** INJUCTION ISSUED **

Reports are starting to come in that GlaxoSmithKline has prevailed and that the Patent Office has been enjoined from making the Final Rules on claims and continuations effective.

More to follow . . .

UPDATE: More post-mortem on the oral arguments from Gene Quinn (link) - Judge Cacheris did not make any statements about the likely merits of the case when making his ruling from the bench. He will, however, be issuing a formal written opinion which will be entered sometime this afternoon.

UPDATE2: Apparently, the PTO has no intention of backing down. Peter Lattman of the Wall Street Journal forwarded the following message from the PTO to Gene Quinn in response to inquiries he made regarding the rules being enjoined:

Interest shown by the U.S. Supreme Court and the U.S. Congress in patent modernization indicates that the system needs change. The USPTO continues to believe that the rules are an important component of modernizing the patent system. They are part of a package of initiatives designed to improve the quality and efficiency of the patent process and move American innovation and our economy forward. This multi-pronged approach is already showing results. Patent examination quality is at a record high. Nearly 97 percent of the patents issued in FY 2007 met stringent independent quality standards, up from about 93 percent in FY 2000. Additionally, last year USPTO’s board of patent appeals upheld examiners decisions to reject patents nearly 70 percent of the time, compared with only 51 percent of the time in FY 2000.

In other words, the PTO knows what's best - the rest of us are just to dense to appreciate the goodness that was bestowed upon us, prior to this litigation . . .

Arguments Are In on Continuation Challenge - Decision Expected Shortly

John White reports over at the PLI Patent Blog:

All of the arguments have been made and Judge Cacheris will be making his decision in about 10 minutes from now.

Judge Cacheris will be entering his opinion sometime this afternoon.

Amici Curiae briefs continue to pour into the Eastern District of Virginia.

The courtroom is completely packed, with reporters everywhere.

You have to feel sorry for the Patent Office because they had no real arguments.

The weight of public interest is so heavily on the side of those seeking the injunction.

Stay tuned . . .

Ground Zero at the ED Virginia

John White from the PLI Blog will be at the hearing this morning and will attempt to provide blow-by-blow coverage as soon as possible. Regardless of whether there has been an injunction issued or not, PLI will be holding a telephone/webcast briefing on Friday, November 2, 2007 on the case.

For more details, click here (link).

Since last week, 4 more amicus brief were added to the mix:

- Joint filing by Hexas LLC, The Roskamp Institute, Tikvah Therapeutics, Inc. - (link)

- Elan Pharmaceuticals, Inc. - (link)

- Pharmaceutical Research and Manufacturers of America - (link)

- Biotechnology Industry Organization - (link)

Of course, the PTO opposed all of the amicus briefs (refering to them as "me too" briefs).

See more coverage at

• PLI Blog (link)
• Patently-O (link)
• Patent Baristas (link)

See also the Certification Analysis prepared by ICF International, on behalf of the PTO, concluding that the continuation rules have "no significant impact" (link)

Sen. Schummer Asks PTO to Delay Implementation of Continuation Rules

Gene Quinn from the PLI Patent Blog broke this recent development in the continuation rules saga - Senator Charles Schummer (D-NY), who is a member of the Judiciary Committee, sent Undersecretary of Commerce for Intellectual Property Jon Dudas a letter raising concerns about the claims and continuations rules that are to go into effect on November 1, 2007.

From the letter:

[C]oncerns have been raised as to the impact this proposed rule will have on certain types of inventions. In addition, there are questions as to whether the PTO has the necessary authority to limit the number of continuation applications. More time would allow all interested parties to analyze these questions further.

The proposed rule regarding examination of claims raises additional concerns. It would require the filing of an extensive examination support document whenever an applicant needs to file more than ten representative claims to accurately describe its invention. Examination support documents can be very costly, thereby requiring an inventor to choose between significant costs and additional claims in the patent (which may be appropriate to accurately define and describe an invention). The proposed rule may thus serve to undermine core principles of patenting process, full candor and disclosure to the PTO and the public.

As you know, there is a pending lawsuit in the Eastern District of Virginia seeking an injunction of the new rules. This court case also cautions against making the proposed rules final at this time. A delay would allow the courts to assess the merits of the pending suit. Finally, Congress is currently considering a patent reform bill in which these issues may be addressed.

I appreciate the PTO's goal to create the most efficient and effective process to ensure both continued innovation and protection for the research and development efforts of patentholders. The proposed rules, however, may have the unintended consequences of stifling such innovation, and I urge you to consider delaying their implementation. Please do not hesitate to contact me with any questions. Thank you very much for your time and close attention.

View the letter here (link)

$156M Verdict Set Aside Against AT&T in the ED Tex.

TGIP v. AT&T (E.D. Tex.) - October 29, 2007

Well, the good news just keeps coming for defendants out of the E.D. Texas. Earlier, the jury found that TGIP's pre-paid calling card patents were not obvious, and that AT&T willfully infringed them, literally, and under the doctrine of equivalents. As recompense, the jury ordered AT&T to pay $156 million dollars - which was the largest patent verdict ever in the E.D. Texas.

AT&T filed a JMOL on the issues of infringement, invalidity, laches, and equitable estoppel. Judge Clark denied JMOL on the issues of invalidity, laches and equitable estoppel, but granted JMOL to AT&T, finding that AT&T could not infringe TGIP's patents.

On the issue of infringement, AT&T argued that

a. The claims teach that the call authorization amount of a card or account is not linked to a security number until the card or account is activated, whereas the call authorization amount in the accused system and method (“the AT&T System”) is linked with the security number before activation;

b. TGIP failed to prove infringement of the ‘114 patent because AT&T uses two different numbers for activation of cards and for making calls, while the claims specify a single number; and

c. TGIP’s claims rest on a theory of joint infringement that cannot be sustained from
the record.

Judge Clark reviewed the functionality of the AT&T System, and found that the evidence in the case could not support the jury verdict:

TGIP argues that the sequence of checks or the updates that take place in the CARDINFO and PINMOD database tables in the AT&T System means that the data terminal does not automatically let the host computer “know” that the card has been activated. However, even if the host computer declines to activate a card because it fails to pass the check, i.e. the card is expired, it is still true that each card’s denomination or call authorization amount is already stored in the database. This evidence only shows that the card can be checked against a denomination stored in the database as a security measure during activation because the amount is already pre-linked to the card’s security number in the database before activation. Similarly, simply copying the call authorization amount to the PINMOD table in the database does not prove infringement because the card’s denomination is already stored in the CARDINFO table of the database. In short, each card’s denomination or call authorization amount has already been generated, printed and stored in the CARDINFO table regardless of whether it can later be modified or copied.

TGIP consistently emphasized that AT&T’s cards allow minutes to be added after the card is activated as a “recharge” function . . . Recharging a card is a separate process that occurs after activation, and cannot be substituted for activation. The fact that the accused card may read on the recharge limitation of a claim does not mean that it reads on every limitation of that claim.

Interestingly, Judge Clark denied AT&T's JMOL on the theory of joint infringement, finding that TGIP provided sufficient evidence showing that AT&T “controlled or directed” the work that third-parties provided for AT&T to perform activation processes, and that AT&T provided specifications to each of its retailers directing the retailers on the processes for sending an activation message to AT&T.

On the issue of willfulness, Judge Clark pointed out that, under the Seagate standard, AT&T did not act in an "objectively unreasonable" manner:

Even though AT&T ultimately did not prove its invalidity defense by clear and convincing evidence, its position was hardly objectively unreasonable. The patentee was concerned enough to ask for reexamination of the ‘768 patent, and to delay taking action on the ‘114 patent for six years. In fact, the USPTO did require changes to the ‘768 patent.

Likewise, it cannot be said there is clear and convincing evidence that it was known or obvious that there was an objectively high likelihood that AT&T’s non-infringement position was incorrect. Even if the jury’s finding of infringement is ultimately upheld, it was, at best, a very close question. Reasonable persons, properly instructed and exercising impartial judgement, could not find by clear and convincing evidence that AT&T acted in the face of an unjustifiably high risk of harm that was either known, or so obvious that it should have been known.

In another interesting sidenote, Judge Clark picked up on the KSR language that stated the TSM test may be "helpful" and stated that the lack of evidence linking the prior art precluded JMOL on obviousness:

The court notes that the presentation of invalidity evidence at trial was, at best, confusing. Conclusory statements by experts are not “uncontradicted evidence” which the jury must accept. There was no lucid explanation as to how one of ordinary skill would combine the three references, nor what parts of each would make up the proper combination. It was not clear whether all three references would be needed, or if any two could be combined. There seemed to be little attempt to set out what structures or parts of systems, known in the prior art, were substituted for others known in the field to achieve a predictable result. While KSR no longer mandates evidence of a motivation or suggestion to combine prior art references, it could still be helpful to a jury (and the judge) to have an expert explain why the references would be combined, or why it was obvious to do so.

View the ruling here (link).

Michael Smith at the EDTexWebLog provides some additional commentary on the plaintiff win rate at the E.D. Tex.:

Overall win rate since 1999 drops from 70% to 67%; Jury win rate drops from 73% to 69%. The 2007 win rate drops from 42% to 28% (now 2 out of seven), and the win rate for 2006 and 2007 combined drops from 57% to 50%. Again, the best national win rate at trial number I've been able to come up with is 59.2%, so the Eastern District is currently running at half that, and has been under the national win rate for two years now. Its overall jury verdict win rate over the past eight years - even with a string of 18 straight wins from 2001 to mid-2006 - is only two percent above the national average of 67%.

A "Different Kind" of Lawsuit filed Against the USPTO

It appears that Faye Zhengxing has filed a pro se complaint against the USPTO in the DC district court, alleging $450 million dollars in damages relating to a restriction and a subsequent abandonment.

Unlike the continuation rules litigation, this one is a bit more scandalous - the complaint alleges the use of toxic gases, laser beams, electric waves, and covert DOJ operations used to undermine the plaintiff (seriously).

Read the 10/23/07 complaint here (link)

Tafas Files Motion Opposing Dismissal in PTO Continuation Rules Case

Tafas filed his opposition to the USPTO's motion to dismiss the amended complaint on Friday. Earlier, the PTO filed a Motion to Dismiss the case, predicated on alleged lack of standing and ripeness.

Tafas responds:

Dr. Tafas is not required to show current harm under each and every permutation or sub-paragraph of the Revised Rules and/or the Patent Act of 1952, 35 U.S.C. §§ 1 et. seq., in order to attain standing. The mere fact that the USPTO has changed the substantive criteria for patent eligibility, fundamentally altered the “rules of the game,” and foreclosed Dr. Tafas’ options and rights provided for by Congress causes him immediate harm including, among other things, immediately impacting how he prosecutes his pending patent applications. The harm could be no more palpable. Of course, having established injury, satisfaction of the causation and redressability elements follow as a matter of course. Invalidating the Revised Rules that are causing Dr. Tafas harm will alleviate the injury.

Dr. Tafas’ challenge to the validity of the Revised Rules is ripe because it raises purely legal challenges. The peculiarities of Dr. Tafas’ own personal patent prosecution history will have absolutely no material bearing vis-a-vis the resolution of these macro-legal issues, which deal with separation of powers, scope of delegated rule-making authority and interpretation of constitutional and statutory provisions. Finally, Dr. Tafas does state a valid APA claim in his Second Count predicated on the Revised Rules being inconsistent with the Patent Clause and the Fifth Amendment of the United States Constitution.

Read Tafas' opposition here (link)

War Drums Beating Louder in the Continuation Rule Battle

"Use humility to make the enemy haughty. Tire them by flight. Cause division among them. When they are unprepared, attack and make your move when they do not expect it."

-- SunTzu, "the Art of War"

Gene Quinn, and the good people over at the PLI Blog have their sharp eyes locked on the Glaxo litigation against the PTO, and have gotten their hands on the AIPLA's amicus brief, filed today in the E.D. Virginia. In short, the AIPLA urges the court to issue the TRO and preliminary injunction:

AIPLA focuses here on the related issues of irreparable harm and the public interest. It particularly addresses the irreparable harm caused by the retroactive impact of applying the new Rules to pending patent applications. Those applications were filed, and substantial resources committed, in reliance on fundamental principles of patent law that have applied for more than a century. As explained more fully below, the retroactive impact of the new Rules will cause irreparable injury not only to the GSK Plaintiffs, but to numerous patent application owners (whether business entities, universities, or individual inventors) throughout the country and over a wide spectrum of technologies.1 A delay in implementing the new Rules pending resolution on the merits, by contrast, should not adversely impact PTO operations or policy. For these reasons, AIPLA urges the Court to grant the temporary restraining order and preliminary injunction sought by the GSK Plaintiffs.

Read the brief here (link)

Additionally, David Kappos, VP and Assistant General Counsel for IBM, filed a declaration in support of the AIPLA, stating that the rules may result in an "irreparable loss" to IBM's IP rights - Read the Kappos declaration here (link)

Other declarations included Joseph Hetz (Brinks Hofer) and Burt Mages (Vierra Magen Marcus & DeNiro) on behalf of SanDisk Corporation, and Samson Helfgott, from Katten Muchin. You can view their declarations here, here, and here.

More notably, Glaxo obtained an affidavit from Harry Manbeck, who was a former PTO commissioner under George H. W. Bush, and is now a member of the Rothwell Figg firm in Washington, D.C.. Manbeck's declaration takes the PTO to task for exceeding their authority in promulgating the new rules, and further submits that the ESD requirements are almost impossible to follow:

"[I]t is my opinion that the Director and the PTO have exceeded their statutory authority in promulgating the Rules, that the Rules exceed the plain language of the Patent Act, and that the Rules' ESD requirement hopelessly lacks guidance."

Read the Manbeck declaration here (link).

Also, as reported by Hal Wegner today, an upper-level PTO management member broke ranks today and distributed this article written by Joff Wild from IAM Magazine over the patent bar's reaction to the new rules:

I have been coming to Washington DC for AIPLA meetings since the mid-1990s and I do not think I have ever known an atmosphere like it. It’s not just the shrug your shoulders, here we go again, kind of reaction to a new USPTO rule or guideline that you normally get. Instead, patent practitioners are angry, they are frustrated and they are perplexed . . . it seems to me that the relationship between the USPTO and practitioners is profoundly unhealthy at the moment. That cannot be good for anyone who is interested in the future of the US patent system. There is real venom – sometimes even contempt – in the language I have been hearing from members of the US patent bar over the past few days when they speak about the office. It is actually quite shocking. Fences need mending and they need mending fast.

Round 2: Tech Companies Clash in Senate over S.1145

In this corner - Coalition for Patent Fairness (CPF):

In a letter dated October 24, the CPF wrote to Senate leaders, expressing their support for S. 1145:

Supporters of patent reform and the Coalition for Patent Fairness, an alliance of large and small businesses and associations in the technology, financial services, energy, chemical, manufacturing and media industries, wish to express our strong support for S. 1145, the Patent Reform Act of 2007. This bill will stimulate American innovation, growth and competitiveness by restoring balance to our patent system. In the end, it will benefit all American workers and American consumers.

* * *

Now, after years of study and compromise; of calls to action and careful examination; of a steady drain on our economy and innovation; the time has come to act. With the U.S. House and the Senate Judiciary Committee having passed their respective versions of the Patent Reform Act, we urge the Senate to stand up for America’s leading innovators, consumers and workers, and pass the Patent Reform Act of 2007
by the end of the year.

Read/download the CPF letter here (link)


And in THIS corner - 430 other companies:

A letter was also written the day before (October 23) by a collection of more than 430 companies, opposing S. 1145:

While we welcome efforts to make improvements to the U.S. patent system, we must make clear our opposition to S. 1145 as approved by the Senate Judiciary Committee. This bill contains provisions that will create uncertainty and weaken the enforceability of validly issued patents. Some of the proposed reform provisions, such as an expanded apportionment of damages, an indefinite post-grant opposition
process, excessive venue restrictions, burdensome and expensive mandatory search requirements, and unworkable interlocutory appeal provisions, pose serious negative consequences for continued innovation and American technological leadership in a competitive global economy. In addition, the bill codifies the current inequitable conduct doctrine rather than to make broadly supported reforms to eliminate litigation abuse of the doctrine and gain increases in patent quality.

No compelling case has been made for a bill written in this fashion. It is based on claims of a crisis in the current patent system that does not exist, supported by selective assertions which do not hold up under scrutiny. Importantly, the bill fails to take into account the impact of numerous court decisions and administrative rules that have occurred recently regarding major patent issues. We believe the authors of the legislation must make fundamental changes to the legislation if it is to work for all American innovators, and we urge you not to consider the bill on the Senate floor unless such changes are made.

Read/download the letter here (link)

An anonymous reader of these letters provided some additional comments to the 271 Patent Blog:

• The opposition letter has over 3 times the number of signatories, compared to the CPF list.
The opposition letter also has more than twice as many states represented.

• The opposition letter has a greater representation of startups and small business relative to
the large entities, where the CPF letter represents almost entirely large businesses and/or companies that do not actively utilize patents (aside from B2B transactions between large companies and other large companies).

• Aside from the tech giants, many of the CPF companies have very small utility patent portfolios relative to their size (ranging between 1 and 17 patents; notably Google only has 61 issued patents, and 51 published applications, per the USPTO’s database). Many other companies have no patents at all.

A *Second* Challenge to IDS Rules Filed in the OMB

A second challenge has been filed in the OMB, hot on the heels of last week's challenge submitted by David Boundy and 29 other signatories. The second challenge is authored by Richard B. Belzer, on behalf of undisclosed clients. Notes Belzer,

I decline to reveal the identity of my clients. They have persuaded me that there is a reasonable expectation that revealing their identities could result in financially devastating retaliation with respect to patent applications now in process or which they would submit to USPTO in the future.

One interesting fact about Belzer is that he previously served, for 10 years, as an economist with the Office of Management and Budget (OMB). He also had oversight of major regulatory initiatives by EPA, OSHA, FDA, USDA, and other agencies, and helped develop government-wide guidelines implementing the Paperwork Reduction Act, OMB directives concerning benefit-cost analysis, and various presidential directives.

Just like the previous challenge, Belzer's presentation doesn't mince words, and further submits that the PTO has provided "no useful information" for the contention that the IDS rule are "not significant"

USPTO does not disclose any analysis of benefits, costs, or other effects in the NPRM [other than baldly stating that "This rulemaking has been determined to be not significant for purposes of Executive Order 12866"]

"Not significant" under EO 12866 normally is limited to regulatory actions that have minor consequences and elicit little or no controversy, such as housekeeping actions, and matters for which the agency is willing and able to perform internal oversight equivalent to that of OMB . . . The NPRM is online at regulations.gov (PTO-P-2005-0024). However, no other USPTO documents or public comments are posted there . . . No estimates of cost, benefits, or other effects are posted on USPTO’s website.

* * *

From the number of public comments submitted to USPTO (65), it is clear that the proposed IDS Rule is at least "significant" under EO 12866. From the contents of these comments, there is a prima facie case that the proposed IDS Rule has effects exceeding $100 million in any one year, and thus is "economically significant." USPTO did not perform a Regulatory Impact Analysis (RIA), nor did it disclose the basis for its determination that the proposed rule is "not significant."

The presentation also has a redacted affidavit from a 20+ year
practitioner that provides some chilling data:

In this declaration, the affiant estimates that the cost of complying with the major provisions of the proposed IDS Rule is about $7.3 billion per year:

• Applications in which more than 20 references are cited: $3.4 billion per year
• Additional explanations of foreign-language or moderately long references: $2.4 billion per year
• Requirements for citation of references after first Office action on the merits: $2.1 billion per year.

The presentation concludes:

Based on my expertise in regulatory analysis, and more than 20 years’ experience reviewing such analyses (including 10 while employed as an economist at OMB), I am virtually certain that the proposed IDS Rule is economically significant . . . Furthermore, based on my governmental experience it is inconceivable that USPTO could be unaware of the approximate magnitude of these costs, or that it employed any reasonable economic method or logic to determine that the proposed rule was 'not significant'. . . . One can infer with reasonable certainty that USPTO deliberately evaded the requirements of Executive Order 12,866.

The USPTO is required, pursuant to OMB’s and is own information quality guidelines, to adhere to the principles of substantive and presentational objectivity . . . The proposed IDS Rule was covered by these guidelines, but USPTO did not disclose any credible information about its cost. This is per se a violation of both substantive and presentational objectivity. The agency could not reasonably have believed that the costs the proposed IDS Rule were trivial and thus not worth mentioning, and its failure to disclose an unbiased cost estimate was knowingly misleading.

Read/download the 2nd challenge (Belzer) here (link)

See First challenge (Boundy) here (link)

Special thanks to David for bringing this to my attention.

Australian Patent Office Abolishes Duty to Disclose Search Results From Foreign Offices

"Management is efficiency in climbing the ladder of success; leadership determines whether the ladder is leaning against the right wall."

- Steven R. Covey

Under Australian Patents Act 1990, patent applicants and patentees were obliged to inform the
Commissioner of Patents of the results of various prior art searches by foreign patent offices in respect of corresponding patent applications filed in overseas jurisdictions. The obligation covers the results of all documentary searches completed prior to the grant of the Australian patent.

In a recent announcement from IP Australia, this obligation was rescinded to make matters easier for practitioners (contrast this with the recent actions of the USPTO).

The thinking behind IP Australia's action was based on the fact that foreign patent office search and examination results are readily available over the Internet. As a result, patent examination staff could retrieve foreign patent office search and examination results during examination, instead of burdening applicants with this task.

After consulting with the public, IP Australia found that

The [public] submissions indicated that there was a general level of consensus that the existing search result disclosure provisions were onerous and costly for applicants and other users of the patent system. There was also a level of doubt expressed as to the value or the benefits arising from the present provisions. This echoes views expressed to IP Australia on other occasions. There was a general view that the proposed changes would not adversely impact on the validity of granted patents.

Also, after considering the public feedback, the Office refreshingly noted:

IP Australia notes that this feedback is in accordance with its own assessment of the
costs of the system to users. IP Australia considers that feedback of this nature
highlights the need for change.

Read IP Australia's Overview Document on rule changes (link)

Patent Cafe Claims First Software to Deal With ESD Requirements

PatentCafe, which specializes in Latent Semantic Analysis (LSA) patent search engine technology and patent management tools, announced recently the availability of the Beta Version of 37CFR.com, which claims to be "the first of its kind integrated search and report workflow software."

According to Patent Cafe:

37CFR.com is a robust ESD report workflow application, unique in that the software also incorporates PatentCafe’s international patent database. The integrated patent search engine uses artificial intelligence to reliably speed the classification of each patent claim, and to instantly identify the “most closely related” patent prior art.

“PatentCafe’s advanced LSA technology cuts search time by almost 40%, and using artificial intelligence, it identifies non-obvious, but closely related prior art that keyword search engines can’t find. This is especially important following the Supreme Court’s ‘obviousness’ ruling in KSR v. Teleflex,” PatentCafe’s CEO Andy Gibbs said.

PatentCafe’s new ESD report workflow makes it nearly impossible to miss a step in a complicated patent search and report preparation process.

See press release here (link)

Go to Patent Cafe's website here (link)

Challenge to USPTO's IDS Rules Filed in OMB

David Boundy, VP of Intellectual Property at Cantor Fitzgerald filed a paper yesterday, along with 29 other signatories, challenging the proposed IDS rules. Many, if not all, of the parties involved in the challenge collaborated in the eralier challenge to the continuation rules.

The current challenge pulls no punches:

In the proposed IDS Rule, USPTO has again misrepresented to OMB the breadth and depth of the effects likely to result. The proposed IDS Rule is clearly “economically significant.” If finalized, it will impose billions of dollars of burden on patent applicants and owners. The preamble asserts that the rule will generate savings to USPTO, but these savings are neither quantified nor reflected in USPTO’s FY 2008 budget submission. In support of these radical changes, USPTO has disclosed no supporting evidence or analysis in the NPRM or the rulemaking docket.

The proposed IDS Rule has another fatal defect: it is fundamentally inconsistent with case law governing the conduct of patent applicants and their agents under federal patent law. The courts require applicants and agents to fully disclose all potentially relevant information to USPTO, and they will take away the property rights of patentees who fail to do so. Through the IDS Rule, USPTO is demanding that patent applicants break the law just to ease USPTO’s workload. It is worth remembering that patent applicants pay fees to USPTO that fully cover the cost of patent examination, and USPTO has specific authority to charge fees specific to the service at issue in this Rule, and currently does so. USPTO now wants to refuse to consider the prior art and eliminate the fee.

Additionally,

[T]he proposed IDS Rule conflicts with the law of inequitable conduct. USPTO is fully aware of this conflict, and so the proposed rule contains language purporting to create a “safe harbor.” To gain shelter there, applicants must take “reasonable steps, “in good faith and to the best of [their] knowledge, information and belief, formed after a reasonable inquiry under the circumstances” “to comply with [these] additional disclosure requirements.”

As safe harbors go, this one has submerged hazards throughout. USPTO does not provide a clue as to what constitutes “reasonable,” “good faith,” or “best” knowledge. While it could have provided clear statements on this point, it did not do so. USPTO could have offered to provide patentees a certification that it was completely satisfied that the applicant had secured mooring in the safe harbor. It did not do that, either. In short, USPTO left patentees at the mercy of future infringers’ counsel.

An interesting side note is that that this paper estimates the minimum direct paperwork cost for only one part of the IDS Rule at $1.9 billion - more than the PTO's total budget of $1.7 billion.

Read/download the paper here (link)

Fullbright & Jaworski Publishes 2007 Litigation Survey

Now on their 4th installment, the law firm of Fulbright & Jaworski has published the 2007 edition of "Litigation Trends Survey Findings." There were 253 U.S. corporate counsel and 50 U.K. corporate counsel that participated in this year's survey. Notably, this year's survey includes a new section on patents and trademarks.

• The respondents to the survey claimed that patent infringement claims are rising. Over the last 3 years, more than 1/3 of U.S. respondents believe patent infringement claims have increased; 2/3 of the respondents from the U.K. agree. More than 1/2 of the companies with $1B or more in revenue are claiming an increase in the number of patent infringement claims they have received.

• Notably, 68% of U.S. Companies have not had any patent infringement claims asserted against them over the last 3 years. 19% report 1 to 5 claims, 8% claim 6 to 10 claims, and 5% claims 11 to 20 claims.

• Three industries were identified as ones most likely to have received patent claims in the past 3 years: manufacturing, retail/wholesale and technology/communication.

• When surveyed on approaches in defending against patent infringement, the survey split the respondents into 3 groups: small (under $100M), medium ($100M-$999M) and large (over $1B). Here's how they explained some of their approaches in defending patent infringement:

Never Defend
Small - 0%
Medium - 21%
Large - 11%

Negotiate License to Avoid Litigation
Small - 20%
Medium - 39%
Large - 22%

Litigate to Final Judgment
Small - 40%
Medium - 46%
Large - 41%

Obtain Written Opinion of Outside Counsel
Small - 0%
Medium - 11%
Large - 26%

• Two-thirds of all respondents felt that recent developments in patent law had made no impact on infringement claims. U.S. respondents were more likely to believe that the developments increased the chances of defending claims through litigation (20%) than to believe they had decreased the chances (12%)

• Over the past 3 years, only 27% of U.S. respondents said that their companies had filed patent infringement claims against others.

• When surveyed on the approaches used for enforcing patents, the following responses were given:

No Patents to Enforce
Small - 10%
Medium - 19%
Large - 11%

Take Actions Short of Litigation
Small - 70%
Medium - 38%
Large - 34%

Litigate as Part of Licensing Strategy
Small - 10%
Medium - 29%
Large - 32%

Litigate Only After Failed Licensing Attempts
Small - 10%
Medium - 14%
Large - 27%

There is a lot of other information in this 53-page report. To download a free copy (after completing an on-line form), click here (link)

SparkIP Launches Clustered Patent Search Site

SparkIP launched a beta exchange "designed for scientists/inventors, universities, government labs, corporations, patent attorneys, and anyone doing research on patented or emerging technologies." Unlike conventional search sites, SparkIP offers "SparkCluster maps" which are designed to give structure and context to the vast amounts of information available.

The clusters are self-organizing and self-naming, which allows the maps reflect the latest terminologies. The site claims that there are over 49,000 SparkClusters, with more added each month, covering over 3.5 million US patents going back to the late 1960s. Plans are in the works to add patent applications, international patents, and other data.

It's an interesting concept and potentially useful tool for people that engage in "landscaping," and one colleague already commented that the site provided good ideas for capturing alternate or additional technology spaces during the patent drafting process. The site also plans to beef-up a licensing component that would allow potential purchasers to locate suitable technologies.

Check out SparkIP here.

See coverage from the Patent Baristas here.

Citizens Against Gov't Waste Publishes Issue Paper on IP Rights

Citizens Against Government Waste (CAGW) recently released a paper, titled "Property Rights in the 21st Century," which examines the importance of protecting personal and intellectual property rights in the U.S. and around the world:

As more governments develop policies that threaten intellectual property, there will be less investment in technology research and development. Individuals and companies will not wish to spend the vast sums of money that are needed to create new products if they believe that the fruits of their labor will be taken away without sufficient, or any, compensation. That is one reason for the growing movement
toward open innovation. The concept is to create new brands by licensing technologies from other companies around the world, and getting more out of the unused ideas from technology created within the company itself. This protects everyone’s intellectual property and encourages innovation in a costeffective
and productive manner.

The paper is written in three parts:

Part I - A Tale of Two Continents (contrasting U.S. view on business and innovation versus the EU)

Part II - International Property Rights: Making the World a Safer Place to Live, Work, & Trade

Part III - Defining Markets In Innovation: A Closer Look at Intellectual Property

Download/Read the paper here (link)

Marshall Phelps Speaks at Annual LES Meeting

The Licensing Executive Society (LES) is holding their annual meeting in Vancouver this week, and yesterday, Marshall Phelps, senior vice president of intellectual property at Microsoft, had some interesting things to say:

• High tech CEOs are failing to manage their companies' IP portfolios properly - instead of focusing on selling patents for revenue, companies should instead focus on building collaborative relationships.

• During Phelp's tenure at IBM, he developed a portfolio of 35,000 patents, which generated more than $1B in revenue - at Microsoft, the portfolio expanded to 19,000 (and further expanding at about 3k applications a year), but generate less than $100M in revenue.

• "The vast majority of companies can not do what IBM did nor should they even try. . . I'm suggesting we broaden our view. The world has changed and mutually beneficial relationships will count for more than money."

• "Licensing will probably become no more than a half to one percent of Microsoft's revenues . . . As for open source, it is here to stay and my job is to find ways to work with it because most of our customers use heterogeneous systems" (Microsoft has struck six deals with open source companies in recent times).

Read article from the EE Times "CEOs neglect patent portfolios, says M'soft exec" (link)

CAFC Punts on Court vs. USPTO Validity Determinations

(1) In Re Translogic Technology Inc. (2006-1192), October 12, 2007

(2) Translogic Technology, Inc. v. Hitachi, LTD, et al. (2005-1387) (nonprecedential), October 12, 2007

This case illustrated the ongoing tension between district court proceedings and parallel USPTO reexaminations, where each proceeding ended with a different result. In Translogic, the district court, after waiting 3 years on 5 reexamination requests, decided to reopen the case and found the patent-in-suit not invalid and infringed, and levied a $86.5M judgment and a permanent injunction (which was later stayed). In the meantime, the PTO found the patent obvious and invalid - for more background info, see earlier 271 Blog post here.

Despite the PTO's findings, the district court stuck to its guns and maintained its ruling, noting that "[t]he Federal Circuit is the proper forum to resolve conflicts between this court's claim construction and the Board's claim construction." One of the primary questions presented on appeal was "[s]hould the judgment of the district court be vacated and the case remanded for summary dismissal because the claims of the '666 patent are unpatentable on reexamination and the patent is void ab initio?"

To answer this question, the CAFC turned to BPAI proceedings, and found that the patent was invalid for obviousness. One of the sticking points was the interpretation of "coupled to" and "coupled to receive" - Translogic argued that the BPAI should have followed the district court's interpretation of "coupled to receive" to mean "connected to receive . . . directly or through one or more intervening inverters." The BPAI interpreted "coupled to receive" to mean "capable of receiving" signals.

Interestingly, the CAFC didn't base its decision on a "broadest reasonable interpretation," but instead engaged in a Phillips analysis of the claims, and found that the BPAI was correct:

The term "coupled to" in the phrase "second stage input terminal 'coupled to' the first stage output terminal" defines a connection between the TGMs. In other words, "coupled to" in the context of this claim phrase defines the connection between two of the TGMs essential for a series multiplexer.

On the other hand, the term "coupled to receive" in the phrase "input terminals 'coupled to receive' first and second input variables" does not specify a particular connection. In other words, the claimed circuit does not require any specific input or connection. Instead, like any logic circuit, this part of the circuit only accepts inputs from an external source. As such, "coupled to" and "coupled to receive" are clearly different in the claimed '666 patent multiplexer circuit . . . Even if the input terminals are not connected, the circuit claimed in the '666 patent defines a series multiplexer. Therefore, this court agrees with the Board's construction that "coupled to receive" means "capable of receiving."

On the issue of obviousness, Translogic argued that the prior art (Gorai) was not applicable, because it pertained to an algorithm to design logic circuits based on functional parameters, while the patent-in-suit improves a known circuit (i.e., multiplexer). The CAFC rejected this argument:

In its prior art argument, Translogic is making the same error corrected by the Supreme Court in KSR. Translogic mistakenly argues that variants of a circuit connecting 2:1 multiplexers in series are not relevant prior art with respect to the '666 patent because these variants do not address the same problem, namely an improved multiplexer circuit. However, this argument overlooks the fundamental proposition that the series circuits in Gorai are prior art within the public domain and the common knowledge of a person of ordinary skill in the art. Thus, the Gorai reference is a relevant prior art reference with respect to the '666 patent and clearly discloses a series 2:1 multiplexer circuit.

[C]laims 47 and 48 of the '666 patent define a series multiplexer circuit. Gorai Fig. 3 discloses the same serial multiplexer circuit. As any person of ordinary skill in the art would understand, the inputs to a circuit do not change the circuit itself. Therefore, this court finds that Gorai discloses a series multiplexer circuit as claimed in the '666 patent. Thus, the Board was correct in concluding that the Gorai reference discloses a series multiplexer circuit.

Regarding the question "[s]hould the judgment of the district court be vacated and the case remanded for summary dismissal because the claims of the '666 patent are unpatentable on reexamination and the patent is void ab initio?", the CAFC issued a short statement, answering this question in the affirmative:

In light of this court's decision in In re Translogic Tech., Inc., this court vacates the district court's decision and remands this case to the district court for dismissal.

New Study: Non-Practicing Patent Holders are Not Overcompensated

A new study was published last month, titled "Revisiting Injubctive Relief in High Tech Industries With Non-Practicing Patent Holders," which looked at alleged market power abuses of non-practicing entities. The paper, authored by Vincenzo Denicolo, Damien Geradin, Anne Layne-Farrar, and Jorge Padilla analyzes various assertions about patent hold-ups, injunctions, and royalty stacking, and concludes that there is no reliable evidence that shows that they are being rewarded "unjustly":

Injunctive relief is at the center of the intellectual property debate over market power abuse. Some scholars, with fears of patent holdup and royalty stacking in mind, have advocated limiting the right to obtain an injunction. In particular, some have called for categorical denials of injunctions for any “non-practicing” patent holder or whenever the patent in question is but one component of a larger, complex product incorporating multiple patented technologies. In this paper we examine the injunctive relief policy proposals using an error cost framework. We find the theory these proposals rest upon to be overly restrictive and therefore likely to result in substantial “false positives”, where patent holders with no designs of patent holdup are nonetheless denied injunctive relief. Moreover, the available empirical evidence does not support the position that patent holdup and royalty stacking are pervasive enough problems to warrant significant policy reform. Instead, we argue that the recent Supreme Court eBay decision can and should be read as a return to a balancing test, where costs and benefits are weighed carefully before granting or denying a patent injunction.

It's a very interesting study, that highlights some policy implications:

[A]ny delay in payment [for infringement] benefits the infringer and harms the patent holder since a dollar today is always worth more than a dollar tomorrow. This is doubly true for R&D focused firms who rely on licensing for their revenues. Nor is there any guarantee that the courts will apply an appropriate interest rate to account for the lost time. Thus, infringers have strong incentives to drag out proceedings while patent holders have incentives to settle.

Furthermore, when courts finally do force payment, patent holders face considerable dangers in a court setting its royalty rates. Specifically, in the absence of ex post holdup a court-set royalty rate acts as a "cap", not a floor, on licensing terms . . . Furthermore, if a court sets a rate too low, it will not only cost the firm in that one transaction but will hinder the firm’s future negotiations, as no other party will pay more than the publicly noted court rate. This dynamic reinforces patent holders incentives to settle on a license, even when it appears that they will win a court case, just to avoid court set rates.

It is therefore easy to imagine circumstances where hardship arguments could favor either side in a patent dispute. Patent holders face substantial delays in receiving payment, delays that might jeopardize their operations; they also face the risk of inadequate royalty rates set by a court, and the long term repercussions that entails. On the other side are the potential losses to a manufacturer from shutting down its plant and the impact this might have on customers or the industry. It is the case particulars under the test that should decide this question, and not the business model of the patent holder.

Download a copy of the paper here (link)

See also Lemley, Shapiro, "Patent Holdup and Royalty Stacking" (link)

*** GlaxoSmithKline Sues USPTO Over Continuation Rules ***

View the complaint here (link)

More from the PLI Blog (link)

USPTO Issues "Clarification" on Continuation Rules for Transitional Applications

When the continuation rules were released, some of our more obsessive-compulsive brethren (said with all due respect) have scoured the continuation rule changes line-by-line, and started notating disconnects and irregularities within the rules.

A good example is the National IP Researchers Association (NIPRA), which slavishly cut through the rules (and comments, and FAQ's, and slides!) and exposed a regulatory mistake in 37 CFR 1.114(f) regarding RCE's. In fact, it appeared that the PTO caught this mistake, and quietly modified the slide presentations without further fanfare (to view NIPRA's analysis, click here).

Now, it appears that there is additional confusion over the "one more" provision on continuations filed before November 1, and additional confusion over the requirement for identification of certain applications that are commonly owned and have at least one common inventor. In response to the apparent confusion, the USPTO has published a "clarification" in the OG, which was published yesterday.

As far as the "clarifying" effect goes, the notice fails in spades. Again, it's not that the information is bad - it just takes multiple reads to understand what the notice is trying to say. For example:

The provisions of 37 CFR 1.78(d)(1) in effect on November 1, 2007 are hereby waived to the extent that a continuing application that satisfies the conditions set forth in 37 CFR 1.78(d)(1)(ii), (d)(1)(iii), or (d)(1)(vi) will not be taken into account for purposes of determining whether there is an "other application filed on or after August 21, 2007 that also claims the benefit under 35 U.S.C. 120, 121, or 365(c) of such prior-filed nonprovisional applications or international applications" under the transitional "one more" continuing application provision as set forth in the final rule notice.

The USPTO is waiving the "or within two months of" provision of 37 CFR 1.78(f)(1)(i)(A) for applications filed before November 1, 2007. Specifically, in an application having an actual filing date before November 1, 2007 ("subject application"), the applicant in the subject application is not required to identify any other pending or patented application that does not have the same actual filing date or the same benefit or priority filing date as the subject application, even if the other application has an actual filing date or benefit or priority filing date within two months of the subject application. However, the applicant in the subject application is required to identify any other pending or patented nonprovisional application that has the same actual filing date or the same benefit or priority filing date as the subject application, if the conditions set forth in 37 CFR 1.78(f)(1)(i)(B) and (C) are met.

I'll be slogging through the notice (for the third time) later today, and will have updated posts. In the meantime, enjoy.

Download notice here (link)

UPDATE: Hats off to the Patent Docs Blog, which provides a rundown here (link)

USPTO Publishes KSR Guidelines, and Internal Continuation Rule Docs

The USPTO has published the long-awaited KSR guidelines, and can be downloaded here (link).

Briefly stated, the rationales for supporting obviousness under the guidelines include:

(A) Combining prior art elements according to known methods to yield predictable results;

(B) Simple substitution of one known element for another to obtain predictable results;

(C) Use of known technique to improve similar devices (methods, or products) in the same way;

(D) Applying a known technique to a known device (method, or product) ready for improvement to yield predictable results;

(E) ‘‘Obvious to try’’—choosing from a finite number of identified, predictable solutions, with a reasonable expectation of success;

(F) Known work in one field of endeavor may prompt variations of it for use in either the same field or a different one based on design incentives or other market forces
if the variations would have been predictable to one of ordinary skill in the art;

(G) Some teaching, suggestion, or motivation in the prior art that would have led one of ordinary skill to modify the prior art reference or to combine prior art reference teachings to arrive at the claimed invention.

Also, the USPTO has completed briefing the examiners on the continuation rule changes - to view the Power Point presentation, click here (link)

Oklahoma Jury Tags Patentee $1.5M for Tortious Interference for Asserting Patent

Dickson Industries, Inc. v. Patent Enforcement Team LLC - W.D. Okla. (CIV-02-0467-HE)

The five-year case involved rumble strip grinding machines, which etch rough lines onto highway shoulders to warn drivers when they drift out of the driving lanes. Patent Enforcement Team (PET) obtained a patent claiming to cover the grinding machines Dickson manufactured, and proceeded to send demand letters to Dickson, Dickson's customers, and potential customers. Soon thereafter, Dickson's rumble strip equipment business began drying up.

Dickson filed a declaratory judgment action near its home town of Tecumseh, Oklahoma, claiming that the patents were invalid, and also accused PET of tortious interference for acting intentionally and with malice toward Dickson and its customers. After a two-week trial, the jury returned a verdict that not only invalidated PET's patent, but also found PET liable for tortious interference, granting Dickson $503,873 in actual damages, and $1,037,363 in punitive damages.

To see the verdict form, click here (link)

According to the jury, Dickson succeeded in showing that:

(1) Dickson had a valid business relationship or expectancy;

(2) PET knew or under the circumstances reasonably should have known about the business relationship or expectancy;

(3) PET interfered with the business relationship or expectancy;

(4) PET’s alleged interference was malicious and wrongful, and neither justified, privileged, nor excused; and

(5) Dickson suffered damages as a direct result of PET’s alleged interference.

This is an unusual case, since owners clearly have the right to enforce their patents, but the jury felt that PET's actions in this case were over the line.

Another interesting rub is the court's jury instructions regarding obviousness and invalidity. PET's patent survived a pre-KSR reexamination request, where the examiner utilized the TSM test, which KSR later disavowed. According to this jury instruction, the court appears to suggest that the KSR decision negated the presumption of validity:

During the reexamination of the ‘069 patent, the patent examiner allowed the patentee to overcome the initial obviousness rejection based on the examiner’s application of what is known as the teaching, suggestion, and motivation test. After the reexamination in this case was completed, the U. S. Supreme Court concluded, in the course of other litigation, that the teaching, suggestion, and motivation test was being improperly applied by some courts. The reexaminer’s determination as to obviousness of the ‘069 patent had relied on the approach of those courts which improperly applied the test. You are therefore instructed that the reexaminer’s determination as to obviousness of the ‘069 patent is not entitled to a presumption of validity due to this improper application of the applicable test.

To view the jury instructions, click here (link)

CAFC Clarifies Rule 11 Sanctions Against Patentee for Ninth Circuit

EON-Net LP, et al. v. Flagstar Bancorp (07-1132) September 27, 2007 (nonprecedential)

Big waves rippled through the patent world last year when Judge Pechman from the W.D. Wa. ruled on Summary Judgment in favor of Flagstar, and levied sanctions against patentee EON-Net for filing multiple complaints against defendants for infringing a patent that was purchased by EON-Net prior to the litigation. After reviewing EON-Net's conduct, the court found that "indicia of extortion are present in this case," where EON-Net engaged in "fill-in-the-blank" demand letters to Flagstar and at least 24 other defendants alleging infringement, along with an offer for an "inexpensive settlement." Eon-Net's complaint and claim chart were virtually identical to its other complaints in other cases.

On appeal, the CAFC reversed the district court, finding that the court acted too hastily in granting summary judgment and issuing sanctions.

On the summary judgment issue, Flagstar argued that it had an existing license from the previous patent owner, Kofax, and additionally argued, albeit in passing, that Flagstar didn't infringe. This created an apparent contradiction that the district court ruled, sua sponte, in favor of EON-Net. On the one hand, Flagstar admits that its activities fall under the scope of the patent vis-a-vis the Kofax license. On the other hand, Flagstara also alleged that it didn't infringe. More importantly, the district court did not conduct a Markman hearing to determine what the patent's scope. Since EON-Net was not given the opportunity to address the claimed features, the CAFC vacated the summary judgment of noninfringement:

Eon-Net also did not have an opportunity to raise evidence of infringement and claim construction in its motion to reconsider, as Flagstar argues it should have done; its motion to reconsider properly argued that the district court’s grant of summary judgment was without notice and appropriately requested an opportunity to present its arguments. The district court should have given Eon-Net an opportunity to fully present its arguments on these issues, even if the district court ultimately would have reached the same conclusion. We have previously held that where a district court construes a patent without following the necessary steps, we should remand the matter for further proceedings so that the district court can follow the appropriate steps.

Regarding the sanctions, the CAFC applied 9th Circuit law on Rule 11 and stated that a party filing a patent infringement claim must first, at minimum, "apply the claims of each and every patent that is being brought into the lawsuit to an accused device and conclude that there is a reasonable basis for a finding of infringement of at least one claim of each patent so asserted." View Eng’g, Inc. v. Robotic Vision Sys., Inc., 208 F.3d 981, 986 (Fed. Cir. 2000). Additionally, "an attorney may not be sanctioned solely for failing to conduct a reasonable inquiry as long as the complaint is well-founded." Since there was sufficient evidence showing there was a reasonable basis behind EON-Net's complaint, and without the benefit of a Markman hearing, the CAFC vacated the sanctions as well:

Although the district court applied the correct standard in addressing Flagstar’s motion for sanctions, we conclude that its assessment of the evidence was "clearly erroneous" as to warrant vacatur . . . Ultimately, all of the district court’s bases for awarding sanctions are tied to its conclusion that Eon-Net had not established that the ’697 patent covered online web applications. First, there is evidence that Eon-Net’s counsel did follow the requirements of View Engineering by applying the claims of the ’697 patent to the accused device (portions of the Flagstar website) and concluding that there was a reasonable basis for a finding of infringement. There is really no dispute that Eon-Net’s counsel did examine portions of Flagstar’s website and, based on his experience, concluded that it worked in a manner that infringed the ’697 patent . . . While we are not passing judgment on what the appropriate construction of the ’697 patent should be, without a full claim construction analysis it is impossible to assess whether Eon-Net’s claim construction was unrealistic.

Also, with regard to EON-Net's litigation conduct, the CAFC also held that a "shotgun" approach to sending demand letters cannot be improper until a proper claim construction is determined:

It may be true that ultimately Eon-Net’s suit was for an improper purpose and that Eon-Net’s pattern of filing nearly identical complaints against a wide variety of companies and then offering to settle those complaints for a relatively small amount of money is one indicia of that improper purpose . . . Without full analysis of the merits of Eon-Net’s claim construction arguments, however, the mere fact Eon-Net filed identical infringement suits against a variety of companies does not by itself establish an improper purpose.

Claiming a Dependent Claim as an Independent Claim: Monsanto v. Syngenta

Monsanto Co. v. Syngenta Seeds (2006-1472) October 4, 2007

Syngenta makes and sells genetically engineered crops. Syngenta obtained a specific type of transgenic corn seeds (GA21 seeds) when it acquired two seed companies that were licensed by Monsanto to sell the seeds to farmers.

Monsanto sued Syngenta, alleging infringement of three of its' patents related to the GA21 seeds. During litigation, Syngenta argued that Monsanto itself performed three steps of the independent claims of two of the patents, thus making it impossible for Syngenta to infringe. The district court agreed, granting Summary Judgment in favor of Syngenta.

Interestingly, Monsanto also alleged infringement of one dependent claim, arguing that the claim should be interpreted as an independent claim, thus vitiating the need to perform the steps recited in the independent claim. Further, Monsanto argued that, even if the claim is dependent, Syngenta nevertheless infringes because Syngenta's performance of the last step of the process resulted in performance of all of the claimed steps, albeit with the first three steps performed by Monsanto.

Monsanto argued that the claim at issue was not "simply" a dependent claim because it entails significantly more than the process of the dependent claim. According to Monsanto, the dependent claim is by itself a single-step process (process of obtaining progeny). Accordingly, the dependent language refers instead to the novel starting material (a fertile transgenic plant previously obtained using the process of the independent claim) of the new process in described in the dependent claim.

To bolster its point, Monsanto draws attention to the form of the dependent claim, which recited "the process of claim 1 further comprising . . .".

The CAFC didn't bite:

Claim 4 expressly recites the process of claim 1 and specifically requires a fertile transgenic plant obtained by the performance of the steps in claim 1. Further, it includes the additional step of obtaining progeny. Claim 4 thus incorporates the format specified by the statute for dependent claims. Contrary to Monsanto’s argument, claim 4 clearly references another claim, not simply a starting material.

The rub here is that the CAFC didn't say it was impossible for a dependent claim to be interpreted as an independent claim are argued, but only that Monsanto didn't claim it that way in the patent:

The claim might have used express language to clarify that it only invoked the product of the process in claim 1 as a starting material, but did not do so. Instead, the claim language reads claim 1 into claim 4.

With regard to the "partial infringement" theory put forth by Monsanto, the CAFC shot this down as well:

Although in a somewhat unusual format, claim 4 is dependent from claim 1 because it only stands if all three steps recited in claim 1 have been performed. In other words, the additional fourth step of obtaining progeny depends on the performance of the process comprising the three steps recited in claim 1 for obtaining a fertile transgenic plant. Claim 4 contains each element of a dependent claim.

AFFIRMED

A New Performance Appraisal Plan in the Works for USPTO Examiners?

With all the practice changes being imposed on patent applicants, it would seem inevitable that some commensurate changes will be imposed on the Examiners at the USPTO. There has been little discussion recently on what the USPTO can do to reassure applicants that patent quality is a two-way street.

This is not to say that the PTO has done nothing - indeed the Office has taken some meaningful steps (most notable the Pre-Appeal Brief Conference Request) to allow applicants to resolve impasses with examiners in a quicker, more efficient manner. However, current PTO operations(i.e., the "count" system) has come increasingly under fire, and may undergo significant changes over the next year.

Back in 2004, the Department of Commerce issued a report that criticized current patent examiner goals, appraisal plans, and performance awards at the PTO. Some notable problems include:

• Patent Examiner Goals Have Not Changed Since 1976 to Better Reflect Efficiencies in Work Processes and Improved Technology

• Most art units (95%) process applications in less time than allotted goals

• Patent examiner performance appraisal plans are not linked to supervisor and PTO goals

• Patent examiners are not rated on achieving PTO’s goals

• Patent examiner award system is not well structured

• Criteria for pendency reduction award are not actually tied to pendency reduction

To view the complete report, click here (link).

Accordingly, the PTO proposed a pilot program last year that would judge examiners under a flat goal of production units per quarter per examiner. The flat goal program requires a flat goal of production units based on the examiner spending 80 percent of his/her time examining. It also raises the production level required for a fully successful performance rating from 95 percent to 100 percent. Under the program, Examiners must complete 100 percent of the assigned goal to maintain a fully successful rating.

Essentially, this regime will place examiners on a quasi-billable hour schedule (insert maniacal laugh here), where examiners will be responsible for issuing "X" amount of production units (i.e. final decisions on applications) within a quarter, assuming that 80% of an examiner's time is spent examining applications. The number of Production Units (PUs) required will be based on the length of the combined quarters and goals based upon grade levels, and complexity of the art.

The pilot program was instituted last year, and expired in September 2007. Notably, the PTO program is similar to the production schedule that already exists for PTO trademark attorneys.

The upside for practitioners is that this, theoretically, will minimize application "churning", where examiners prolong examination through a series of incremental, but indistinct, rejections. As far as applicants are concerned, this could be a positive development.

On the examiner's side, this is not good news. First off, the 80% assumption jacks up the historical 70-75 % examining time existing in the patent corp, where the remaining time is used for training, appeals conferences, interviews, leave time, etc. Also, POPA has pointed out that the flat goal program only accounts for the use of annual leave accrued during a particular quarter. If an employee has accrued leave and desires to take additional leave in a quarter, the examiner would still be responsible for achieving 100 percent of his/her assigned flat goal.

Nevertheless, the PTO is pushing hard to implement flat goal production. In a letter sent last year to POPA, the PTO stated:

“Unless you limit your proposals in this bargaining to the procedures and appropriate arrangements in response to management’s decision to implement a Flat Goal Pilot by next Wednesday, November 22, 2006, and agree in writing that you will not further claim that the entire topic is permissive, we will conclude that you have no interest in bargaining over these issues and will begin the implementation process for the pilot, based upon our last best offer.”

View USPTO's notice letter on flat goal production here (link)

Read POPA's reaction here (link) and here (link)

NOTE: In an interesting twist, POPA is claiming that the PTO's changes regarding flat goal of production is illegal (where have we heard that before about PTO rule changes?). According to POPA:

The agency’s program, however, is illegal because statute and case law require that a federal employee’s performance appraisal plan “to the maximum extent possible, permit the accurate evaluation of job performance on the basis of objective criteria.” 5 U.S.C. § 4302(b)(1).

For years, the current examiner performance appraisal plans have measured examiners’ performance in six-minute intervals. The flat goal would no longer account for all the actual duties performed by an examiner and, thus, would not be measuring performance “to the maximum extent feasible.”