads the USPTO employee union POPA. Budens writes:

About a week or so ago POPA started hearing rumors that the White House Office of Management and Budget (OMB) was attempting to mess with USPTO funding by requiring that our sequestration hit be taken off of our fee income rather than our appropriated budget level. I also heard that USPTO management had been put under a “gag order” not to discuss these changes until approved by OMB and Commerce. The rumors also suggested that the sequestered fees would not go into our AIA reserve fund for later availability, but would in fact, not be available for USPTO use, i.e., our fees are going to be diverted once again, barely a month after full implementation of the AIA that was supposed to prevent fee diversion!

In discussions with AIPLA, IPO and others, I learned that they had also heard such rumors and that none of us were getting any information out of USPTO management. To date and despite numerous inquiries from POPA, USPTO management has still not discussed this issue, all but confirming the gag order.

I believe other recent developments have all but confirmed those rumors and I wanted to update you because OMB’s interpretation of the impact of sequestration on the USPTO will have significant impacts.

Today, the OCIO notified its staff of an $80M cut to the OCIO budget. [DDC Note: Office of the Chief Information Officer] This will result in layoffs of a number of USPTO contractors and significant delays in the development of the Patents-End-To-End project (PE2E) and upgrades to PALM — both critical IT projects. Obviously this is not good news, but I suspect it is evidence that OMB’s sequestration decision is being implemented. And yesterday, you all should have seen the Memorandum from the ADCs regarding changes to overtime in the Examining Corps. Again, more evidence that the rumors are true.

The USPTO’s fee income is currently below projected levels. In other words, we are already operating in a sequester environment by virtue of our reduced fee income. It is incomprehensible to me why the White House would then pile on us by taking such a negative interpretation of sequester on the USPTO. This is about as short sighted as anything I can think of. Our fee income represents filed patent applications that will need to be examined. To now take away those fees while leaving the USPTO with the work to do is counterproductive.

In his letter, Budens mentions the AIA reserve fund that is now codified in 35 U.S.C. § 42. The law establishes a “Patent and Trademark Fee Reserve Fund” within the US Treasury.

If fee collections by the Patent and Trademark Office for a fiscal year exceed the amount appropriated to the Office for that fiscal year, fees collected in excess of the appropriated amount shall be deposited in the Patent and Trademark Fee Reserve Fund. To the extent and in the amounts provided in appropriations Acts, amounts in the Fund shall be made available until expended only for obligation and expenditure by the Office in accordance with paragraph.

As Budens suggests, it does not appear that this provision would be effective against the budget cuts outlined above because they are coming from either executive fiat or the cap set in the Budget Resolution – neither of which changes the amount appropriated.

Depending upon how it is calculated, the USPTO may be facing about $140 million in cuts for the remaining 5½ months of FY2013.

Recent Patent Assignments

Patent

Recent Patent Deals from the USPTO Assignment Records:

  • Ericsson transferred over 820 patent families to the publicly traded company known as Unwired Planet, Inc. (UPIP). Ericsson will receive a percentage of any revenue generated from the patents. (20% of first $100m; 50% up to $500m; and 70% of any additional revenue). Unwired has lawsuits pending against both Apple and Google.
  • A new company known as BRIGHT SUN TECHNOLOGIES, seemingly headquartered at the offices of Fenwick & West, has purchased 100+ patents from Marathon Solutions. Those patents previously belonged to AOL. See Patent No. 8,335,834.
  • The transfer of patents from EASTMAN KODAK to INTELLECTUAL VENTURES have begun to show up in the assignment records. See Patent No. 6,804,407. Apple also recorded a block of Kodak patents
  • Frank Bisignano (JPMorgan COO) obtained another two dozen patents from Inselberg Interactive.
  • Nokia transferred about thirty patents to a new Las Vegas entity known as MEMORY TECHNOLOGIES LLC. See Patent No. 7,172,454.
  • Bankrupt ORMET CORPORATION has transferred its patents to the WAYZATA INVESTMENT PARTNERS as part of a restructuring process – apparently as collateral.
  • As part of a deal with Sanofi, COVIS PHARMA has received the patent rights for a set of Sanofi drugs. See Patent No. 6,297,254.
  • A new company founded by Heidi Zak and Dave Specter – MeCommerce – has obtained a set of patents covering methods of custom fitting and ordering clothing. Although the patents look interesting, they have already bounced through three other companies. See Patent No. 6,711,455
  • And last but not least, the OPEN INVENTION NETWORK added a few more patents to its portfolio.

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

Patent, , , ,

Guest Post by Martin Goetz

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

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

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

Here's why it makes no sense….

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

END