Is KSR Actually Helping Applicants at the BPAI?

Earlier in the month, the 271 Blog reported on post-KSR appeals at the BPAI related to obviousness (link), and reported that "only" 36% of obviousness cases were reversed on appeal. This inevitably lead to the question: "what was the reversal rate before KSR?"

This resulted in further digging, and a bit of controversy. The BPAI traditionally publishes statistics in the Official Gazette (OG), and similarly posts statistics on the BPAI link of the Office's web page.

Back in 2005, a widely-distributed analysis was made on reversal rates, based off of the OG, and reported that the reversal rate was around 60%:

Disposition-------% of Dispositions--------[% decided cases]
Affirmed------------------- 36. 6%------------------[40 % decided]
Affirmed-in-Part---------12.6 %-------------------[14 % decided]
Reversed-------------------40.9 %------------------[45 % decided]
Reversals-------------------53.5 %------------------[59 % decided]

Partial Remands, Dismissals--------9.9 %

TOTAL, 100.0%

Now, the 59% "reversal" number was a combination of decisions that outright reversed a rejection (40.9%), and partial reversals (i.e., "affirmed-in-part" - 12.6%). It is important to note here, that the reversals included ALL rejections, and not just obviousness rejections.

Turning to the published numbers on the BPAI site (link), the numbers tell a slightly different story:

FY 2005 (link) -- reversed = 39.6%; partial reversals = 12.5%; total reversals = 52.1%

FY 2006 (link) -- reversed = 34.8%; partial reversals = 12.1%; total reversals = 46.9%

FY 2007, through April (link) -- reversed = 29.6%; partial reversals = 13.9%; total reversals = 43.5%

Judging from the "reversed" numbers alone, the 36% rate of reversal on obviousness rejections for May 2007 suggests an increased rate of reversal at the BPAI. Again, the early numbers (2005-2007) combined all reversals, which may or may not have been based on obviousness. Thus, it can be extrapolated that the reversal rate of 36% on "obviousness-only" rejections suggests an increase in the overall reversal rate. It follows that the likelihood of reversal on 103 grounds increased as well.

The BPAI is expected to publish its May numbers shortly, and they will be posted when they come out.

Kicking the Peer-to-Patent Tires

On June 15, the USPTO launched the Peer-to-Patent project (see OG Notice here), where the public was invited to participate in the examination of patent applications (for a Project Summary, click here).

Now that a week has passed, it appears that the project is off to a decent start. So far, the USPTO has listed 5 patent applications (link), and the boards appear to be quite lively with discussion. Participants range from engineers and computer professionals, to students, writers and even other lawyers. So far, participants have contributed 5.6 prior art submissions, and 18.8 discussion threads, per application. Also, the comments are often detailed and are mostly well-reasoned.

To get an idea of the process, click on any of the listed applications (link) and feel free to browse through the prior art, discussion and research links to see how participants have been interacting with the system. If you feel inclined to sign up with the project, click here (link).

• Listen to interview with Jon Doll on the Peer-to-Patent Project (link)
• Read recent interview with Beth Noveck, co-creator of the project (link)
• Article from the Washington Post (link)

Hell Hath No Fury - Attack Launched on USPTO Continuation Rule Changes

On June 15, David Boundy from Cantor Fitzgerald and Mike Strickland from GlaxoSmithKline appeared at a White House meeting with the Office of Management and Budget (OMB) to discuss the PTO's rules to limit patent applications (link). Attendees included:

• John Love - USPTO
  
• Jennifer McDowell - USPTO
  
• David Rostker - OMB/ Office of Information and Regulatory Affairs (Desk Office covering Commerce Dept)
  
• Lisa Branch - OMB/ Office of Information and Regulatory Affairs, Counselor to Administrator Dudley
  
• Aaron Flynn - Office of Science and Technology Policy
  
• Peter Robbins - Dept of Commerce, Office of General Counsel
  
• Carrol Barnes - Small Business Administration/Office of Advocacy
  
• Rob Alderfer - OMB
  
• Nikesh Jindal - OMB

The conference was in regard to numerous concerns over the implementation of the rule changes, namely:

1. The USPTO’s alleged failure to adhere to the regulatory philosophy and principles of Executive order 12,866 (link)
   
2. The USPTO’s alleged violation of the Information Quality Act and Office of Management and Budget’s implementing guidelines; and
   
3. Significant discrepancies being found between the USPTO’s claimed savings in paperwork burden and the increase in actual burden specifically mandated by the Limits on Claims Rule.

These concerns were summarized in a letter to the honorable Susan Dudley, Office of Information and Regulatory Affairs (OMB), and signed on behalf of numerous organizations and companies that oppose the changes.

• To download/view the cover letter, see here (link)


• To download/view the joining signatories, along with opposition statements (attached as Appendix A), see here (link)

Attached to the letter are numerous exhibits, which contained detailed arguments against the implementation of the continuation rule changes. THe exhibits are arranged as follows

• Appendix A - Public Comments Submitted by Signatories to USPTO on its Notices of Proposed Rulemaking

• Appendix B - The Draft Rules are “Economically Significant” under Executive Order 12,866

• Appendix C - The Draft Rules Are Not Required by Patent Law or Necessary to Implement Patent Law, and are Therefore Impermissible Under EO 12,866 § 1(a)

• Appendix D- USPTO’s Written Rationale is Insufficient

• Appendix E - The Rules Exceed the Authority Delegated to USPTO under the Administrative Procedure Act and Patent Act

• Appendix F - Existing Regulations or Administrative Practices Created or Contributed to the Problems USPTO Seeks to Remedy (EO 12,866 Sec. 1(b)(2))

• Appendix G - USPTO Did Not Rely on the Best Available Scientific, Technical, Economic and Other Information (EO 12,866 Sec. 1(b)(7))

• Appendix H- USPTO’s Claimed Reduction in Backlog Is Unlikely to Materialize

• Appendix I - USPTO Cannot Show that the Proposed Rules are the “Most Cost Effective” Solution

• Appendix J - USPTO’s Promises of Procedural Remedies Against Substantive Harshness are Illusory

• Appendix K - USPTO Failed to Comply with Applicable Information Quality Principles and Guidelines

• Appendix L - USPTO Has Withheld Data and Analysis Essential for Evaluating its Proposals

• Appendix M - USPTO’s Estimates of Paperwork Burden are Invalid and Unreliable (Paperwork Reduction Act)

• Appendix N- Materials Received from USPTO in Response to FOIA Request,
Including Chicago “Town Hall” Slides

• Appendices O-Q - Relevant Statutes/C.F.R./MPEP

To view the attachments (Appendices B-Q), click here (link) (91 pages)

The attachments total hundreds of pages and allege numerous improprieties with regard to the manner in which the continuation rule changes were implemented, including:

- The PTO apparently did not conduct any studies to identify the source of its backlog problem (Appendix C-4, footnote 24);

- The PTO breached its duties of candor and good faith (Administrative Procedure Act, Freedom of Information Act) by failing to disclose its data, assumptions, and models, refusing to provide them when required, and then further refusing to provide them in response to a FOIA request (Appendix C-3, and Appendices L, N(1) and N(2));

- The rationales provided by PTO are insufficient to meet the requirements of Executive Order 12,866 (Appendix D);

- The PTO violated both the Executive Order and Administrative Procedure Act by failing to discuss alternatives to the proposed rules in the Notices of Proposed Rulemaking (Appedix D, Appendix I-1 to I-6);

- The backlog may well be due to internal disincentives provided to examiners, and not any burden imposed on the office by applicants (Appendix F-8 to F-11);

- The Proposed Rulemaking breached statutory obligations, including the Information Quality Act (Appendix K);

- The paperwork burden estimated for the Examination Support Documents (ESD),
which were noted to be extraordinarily burdensome by many of the comment letters, were estimated by PTO to be zero (Appendix M). Interestingly, John Whealan, PTO Solicitor, stated at a Duke Symposium, that "If you want all your claims examined up front, you can have it done, but it's going to cost you, you're going to have to do some work, which in the current law of inequitable conduct, nobody's going to want to do" (Appendix M-6).

To view the FOIA requests click here (link1 - PTO budget, pendency, attrition (79 pages)) and here (link2 - request for files on rulemaking proceedings (continuation, claim examination, IDS) (117 pages)).

It is likely that this material will serve as a basis for a subsequent lawsuit if the USPTO decides to enact the proposed rule changes.

FeedBlitz Alert

To readers of this blog that have tried to subscribe in the last week or so, it has come to my attention that the FeedBlitz service is experiencing difficulties. If you've had problems subscribing, please try again later. Sorry for the inconvenience.

-271 Blog

More Patent Reform News

• Chief Judge Michel's new letter to the Senate (link) - Judge Michel expounds on his concerns over mandatory interlocutory appeals, and apportionment of damages. In the latest letter, Judge Michel offers some alternatives:

[T]he third avenue of [interlocutory] appeal could be limited to cases in which, despite the absence of a grant of summary judgment, the trial court determines that claim construction will likely control the verdict on infringement. Under such a provision, the number of interlocutory appeals on this third avenue would, I expect, be far fewer than under the provision as currently drafted.

With regard to Section 5, on apportionment of damages when calculated as a reasonable royalty, the current language requires the court to conduct a massive macroeconomic analysis. The analysis requires determining the economic value of all prior art technology and the economic value of everything in the accused product or process not attributable to the asserted patent . . . Perhaps the Committee would consider making this analysis discretionary with the court so that it could be limited to those cases where it might be truly necessary. A second alteration would be to require the accused infringer to establish a basis by submitting sufficient evidence before the undertaking would occur.

• More than 200 organizations signed a letter similarly opposing the apportionment of damages provision, and also opposing the "second window" provision and the expanded rulemaking authority for the USPTO. The letter can be viewed/downloaded here (link)

• Senator Kennedy admitted recently that Congress is having problems grappling with the esoteric issues of patent law. "All of us are generalists, we're elected as generalists, and this is an enormously technical issue," Kennedy said. He also remarked that the biotech and high-tech sectors should work out differences by themselves -- otherwise, "it comes down to who has more lobbyists."

• In a bit of a twist, Democratic presidential candidate and former Sen. John Edwards (N.C.) on Thursday in Detroit offered details of his universal health care proposal, which included overhauling the patent process for breakthrough pharmaceuticals. His proposal will explore the possibilities of offering "prizes" for breakthrough discoveries. From Edwards' website (link):

Edwards will convene an expert panel to explore whether there are certain key disorders where prizes for breakthroughs – as an alternative to patent monopolies—would offer new incentives to researchers, guaranteed gains to companies, and lower costs to patients. Prizes would supplement, but not replace, the current patent system.

CAFC: Lack of Corresponding Structure Invalidates Means-Plus-Function Claim

Biomedino, LLC v. Waters Technologies Corp. (2006-1350) June 18, 2007

Biomedino appealed the judgment of the district court that claims 13-17 and 40 of U.S. Pat. No. 6,602,502 ("the ’502 patent") were invalid for indefiniteness under 35 U.S.C. § 112, ¶ 2.

The claims recited "control means", but the only references in the specification to the "control means" are a box labeled "Control" in one figure and a statement that the regeneration process of the invention "may be controlled automatically by known differential pressure, valving and control equipment."

The CAFC distilled the issues down to the following:

Essentially this case asks the following question: for purposes of § 112, ¶ 6, is sufficient corresponding structure disclosed when the specification simply recites that a claimed function can be performed by known methods or using known equipment where prior art of record and the testimony of experts suggest that known methods and equipment exist?

Even though one skilled in art could identify known methods, the CAFC concluded that some type of disclosed structure was required to meet § 112, ¶ 6:

In the present case, there is nothing to suggest a structure for the claimed control means. As we have previously explained, § 112, ¶ 6 requires some disclosure of structure in the specification corresponding to the claimed means. "[W]hile it is true that the patentee need not disclose details of structures well known in the art, the specification must nonetheless disclose some structure." Default Proof, 412 F.3d at 1302; see also Atmel, 198 F.3d at 1382 ("There must be structure in the specification" and the requirements of § 112, ¶ 6 will not be met when there is "a total omission of structure.") . . .

The inquiry is whether one of skill in the art would understand the specification itself to disclose a structure, not simply whether that person would be capable of implementing a structure . . . Accordingly, a bare statement that known techniques or methods can be used does not disclose structure. To conclude otherwise would vitiate the language of the statute requiring "corresponding structure, material, or acts described in the specification."

AFFIRMED

E.D. Tex. Grants Permanent Injunction for Non-Practicing Patent Holder

CSIRO v. Buffalo Technology, Inc., E.D. Tex. (6:06-CV-324), June 15, 2007

CSIRO is the principal scientific research organization of the Australian Federal Government. Established in 1926, CSIRO conducts scientific research and applies the efforts of that research to benefit the public at large. CSIRO is similar to the United States’ National Science Foundation and National Institute of Health.

On January 23, 1996 CSIRO was granted U.S. Patent No. 5,487,069 (“the ‘069 patent”) which is directed to addressing the "multipath" problem for indoor wireless networks (WLANs). CSIRO’s intent from the beginning was to derive revenue from its invention through licensing the ‘069 patent. The patent is considered by CSIRO to be a "core" patent for the IEEE 802.11a and 802.11g standards.

CSIRO successfully sued Buffalo in the E.D. Tex. for infringing the '069 patent, and sough a permanent injunction. Buffalo countered that CSIRO was not entitled to an injunction since eBay, since it did not produce any products or otherwise compete in the relevant wireless market.

Judge Davis disagreed, stating that formal research institutions may avail themselves of injunctive relief when their patents are infringed.

Irreparable Harm to CSIRO

Relying on the TiVo, Paice and Visto cases, Buffalo argued that, since eBay, district courts have typically granted injunctive relief in favor of competitors but denied injunctive relief to non-competing licensors. The court rejected this argument:

The majority opinion in eBay rejected the conclusion that “a ‘plaintiff’s willingness to license its patents’ and ‘its lack of commercial activity in practicing the patents’ would be sufficient to establish that the patent holder would not suffer irreparable harm if an injunction did not issue.”

CSIRO has shown that its harm is not merely financial. While CSIRO does not compete with Buffalo for market share, CSIRO does compete internationally with other research groups—such as universities—for resources, ideas, and the best scientific minds to transform those ideas into realities. CSIRO’s reputation is an important element in recruiting the top scientists in the world. Having its patents challenged via the courts not only impugns CSIRO’s reputation as a leading scientific research entity but forces it to divert millions of dollars away from research and into litigation costs. Delays in funding result in lost research capabilities, lost pportunities to develop additional research capabilities, lost opportunities to accelerate existing projects or begin new projects. Once those opportunities have passed, they are often lost for good, as another entity takes advantage of the opportunity. Delays in research are likely to result in important knowledge not being developed at all or CSIRO being pushed out of valuable fields as other research groups achieve critical intellectual property positions. Thus, the harm of lost opportunities is irreparable. They cannot be regained with future money because the opportunity that was lost already belongs to someone else.

Adequacy of Remedies Available at Law:

In his concurrence, Justice Kennedy instructed courts to be cognizant of the nature of the patent being enforced and the economic function of the patent holder when applying the equitable factors. eBay, 126 S. Ct. at 1842 (Kennedy, J., concurring) (“When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest.”) . . . The right to exclude becomes more urgent when the product is the invention.

This case is not the situation that concerned Justice Kennedy; Buffalo’s infringing use of CSIRO’s technology is not limited to a minor component of the technology. The ‘069 patent is the core technology embodied in the IEEE’s 802.11a and 802.11g standards. Buffalo’s products are designed to provide the wireless functionality of the IEEE’s 802.11a and 802.11g standards. Since Buffalo’s infringement relates to the essence of the technology and is not a “small component” of Buffalo’s infringing products, monetary damages are less adequate in compensating CSIRO for Buffalo’s future infringement.

Balance of Hardships

Finding the CSIRO suffered irreparable harm, the court found Buffalo's hardship was not sufficient to find in its favor: "The hardship to Buffalo of permanently enjoining its infringing conduct is limited to the injury ordinarily expected when an injunction is imposed. Mere hardship incurred in the process of ceasing operations is not sufficient."

The Public Interest

Research institutions, such as CSIRO, make substantial scientific advances. The work of research institutions is often at the forefront of scientific awareness. Although their work may not always have immediate applications, the work of research institutions has produced enormous benefits to society in the form of new products and processes. Because the work of research institutions such as CSIRO is often fundamental to scientific advancement, it merits strong patent protection. Furthermore, the public interest is advanced by encouraging investment by research
organizations into future technologies and serves to promote the progress of science and the useful arts. Thus, the public interest factor favors CSIRO’s motion for permanent injunction.

View/download the order here (link)

US, EU Patent Examiners Issue More Warnings Over Quality

Butch: You okay?

Marsellus: Naw man. I'm pretty far from okay.

Butch: What now between me and you?

Marsellus: I tell you what now between me and you. There is no me and you. Not no more.

- Pulp Fiction (1994)

As more and more pressure is put on patent offices to increase patent quality, examiners have started to push back, and have expressed a sense of isolation from most patent quality initiatives. For the most part, the sentiment from the examining corps has been that "we know what you want from us, we're just not sure how we are expected to do it."

Back in April, a Coalition of Patent Examiner Representatives from the US, Canada and the EU issued a letter to their respective patent office Commissioners/Presidents, warning that insufficient time and resources were available for effective examination of patents:

Patent offices worldwide continue to focus on their backlogs of applications and ways to increase examiner productivity. Unfortunately, in many patent offices, the pressures on examiners to produce and methods of allocating work have reduced the capacity of examiners to provide the quality of examination the peoples of the world deserve. Quality examination requires skilled, well-trained and motivated examiners, powerful and efficient search and examination tools and, most importantly, the time necessary for examiners to apply those skills, training and tools to the examination of patent applications. The pressure on productivity has greatly reduced the sense of job satisfaction of examiners, who feel unable to take the time to do the job justice. This has damaged the motivation of the examiners with concomitant impact on the operational effectiveness and the quality of output of Patent Offices.

Consequently, we, the undersigned representatives of patent examiners, join together in declaring that the combined pressures of higher productivity demands, increasingly complex patent applications and an ever-expanding body of relevant patent and non-patent literature have reached such a level that, unless serious measures are taken, meaningful protection of intellectual property throughout the world may, itself, become history.

Shortly after the letter was issued, Robert Budens, president of the Patent Office Professional Association (POPA) spoke with Managing Intellectual Property magazine (link), and repeated the call for more time and resources for patent examination. "Everyone except management believes that we need more time to do the job. Their rationale is that if we get more time, then the backlog will grow. I disagree. In the short term that's right, but in the long term it means that the retention level doesn't drop."

In the EU, an interesting development came to light this week as an internal survey entitled "Governance of the EPO: A Staff Perspective" was leaked to the press. The EPO confirmed that the document is authentic, but did not offer any official comment on its findings. After reading the study, it is apparent that the examiners have some serious issues with the logistical workings of the office:

• Only 8% of examiner agreed with the statement that "the MAC is actively supporting the quality development process."

• Only 6% of the examiners agreed with the statement "I identify with the views put forward by the MAC" (down from 12% in 2004).

• When asked to identify "opportunities to improve efficiency," the most frequently
chosen were "better functioning of the computer systems," "clear and consistent instructions" and "better balance between workload and capacity."

• The research group (Research International) concluded in the study that EPO staff perceives their management as “totally disconnected from my reality.”

• In the open comments portion of the survey, 93.7% of the comments were negative, 5.5% neutral (mostly "no comment") and only 0.7% positive.

View/download "Governance of the EPO: A Staff Perspective" (link)

View/download the Coalition of Patent Examiners letter (link)

Notably, Amitrajeet Batabyal and Gregory DeAngelo have conducted theoretical analysis on the issue of stringent examination versus backlog reduction at the PTO. Unfortunatly, the findings in the study were inconclusive:

Our theoretical analysis shows that there is no definite answer to this question [whether there is or isn’t a tradeoff between the twin objectives of backlog reduction and error minimization]. Hence, we use numerical methods and our numerical analysis leads to two conclusions. For many values of the model parameters that describe the stringency of examinations, a more stringent examination process does lengthen the pendency period. In contrast, for most values of the model parameter that describes the volume of patent applications handled by the PTO under study, a more stringent examination process does not lengthen the pendency period.

See: "Average Patent Pendency and Examination Errors: A Queuing Theoretic Analysis" (link)

See also: "Is there a Tradeoff between Average Patent Pendency and Examination Errors?" (link)

More Voices Speak Out on Patent Reform

As the Patent Reform Act of 2007 makes its way through the Senate, more and more entities are making sure their concerns are being heard by Congress. To be sure, the swell of dissent is increasing, and is expected to further increase over the coming weeks. Some recent letters to Congress include:

Chief Judge Michel: his letter includes a biting criticism over the apportionment of damages:

• "As promised, I have since reviewed some of the Federal Circuit decisions that address aspects of this subject [damages], and I have also identified and attached an article that should help you more than reading individual opinions. Significantly, it was written by a seasoned patent litigator with direct experience in how such damage theories are actually litigated in court. Lawyers employed by particular companies, like most law professors, have little or no experience from that perspective. Mr. Rooklidge, by contrast, has several decades of litigation experience in precisely these types of cases."

• In short, the current provision has the following shortcomings. First, it requires a massive damages trial in every case and does so without an assignment of burden of proof on the proper party and articulation of a clear standard of proof associated with that burden. Second, the analysis required is vastly more complicated than that done under current law. Third, the meaning of various phrases in the bills would be litigated for many years creating an intervening period of great uncertainty that would discourage settlements of disputes without litigation or at least prior to lengthy and expensive trials.

View/download Michel letter here (link).

View Rooklidge article here (link).


Advanced Medical Technology Association (AvaMed): the world's largest association of medical device manufacturers stated the following:

• "We agree with the position taken by many other industry groups, as well as Chief Judge Michel of the Federal Circuit, in opposing any apportionment of damages."

• "AdvaMed’s IP Working Group also opposes the “second window” of post-grant oppositions.Unlike many other industries, the life cycle of medical devices is relatively short—often no longer than seven to ten years. The ability to quickly capture, and then maintain, market share over this short period is critical."

• "Inequitable Conduct Should be Reformed and Substantive Rulemaking Should Not be Delegated to the PTO . . . With respect to the delegation of substantive rulemaking to the PTO, we oppose this provision. Such rulemaking likely would result in litigation challenging the PTO, which would create further uncertainty. In addition, giving the PTO power to make substantive rules, while bypassing legislation that is subject to debate and commentary, would inevitably lead to specialized lobbying groups."

View/download AvaMed letter here (link).

Massachusetts Medical Device Industry Council (MassMEDIC): Massachusetts ranks second among all states in the number of medical device patents filed each year. In a letter to Senator Kennedy, MassMEDIC states:

• "MassMEDIC opposes an open-ended post-grant opposition that allows for a second window of review after the initial post-issuance challenge period. Having a second, open-ended window prevents conveyance of patent certainty, validity, and exclusivity, which are essential to justify the millions of investment dollars needed to bring these types of inventions through to commercialization."

• "MassMEDIC opposes the bill’s limit on patent infringement damages to the economic value attributable to the patent’s “improvement over the prior art.” As Judge Michel of the Court of Appeals for the Federal Circuit (which has exclusive jurisdiction over appeals for patent cases) has recognized, a “prior art subtraction” standard would add complexity and uncertainty to patent litigation and result in more costly and lengthy court proceedings."

• MassMEDIC opposes [the] delegation of expansive rulemaking authority [to the USPTO] provided under S1145.

View/download MassMedic letter here (link).


Medical Device Manufacturer's Association (MDMA):

• The Patent Reform Act of 2007 includes provisions that, when combined with the changes that have already taken place, threaten to devastate life sciences investment, and thereby, innovation. MDMA is particularly concerned with the provisions dealing with PTO rule making authority, apportionment of damages, the open-ended nature of the post-grant review window, and the lack of redress for the growing use of the inequitable conduct defense.

View/download MDMA letter here (link).

Patent Reform Act Hits a Snag

Senators Coburn, Grassley, Kyl, Sessions and Brownback issued a letter today to Senator Leahy expressing concerns over patent reform. The letter reads as follows (w/ emphasis added):

Dear Chairman Leahy and Ranking Member Specter:

We write to you about S. 1 145, the Patent Reform Bill of 2007. We commend you for tackling the important issue of patent reform. We agree that if is important to update our nation's patent system to ensure better patent quality and to preserve property rights in the inventions that drive our economy. However, after last week's hearing, it is obvious that there are multiple issues that need to be reviewed and discussed before the Committee is prepared to mark up the bill.

We believe that the testimony at the hearing reflected the need for further discussion among members, staff, the Patent and Trademark Office, the Department of Justice, and stakeholders. Accordingly, we ask that you not move the patent reform bill until we have had time to work through certain issues. Some of us plan to submit Questions for the Record for the hearing which are not due to be submitted until Wednesday June 13--one day before the scheduled markup. The Committee should be afforded appropriate time to fully review and evaluate those answers. It is likely that those answers will give insight into changes that should be made to improve the legislation.

We believe that more hearings are necessary to adequately address a number of important issues with broad implications for our economy. Specifically, we believe that the issue of mandatory apportionment of damages, past-grant opposition, and broad rulemaking authority for USPTO need to be more carefully examined to ensure that they do not undermine innovation, increase frivolous litigation, or undermine property rights. Many prominent American businesses on the cutting edge of innovation are expressing concerns about the impact of sweeping patent reform. These concerns merit thoughtful deliberation, and we believe that more hearings will help to inform the committee before we proceed to markup.

Additionally, mare attention should be given to the issue of how to improve patent quality. It is critical to America's global innovative edge that Congress ensures that the U.S. Patent and Trademark Office is as effective as possible in issuing valid patents.

Finally, more attention should be given to examining the problem of speculative litigation and
alternatives to stopping unnecessary and costly litigation.

Although the Committee's Intellectual Property Subcommittee did hold four hearings on the general issue of patent legislation in the 109th Congress, the hearings preceded any specific legislative proposal. Now that we have specific bill text, the Committee should dig into the legislation and fully educate itself as to the implications while giving Members full opportunity to suggest alternative language.

Thank you for your consideration of our request. We stand ready to work with you to move
responsible patent reform legislation that protects innovation and protects America's competitive edge.

• View/download the letter here (link).
• The letter is significant, since the signatures represents a majority of Republican members on the Senate Judiciary Committee (to view members, click here)

SDNY Takes on KSR - And Finds Patent Obvious

McNeil-PPC, inc. v. Perrigo, Co., 05 Civ. 1321 (SDNY, June 5, 2007)

Since KSR, there have only been 3 published district court decisions that addressed the new standard of obviousness:

• Technology Licensing Corp. v. Gennum Corp., No. 01-04204, 2007 WL 1319528, at *18 n.38 (N.D. Cal. May 4, 2007)


• Smith & Nephew, Inc. v. Arthrex, Inc., No. 04-29, 2007 WL 1467228 (D. Or. May 17, 2007)


• Abbott Labs. v. Sandoz, Inc., No. 05-5373, 2007 WL 1549498 (N.D. Ill. May 24, 2007)

This week, the SDNY published a 4th and sweeping decision that invalidated J&J/Merc's U.S. Patent 5,817,340 which was related to the antacid "Pepcid Complete." An exemplary claim recites:

5. A method for manufacturing a solid oral dosage form comprising:

a) forming granules containing famotidine for the treatment of gastric disorder;

b) coating the granules with a coating impermeable to aluminum hydroxide or magnesium hydroxide to form impermeably coated famotidine granules;

c) mixing a therapeutically effective amount of aluminum hydroxide or magnesium hydroxide with a therapeutically effective amount of impermeably coated famotidine granules and pharmaceutically acceptable excipients to form a compression mixture; then

d) pressing the compression mixture to form a solid oral dosage form.

The evidence established that all of the limitations in the '340 patent were found in four different prior art documents. The patentee argued that it was improper to combine the teachings related to famotidine and antacids (which reduced the bitter taste). Alternately, the patentee argued that the prior art did not provide an apparent reason to combine an impermeable coating with antacid, since other alternatives existed at the time that were less expensive than an impermeable coating.

The district court disagreed, relying in part on statements the patentee made earlier to the FDA. With regard to the famotidine, the district court noted:

Plaintiffs contend that the composition at issue is the combination of famotidine and antacid, not famotidine alone, and that Perrigo has failed to show that the combination product has a bitter taste. Yet the NDA Plaintiffs submitted to the FDA for Pepcid Complete states: "Taste masking of famotidine is necessary in [the combination famotidine-antacid product] due to the bitterness of the drug substance." . . . Internal McNeil memoranda also indicate Plaintiffs' belief that famotidine has a bitter taste in the combination product . . . The record evidence therefore establishes that a skilled formulator would have reason to mask the bitter taste of famotidine even with the addition of antacid.

Regarding the impermeable coating, the court stated the following:

In the alternative, Plaintiffs contend that other modes of taste-masking are preferable to impermeable coating. Coated granules are "much more" expensive "than simply using flavorants and sweeteners." . . . Plaintiffs assert that because of this cost disparity, a skilled formulator would resort to coating only if a bitter taste remained after the addition of flavorants and sweeteners . . . Plaintiffs assert that in light of the alternatives, a person of ordinary skill would not have been motivated to use impermeable coating for taste-masking purposes.

This Court disagrees. Under KSR, "[t]he combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results." . . . The '340 patent does no more than combine the predictable results of Davis and Wolfe with the predictable results of the '072 and '1 14 patents. Of course, obviousness is not established "merely by demonstrating that each of [an invention's] elements was . . . known in the prior art," because "it can be important to identify a reason that would have prompted a person of ordinary skill in the relevant field to combine the elements in the way the claimed new invention does." . . . But pre-KSR precedent refutes Plaintiffs' theory of non-obviousness, which is that the costs of the coating process would have dissuaded a skilled formulator from combining the references. "[T]he fact that the [prior art] would not be combined by businessmen for economic reasons is not the same as saying that it could not be done because skilled persons in the art felt that there was some technological incompatibility that prevented their combination. Only the latter fact is telling on the issue of nonobviousness." Orthopedic Equip. Co. v. United States, 702 F.2d 1005, 1013 (Fed. Cir. 1983).

KSR casts doubt on the continuing validity of Federal Circuit precedent on the issue of obviousness. The Supreme Court did suggest, however, that some Federal Circuit caselaw may have appropriately applied the broad conception of the teaching, suggestion or motivation test that the Supreme Court has endorsed . . . This Court perceives no conflict between KSR and the portion of Orthopedic Equipment cited above.

Interestingly, the patentee argued that an inventor's comments outside the four corners of the patent should be ignored, because, under KSR, "[t]he question is not whether the combination was obvious to the patentee but whether the combination was obvious to a person with ordinary skill in the art." The district court dismissed this argument as well:

The notion that contemporaneous admissions by the skilled inventor of the patent in suit must be ignored finds no support in any of the cited precedents, let alone KSR. "Common sense" dictates that if these admissions raise an inference of obviousness, then the patent is invalid under § 103.

Read/view the decision here (link).

WebCast of Senate Patent Reform Hearings

The Senate will conduct a hearing today before the Senate Judiciary Committee on “Patent Reform: The Future of American Innovation.” The final witness list is as follows:

Panel I

The Honorable Jon W. Dudas Undersecretary of Commerce for Intellectual Property Director of the U.S. Patent and Trademark Office Department of Commerce Alexandria, VA

Panel II

Mr. Bruce G. Bernstein Chief Intellectual Property and Licensing Officer InterDigital Communications Corporation King of Prussia, PA

Ms. Mary Doyle Senior Vice President, General Counsel and Secretary Palm, Inc. Sunnyvale, CA

Mr. John A. Squires Chief Intellectual Property Counsel Goldman, Sachs & Co. New York, NY

Ms. Kathryn L. Biberstein Senior Vice President General Counsel and Secretary, and Chief Compliance Officer Alkermes, Inc. Cambridge, MA


The hearings are scheduled to begin shortly (10:00AM EST) - to watch them over webcast, click here (.ram format)

KSR and the BPAI: Analysis of Appeals for May, 2007

Over at the Fire of Genius blog, Joe Miller has been tabulating post-KSR decisions from the CAFC, the district courts and the BPAI (link) . Now that we have passed the one-month anniversary of KSR, how have Appellants fared at the USPTO?

Not so hot. For the month of May, Examiners have enjoyed a 64% affirmance rate on obviousness rejections.

The following list was made after reviewing 45 reported cases from the BPAI through May 29, 2007:

32 Appeals affirmed:

1. Ex parte Teng, 2007 WL 1378835 (BPAI May 10, 2007) (No. 2007-0954, Tech. Ctr. 2100)
2. Ex parte Askeland, 2007 WL 1418543 (BPAI May 14, 2007) (No. 2007-0960, Tech. Ctr. 2800)
3. Ex parte Jha, 2007 WL 1433429 (BPAI May 15, 2007) (No. 2007-0708, Tech. Ctr. 2100)
4. Ex parte Toyoyama, 2007 WL 1433430 (BPAI May 15, 2007) (No. 2007-0803, Tech. Ctr. 2800)
5. Ex parte LeRose, 2007 WL 1433432 (BPAI May 15, 2007) (No. 2007-1289, Tech. Ctr. 2100)
6. Ex parte Almog, 2007 WL 1451798 (BPAI May 15, 2007) (No. 2006-2968, Tech. Ctr. 1700)
7. Ex parte Valiulis, 2007 WL 1451799 (BPAI May 16, 2007) (No. 2006-3003, Tech. Ctr. 3600)
8. Ex parte Amigh, 2007 WL 1451803 (BPAI May 16, 2007) (No. 2007-0485, Tech. Ctr. 1700)
9. Ex parte Mihalos, 2007 WL 1451806 (BPAI May 16, 2007) (No. 2007-1390, Tech. Ctr. 1700)
10. Ex parte Cohen, 2007 WL 1460347 (BPAI May 17, 2007) (No. 2006-2886, Tech. Ctr. 2800)
11. Ex parte Inala, 2007 WL 1460346 (BPAI May 17, 2007) (No. 2007-0221, Tech. Ctr. 2100)
12. Ex parte Elman, 2007 WL 1460351 (BPAI May 18, 2007) (No. 2007-1204, Tech. Ctr. 3700)
13. Ex parte Roseth, 2007 WL 1460343 (BPAI May 18, 2007) (No. 2006-3311, Tech. Ctr. 3700)
14. Ex parte Cheung, 2007 WL 1460349 (BPAI May 18, 2007) (No. 2007-0717, Tech. Ctr. 2100)
15. Ex parte Shin, 2007 WL 146035 (BPAI May 18, 2007) (No. 2007-0002, Tech. Ctr. 1700)
16. Ex parte Mangold, 2007 WL 1511937 (BPAI May 21, 2007) (No. 2007-0088, Tech. Ctr. 1700)
17. Ex parte Zimmerman, 2007 WL 1494282 (BPAI May 22, 2007) (No. 2007-1308, Tech. Ctr. 3600)
18. Ex parte Lacasse, 2007 WL 1522947 (BPAI May 22, 2007) (No. 2006-2816, Tech. Ctr. 1700)
19. Ex parte Atwood Mobile Prods., 2007 WL 1511938 (BPAI May 23, 2007) (No. 2007-0128, Reexamination No. 90/006, Pat. No. 5,573,648, Tech. Ctr. 1700)
20. Ex parte Garelli, 2007 WL 1511955 (BPAI May 23, 2007) (No. 2007-1922, Tech. Ctr. 1700)
21. Ex parte Paulus, 2007 WL 1511948 (BPAI May 23, 2007) (No. 2007-1104, Tech. Ctr. 2800)
22. Ex parte Higashi, 2007 WL 1511945 (BPAI May 23, 2007) (No. 2007-1004, Tech. Ctr. 1700)
23. Ex parte Van Den Bergh, 2007 WL 1511943 (BPAI May 23, 2007) (No. 2007-0835, Tech. Ctr. 2800)
24. Ex parte Lee, 2007 WL 1511941 (BPAI May 23, 2007) (No. 2007-0642, Tech. Ctr. 2600)
25. Ex parte Goto, 2007 WL 1522956 (BPAI May 24, 2007) (No. 2007-0693, Tech. Ctr. 1700)
26. Ex parte Pisarsky, 2007 WL 1522961 (BPAI May 24, 2007) (No. 2007-2005, Tech. Ctr. 3700)
27. Ex parte Capoccia, 2007 WL 1522959 (BPAI May 24, 2007) (No. 2007-1365, Reexamination No. 90/006, Pat. No. 6,289,548, Tech. Ctr. 1700)
28. Ex parte Brookshire, 2007 WL 1537599 (BPAI May 25, 2007) (No. 2006-2311, Tech. Ctr. 3600)
29. Ex parte Rafal, 2007 WL 1537602 (BPAI May 25, 2007) (No. 2006-3144, Tech. Ctr. 2100)
30. Ex parte Clark, 2007 WL 1537609 (BPAI May 25, 2007) (No. 2007-0561, Tech. Ctr. 2800)
31. Ex parte Swanson, 2007 WL 1537613 (BPAI May 25, 2007) (No. 2007-1765, Tech. Ctr. 1700)
32. Ex parte Hubacek, 2007 WL 1537606 (BPAI May 25, 2007) (No. 2007-0127, Tech. Ctr. 1700)

9 Appeals Reversed

1. Ex parte Kalliokulju, 2007 WL 1378833 (BPAI May 10, 2007) (No. 2007-0834, Tech. Ctr. 2100)
2. Ex parte Erkey, 2007 WL 1406641 (BPAI May 10, 2007) (No. 2007-1375, Tech. Ctr. 1700)
3. Ex parte Umberger, 2007 WL 1451804 (BPAI May 16, 2007) (No. 2007-0965, Tech. Ctr. 2100)
4. Ex parte Mayer, 2007 wl 1522953 (BPAI May 16, 2007) (No. 2007-0403, Tech. Ctr. 3700)
5. Ex parte Napolez, 2007 WL 1460353 (BPAI May 18, 2007) (No. 2007-1916, Tech. Ctr. 3600)
6. Ex parte Bodin, 2007 WL 1481832 (BPAI May 21, 2007) (No. 2007-0257, Tech. Ctr. 2100)
7. Ex parte Diehl, 2007 WL 1522949 (BPAI May 24, 2007) (No. 2007-0125, Tech. Ctr. 1700)
8. Ex parte Katoh, 2007 WL 1540192 (BPAI May 29, 2007) (No. 2007-1460, Tech. Ctr. 3600)
9. Ex parte Rinkevich, 2007 WL 1552288 (BPAI May 29, 2007) (No. 2007-1317, Tech. Ctr. 2100)

4 Appeals Reversed-in-Part, Affirmed-in-Part

1. Ex parte Fokken, 2007 WL 1540195 (BPAI May 16, 2007) (No. 2007-1565, Tech. Ctr. 1700)
2. Ex parte Blanchard, 2007 WL 1460352 (BPAI May 18, 2007) (No. 2007-1364, Tech. Ctr. 3700)
3. Ex parte Ratcliff, 2007 WL 1494281 (BPAI May 22, 2007) (No. 2007-1302, Tech. Ctr. 2100)
4. Ex parte Nolte, 2007 WL 1494275 (BPAI May 22, 2007) (No. 2007-0563, Tech. Ctr. 2100)

Thus, Appellants have managed to overturn obviousness rejections in only 36% of the Appeals decided in May. Notably, 2 of the affirmed 103 rejections were from reexamination requests (Ex parte Atwood Mobile Prods., Ex Parte Capoccia) .

As Joe previously noted, the Board has overwhelmingly attached itself to the "precise teachings" and "inferences and creative steps" language used in the KSR decision:

“[A]nalysis [of whether the subject matter of a claim is obvious] need not seek out precise teachings directed to the specific subject matter of the challenged claim, for a court can take account of the inferences and creative steps that a person of ordinary skill in the art would employ.”

In cases where the rejections were reversed, combinations were rejected by the Board when they were at odds with "common sense." For example,

From these facts, there is no apparent reason to provide any phase change material (cooling medium), much less a phase change material having a different melting point, between two insulation layers. To do so would run counter to common sense of a person of ordinary skill in the art and the purpose of using the phase change material since the insulation layers would prevent the phase change material from performing its desired cooling function. Thus, contrary to the Examiner’s contentions at page 4 of the Answer, we determine that a person having ordinary skill in the relevant art would not have been led to the claimed subject matter within the meaning of 35 U.S.C. § 103. (Ex Parte Mayer).

Ine one case, the Board found that the Examiner relied on improper hindisght reasoning in formulating the rejection:

"In the instant case, we conclude that a person of ordinary skill in the art having common sense at the time of the invention would not have reasonably looked to Wu to solve a problem already solved by Savill. Therefore, we agree with Appellants that the Examiner has impermissibly used the instant claims as a guide or roadmap in formulating the rejection." Ex parte Rinkevich (emphasis in the original).

In a few cases (Ex Parte Jha, Amigh, Mayer), the Board relied on the CAFC Dystar and Alza decisions for the proposition that the obviousness test was "flexible" and "motivation need not be found in the references sought to be combined, but may be found in any number of sources, including common knowledge, the prior art as a whole, or the nature of the problem itself."

In one interesting case, the Board affirmed the rejection despite a 1.132 declaration that argued unexpected results (Ex Parte Hubacek).

• To view individual decisions, see the USPTO e-FOIA page (link). Decisions may be searched by inventor name, appeal no., application no., etc. Since the PTO severs these links after a short while, there was little reason to link each of the decisions in this post.

California Healthcare Institute Releases White Paper on Patent Reform

The California Healthcare Institute (CHI) issued a white paper yesterday, titled “Impact of Patent Law Changes on Biomedical Investment and Innovation.” The paper analyzes several recent developments related to patent law that could have serious implications to the biomedical industry in California and nationwide. The paper addresses three specific topics:

(1) Recent U.S. Supreme Court decisions that weaken patents

Like many others, the CHI is concerned with the apparent anti-patent stance taken by the SCOTUS.

In several recent cases, the Supreme Court appears to have been taking an increasingly anti-patent stance . . . In the May 2006 eBay, Inc. v. MercExchange, L.L.C., the U.S. Supreme Court reduced the availability of permanent injunctions, even if infringement has been found. This decision weakens the value of patent rights for patent owners who are not commercializing their inventions by making it more difficult for those parties to enjoin an infringer. In January 2007, the Supreme Court turned to patent license agreements. In MedImmune, Inc. v. Genentech, Inc., the Court made it easier for a patent licensee to challenge the validity of the patent being licensed. In its most recent patent opinion, KSR International Co. v. Teleflex, Inc. the U.S. Supreme Court lowered the standards used to evaluate obviousness, making it harder for applicants to obtain a patent in the USPTO and easier for defendants to invalidate a patent in litigation.

(2) Patent reform legislation being considered by Congress

The CHI maintains the position that the current round of reforms that are directed to tech companies do not address the business concerns of life science companies.

In general, life science inventions require years of development, extensive clinical testing and regulatory approval before they can be marketed. In contrast, the software, IT, and other high-tech industries operate on a far shorter innovation cycle. Such products are quickly developed and commercialized, with no regulatory delay. Once in the market, such products are soon superseded by improved products, whereas life science products are long-lived. The high-tech sector is currently procuring patents at a much higher rate than the life sciences sector. Accordingly, unlike life sciences products, hundreds, or thousands, of patents, often cover software, IT and other high-tech products. Therefore, the relative value per patent is much higher in the life sciences. Investors must be able to rely on such patents to justify the vast investments in time and money needed to bring a life science product to market. The Patent Reform Act of 2007 includes provisions, tailored to meet the needs of the software, IT, high-tech and financial services industries, that threaten to devastate life sciences investment and innovation. Specific concerns include provisions dealing with apportionment of damages, the post-grant review "second window," and expansive PTO rulemaking authority.

(3) The hostile approach taken by the USPTO toward making and promulgating new patent rules.

The PTO’s proposed changes regarding the limitation of continuation claims would significantly change the way applicants file their applications and would decrease an applicant’s ability to obtain full patent coverage for its inventions. As proposed, the rules would have a devastating effect on mid-sized and start-up life science companies. Additionally, because there is a critical window during which an applicant must demonstrate value to a prospective investor, an applicant may be motivated to accept narrower claims in return for prompt issuance of a patent. Limiting continuations would decrease an applicant’s ability to file for the broader protection and would limit the opportunity to develop an adequate prosecution record for eventual appeal. While the PTO suggests that filing an appeal remains a possibility, the length of time required to complete the appeal process will likely extend beyond the time allotted for investment decisions. Consequently, the inventor may not obtain the critical funding needed.

One additional point that is worth mentioning is that there appears to be little coordination between the courts, Congress, and the PTO during the reform process. The CAFC has already pointed out some of the serious logistical problems in the Reform Act in the May 4 letter from Chief Justice Michel (link). But what about the district court judges? What steps will the PTO take to incorporate the proposed post-grant opposition procedure to ensure a smooth transition?

Hopefully some of these questions will be answered in the June 6 Senate hearings, where Jon Dudas will provide his comments on the Patent Reform Act of 2007.

Read California Healthcare Institute White Paper (link)

View CHI membership list (link)