PATENTS + iPOD = LOTS OF PRESS: Well, after Creative Technology crowed about its musical interface patent, and the insinuation that the iPOD may be infringing, you might think that Creative engaged in a bit of gamesmanship to gain notoriety for its line of MP3 players. After all, there are legions of press releases where companies showcase a freshly-granted patent like a new baby to convince investors that they hold the key to the "next big thing" in their field of technology. Sometimes companies are right in their interpretation of their patent. However, it is often the case that the issued patent is not as earth-shattering as the press release suggests. In any case, the media typically ignores these announcements as a matter of course. That is, unless you have a patent that is remotely applicable to Apple's iPOD line.

Now, I haven't analyzed the strength of Creative's patent (nor have I been retained to determine an infringement position on the patent), but judging by the market's reaction, Creative Technology is getting the type of media attention every company dreams of when they announce an issued patent (BTW, Creative's stock shot up 7% on the news). And the threat to Apple was just icing on the cake.

But what's the big deal? In the case of Microsoft, the "controversy" was over two allegedly overlapping patent applications with Apple. Since neither of them has issued as a patent, there is nothing to sue over. Besides, the claims barely cover the same subject matter.

In Creative's case, they have a patent that is potentially enforceable against Apple (nobody knows for sure yet). Well, if THAT is news in and of itself, then you could easily create new headlines by spending a few minutes on the USPTO site to find other patents that at least superficially "threaten" the iPOD product line. After about 5 minutes, I discovered these 2 gems:

US Patent 5,670,73 - "Data protocol and method for segmenting memory for a music chip" - issued September 23, 1997 to Lucent Technologies, Inc.

Claim 18. A data protocol for use in storing pre-recorded audio in memory of an integrated circuit chip, said integrated circuit chip being adapted for use with an audio player, said data protocol comprising:

global header having parameters stored therein corresponding to an encoding technique used for storing said pre-recorded audio in memory and used by said audio player in decoding said audio; and

at least one individual header having multiple data fields, said data fields including general description information about individual tracks of said pre-recorded audio.

US Patent 5,918,303 - "Performance setting data selecting apparatus" - issued June 29, 1999 to Yamaha Corporation.

Claim 15. A performance setting data selecting method comprising the steps of:

(a) preparing means for storing a correspondence between each of a plurality of tune names and performance setting data suitable for playing each tune;

(b) designating the tune name of each tune; and

(c) setting the performance setting data corresponding to the tune name of each designated tune by reading the performance setting data from said storing means.

I'm serious - 5 minutes. In fact, it took me longer to type this out than it did for me to find these references. The point is that most companies go through this kind of stuff all the time when they map out patents for product releases. No matter what product you are dealing with, there will invariably be a cluster of patents that touch upon the subject matter one way or another. But you won't know where you fall in the patent landscape until you actually analyze specific patents against the actual product. And without doing the analysis, I don't see what the point is (other than selling newspapers) to fly off the handle each time someone announces a patent "threat" towards a particular product.

MUELLER AT IT AGAIN: After being credited (or blamed) for sinking computer-related inventions in the EU, anti-software gadfly Florian Mueller published a guest column in the EU Observer, calling for the European Parliament to pass a resolution urging the European Patent Office to "ensure that it complies with the existing rules on the patentability of computer-related inventions."

The objective of the resolution, he says, would be to influence the policy of the European Patent Office (EPO), and possibly to request a new proposal for a software patent directive from the European Commission along the lines of Parliamentary amendments made to the previous draft.
A parliamentary resolution would not be legally binding upon the European Patent Office, but Mueller believes that it would carry a lot of political weight.

Basically, Mueller is saying that, by issuing software patents, the EPO is effectively breaking the law by not adhering to Article 52 of the European Patent Code, which technically prohibits computer programs. As such, he wants the European Parliament to tell the EPO to "cut it out."

The article rehashes the same arguments that Mueller's been peddling over the last 3 years: Microsoft and similarly situated companies are engaging in a global conspiracy to destroy all start-ups, and software patents are at the center of that conspiracy. For good measure, Mueller also enjoys engaging in ad hominem argumentation regarding the U.S. (we're all suckers here, don't you know). Some notable gems from the article, along with some irresistible commentary from yours truly:

Europe is fortunate, and many in the USA and Asia are jealous, because article 52 of the European Patent Convention expressly excludes software from patentability [LOL!]. That's why we have hardly any software patent litigation over here [never mind that patent filings in the EU are half of that in the US, and that obtaining a patent in the EU costs 3-5 times as much as it does in the US]. The parliament preserved that major competitive advantage.

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The US Congress is presently working on a patent reform bill that would primarily benefit large corporations [you mean like first-to-file which is the standard in the EU?]. Those politicians and citizens in America who fight for balanced intellectual property rights deserve to be further encouraged.

In India, South America, South Africa and other countries and regions, the jury is still out on software patents. There is some awareness for the issues involved. If Europe doesn't send a signal to the rest of the world, then the US government might just have its way [run for your lives!].

President Bush has chosen a Microsoft lobbyist to become the permanent representative of the United States to the European Union, which says something about its perspective on foreign trade [I can only guess that the "something" implied by Mueller is Microsoft's clandestine subversion of EU patent policy through representative members of the US government].

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Every patent is a 20-year monopoly, and most of those monopolies aren't justified because the respective "inventions" don't represent major breakthroughs [maybe the EU needs to write that into Article 52: only "major breakthroughs"need apply]

I continue to be amazed how Mr. Mueller is given carte blanche in the EU press to rail against software patents. What's even more amazing is the number of EU Parliament members that are actually convinced by his line of reasoning . . .

iPOD PATENTS EVERYWHERE, AND NOT A DROP TO DRINK: Hot on the heels of Apple's run-in with the Microsoft's "musical interface" patent at the USPTO (and the ridiculous amount of press that ensued), Creative Technologies has decided to grab some of the spotlight and announce that they too are in the portable-music patenting business, and they have at least one patent that may be of interest to Apple.

Fresh after reporting their first quarterly loss in three years, Creative appears to be ready to raise awareness on their patent portfolio, and particularly the recently-issued US Patent 6,928,433, titled "Automatic hierarchical categorization of music by metadata."

Referred to as the "Zen Patent" (your guess is as good as mine), the disclosure covers the user interface that enables users of portable media players to navigate among and select tracks on the players. The user interface for portable media players enables selection of at least one track in a portable media player as a user sequentially navigates through a hierarchy using three or more successive screens on the display of the player. One example would be the sequence of screens that could display artists, then albums, and then tracks. When the user selects an artist, the player displays a list of albums for that artist. Selection of one of the listed albums then displays a list of tracks on the album.

What's interesting about Creative's announcement is that it almost has a belligerent tone towards the iPod product line (can you blame them?). If I didn't know better, it would appear that Creative is directing a veiled threat to Apple:

"The user interface covered by the Zen Patent was invented by Creative research and development engineers in our Advanced Technology Center in Scotts Valley, California," said Sim Wong Hoo, chairman and CEO of Creative. "The first portable media player based upon the user interface covered in our Zen Patent was our NOMAD Jukebox MP3 player. We shipped the Nomad Jukebox to U.S. retail customers in September of 2000, and by November of 2000, it was already ranked as the top revenue-generating product in the U.S. in the digital audio player category, according to PC Data. By January of 2001, we announced that we had already sold 100,000 NOMAD Jukeboxes. The Apple iPod was only announced in October 2001, 13 months after we had been shipping the NOMAD Jukebox based upon the user interface covered by our Zen Patent."

Claim 1 of the patent reads as follows:

1. A method of selecting at least one track from a plurality of tracks stored in a computer-readable medium of a portable media player configured to present sequentially a first, second, and third display screen on the display of the media player, the plurality of tracks accessed according to a hierarchy, the hierarchy having a plurality of categories, subcategories, and items respectively in a first, second, and third level of the hierarchy, the method comprising:

selecting a category in the first display screen of the portable media player;

displaying the subcategories belonging to the selected category in a listing presented in the second display screen;

selecting a subcategory in the second display screen;

displaying the items belonging to the selected subcategory in a listing presented in the third display screen; and

accessing at least one track based on a selection made in one of the display screens.

RFID PATENT PORTAL ANNOUNCED: Swiss economic intelligence monitor CentreDoc has announced an RFID patent-watching online portal called 'RFID Patents', which focuses on new developments in RFID technology patents and intellectual property.

CentreDoc carried out a survey of firms in the RFID sector to determine their requirements in terms of technological information and, more particularly, patents. This survey resulted in the launch of the RFID Patents portal, which is intended to provide regular and pertinent information to industry players.

As the number of RFID patents increase (65% over the last 4 years), CentreDoc has set up the portal to monitor RFID patenting activity including bibliographical data, a summary, and the complete text of new patent applications relating both to tag technology and to that of readers and their applications. A search engine is provided to find the filed documents. Its coverage will extend to American, European and other global (PCT) patent applications.

REP. CANNON MAKES APPARENT CONNECTION BETWEEN FIRST-TO-FILE AND TROLLS: Rep. Chris Cannon and Sen. Orrin Hatch came out this weekend to throw their support behind patent reform, and particularly behind first-to-file. One interesting thing I noticed about the reporting on this event in the Salt Lake Tribune, was that it seemed that Rep. Cannon is claiming that first-to-file is somehow intended to combat patent "trolls":

Cannon says reform is needed to counter the antics of "trolls" - people who search for ideas not yet patented and then steal the innovation before the inventor can lay claim to it. A key provision of the legislation would award a patent to first one to file for it - not necessarily the first one to come up with the idea or to invent a product. The proposed changes, in a House bill co-sponsored by Cannon, also tweak the law in other areas, such as "harmonizing" U.S. law with that of other countries and attempting to curb expensive lawsuits over infringement.

Now, either the reporting was kind of sloppy, or Rep. Cannon hasn't been fully briefed on the effect of the reforms he co-sponsored. First-to-file isn't so much about curbing lawsuits as it is a "gimme" to WIPO to show them that the U.S. is still keen to establish a "world patent" sometime in the distant future (say, like 50 years). This is the first time I've seen first-to-file being tied to reducing the frequency of "trolling" in the patent community. Even more bizarre was the defining of trolls as "people who search for ideas not yet patented and then steal the innovation before the inventor can lay claim to it." What the heck is that?

It is becoming apparent to me that the actual effect of first-to-file (i.e., reducing uncertainty over inventorship and reducing litigation cost) may become the opposite of what is being pitched to the public. Assuming that first-to-file reduces litigation costs, how is that supposed to reduce the number of lawsuits? Can anyone point me to an area of litigation where the number of lawsuits dropped once it became cheaper to take someone to court? Wouldn't this encourage contingency cases, since the monetary risk to plaintiff's attorneys becomes lessened?

The most bizarre comment of all by Rep. Cannon was his reply to critics of first-to-file:

Cannon suggests that critics of the reforms have "motivations that are not straightforward" and may, in fact, be trolls. Under the new legislation, Cannon says, "People who legitimately come up with ideas will have a much better and robust market and they can get paid better than they were before."

I have no idea where he got that from . . .

AZoNANO PROVIDES SOME NANOTECH PATENT BASICS: In a series of articles, AZoNano.com discusses the basics of nanotechnology and patenting issues. As most of you know, nanotechnology refers to the manipulation of matter at the scale of atoms and molecules, where size is measured in billionths of meters (one nanometer = one-billionth of a meter). Nanotech isn’t a single technology - but a range of technologies converging at the nanoscale - including biotechnology, genomics, neurosciences, robotics and information technologies.

Nanotechnology is undergoing a patent boom similar to that experienced by software, but on a much smaller scale. Undoubtedly, patents will play a major role in deciding who will capture nanotech’s trillion dollar market, and will determine who will have access to nanoscale technologies at what price. At stake is control over innovations that span multiple industry sectors - from electronics, energy, mining and defense to new materials, pharmaceuticals and agriculture. As the ‘Wall Street Journal’ put it, “companies that hold pioneering patents could potentially put up tolls on entire industries.”

And just like software, nanotechnology has proven itself to be susceptible to overly broad patents. In this report from the ETC Group, a conclusion was made that "breathtakingly broad" nanotech patents have been granted that cut across multiple industry sectors and include sweeping claims on entire areas of the Periodic Table. Although industry analysts assert that nanotechnology is in its infancy, "patent thickets" on fundamental nano-scale materials, tools and processes are already creating thorny barriers for would-be innovators. Claims are often broad, overlapping and conflicting - a scenario ripe for massive patent litigation battles in the future.

Patenting Nanotechnology - Introduction

Patenting Nanotechnology - What is Class 977 and How Does It Affect Nanotechnology Development?

Patenting Nanotechnology - Overview of the Role of Public Sector Universities in Nanotech IP Rights

NATIONAL ACADEMY OF PUBLIC ADMINISTRATION TO CALL FOR THE CORPORATIZATION OF THE USPTO: In a report summary being circulated by NAPA, a recommendation is being floated to reorganize the USPTO as a federal corporation. The idea behind the reorganization is to insulate the USPTO against fee diversion (which is always a good idea), and to set the USPTO loose in establishing its own performance milestones.

Under the proposed reorganization, the CEO position would take the place of a board of directors, and an "advisory board" could be set up to provide input from people interested in patent policy.

A PTO spokesman had no comment on the recommendation but said an official response will be included in the final report when it is released in the near future.

Calls were previously made to incorporate the USPTO (the last serious attempt was in 1997) , but it never panned out, mostly dues to resistance from independent inventors and federal employee unions (POPA). I doubt it will go anywhere this time either, but I still think it's a good idea.

MYHRVOLD SAYS CLAIMS OF PATENT "PROBLEMS" ARE BUNK: Former Microsoft CTO Nathan Myhrvold (who now heads start-up Intellectual Ventures that develops and licenses patents), told the Progress & Freedom Foundation's annual conference recently that "before you get worked up about this gigantic problem, you ought to see what the facts are."

According to Myhrvold, patent litigation represents only 3 percent of federal lawsuits and there has been a steady decline in the number of lawsuits filed per patent. "Almost everything you have heard about patent litigation statistics is not true," he said. "Patents are the least litigious part of intellectual property law."

Myhrvold also took on the concept of patent trolls (companies that exist only to accumulate patents and extract licensing fees). Myhrvold properly pointed out that there isn't any hard data to support the view that holding companies are as big a problem as claimed. "This is a great example of people having a bunch of anecdotes...I don't see that it's wrong to invent without making products."

MUELLER WARNS AGAINST ANTI-IP RADICALISM: Recently, open-source companies using the Linux brand name (which belongs to Linux creator Linus Torvalds) have been approached by Linux lawyers seeking licensing fees. Accordingly, some of the more vocal members of the open-source community have been screaming "Judas!" at Linux, apparently being unable to distinguish how one could simultaneously oppose software patents and enforce trademarks at the same time.

Apparently, the outcry was significant enough that Florian Mueller had to step in and warn the more radical elements that "all parts of the open-source community should steer clear of an anti-IP positioning, or else a vocal and radical minority will be responsible for unfavorable legislation and a reluctance by center-right governments to adopt open-source software".

"It's lawless and pointless to indiscriminately oppose intellectual property rights. They're the foundation of the digital economy. We just have to ensure that they serve their real purpose of protecting innovators, and that's what software patents unfortunately don't do in 999 out of 1,000 cases. Software patents are a power play that benefits anti-competitive forces and productless extortioners, but copyright and trademarks generally reward those who create and market real products."

Well, at least Mr. Mueller has some sense of the ridiculous, but it's always interesting to me how the "real purpose of protecting innovators" is never applied to software patents, especially when one is operating in an environment where patent protection is shunned as a matter of course.

ROBERT MOOG DEAD AT 71: Robert Moog, whose self-named synthesizers turned electric currents into sound, revolutionizing music in the 1960s and opening the wave that became electronica, has died. He was 71.

Moog died Sunday at his home in Asheville, N.C., according to his company's Web site. An inoperable brain tumor had been detected in April.

As a Ph.D. student in engineering physics at Cornell, Moog in 1964 developed his first voltage-controlled synthesizer modules with composer Herb Deutsch. By year's end, R.A. Moog Co. marketed the first commercial modular synthesizer.

His patents can be viewed here, including his 1977 patent for the electronic synthesizer. I used to play on these things all the time "back in the day" - it's really sad when we lose an icon like this . . .

A LOOK BACK ON LEMELSON: The Boston Globe has an excellent and informative restrospective on Jerome Lemelson (registration required - see BugMeNot link for access to compulsory registration pages), considered a hero or a supreme villan, depending on your outlook.

Considered the godfather of patent "trolls" and perfector of the submarine patent, critics charge that for decades Lemelson manipulated the U.S. Patent Office. They accuse him of exploiting loopholes that forced 979 companies -- including Ford, Dell, Boeing, General Electric, Mitsubishi and Motorola -- to pay $1.5 billion in licensing fees over hundreds of patents related to machine-vision technologies (which included the barcode).

On Christmas Eve in 1954, Lemelson filed a 150-page patent application with the U.S. Patent Office. The patent spelled out how a robot could perform a variety of fantastic tasks during industrial production, such as riveting, welding and transport. It also showed how a robot, armed with a camera, could serve as a quality control inspector and manage jobs that the human eye could not.

Two years later, Lemelson submitted another application expanding on the previous one. Those two applications, Lemelson asserted, contained the genesis of machine vision and computerized automatic identification, later known as bar code scanning - concepts the rest of the world wouldn't come to recognize until decades later.

Lemelson never bothered to construct a model or build a company around the designs. The patent office didn't require it. Almost none of his ideas were personally taken from the drawing board to assembly line.

"Anything he claims to have invented, he didn't. He's a science fiction writer," said Robert Shillman, founder, chairman and chief executive at Cognex Corp., the world's largest maker of machine vision products and one of Lemelson's most truculent opponents. Crediting Lemelson with machine vision is like "saying Jules Verne invented space travel," he said. "For Lemelson to get the credit for inventing machine vision and to add insult to injury, to sue people for using our machine vision is just too bitter a pill to swallow.

Shillman was founder, chairman and chief executive of Cognex Corp., a leader in machine vision technology, and he had watched as one company after another had crumbled before Lemelson's lawyers. Lemelson would claim that he had invented machine vision and held the patents; when he threatened to sue, companies would pay him off.

At the height of Lemelson's litigation efforts, he had toppled most of the large companies he went after, but Cognex Corp. was having none of it. Ultimately, they decided to bet the company that they could invalidate Lemelson's patents. In 2000, the big showdown happened, and the trial came down to the numbing testimony of 20 witnesses, more than 1 million legal documents and a staggering 1,300 exhibits. Over 27 days, the two sides hammered each other.

The court eventually found that 14 critical patent claims by Lemelson were unenforceable under a rare defense called prosecution laches -- an unreasonable delay or negligence in pursuing a right. The judge also said the claims were invalid for lack of a written description, and a person of ordinary skill could not build the inventions using Lemelson's patents as his own experts had asserted. He added that "Symbol and Cognex products do not work like anything disclosed and claimed by Lemelson."

The decision spelled the end of the Lemelson era (he died in October 1997). While his foundation continues to collect royalities on many of his other patents, the Lemelson juggernaut became a shadow of its former self.

MOTOROLA ANNOUNCES THAT MORE ISN'T REALLY BETTER: (Chicago Tribune) After going through the 1990s with a policy of patenting as much as possible, Motorola switched gears five years ago to focus on technologies deemed most critical. It's made for a delicate balance between the company's researchers--who are compensated partly for producing patents--and managers commissioned to keep a lid on costs. Motorola was regularly among the top 10 recipients of U.S. patents during the 1990s, but lately has been content to sit at 30th in 2004, according to U.S. Patent Office data.

In the early 1990s, Motorola had a stated goal "to get as many patents as we could get," said Jonathan Meyer, Motorola's senior vice president for intellectual property law.Then, about five years ago, the company revamped its patent strategy, he said. The initial focus was simple: "What can we do to cut costs?"

While shaving costs, Motorola also realized that its old patent strategy lacked consistency and focus, Meyer said. "It was an arbitrary chasing of ranking."For example, the company filed about 50 patents in the late 1990s for battery latches for wireless phones. That was overkill, given a latch's relative insignificance as a revenue generator. Or as Charles Backof, a vice president in Motorola's technology office, put it: "Are you ever going to make money off of a battery latch patent?"

ONE COMMISSIONER ENTERS - ANOTHER ONE LEAVING? U.S. Secretary of Commerce Carlos M. Gutierrez has named John J. Doll to be Commissioner for Patents. He was sworn in on August 17, 2005. Doll has been Acting Commissioner for Patents since April 2005.

As Commissioner for Patents, Doll is responsible for the productivity and quality of the work done by more than 4,000 patent examiners, paralegals and other support professionals, for patent examination policy, budget decisions, and for patent-related Information Technology (IT) decisions.

From January – April 2005, Doll served as the Deputy Commissioner for Patent Resources and Planning directing information processing and technology, and budget formulation and execution for patent operations. He previously served as Special Assistant to the Under Secretary. Doll was a group director from 1995 - 2004 in the technology center responsible for examination of biotechnology, organic chemistry, and pharmaceutical patent applications. He was an integral part of the team responsible for last year’s implementation of the Image File Wrapper (IFW), the USPTO’s electronic patent application processing system.

MEANWHILE . . .

Asahi has been reporting that an allegedly illegal slush fund has been discovered at Japan's trade ministry Policy Planning Office, where 45 bankbooks recorded "dubious" bank deposits and were stashed in a bag that was passed around as officials moved on.

One bank account was in the name of Hiroshi Ogawa, a former planning office head who now serves as commissioner of the Japan Patent Office, according to officials of the Ministry of Economy, Trade and Industry.

At a Lower House committee session Wednesday, the ministry revealed the names of Ogawa and two other former office chiefs in connection with 12 million yen held in the slush fund.
Their names were used for three bank accounts, whose passbooks were among the 45 kept in the bag in question, according to the sources. The slush fund was allegedly built up through unused research subsidies to a ministry affiliate.

WHY FIRST TO FILE IS A DUMB IDEA: It appears that one benefit that came from the Apple-Microsoft nonsense is that people started asking questions on how the US patent world would look under a first-to-file regime. More specifically, people started getting nervous over the prospect of potentially losing patent protection over nothing more than being second in a "race to file" an application at the USPTO (in this post from Groklaw, the catchy call-to-arms "remember the iPod!" was coined).

iPod issues aside, there are a number of reasons to be skeptical of the benefits proposed by first-to-file. Actually, it would be more accurate to say "benefit" (singular), since only one basic advantage is provided for first-to-file: simplicity.

The basic idea under first-to-file is that you look at the filing date of a patent, then compares it to the filing date of other patents, or publication dates of other prior art and - voila! - you have determined whether you are an inventor or not. It certainly sounds simple. But with all simple things, there are always strings attached. And in this case, they are some pretty serious strings tied to first-to-file. With all the arguments in favor of first-to-file, I've noticed that the focus is overwhelmingly based in logistics, but there is little analysis on the equities of such a regime.

First let's start with the easy one - US should adopt first-to-file because everyone else is doing it. Is this really a reason? The rest of the world uses the metric system, yet I don't feel my life is less fulfilling as a result of sticking with the English system.

It's no secret that the goal of patent harmonization is to ultimately produce (in some distant future) a "world patent" where one can file a single application and potentially receive worldwide protection. It sounds good on paper, but no one has a blueprint on how such a system would be implemented or enforced. How will it be funded? How will issues between national offices be resolved? What about the courts? Will U.S. software companies be subject to cretinous anti-software provisions in foreign offices? These and many other questions need to be answered before inventors in the US will feel comfortable giving up one set of rights for another.

A second reason given for supporting first-to-file is that the first to invent rule is enormously complex, and generates substantial litigation and complexity. I suppose that's true, but it should be noted that "first-to-invent" in the traditional sense has more to do with Interferences than it does with overall patent protection (i.e. prior art). And the last statistic I saw (granted, this was back in 1999), only about 0.01% of all patents were subject to Interference proceedings. So, in that sense, I'm not buying this "substantial litigation" argument. And even in the context of prior art, this would certainly simplify the examination/litigation process, but is it fair to the inventor?

The worst thing about first-to-file is that it places an inventor's allegiance first and foremost to the Patent Office, instead of his/her business interests. Just because you patent something does not mean it will be of commercial importance to your company. Our current system recognizes that, and allows inventors to mull over an invention and it's application in the market to see whether or not it is worth patenting (it is worth noting that in this recent survey, when companies were asked "how many of your inventions generated sales/profits?" the answer "none" came up 42% and 55% respectively). Under a first-to-file system, your priorities will not be in evaluating your technology, but merely getting things on file at the USPTO (presumably in the form of a provisional application).

And as others have properly noted, sophisticated (read: big) companies keep close tabs on this stuff, and are often intimately involved in the crafting of the legislation. They will undoubtedly be prepared when/if the legislation hits, and will adjust their patent filing strategies accordingly from the start. However, woe be onto the company that is unable to quickly make the adjustment (remember, most small companies don't even have a patent department). A miss for someone like IBM or Microsoft will not be all that catastrophic - to them patents are like currency - but to an emerging company, it could spell disaster.

Another serious problem, which I haven't heard anything from the USPTO about, is patent quality. As far as I can tell, the USPTO has no apparent plan to deal with a first-to-file system, and is barely keeping its head above water with the filings they currently have. If another flood of patents wash over the USPTO after first-to-file, it is almost certain that the office will drown.

GIVES YOU A NEW PERSPECTIVE ON "FILL-ER-UP!": (Newsday.com) Singapore scientists said they have invented a urine-activated credit-card sized battery that can be used in test kits. The government-funded Institute of Bioengineering and Nanotechnology said in a statement placed on its Web site that the device was the "perfect power source for cheap, disposable health care test-kits for diseases such as diabetes."

The battery works once urine is added on a chemical-ready filter paper that sets off the cathode which produces about 1.5 volts of electricity.

WHY NEWSROOMS NEED PATENT PRIMERS: It's bad enough when reporters run headlines like "Donald Trump Seeks Patent on 'You're Fired!'", but the latest brouhaha over the Apple iPod patent application has to be the most annoying (non) story this year. Here's the situation:

Apple files a patent application on a user interface for the iPod wheel.

The USPTO cites a Microsoft application as prior art against the claims (Microsoft's application predates Apple's by 5 months).

HORRORS!

Sensing another Apple/Microsoft patent standoff, the press runs over 300 reports on the rejection, with wild speculation about Microsoft usurping Apple's iPod's product line. To be fair, a good number of these articles have an obligatory quote from a patent attorney telling them "it's no big deal," but these stories persist nevertheless.

It's just a garbage story - competitors have patents cited against one another all the time. And in cases like this, where the applications are so close together, it's almost a no-brainer that Apple fill simply file a 1.131 declaration to swear behind the Microsoft reference, and everyone will go their merry way.

USPTO LOOKS TO REVAMP ELECTRONIC FILING (AND THIS TIME THEY MEAN IT): Last Friday, the USPTO announced beta testing of a new, Web-based system which will start in December and is scheduled to go live in March.

The push to go increasingly digital reflects the office's drive to get through a backlog of about 850,000 pending applications as the number continues to rise. The office recently spent 18 months digitizing 250 million pages of paper records. (Now paper applications are scanned within days of when they arrive). It also plans to hire 950 new examiners this year and more than 1,000 each year for the next several years until they catch up.

Almost all applicants currently send their documents via mail (only about 2% are being filed electronically). In fact, the Patent Office is the "largest recipient of overnight mail in the world," said Margaret Focarino, deputy commissioner for patent operations.

The Patent Office has been talking about going paperless for years and received its first application in electronic form during a pilot test in 1999. Since then, everyone has successfully avoided using a confusing and often useless e-filing system due to endless SNAFU's and lousy product releases by USPTO vendors. Let's hope they get this one right (finally!).

Incidentally, the UK Patent Office is celebrating the one-year anniversary of e-filing. If you think they're doing better than the USPTO after 6 years, you're partially right - their e-filings are at a whopping 4% . . .

LOOK AT 35 U.S.C. §103, AND NOT §101 (i.e., KNOWING WHERE TO DIRECT YOUR ANGER ON SOFTWARE PATENTS): In this recent post on Groklaw, an understandingly troubling situation was described, where J2 Global Communications (otherwise known as eFax), and Catchcurve (a patent holding company) have begun suing companies over patents relating to the transmission and retrieval of facsimile and other messages over a circuit or packet-switched network (the patents are detailed on Groklaw). One of the companies they hit was Mijanda, who offers a fax to email gateway hosting service on Asterisk, a GPL licensed general purpose IP-PBX available under GNU/Linux. You probably don't need me to tell you that when you mix patent rights and litigation with open-source, the combination is spectacularly explosive.

[Blogger note: for another discussion on patents, check out this thread on Patent Barristas]

Predictably, many of the comments called for the abolition of software patents. The part I found most interesting was that the comments would start out complaining how "obvious" and "ridiculous" the patents were, but would oddly conclude that, in light of this alleged obviousness, ALL software patents needed to be abolished. Personally, I don't know how obvious (if at all) the claims are in the asserted patents, but commingling anticipation and obviousness (35 U.S.C. §102-103) with nonstatutory subject matter (35 U.S.C. §101) won't get you very far in terms of understanding patent policy - the concepts are completely different.

Anticipation and obviousness means that someone else previously disclosed or invented the subject matter you are trying to claim (i.e., "thanks for showing up, but, unfortunately, this seat is taken"). However claiming nonstatutory subject matter means that you have no right to seek patent protection in the first place (i.e., "sorry, I won't let you in - we don't serve your kind here). While there are PLENTY of reasons to knock certain software patents over obviousness issues - which I will discuss in subsequent postings - I can't recall a single instance where a patent was brought to my attention that seriously warranted a 35 U.S.C. §101 analysis.

FIRM MARKETS STORYLINE PATENTS: Now THIS is a good one. A firm in Northern Virginia is on a marketing push for inventor submissions for storyline patents.

What's that, you say? What's a storyline patent?

Well, it doesn't exist - at least not yet, according to Andrew Knight, who runs Knight and Associates: "the first and best in storyline patents."

According to the website, due to the fierce competition for publication and financial rewards associated with quality storytelling (as opposed to the quality of the underlying storyline itself), skilled storytellers can seek potential profit from unique fictional storylines by filing patent applications instead of novels or screenplays. The company's goal (again, according to the website) is to reward the true value of his innovations—the underlying storylines—instead of forced, sub-par expressions of these underlying storylines. Mr. Knight has previously submitted an article to the JPTOS on this subject back in 2004 (vol. 86, no. 11). Under the legal analysis, Mr. Knight provides an exemplary claim (using the Memento storyline as an example):

A process of relaying a story having a unique plot, the story involving characters and having a timeline, comprising:

indicating that a first character has an inability to retain long-term memories after a time in the timeline;

indicating that said first character trusts notes written by said first character;

indicating that said first character believes that said first character has been wronged by a perpetrator;

indicating that said first character desires to perform an act of retribution against said perpetrator;

indicating that said first character believes that attempting to perform said act is a futile endeavor; and

indicating that said first character writes a note to said first character indicating that a second character, whom the first character believes is not the perpetrator, is the perpetrator.

I suppose this concept is possible in a metaphysical sense, and I also suppose it's conceivable to patent such things from a section 101 standpoint (although I have serious reservations - I'm not seeing the "concrete, tangible result" here). But how on earth would you claim such things to get around all the 112 issues. While the site claims that terms like "trusts", "believes", "desires" and "futile" are not ambiguous, I can't see how one can take such a position. Since you're claiming from the vantage point of the character, who would be "a person having ordinary skill in the art" for making such an interpretation - the character or the author? If my storyline has the character "suspecting" instead of "believing", do I escape infringement? Is it an equivalent? How do I determine if a claim element is enabled? How would means-plus-function be interpreted in such situations?

Interestingly, the analysis discusses embodiments of a storyline in Beauregard format as well (a "machine-readable storage medium storing information and configured to cause a machine to perform a process of relaying a story having a unique plot"). I have to confess that I'm curious to see these applications that have allegedly been filed (I couldn't find them on my first try, although I found this howler that was filed by IBM).

If anyone manages to find these applications, please forward them to me.

More here from I/P Updates

BEN KLEMENS [BK] RESPONDS (AND MY COUNTER-RESPONSE):

[BK]: First, I feel that you're dodging the basic question that the article was intended to answer: if we have any respect for the mathematical exception, how do we prevent patents like the cosine calculation patent?

[Response]: Let me put it this way - my position is one of degree, while the article appears to take a position in kind. In other words, I can empathize with concerns over specific patents that appear close to claiming a purely mathematical algorithm. However, it does not follow that, because a patent claim contains mathematical processes, the entire application should be precluded from seeking patent protection in the first place.

Regarding the cosine calculation patent, I'm not sure what is so objectionable about the patent. First of all, the patent is not simply claiming a method for calculating the cosine of an angle. Instead, the patent deals with improving on CORDIC and Timmermann algorithms in cases where the angles are so small that they approach zero. In such situations, the patent claims that errors induced in a resultant point require large amounts of CORDIC stages to compensate for the induced error. Accordingly, the patent proposes a computation device and accompanying method for improving these inefficiencies. Is it based in math? You bet. Is it nonstatutory subject matter? No - the apparatus claim (claim 1) clearly is reciting a physical structure, and the method claim (claim 11) is reciting steps that are performed on a processor.

[BK]: You tell us that you can't draw the line between software and hardware, but give me something on the positive side: how do you propose to draw the line between software and math? Unlike the slippery slope you allude to at the end of your article, this is one which we actually have fallen down, and which need to be addressed here in the present day. Under the current regime, it's pretty darn likely that Benson's (and Flook's) patents would stand, and to me that says something is wrong with the current system.

[Response]: How does that mean something is wrong with the current system? For what reason would you deny researchers dealing with mathematical processes the opportunity for patent, while allowing it for just about every other field of technology? As long as something produces a useful, concrete and tangible result, there should be a pretty compelling reason for denying it access to patent.

[BK]: You make fun of Benson . . .

[Response]: I don't believe I did, and if so, it wasn't my intent.

[BK]: . . . but it was the law of the land from 1972 until In re Alappat in 1991, and just about every computing concept in common use today was developed during that period, as were great advances in digital computing hardware

[Response]: Actually, Benson is still good law today, and the holding in Benson never precluded algorithms from being patented (the court punted on that decision, claiming that it was a matter for Congress to deal with). Furthermore, I haven't seen any tangible evidence of a decline in the advance of digital computing hardware on account of patents since that time.

[BK]: Somehow, the courts and USPTO were able during that period to work out some sort of line between the patentable and the unpatentable. I'm sure you can give me examples of friction on the borderline, where somebody was denied a patent which should have been granted, but the courts' and USPTO's intuition seemed to work pretty darn well.

[Response]: As a matter of fact, the courts and the USPTO could NOT establish a line between patentable and unpatentable matter, which was the problem. The USPTO was examining applications using one standard, while the courts were doing something entirely different (the USPTO commissioners during this time were notorious for butting heads with the Federal Circuit over software patents). As a result, nobody was clear as to what would be patentable and what would not. There is a surprisingly large body of "software" and "mathematical" patents that were being granted during that time. Clever applicants learned how to game the system and claim algorithms by disguising them in structural language or otherwise masking the algorithm by claiming physical steps performed in a processing device (much like the EU practitioners are doing nowadays). In my opinion, this practice exalted form over substance and was rightfully done away with.

[BK]: Further, the structure of the software industry is totally different from any other, as noted in part two of the IEEE Spectrum series. Most of the world's legal systems today, and that of the USA until 1991, had some gut feeling that software is different from other fields, both in what it is and in how it is produced, and that patents weren't designed for such a beast.

[Response]: Absolutely correct. Software is different. But so is circuitry when compared to chemistry and mechanical structures. Each has its' own finer points in the realm of patents. The rub with software is that it is tremendously easy (from a logistical standpoint) to develop your own software - you don't need clean rooms, lab equipment, test-beds, etc. Anyone with solid programming ability and a compiler can create their own software company. Because of this, the software market exploded in the 1990's, and so did the clamor for patenting advances in the technology (I dispute that "most of the world's legal systems" were against patents during that time).

[BK]: Peter, you have it easy because software patents are the status quo today where you live, so you can just throw up your hands and say `hey, the status quo sort of works and I can't imagine it any other way', but when so much of the rest of the world is doing just fine with an alternative status quo, and so many industry practitioners are expressing dissatisfaction with the USA's status quo, you need more of a defense than that.

[Response]: I started as an examiner with the USPTO before State Street was decided, and examiners were give guidelines for examining software patents. If you read the guidelines, you can quickly determine why nobody was using them in the examining corps. You had so many different considerations and sub-questions you had to ask, that you would quickly throw up your hands trying to apply the guidelines to to a specific situation. And because software patents are status quo now didn't mean they weren't vigorously debated previously. There are numerous publications and articles - I recommend ones written by Pamela Samuelson and Richard Stern (who incidentally was one of my professors at GWU) - that point out potential pitfalls and difficulties of software patents (Richard Stern even suggested a quasi-registration system similar to Trademarks for software in lieu of traditional patents). They certainly raise questions on the wholesale patenting of algorithmic processes, but these questions were not daunting enough to conclude that software patents, in and of themselves, should not be patentable

[BK]: Yes, drawing the line between what should or should not be patentable is difficult. Your average Supreme Court justice would probably have an easier time giving a precise definition of pornography . . .

[Response]: I used to joke that the Benson decision was a reverse-Jacobellis ruling. Jacobellis is the Supreme Court pornography decision with the famous "I know it when I see it" phrase. In Benson, Justice Douglas (who was never a fan of patents to begin with), basically said in the decision that he wasn't sure what a patentable algorithm was, but he knew Benson's algorithm wasn't it.

[BK]: . . . But to say that it's impossible is just sort of a cop-out, and to say that it will inevitably lead to the unpatentability of chemistry is clearly false, because most of the world and the USA of `72-`91 trundles/trundled along OK with some sort of distinction.

[Response]: It's not a cop-out, it's a fact. The difference in our opinions is that I believe new technologies should be embraced by our patent system, unless there is a good reason not to. Providing advancement in an academic environment is one thing, but those advancements won't make it to the marketplace unless participants have a financial incentive to do so. And there is little doubt that patents are a very powerful incentive. Just because there are inherent complications in the technology (or that some individuals are arguably abusing their patent rights) doesn't mean it should be banned entirely from patenting.

In contrast to this, there are a fair amount of people (and I'm not saying you are one of them) that seem horrified at the concept of patents being used for individual gain. If one parses the literature of the FII (and people like Florian Mueller), you can't help but wonder if they are opposed to the concept of patents and private property altogether (although they will vehemently deny it). I again submit that the same arguments being currently used for banning software patents can easily be applied to most of the process or method claims contained in an electrical, mechanical or even a chemical patent. The fact that the world didn't crumble in the absence of software patents is a red herring. Contrary to the image portrayed by anti-software advocates, inventors and software developers did not sit blissfully happy developing software in a void, but spent hundreds of millions of dollars questioning the legal status quo of the time because they saw an inequitable handling of an emerging technology by the USPTO and by the court system. The fact that one can anecdotally provide situations where a developer chose to "give away" a subsequently successful technology (read: VisiCalc) during that time is of little relevance to the current software patent debate, because it was their choice whether or not they wanted to seek legal protection. And if you choose not to participate in the legal system, it is your right to do so - but it does not give you the right to deny others their right to seek patent protection on technology they worked hard to develop.

IEEE ARTICLE PROPOSES BENSON APPROACH TO DEALING WITH SOFTWARE PATENTS: In this article published in IEEE Spectrum, Ben Klemens calls out for the abolition of software patents, due to the fact that software is inherently intermingled with abstract mathematics, and as such, should not be patentable. The arguments made by Mr. Klemens are particularly relevant to the debate currently going on in Europe, regarding the "technical effect" requirement for software, and the current inability to define it in the Europe.

According to the article, In 1936, Alan Turing described a theoretical computer that is effectively equivalent to every computer in existence today. His design included an infinitely long tape and read/write head, which did different things depending on the data on the tape and the machine's state. Because different states cause the machine to do different things, his contraption is often called a state machine.

Around the same time, Alonzo Church proved that that stuff is mathematics. Church created lambda calculus, a formal means of writing mathematical expressions and also a tool that can be used to program a state machine. That is, any program written in a language such as C is a trivial translation of a set of purely mathematical lambda-calculus expressions.

Taking the two together, the article concludes that state machines—physical objects such as computers—should be patentable, while the states to which they are set—information such as programs and data—should remain unpatentable. By using this distinction, the article posits that pure mathematics would be properly excluded from patent protection, while inventors who design faster and better computing devices receive patents on their inventions.

I disagree with this approach for a number of reasons. First of all, this was the approach taken by the Supreme Court in Benson back in 1972, where the court rejected the applicant's arguments that specific software loaded into a general purpose computer effectively made it a "new" machine, and thus should be patentable. An important basis for the court's decision was that mathematical processes embodied in software was “the basic tools of scientific and technological work,” and allowing such patents would destroy innovation.

While this is undoubtedly a correct statement in principle, there is a difference between the circumstance of baldly claiming a mathematical process as opposed to claiming a process that is partly based on a mathematical or physical process. In fact this distinction was repeatedly revisited by the courts since Benson (and yes, scientists and engineers were very intimately involved with the caselaw development), where it was ultimately determined that this approach would not work.

Devices that work by way of digital electronics are not excluded from the patent system simply because their mechanism of operation can be represented by mathematical formulae. The output of an electronic device or circuit may be approximated to any required degree as a mathematical function of its current state and its inputs; some devices, such as the transistor, embody remarkably elementary mathematical functions. As Judge Newman stated in her concurring opinion in Alappat:

Digital electronic devices implement mathematical manipulations of electronic signals, as chemical structures and reactions implement principles of molecular behavior. An apparatus that is configured to perform specific electronic procedures in accordance with instructions that require numerical measurements and mathematical calculations is no less statutory than any other combination of steps and components. A combination of mechanical or chemical components, structured to operate in accordance with the principles of mechanics or chemistry, does not become nonstatutory because those interactions and reactions follow basic scientific principles. Mathematics is not a monster to be struck down or out of the patent system, but simply another resource whereby technological advance is achieved.

[O]ne must have a powerful reason to exclude technology from the scope of Title 35. Indeed, the importance of the patent incentive in industrial innovation was the principal factor in the formation of the Federal Circuit. It is thus appropriate constructively to apply statute, precedent, and policy to the variety of inventions that the information age has generated, and to remove the cloud on whether these inventions may participate in the benefits and obligations of the patent system.

If there is a slippery slope, it would be one where Mr. Klemens' test for patentability would be applied to software patents. For, if software was to be entirely excluded from patent protection based on its' cozy relationship with mathematical priciples, there would be nothing to prevent the eventual abolition of virtually all method claims involving circuitry or other "physical" devices. Not a good result, if you ask me.

ARE BIG CITIES REALLY WHERE IT'S AT? Michael Orlando, a senior economist at the Federal Reserve Bank of Kansas City, and Michael Verba, a research associate at the bank recently published a report that examined patent data, and found that entrepreneurial activity in cutting-edge technology was higher in bigger cities than in smaller locales.

Why the difference? Orlando and Verba speculate that more populous areas have more resources for entrepreneurs.

Take talent. Metros with populations of between 1 million and 4 million have twice as many engineers and scientists per capita as do metros of fewer than 1 million. Larger cities also offer more access to equipment and even to places like Starbucks for a chance meeting. That's particularly important for those in nascent fields who often require ample help to figure out their next step.

It's not all bad news for less-crowded states or cities. More-established technology fields still offer the chance to innovate without the need for such infrastructure.

RFID COMPANIES ANNOUNCE PATENT POOL: A group of 20 RFID vendors announced the formation of a consortium that will pool RFID patents for licensing. The move is intended to simplify and streamline outside access to RFID intellectual property, has been welcomed by industry analysts as a "positive step".

Similar to the pooling of MPEG and DVD industry group patents, the RFID effort is rooted in creating an integrated solution among patent holders and potential licensees, and is partially intended to prevent standalone companies from taking ownership of the whole marketplace.

10 RFID companies that have publicly announced their participation in the pool include Alien Technology, Symbol Technologies, Avery Dennison, ThingMagic, AWID and Zebra Technologies. However, a couple of questions remain. One is the role of silicon manufacturers such as Texas Instruments and Philips, which are critical to the industry and not represented in the list of charter consortium members. Another question is how the group will co-exist with Intermec Technologies, who is one of the leading RFID companies. Intermec holds a fair number of patents in RFID technologies, but has been openly retiscent in joining the group.

According to analysists, the new group provides a clear migration path for scalable, long-term EPC Gen2 tags, and should extinguish user concerns about RFID intellectual property.

UK PATENT OFFICE REPORTS THAT PATENT GRANTS ARE UP, BUT APPLICATION FILING IS DOWN: The UK patent office says it granted eight per cent more patents last year than in 2003, yet the numbers of patent applications is in decline.

This is especially true in the field of computing and electronics. For example, in the category Electronic circuitry; telecommunications, 1,385 applications were published - a drop of 15 per cent - while 1635 were granted, up 21 per cent. In fact the UK PTO granted more patents than it received in this category.

However, a spokesperson for the UK Patent Office said that since applications may linger up to three years in the Patent Office before a decision is made, it is possible that the anomaly is the result of a glut of patents applied for in prior years being granted.

By far the most prolific patent applicants are the technology companies. Hewlett-Packard topped 2004, receiving 294 patents granted. NEC made third position, IBM and Samsung were in fourth and fifth place respectively. Places 8, 9 and 10 went to Ericsson, Motorola and Intel - the latter receiving 107 patents.

Furthermore, the UKPTO published 12,993 applications and granted 10,541: that's more than 80 per cent. Even though patents granted may be the result of applications that have taken a number of years to complete, in 2003 that figure was 75 per cent - this is apparently higher than the allowance rate of the US, which is around 54%.

The UK PO claims that this trend was due to "higher quality" patent applications, since applicants are better informed and that there are more support networks and patents attorneys to help ensure applications are made appropriately.

However, there are questions regarding the accuracy of this statement. Back in the 1990's, the European Patent Offices had reputations of issuing higher quality patents, but this was due, at least in part, to the fact the the workloads of European examiners was much lower than in the US. As such, the examiners were given more time to examine applications. However, in light of the precipitous rise in applications over the last 5 years, the question remains whether or not EU Patent Offices have kept up with the surge in patent filings by hiring more examiners (something the USPTO has not done too well as of late).

Also, there is the theory that, since the UK Patent Office has a much more hard-lined approach to software patents, applicants are instead filing software patents with the EPO, which has a slightly more relaxed view on software patents. As Greg Aharonian correctly states, "some of the drop in filings at the UKPO may not indicate a lack of interest, but rather reflects shifts in forums."

THE DOWNSIDE OF CONTINUATIONS (PART III): Continuing from last week's post, I discussed the concept of parasitic reexamination, where you take the litigation record of a previous defendant filed in a continuation and use it against the parent application. One big advantage of this approach is that you can "tack on" to the invalidity work done by previous counsel, and establish your own invalidity position in a fraction of the time (and expense) it took the original defendant to do so.

This may be a good time to note that the parasitic approach is not an end-point, it's a starting point. Due diligence should always be exercised by anyone considering a reexamination, and the work of previous defendants and their counsel should be vetted for thoroughness and accuracy.

However, once the art is collected and analyzed, it can be a potent weapon against the patent(s) being asserted against the industry. This is basically was was done in the Eolas patent reexamination, as well as the NTP reexaminations. Currently, both patents are hung up at the USPTO, with the patentees trying to salvage what they can of their patent claims.

Once reexamination is underway, the patentee is placed in the awkward position of placing a myriad of statements into the prosecution history, which can easily narrow the scope of the claims and potentially eliminate equivalents that could be asserted in future litigation. Also, anything narrowed in the parent application will have a direct effect on all the continuations (and CIPs). Accordingly, the patentee must spend a lot of time making sure that the reexamination strategy doesn't clash with the litigation strategy. And if the patentee is a holding company (that often tries cases on contingency), this ties up a lot of resources, which is a good thing for potential defendants.

The patentee also has to exercise the same care in responding to office actions in the continuation, as statements by the applicant/patentee can also trickle-down and limit the scope of the parent. The big case in this regard is the Federal Circuit's decision in Microsoft v. Multi-Tech Systems, that was decided in February of 2004. The big rub in this case is that the prosecution history of a continuation application can limit the scope of the parent, even if the prosecution history is closed in the parent. Judge Rader, in his dissent, summarized it this way:

By way of illustration, assume three patents (A, B, and C) share a common specification directed to a method for hanging a picture.

Patent A claims an attaching step and a leveling step.

Patent B claims an attaching step and a centering step.

Patent C claims only the attaching step.

The prior art contains a reference to attaching pictures using nails. Because they contain limitations beyond attaching, patents A and B issue without rejection. Patent C, however, is rejected in light of the prior art.

To distinguish the prior art, the applicant clarifies the attaching step is limited to using Velcro, not nails. Under what logic would a court limit the claims in Patents A and B to Velcro based on the later and inapplicable prosecution history of Patent C? That, however, is exactly what the majority does in this case.

[T]he majority essentially disregards the holding of Georgia-Pacific. In this case, for the first time, this court applies the prosecution history of one patent to limit the claims of a related patent that was allowed before the creation of the prosecution history at issue.

This should be scary stuff for anyone that is prosecuting continuation applications, and is something to keep in mind when considering a reexamination. Reexaminations have begun to establish themselves as effective weapons to use against over-zealous patentees. By threatening an entire line of patents, defendants can develop opportunities to neutralize problematic patents, or at least gain a bargaining position over a plaintiff that is in the middle of an enforcement effort. Of course, this can also lead to a situation where you can claim that the parties "reached a settlement on very favorable terms" and actually mean it . . .

AND SPEAKING OF DATATREASURY . . . I discovered this article in The Green Sheet, which does a nice job summarizing the actions of DataTreasury and their enforcement of US patents 5,910,988 and 6,032,137 against the entire banking industry pursuant to Check 21.

For those that may not be familiar with it, The Check Clearing for the 21st Century Act ("Check 21") was passed by Congress and became effective on October 28, 2004. Check 21 is intended to foster innovation in the payments system and to enhance its efficiency by reducing some of the legal impediments to check truncation. The law facilitates check truncation by creating a new negotiable instrument called a substitute check, which permits banks to truncate original checks, to process check information electronically, and to deliver substitute checks to banks that want to continue receiving paper checks. A substitute check is the legal equivalent of the original check and includes all the information contained on the original check. The law does not require banks to accept checks in electronic form nor does it require banks to use the new authority granted by the Act to create substitute checks (more information can be found here).

The problem here is that DataTreasury is claiming to have a patent on core features used in the Check 21 process. So now we have a law allowing banks to electronically process checks, but in order to do so, they have to go through DataTreasury's patent. Very valuable stuff.

According to DataTreasury, each year Bank of America processes 9.4 billion checks; Citigroup processes 2.4 billion; Wachovia processes 4.5 billion; and Wells Fargo processes 3.7 billion checks. JPMorgan Chase processed 1.5 billion checks in 2003.

So far, DataTreasury has been successful in its attempts to go after patent infringers. It has entered into licensing agreements with some companies, and at least one company, ACS, is permanently barred from ever using its technology. JPMorgan Chase, which opted to settle with DataTreasury in the infringement suit, is now a DataTreasury licensee. And DataTreasury has made it clear that they will be going after others. DataTreasury is currently preparing to take First Data and Ingenico to trial to resolve its claims against them; it has refiled its claims against Viewpointe Archive, a check-image archiving provider founded by JPMorgan Chase.

THE DOWNSIDE OF CONTINUATIONS (PART II): In yesterday's post, I mentioned how active litigation during the course of filing continuations at the USPTO can give the public a "free peek" at the documents and prior art asserted during the lawsuit. Today I will explain how this situation can present pitfalls for the patentee/plaintiff.

First of all, unless the court ruled on the validity of the patent in light of the cited art, an early settlement can effectively create a body of "lingering prior art" that has the potential of clouding the scope of the entire patent family. In the case of holding companies, when they begin enforcement of a patent, they don't simply sue one company and leave it at that - they have a hit list of 10 to 50-or-more companies that they send letters to, seeking lincenses for the patent. Of course, these companies talk to other companies, who then talk to the press, and before you know it, you have a sizable body of nervous companies wondering if they are going to be sued next.

This is where the information contained in the continuation can become valuable for potential defendants. If the defendant(s) in the original lawsuit made it through a Markman hearing, chances are that someone spent a lot of time and money putting up the defense. Search firms are typically hired to scour for prior art, and patent attorneys sift through mountains of documents to identify the most damaging prior art they can find. The fact that the case settled shouldn't necessarily mean that the art wasn't any good (although sometimes that can be the case). Just as defendants wants to escape infringement, the plaintiffs don't want patents to be invalidated. Accordingly, plaintiffs will often discount the settlement offer to entice the defendant to settle without a validity challenge, which in turn allows the plaintiffs to continue the fight with other defendants (this is often where the "settlement on favorable terms" phrase comes from).

But one problem with validity challenges in court is that the defendant is hampered by the rule that requires a court to presume that an issued patent is valid. As such, invalidity can only be proven by "clear and convincing" evidence (which, in general, is pretty tough to do). Also, during the claim construction, courts must also construe the claims in a way that preserves validity.

But the situation is different in the USPTO, which does not presume patents to be valid.

Determining what the prior art teaches is a question of fact, and the application of the prior art to the claims falls under the preponderance of the evidence standard, which is much more lax than "clear and convincing." And because the USPTO falls under the Administrative Procedures Act, review by the Federal Circuit of USPTO findings is limited to "substantial evidence", which is more deferential than the "clearly erroneous" standard. Thus, the handicaps that defendants must deal with in court don't necessarily translate to the USPTO.

So what can be done with this information?

If the litigation record and prior art is published in a continuation, it does not follow that the art was cited in the original patent. In fact, since it is already an issued patent, there is no duty whatsoever on the patentee to make it part of the original USPTO record. However, through reexamination, you can make it part of the record.

When staring your reexamination analysis in these situations, you can effectively leech off the litigation record (I call this a "parasitic approach"), and use it to quickly establish the invalidity position of the prior defendant. Since someone has already spent a good deal of time preparing the challenge, but was unable to execute it in court due to settlement, this can give you a much-needed head start in your evaluation of the patent. If, in fact, a "killer reference" exists in the pile, you have effectively established an invalidity position in about half the time it took the original defendant to do the same (if not more).

To be continued . . .

WHY PATENTEES NEED TO BE CAREFUL AFTER A POST-MARKMAN SETTLEMENT (AKA THE DOWNSIDE OF CONTINUATIONS - PART I): In many cases, patentees who are on an enforcement binge (particularly holding companies) also have continuations pending in the USPTO. Eventually, someone decides to put up a fight, and the patent goes into litigation. During the course of litigation, defendants will inevitably claim invalidity, and provide the court with prior art. Subsequently, a Markman hearing will usually take place, and in many cases, a settlement is often reached just after the hearing (which, incidentally, is when cases are most vulnerable to summary judgment).

As soon as a settlement is reached, at least one of the parties will begin issuing press releases, claiming victory in the litigation (defendants typically describe this as "reaching a settlement on favorable terms"). Interested outsiders read the news and begin wondering what all of this means to them.

You need more information, but you're not sure where you can get it.

Enter the continuation.

Under 37 C.F.R. 1.56, patentees are required to disclose all information "material to patentability." The "old" rule (but still valid) was that information is "material" if there is a substantial likelihood that a reasonable examiner would consider it important in deciding to allow the application to issue as a patent. Under the "new" rule, information is "material" when there is a prima facie case of unpatentability or if the information is inconsistent with patentability arguments contained in the record.

This means that, if a patentee has pending continuations before the USPTO at the time of litigation, he/she has a duty to disclose all material information from the litigation into the record of the continuation (inventor testimony, arguments from both sides that affect the claim scope, Markman ruling, etc.). Failure to do so would open the patentee to an inequitable conduct charge, and could potentially render the remaining continuations unenforceable. If the patentee known what's best, all of the material documents get filed in the USPTO.

Since the USPTO provides the transactional history of published applications, the entire litigation record submitted by the patentee gets published as well. This means that you have the opportunity to peek at the litigation record, along with all the newly cited art.

Such is the case with DataTreasury and their high-profile case against JP Morgan. One of the asserted patents (US Patent 5,910,988), has a number of continuations that are pending in the PTO. One of the continuations already has the documentation entered into the PTO file, and is published on the USPTO website.

If you check out the image files, you will see that a lot of documents were submitted into the file (1,000+ pages of Non-Patent Literature (NPL) documents). And while you can't directly view the NPL documents online, you can easily order them from the USPTO. If you aren't inclined to wade through such a mass of documents, you can still get a good idea of what was filed by viewing the Information Disclosure Statements (IDS) that identify each of these documents (since December 2003, DataTreasury submitted over 30 pages identifying prior art).

To be continued . . .

BELLYACHING ISN'T JUST FOR SOFTWARE PATENTS: While not exactly a surprise (and 25 years after the Supreme Court's Chakrabarty decision), Greenpeace has started a campaign against biotech giant Monsanto for its patent application on genetically modified pigs (WO 2005/017204 and WO 2005/015989). While this blog doesn't usually deal with biochemistry and such, I found it striking how similar the hostility and aggression directed at Monsanto was to the scorn directed at large software companies (I won't mention names) for being interested in obtaining patents in the first place:

Eric Gall of Greenpeace International said: "Monsanto is once again trying to control the food we grow. This is patenting life. This is abuse of patent laws and it is an outright offence to farmers world-wide."

"If this patent gets granted, Monsanto could control the normal breeding of pigs to a large extent, without any real invention behind it. The experience farmers have with this company so far let them expect a further shocking exercise of squeezing royalties and suing farmers on global scale," warned Gall. "This patent application is so absurd we wonder what Monsanto will come up with next?"

Sound familiar? The only caveat here is that, unlike software, the biochem gripes don't typically end with " . . . and that's why we need to get rid of biotech patents."

. . . AND A SMALL SIGH OF RELIEF CAME FROM RIM . . . The U.S. Court of Appeals for the Federal Circuit threw out a district court ruling that Research-In-Motion (RIM) had infringed on six patent claims held by privately held NTP. The decision means that instead of facing 11 affirmed claims of infringement -- as was the case after the court's earlier ruling -- RIM is now facing just seven. The case is being remanded for further consideration (and yes, the injunction is still on the table).

The Federal Circuit overturned the lower court's finding that RIM had infringed NTP Inc.'s method claims, but reaffirmed the infringement of patents of the e-mail "system." (the decision can be viewed here - all 75 pages).

Also, the Federal Circuit addressed the issue of 35 U.S.C. 271(a) and infringement "within" the United States:

Because a process is nothing more than the sequence of actions of which it is comprised, the use of a process necessarily involves doing or performing each of the steps recited. This is unlike use of a system as a whole, in which the components are used collectively, not individually.

We therefore hold that a process cannot be used "within" the United States as required by section 271(a) unless each of the steps is performed within this country.

In the present case, each of the asserted method claims of the ’960, ’172, and ’451 patents recites a step that utilizes an "interface" or "interface switch," which is only satisfied by the use of RIM’s Relay located in Canada. Therefore, as a matter of law, these claimed methods could not be infringed by use of RIM’s system. See Eli Lilly & Co. v. Am. Cyanamid Co., 82 F.3d 1568, 1571 (Fed. Cir. 1996) (discussing the enactment of section 271(g) and stating that "[p]rior to the enactment of the [Process Patents Amendments Act of 1988], a patentee holding a process patent could sue for infringement if others used the process in this country, but had no cause of action if such persons used the patented process abroad to manufacture products, and then imported, used, or sold the products in this country"); see also Zoltek Corp. v. United States, 51 Fed. Cl. 829, 836 (2002) (stating that "if a private party practiced even one step of a patented process outside the United States, it avoided infringement liability, as [section 271(a)] was limited to acts committed within the United States").

Thus, we agree with RIM that a finding of direct infringement by RIM’s customers under section 271(a) of the method claims reciting an "interface switch"or an "interface"is precluded by the location of RIM’s Relay in Canada. As a consequence, RIM cannot be liable for induced or contributory infringement of the asserted method claims, as a matter of law.

The difference in affirmed infringements could also prove important in settlement negotiations or in determining a final judgment award. In June, settlement negotiations between the two companies broke down. They had previously announced in March an initial agreement under which RIM would pay NTP $450 million to settle the case.

Also, NTP's patents under reexamination are still being shot down in the USPTO. Is NTP worried? Not if you ask NTP's attorney James Wallace, who properly stated that "all we need is just one claim to shut them down."

IS THE EURO AN INFRINGING PRODUCT? A company called Document Security Systems thinks so. The Rochester, NY company claimed yesterday that every Euro banknote in circulation infringes on a patent it owns covering anti-counterfeiting technology. In pursuance of its claim Document Security Systems lodged a lawsuit to recover damages “at the rate of a reasonable royalty” from the European Central Bank of Frankfurt, Germany.

In its complaint lodged in the European Court of First Instance in Luxembourg, the company alleges that all Euro banknotes in circulation infringe its European Patent EP0455750B1, which covers a method of incorporating an anti-counterfeiting feature into banknotes or similar security documents to protect against forgeries by digital scanning and copying devices.

According to the company, this patent was granted and subsequently confirmed valid in 1999 by the Technical Board of Appeals of the European Patent Office. The patent was acquired in 2004 by Document Security Systems, Inc. (DSSI), from the estate of the inventor, the late Ralph Wicker, whose son Tom is now chief technology officer of DSSI.

The twelve countries in Europe changed their currency from individual national currencies to the Euro on January 1 2002, and seven denominations of new bank notes were designed and printed. By the end of 2006, which is the earliest that this case might come to trial, the ECB is expected to have printed or caused to be printed about 30 billion Euro banknotes, all of which DSSI believes infringe the patent.

Patrick White, CEO of DSSI, claimed: “The Euro is not the only currency utilising our technologies without authorisation. We believe there are a significant number of other currencies and also traveller’s checks that contain our patented technologies on an unlicensed basis. There are also a number of corporations who may be potential infringers. We plan on addressing each and every instance."

A number of non-European currencies printed in Britain also infringe the patent, Mr. White said. The company is also planning litigation against them, he added.

The European Court of First Instance handles complaints against European institutions. The case is T-295/05, Document Security Systems Inc. v. European Central Bank.

HAS THE EU STARTED ITS "STATE-STREET" MARCH? In a great heads-up from Axel Horn and his IP::JUR Blog, the Royal Court of Justice (UK) recently issued an opinion on a duo of business-method patents ("automatic real-time client credit management, real-time online corroborated wager prices, real-time interactive transaction confirmation, automatic price-spread adjustments, automatic setting of forward pricing, automatic wager-tracking indices, automatic dealer hedging, automatic client and dealer defined wagering limits, and multiple-price wagering"). Axel does a good summary of the case on his site.

The interesting thing about this decision is how openly the Deputy Judge heaped scorn on the concept of "technical" or "technical contribution", as is currently required in the EPO and the member states regarding software patents. When the US grappled with these same concepts 20 years ago, the district courts and the Federal Circuit kept contorting themselves and the caselaw in an ultimately fruitless attempt to define what kinds of software, and in what format, could be patented. Ultimately, the Federal Circuit realized that any "bright-line" rules (with a few obvious exceptions) regarding software were inherently unworkable. By the time State Street was decided, it was concluded that just about any type of software could be eligible for patent protection.

This UK decision should be of interest to anyone seeking to obtain patent protection in the EU, and it exemplifies the hit-or-miss examination process in the EU in the technical fields (yes, I'm using that term) of software and computer-related inventions:

What is an 'invention' (in the sense I am now concerned with) is a topic bedevilled by verbal formulae – and by the sweeping of problems under the carpet. So, before I go any further I want to bring some of those problems out into the light of day.

But first: does it really matter? Is it merely a sterile argument about the meaning of words? To which I answer that whoever controls the meaning of 'invention' controls what can be patented and hence an important aspect of industrial policy. There can be but one justification for having a patent system, and that is that
it is good for the people of the country. If the patenting of certain things does more harm than good, it matters. Patents that are wrongly granted can be very expensive to challenge and may deter small and medium enterprises.

At the risk of some inaccuracy, patents are supposed to be granted for non-obvious advances in technology. I said "at the risk of some inaccuracy". We sense that we know 'technology' when we see it. And no doubt that is correct, most of the time.

But it is not correct all of the time. Therein lies the delusion. You can prove that for yourself by trying to find a definition of 'technology' that everybody can agree on. The more you try, the more you will discover what a horribly imprecise concept it is. (Would it cover an astro-navigation chart? Naval tactics? Double-entry bookkeeping? The phonetic alphabet?) Many have tried to frame an acceptable definition, but to the best of my knowledge none have succeeded. It is like the
equally vexing question, "What is Art?". The hard truth is this: concepts of that sort have no existence, and words of that sort have no meaning, except by human
convention; but human beings are hopelessly in disagreement at the margin. And it is, precisely, at the margin of uncertainty that cases come up for decision.

How, then, does the law define what is an 'invention'? The answer is that nobody has ever come up with a satisfactory, all-embracing definition and I do not suppose anybody will.

This sounds astonishingly close to the Federal Circuit's decision in Alappat, where the Federal Circuit did away with most of the Freeman-Walter Abele (FWA) "test" for patentable subject matter, and started to set the stage for State Street, which was decided 4 years later. The FWA test was as follows:

(1) Is a mathematical algorithm recited directly or indirectly in the claims?

(2) If so, is the claim, as a whole, applied to or limited by physical elements or process steps?

(3) If not, then the subject matter would not be patentable. However, when an algorithm is applied to one or more elements of an otherwise statutory process claim, the subject matter is patentable.

Sounds close to what the EU is doing right now. One can only hope that questions like these from the courts and from EU Patent Office officials will ultimately sway the legislators into reversing the folly of the last year regarding software patents. In the meantime, we can only hope and wait.

BTW, the applications that were under consideration in the UK decision were ultimately rejected as being business methods . . . you can't win them all.