CAFC: Damage Apportionment in Action

American Seating Company v. USSC Group, Inc. (2007-1112) January 39, 2007

USSC appealed a jury verdict which awarded American Seating damages for patent infringment relating to tie-down wheelchairs for mass transit transportation. Likewise, American Seating was appealing a JMOL that reduced damages due to convoyed sales being improperly included in the calculations.

A "convoyed sale" refers to the relationship between the sale of a patented product and a functionally associated non-patented product. A patentee may recover lost profits on unpatented components sold with a patented item, a convoyed sale, if both the patented and unpatented products "together were considered to be components of a single assembly or parts of a complete machine, or they together constituted a functional unit." A functional relationship will not exist when independently operating patented and unpatented products are purchased as a package solely because of customer demand.

In this case, the CAFC agreed with the district court that the damages were properly reduced, based on the language of the patent:

Tie-downs and passenger seats were usually but not always purchased by bus manufacturers from the same company; package sales were for reasons of convenience and "one-stop shopping," not because of an absolute requirement that the two items function together. Although the specification refers to a preferred embodiment in which the tie-down of the invention is located "adjacent chairs that fold against the side of the bus," . . . the claims make no mention of the passenger seats and the references to the "adjacent chairs" do not indicate any functional relation between the seats and the wheelchair tie-downs.

Also, the market demand was independent of the patented product:

A bus utilizing American Seating’s tie-down restraint system and outfitted by USSC’s passenger seats would be equally as functional as a bus furnished with only American Seating products. The evidence shows that passenger seats command a market value and serve a useful purpose independent of the patented product . . . Because it is clear that no interrelated or functional relationship inheres between the seats and the tie-down restraint system on a passenger bus, the district court was correct that the jury had no basis to conclude that lost profits on collateral sales of passenger seats were due American Seating.

AFFIRMED

Tensions Rise as Patent Reform Hits "The Final Stretch"

On Monday, various companies, industry groups and universities are reported to have met to discuss the Patent Reform Act, where Patrick Leahy, chairman of the Senate Judiciary Committee, appeared at the meeting. Hewlett Packard's GC Mike Holston, who spoke with Reuters recently about the meeting, commented that "we're 95 percent of the way there . . . we're in the final stretch." The bill is slated to go before the Senate in February, according to an aide to the Senate Judiciary Committee.

Nevertheless, some sticking points remain: (1) apportionment of damages, (2) venue, (3) post-grant reviews, and (4) inequitable conduct.

Read the Reuters story here (link).

In the meantime, commentary criticizing the Patent Reform Act seems to be popping up more often lately:

Gernot Pehnelt, "U.S. Has Best Patent System, so Why Fix It?" (link) - "'Virtually all of the inventions which ultimately hastened economic development and lifted living standards - especially new technologies and manufacturing processes - were developed in societies with strong intellectual-property protections,' according to a 2005 report, 'The Economic Value of Intellectual Property.' U.S. patent reform will only weaken international protection of intellectual property."

Alexander Poltorak, "U.S. Can't Afford to Mar Innovation"(link) - "If lawmakers strengthened copyrights, one form of intellectual property protection, why are they now moving to weaken patents? We are at the mercy of deep-pocketed lobbyists playing trick-or-treat with legislators in Washington. But can we afford to turn back the clock on innovation?"

TMCnet, "Inventors Cry Foul Over Patent Reform" (link) - "Patent history is littered with instances of inventors becoming embroiled in ruinous litigation. The engineer Bob Kearns, inventor of the intermittent windscreen wiper, spent 30 years in dispute with the motor industry after his idea was used without payment. Edwin Armstrong, inventor of FM radio, was left penniless after a 12-year patent battle over the invention with his former employer RCA, and in 1954 he committed suicide."

Even the patent blogs are heating up as of late - Dennis at Patently-O posted yesterday that "the proposed patent reforms now being debated by the Senate do virtually noting to address these serious problems and instead potentially cause harm to the current regime." This prompted the crusading Troll Tracker to mockingly respond: "Yeah, let's not 'cause harm to the current regime' and 'destabilize' this wonderful system of ours." Shortly thereafter, the Patent Prospector jumped into the fray.

Fasten your seatbelts - February is going to be one bumpy ride . . .

N.D. Ga.: Supreme Court's Twombly Decision Doesn't Affect Pleadings in Patent Cases

CBT Flint Partners v. Goodmail Systems, Inc. (1:07-CV-1822-TWT) December 14, 2007

CBT filed its complaint against Goodmail Systems and other parties alleging infringement of patents relating to methods for billing a fee to a party initiating an e-mail communication when the party is not on an authorization list. In the complaint, CBT alleged that

“[o]n information and belief, Goodmail makes, uses, offers to sell, and/or sells within the United States and this judicial district products and/or services, including but not limited to email certification services, which include and/or practice one or more of the inventions claims in the ‘114 Patent and/or ‘550 Patent.”

CBT also alleged that

“[o]n information and belief, Goodmail has infringed and continues to infringe, has actively and knowingly induced and continues to actively and knowingly induce infringement of, and/or has contributed to and continues to contribute to acts of infringement of one or more claims of the ‘114 Patent, all in violation of 35 U.S.C. §§ 271 (a), (b), and (c).”

In response, Goodmail moved to dismiss the case on the grounds that CBT failed to state a claim upon which relief can be granted. Specifically, the response contended that the Supreme Court’s recent decision in Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007) (link), altered the pleading requirements, and asked the Court to extend Twombly’s reasoning from the § 1 Sherman Act antitrust context to the patent context. Prior to this case, the 11th Circuit has not decided whether Twombly has altered pleading standards in the patent context.

From Judge Thomas Thrash's opinion:

Here, the parties have two very different views of Twombly’s effect upon pleading standards. The Defendant’s view is that Twombly demands that litigants provide more factual detail than before, especially in the patent context. The Defendant further argues that the allegations of infringement, inducement of infringement, contributory infringement, and willful infringement are insufficiently plead. The Plaintiff contends that the Complaint adequately sets out the patent infringement claims even in a post Twombly world.

In my view, Twombly did not radically alter the elemntary rules of civil procedure that have governed litigation in the federal courts for the past seventy years. The Court’s forced retirement of Conley v. Gibson’s “no set of facts” language does not change the fundamental command of Rule 8 as to what a valid complaint must look like. Indeed, the Court made clear that it was not imposing a heightened pleading standard . . . As a general matter, I am loath to assume that the Supreme Court circumvented the normal channels for amending the Federal Rules . . . Second, to the extent that Twombly might be plausibly read to alter the requirements for the sufficiency of a complaint, there should be a strong presumption in favor of narrowly confining the decision to its facts.

Third, my view that Twombly did not alter pleading standards - especially in the patent context - is bolstered by looking to the language of Rule 84 of the Federal Rules . . . Fed. R. Civ. P. 84 Form 16 provides a model for stating a claim in a patent infringement case, and contains extremely barebones factual allegations identifying the patent and the infringing product. The form is not appreciably different from the allegations contained in the Complaint.

[N]arrowly understood, the Court’s language merely forecloses litigants from answering motions to dismiss by responding, “Although I can’t make a good faith allegation of illegal conduct now, I bet I’ll find something good during discovery.” In the Sherman Act § 1 context, this means that where independent, parallel behavior is the only basis for an assertion of “agreement,” that is not a ticket for admission to the discovery process. The Court’s plausibility requirement in this context was designed to ensure that the plaintiffs had a reason to move the case along to the discovery phase beyond allegations of lawful behavior. But this is nothing new. The retirement of the “no set of facts” language, however, should not be confused with a requirement that the complaint contain more factual specificity than was required before the Court decided Twombly.

Motion to Dismiss DENIED

Read/Download the opinion here (link)

CAFC Denies Patentee "Benefit of Ambiguity", Holds Patent Invalid Under 112

Halliburton Energy Services, Inc. v. M-I LLC (2007-1149), January 25, 2008

Halliburton appealed a summary judgment decision from the ED Texas which held claims invalid for indefiniteness under 35 U.S.C. 112(2). Halliburton's patent relates to oil field drilling fluids that are fragile gels. During prosecution, Halliburton distinguished the claims of the patent by stating that the claims were "limited to" a "fragile gel" drilling fluid or the method of using a "fragile gel" drilling fluid. Thus, although the term "fragile gel" appears only in the preamble of the asserted independent claims, it was conceded that the claimed drilling fluids are limited to those that are "fragile gels."

The district court looked at the definition of fragile gel in the specification and found that it was too subjective and unclear because it relied on terms such as "easily transitions," "easily disrupted or thinned," "less gel-like," "more liquid-like," "quickly returns to a gel," "break instantaneously," and "minimum pressure, force, and time." While a graph was provided in the figures that purported to show the "fragile gel's" characteristics, the district court found that the graph did not delineate the bounds of the invention because both prior art fluids and fluids of the invention exhibit the same shape curves.

The district court also noted that Halliburton’s proposed additional limitation to the term "fragile gel," that it contains no or only low amounts of organophilic clay or lignite, was improperly imported from the specification, which states that the fragile gel of certain embodiments of the invention of the patent preferably does not have these clays. The court found that the doctrine of claim differentiation further counseled against this construction because dependent claims added the limitation that the fluid is "substantially free of organophilic clay."

On appeal, the CAFC sffirmed the district court. Looking at the claim differentiation argument first, the CAFC stated:

[N]othing in the specification of the ’832 patent requires the fragile gel drilling fluid as claimed to have low or no organophilic clay. Instead, the specification merely says there is no need for such clays. Absence of need for a component does not necessarily mean that that component is absent, or present only in low amounts. Additionally, the specification states that "preferably" none of these clays are added; this strongly suggests that absence of clays is simply a preferred embodiment. This reading is reinforced by the dependent claims: claims 20, 58, 95, 125 add the limitation that the fluid is "substantially free of organophilic clay." Thus, a requirement of low or no organophilic clays is not properly part of the construction of "fragile gel" as contained in the asserted independent claims.

The CAFC further found that the specification failed to distinguish the characteristics of a "fragile gel" from the prior art as well:

[W]e reject Halliburton’s assertion that a "fragile gel" can be defined by an L-shaped curve alone because the specification does not distinguish how the "fragile gels" claimed in the ’832 patent performed differently than the disclosed prior art—how much more quickly the gels broke when stress was imposed or how much more quickly the gels reformed when stress was removed. Halliburton’s failure to distinguish the fragileness of the drilling fluids of the invention from the close prior art (the 12.1 SF fluid that exhibited the L-shaped curve behavior) is fatal.

[E]ven if the ’832 patent distinguished "fragile gels" of the invention from those of the prior art, it did not place any limit on the scope of what was invented beyond the prior art . . . By failing to identify the degree of the fragility of its invention, Halliburton’s proposed definition would allow the claims to cover not only that which it invented that was superior to the prior art, but also all future improvements to the gel’s fragility. While patentees are allowed to claim their inventions broadly, they must do so in a way that distinctly identifies the boundaries of their claims.

In this case . . . Halliburton asks that we resolve the ambiguity in a way that gives it the broadest possible construction (i.e., that its claim covers all future improvements without regard to whether Halliburton invented such improvements); such a construction would undermine the notice function of the claims because it would allow Halliburton to benefit from the ambiguity, rather than requiring Halliburton to give proper notice of the scope of the claims to competitors. Additionally, adopting the broadest possible construction could retard innovation because cautious competitors may steer too far around that which Halliburton actually invented, neglecting improvements that otherwise might be made.

As an aside, the CAFC sent a message to the PTO on such situations:

We note that the patent drafter is in the best position to resolve the ambiguity in the patent claims, and it is highly desirable that patent examiners demand that applicants do so in appropriate circumstances so that the patent can be amended during prosecution rather than attempting to resolve the ambiguity in litigation.

AFFIRMED.

Friday Post - Ringtones from the USPTO

The USPTO's website has a "Kids' Pages" section that contains a collection of sounds filed under a "Trademark Soundex." It's a collection of trademarked sounds in MP3 and WAV formats. According to some readers, the site makes for a good source of ringtones for your cell phone.

Those of you interested in an annoyance factor for your ring tone, the early favorites are the Beneficial Insurance jingle ("at Beneficial - toot! toot! - you're good for more...") and Mattress Discounters ("have a good night's sleep on . . . Mattress Discounters!"). Commented one person: "after hearing it 3-4 times, I feel I want to punch something . . ."

To view the sounds, click here (link).

ISO Pushing Forward to Establish International Standard for Patent Valuation

In an ambitious effort, the International Organization for Standardization (ISO) is moving forward to establish an international standard for patent valuation. According to an email letter from the project’s leader Alexander Wurzer (received yesterday at the IAM blog), the ISO is seeking participants to help in this project

The International Organization for Standardization, ISO, has published a new work item proposal for the standardization of patent valuation processes.

The proposal was initiated by the German Institute for Standardization, DIN, and is based on a publicly available specification PAS 1070 “General Principles of Proper Patent Valuation" (SAB1), published in 2007.

The PAS 1070 was developed by a working committee of DIN, chaired by Prof. Alexander Wurzer, together with representatives from all relevant and concerned groups, including industry, consulting, accounting and academia. The PAS defines general principles and requirements for a reliable and appropriate valuation of patents. Its main intention is to serve as a guideline for users of patent value information, to enable a quality assessment of valuation reports and expert appraisals.

The publication of PAS 1070 encouraged great response, emphasizing the necessity and demand for consolidation and standardization of patent valuation, and for a definition of general principles for proper and reliable patent valuation. It also highlighted that national initiatives in this issue of high global importance are not sufficient.

DIN therefore formed a working committee and initiated this international standardization project on patent valuation at ISO. This shall meet the requirement for an international standard. ISO followed that initiative and will appoint a committee to develop an ISO-standard for patent valuation if all relevant and concerned groups articulate their interest to ISO through their national standardization bodies.

You can participate in the development of an ISO standard on patent valuation.

ISO follows a general procedure in implementing working committees for new work item proposals. Therefore you only have to contact your national standardization body and inform them about this proposal and your interest to join the development of an ISO standard on patent valuation. Your national standardization body as your representative at ISO will follow this proposal and bring all other interested groups in your country together to join the implementation of this ISO standard.

To make such an international project work, individual experts or single companies cannot directly contact ISO, which is why you have to contact your national standardization body. To contact your national standardization body, you may use the following list at ISO which provides direct links to your representatives: http://www.iso.org/iso/about/iso_members.htm

Your national standardization body will fill out the ballot form for the implementation of the ISO committee for this new work item proposal. Your national standardization body can download the required ballot form from the ISO website at www.iso.org/forms by simply following the link: “Form 04 New Work Item Proposal”.

Of course you can further support the development of this ISO standard on patent valuation by forwarding this message to any of your partners who may be interested in or concerned by it. Additional information on ISO standards and procedures can be obtained from http://www.iso.org/ or your national standardization body.

Best regards,

Alexander J. Wurzer

Chairman of the working committee for Patent Valuation at DIN e.V.

For a preliminary run-down of patent valuations techniques, see Grünewald & Wurzer, "Approaches and Methods of Patent Valuation" (link).

See also IAM Magazine, ""Developing a patent valuation standard", May 01, 2007 (link). From the article:

So, how can technical progress be promoted? We need inventions and their exploitation – their realisation or transfer into our daily lives. What helps to facilitate this? Legal protection and money. But surely, there is a lot more we could do; for example, a technology transfer market. For such a market, you need prices. And in order to attract money – which for the main part is risk-averse – you have to reduce the risk incurred. One way of doing this and to establish trust is to devise a generally accepted standard for quantitative financial patent valuation.

This would also help to reduce many of the problems associated with the limited amount of information generally available for investors in the complicated area of technology and patents. And this is what banks have been asking for before they can feel comfortable in investing in patents or in using them as collateral.

FTC Asserts Antitrust Authority on Patent Licenses in Standardized Technologies

In the Matter of Negotiated Data Solutions LLC (File No. 0510094)

In an unusual move, the Federal Trade Commission decided in a 3-2 ruling that the FTC had the authority to file a complaint against company Negotiated Data Solutions ("N-Data") for allegedly charging "excess" licensing royalties for patents related to Ethernet technology in violation of Section 5 of the FTC Act. N-Data obtained the Ethernet-related patents from National Semiconductor Corp, who previously agreed to let the IEEE incorporate them into its Ethernet Standard in exchange for one-time royalties of $1,000 per license. Now, N-Data is trying to increase the royalty payment. According to the FTC's complaint:

The Complaint in this matter alleges that N-Data reneged on a prior licensing commitment to a standard-setting body and thereby was able to increase the price of an Ethernet technology used by almost every American consumer who owns a computer. Based on the facts developed by staff during the investigation, we find reason to believe that this conduct violated Section 5 of the FTC Act.

The impact of Respondent’s alleged actions, if not stopped, could be enormously harmful to standard-setting. Standard-setting organization participants have long worried about the impact of firms failing to disclose their intellectual property until after industry lock-in. Many standard-setting organizations have begun to develop policies to deal with that problem. But if N-Data’s conduct became the accepted way of doing business, even the most diligent standard-setting organizations would not be able to rely on the good faith assurances of respected companies. The possibility exists that those companies would exit the business, and that their patent portfolios would make their way to others who are less interested in honoring commitments than in exploiting industry lock-in. Congress created the Commission precisely to
challenge just this sort of conduct.

The Commission accepted a proposed consent agreement premised on two separate violations: (1) N-Data’s alleged conduct was an unfair method of competition, and (2) their conduct was also an unfair act or practice. Notably, the FTC did not pursue the action under traditional Sherman Act principles, but under "broader authorities" vested in the Commission. Noted the Commission:

We recognize that some may criticize the Commission for broadly (but appropriately) applying our unfairness authority to stop the conduct alleged in this Complaint. But the cost of ignoring this particularly pernicious problem is too high. Using our statutory authority to its fullest extent is not only consistent with the Commission’s obligations, but also essential to preserving a free and dynamic marketplace.

Read the Statement of the Commission here (link)

Read dissenting statements of Chairman Majoras (link) and Kovacic (link)

USPTO Clarifies "Duty to Disclose" Language in Oaths/Declarations

The USPTO has indicated that, in order to comply with 37 CFR 1.63(b)(3), an oath or declaration must acknowledge a duty to disclose information material to patentability as defined in 37 CFR 1.56:

All oaths or declarations filed on or after June 1,2008, will be required to include the language expressly set forth in 37 CFR 1.63, including that in 37 CFR 1.63(b)(3). This notice applies to oaths or declarations filed in all nonprovisional patent applications, including reissue applications.

The problem? Applicants are using outdated language in their documents:

[S]ome applicants in their oaths or declarations continue to use "material to the examination of the application" in place of "material to patentability," and "in accordance with 1.56(a)" in place of "as defined in 1.56." In response to proper objections made during the examination of pending patent applications, practitioners have argued that the oaths and declarations executed by applicants with the outdated language in question are proper and meet the requirements set forth in 37 CFR 1.63.

The solution? Use the express language provides in 37 CFR 1.63:

With this Notice, the Office is putting applicants and their representatives on notice that compliance with the express language of 37 CFR 1.63 will now be required. Additionally, to the extent the Reply to Comment 38 in the 1992 Final Rule authorized the continued use of the "material to examination" and "in accordance with 37 CFR 1.56(a)," language, this authorization it is hereby rescinded, and reliance on the Reply to Comments 38 will no longer be accepted. If an oath or declaration filed on or after June 1,2008, does not include the express language set forth in 37 CFR 1.63(b)(3), the Office will object to the oath or declaration as failing to comply with 37 CFR 1.63. A supplemental oath or declaration pursuant to 37 CFR 1.67 will then be required.

See the PTO notice here (link)

Reid: Patent Reform a Top Priority (Sort Of)

Sen. Harry Reid made a statement today on the floor of the U.S. Senate, outlining Democrats’ legislative priorities for the first session of 2008. While patent reform was mentioned as a "priority" in Reid's speech, it appears that it will have to wait its turn in the legislative agenda:

Together we must address these growing challenges, both foreign and domestic. Here at home, that starts with an economic stimulus package . . . We will meet with President Bush today to continue working out this plan. While we await the results of the discussions on the stimulus package, we will begin the year by addressing other important priorities.

First, the bipartisan Indian Health Care Improvement Act . . . We will also return to the Foreign Intelligence Surveillance bill. Democrats maintained last year that we must pass a FISA law that gives our law enforcement officials the tools they need to fight terrorism without infringing on the fundamental rights of law-abiding Americans . . . Passing the Defense Authorization bill — again — is also a top priority for this work period.

Once we work these issues out, time permitting, we will also turn to two other priorities in this first work period: patent reform and an energy package.

Read Reid's speech in its entirety here (link)

UPDATE: According to the IPO, Senator Leahy will “attempt to pass a revised version of S. 1145 in the Senate in February.” (see Patently-O)

Petitioner Seeks Certiorari on 11th Amendment Immunity on Patent Cases

Biomedical Patent Management Corporation v. State of California (on cert.)

States have become major players in the patent market. Many of the largest universities and research institutions are state-owned, and their inventions increasingly contribute substantial revenues to the state. In recent years, states have increasingly turned to the federal courts to maximize the value of their patent portfolios. Through aggressive litigation, states have won judgments and settlement awards in the hundreds of millions of dollars. Since the 1990's, at least 32 states have filed at least 173 affirmative patent actions.

The problem, as BPMC sees it, is while states (i.e., universities) embrace federal jurisdiction when it comes to the plaintiff side, states "simultaneously avoid federal jurisdiction when they themselves are faced with claims of patent infringement; in those circumstances, they assert sovereign immunity under the Eleventh Amendment." Thus, universities are having their cake and eating it too, while other participants in the patent system cannot avail themselves of such immunities.

BPMC is the sole owner of a patent related to non-invasive prenatal screening for fetal abnormalities such as trisomy 21 (Down Syndrome). California’s Department of Health Services (“DHS”) manages the only sizable prenatal screening program in the nation that implements the procedure described in the patent without a license. Moreover, DHS has issued regulations that would prevent existing and potential licensees of the patent from practicing the invention in California except under license from DHS. Under the regulations, all fees for practicing the invention in California must be remitted directly to the state.

Naturally, litigation ensued thereafter. In August 1997, Kaiser Foundation Health Plan, Inc. (“Kaiser”), a subcontractor of DHS, filed an action against BPMC in the United States District Court for the Northern District of California, seeking a declaratory judgment of non-infringement or invalidity as to the patent. DHS was allowed to intervene in the case. The court dismissed the case under improper venue.

In February 2006, BPMC refiled its complaint against DHS in the United States District Court for the Northern District of California, alleging the same counts of patent infringement. DHS moved to dismiss on the basis of Eleventh Amendment immunity. The district court granted DHS’s motion, and the Federal Circuit affirmed (link).

The CAFC reasoned that “DHS’s intervention in the [First Action] constituted a waiver of its sovereign immunity in that suit,” but held that, “where a waiver of immunity occurs in an earlier action that is dismissed,” the waiver “does not extend to the separate lawsuit.” The court also rejected BPMC’s contention that California’s patent-litigation activities effected a waiver, agreeing with the district court that this was a “constructive waiver” theory foreclosed by College Savings Bank.

BPMC disagreed, and petitioned the Supreme Court. According to the petition, the questions presented are:

1. Whether a state’s waiver of Eleventh Amendment immunity in one action extends to a subsequent action involving the same parties and the same underlying transaction or occurrence.

2. Whether a state waives its Eleventh Amendment immunity in patent actions by regularly andvoluntarily invoking federal jurisdiction to enforce its own patent rights.

Read/download the petition here (link)

Is the Media Convincing the Public that the Patent System is "Broken"?

It's been common knowledge that, generally, as a subject becomes more esoteric, the public relies more greatly on mainstream press coverage to formulate opinions. The recent media coverage of the U.S. patent system has caught the attention of scholars, practitioners and entrepreneurs, where commentators have increasingly referenced media coverage that casts the patent system in a negative light (e.g., "bad" patents, opportunistic litigation, etc.). While some suggest that the coverage accurately reflects fundamental systemic problems, others believe that some media accounts are inaccurate, or at least overstate problems in the system.

Lisa A. Dolak and Blaine T. Bettinger, who have previously looked at media coverage of patent-related issues, have released a study titled "The United States Patent System in the Media Mirror ." The 67-page report looks closely at media coverage and its' effect on readers, and provides valuable insight and perspective on the increased calls for patent reform.

Among other things, the article addresses the following questions, as they were posed to the study's participants:

How is the patent system portrayed in the item headline (based on your quick impression after reading the item headline) – would it be likely to make an average person view the patent system more favorably, less favorably, or neither, and if “neither,” is it because the headline is neutral? Or balanced?

How is the patent system portrayed in the item body (based on your quick impression after reading the item body) – would it be likely to make an average person view the patent system more favorably, less favorably, or neither, and if “neither,” is it because the headline is neutral? Or balanced?

Regarding the headlines, the study found that 95% of all items in the dataset carried a “neutral” headline, 4% bore a “negative” headline, and fewer than 1% portrayed the patent system positively. As an interesting side note, the study singled out the Financial Times as having the largest number (13%) of overtly "negative" headlines regarding the patent system.

Overall, the “body portrayals” were more negative than the headlines. Specifically, the study found that while 2% of all of the items in the dataset portrayed the patent system in a positive light, the percentage of items which portrayed the patent system negatively was 15% (with the Financial Times clocking in at 30%). In each case, the individual newspaper “body portrayals” were similarly “more negative” than their headlines, overall.

The “news” item body portrayals were slightly more negative than the headline portrayals, with 93% of news items being neutral, 7% negative, and no news items that portrayed the patent system positively.

With unsigned editorials, 70% of all the unsigned editorials in the dataset had a neutral headline while 30% communicated a negative headline. Again, none of the headlines from the unsigned editorials portrayed the patent system in a positive light.

Regarding the relative prevalence of positive messages in all items, the following messages seemed to resonate in the media coverage:

• “Institutional actors are taking steps to improve the patent system” - 30%
• “The patent system is necessary to spur innovation” - 27%
• “The patent system is not in need of significant reform” - 22%
• “The patent system is important for U.S. economic vitality” - 13%
• “The Federal Circuit has brought needed stability to patent law” - 3%

Regarding the negative messages in all items, the following messages were the most prevalent:

• “Poor patent quality” - 17%
• “Patents shouldn’t be enforceable by those who don’t practice the invention” - 15%
• “The patent system needs reform” - 11%
• “The patent system stifles innovation” - 10%
• “The USPTO is overtaxed/underfunded” - 7%
• “Patent litigation is too prevalent/costly/slow” - 6%
• “The patent system permits extortion/litigation abuse” - 6%
• “The definition of what can be patented is too broad” - 5%
• “A patent on single invention can result in out-of-proportion injunction/damage award.” - 5%
• “The patent system is skewed in favor of patent owners.” - 4%

The authors conclude with the following:

Recent major newspaper content presents, overall, a considerably negative depiction of the U.S. patent system. We observed some anticipated differences between news and editorial coverage, in this regard, and some not-so-expected similarities and differences among the newspapers we examined. By systematically cataloguing and analyzing media representations relating to particular issues, we also gained insight into what the media-consuming public learned about perceived problems and attributes associated with the patent system.

Given the esoteric nature of patent law, media portrayals have particular “sway” over public attitudes about the patent system. This study provides a unique analysis of the media’s recent representations of the patent system to reveal, perhaps for the first time, a glimpse into the public’s “legal knowledge” of the system, based upon those portrayals. This information will be of particular use to attorneys, legislators, or other individuals who will interact with a media consuming public that has been exposed to a primarily negative portrayal of the patent system.

View/download a copy of the draft report from SSRN here (link).

See also, "Ebay and the Blackberry®: A Media Coverage Case Study" (link).

While it isn't necessaily patent related, the NYT carried the following article, titled "Unintended Consequences: Why do well-meaning laws backfire?" - it's worth a look.

Article Looks at Effects of NPE Patents on Innovation

Different entities use the patent system in different ways, depending on their respective business models. A recent paper, titled "Don’t Feed The Trolls?", written by economists John Johnson, Gregory K. Leonard, Christine Meyer and Ken Serwin, acknowledged this dynamic briefly and looked at the propriety of reforming the patent system to combat "trolling" or promoting other goals.

At the outset, the authors acknowledge that much of the discussion regarding patent reform has been couched in terms of "patent trolls asserting bad patents." Regarding the term "patent troll," the paper maintains that the definition of "troll" remains elusive:

The patent-holding company, the university, and the sole inventor are not the type of entities generally contemplated by those using the phrase “patent troll” in a derogatory manner. However, practically-speaking, it is quite difficult to craft a definition of “troll” that does not sweep other types of entities into its net.

On the "bad patents" part:

Definitions that focus on reliance on suspect patents as a critical trait of the patent troll, such as the definition proffered by the Congressional sub-committee, are also problematic. Determining the validity of a patent generally requires lengthy and expensive litigation. The patents of several so-called trolls have survived invalidity challenges relatively unscathed. Conversely, patents held by entities that produce a product that embodies a patented technology have been found to be invalid. On an ex ante basis, therefore,it is difficult to identify a patent troll. Even ex post, patent validity does not seem to be a good way of discerning trolls from “legitimate” holders of IP assets, since even firms who manufacture products embodying patented technology sometimes discover in litigation that their patents are invalid.

At least in one sense, non-practicing entities (NPE's) behavior has appeared to have increased the value of patents qua patents:

[P]atent trolls come in a variety of configurations. In most configurations, their behavior tends to increase the value of patents. The increase in value results, primarily, from increased liquidity in the market for the transfer of patent rights. The result of increased patent value is an increase in patenting activity.

Assets freely traded in liquid markets are worth more than identical assets traded in illiquid markets. Illiquidity increases the risk of holding the asset and buyers require a discount to compensate for that additional risk. The activities and behavior of patent trolls has led to increases in the frequency, visibility, and competitiveness of transfers of patent rights.

However, it is clear that, while patent trolls arguably have the effect of increasing inventive activity, their effect on development and commercialization activity are not so favorable.

Read more from the NERA economic consulting website, and view/download a copy of the paper here (link)

Quanta Oral Arguments: Will the Supreme Court Clarify the Exhaustion Doctrine?

By Charles R. Macedo, Esq., Joseph Casino, Esq., Michael Kasdan, Esq., and Howard Wizenfeld, Esq. (link)

Today, for the first time in half a century, the Supreme Court heard oral argument on the extent to which a patentee can license its patents to different members of the same sales chain for the same product. In Quanta v. LG Electronics, the High Court heard arguments on whether a patentee can grant patent rights and at the same time contract around the exhaustion doctrine. Further, the issue of whether patent exhaustion applies to method claims was also before the Court. Charley Macedo attended the oral arguments to get a first hand impression of how the Supreme Court might deal with the issues related to patent exhaustion.

An interesting aspect of oral argument at the Supreme Court was the focus of the Justices on whether patent exhaustion is an issue of patent law or contract/antitrust law. Justice Breyer’s questions appeared to suggest that, under contract law theories, a patentee should not be able to put a post customer restriction in a license because it would impose improper "equitable servitudes on chattel". He also suggested that placing such a restriction could violate antitrust law doctrines. By contrast, Justice Roberts focused on whether exhaustion is a patent law or contract law doctrine.

In fact, the theory of patent exhaustion probably implicates both patent law and contract law. It implicates patent law because, once an authorized sale is made, the patentee should have no further right to limit the sale of that item in commerce. It implicates contract and antitrust law to the extent the patentee tries to impose an improper restriction in its license agreement. Either way, the Supreme Court should preclude a patentee from contracting around the exhaustion doctrine.

The Justices were also interested in knowing why the exhaustion doctrine was codified in the Copyright Act but not in the 1952 Patent Act. In this regard the Amici were unable to cite to any useful discussion.

During argument LGE also argued that the notices Intel sent to its customers were valid techniques of avoiding a defense of implied license. LGE objected to the use of the exhaustion doctrine as an end-around to the defense of implied license.

The role of patent protection in the U.S. economy continues to remain important and should not be undermined. However, once a patentee has authorized goods or services to be sold under its patent, it should not be entitled to obtain a second payment for the same patent. The Supreme Court has a chance to reestablish this fundamental principle of U.S. Patent Law. We will have to wait and see if the Court takes advantage of this opportunity.

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Download SCOTUS transcript of oral arguments here (link)

See also:

Diane Bartz, "Supreme Court Hears LG-Quanta Patent Case" (Reuters - link)

Laurel Newby, "Justices Skeptical of Patent-Holders' Claim" (Law.com - link)

CNNMoney.com: "US High Court Uncomfortable With LG Position in Patent Case" (link)

Seagate Wipes Out Willfulness in the ND Illinois

Trading Technologies International Inc. v. eSpeed, Inc. (04 C 5312), Jan. 3, 2008

At trial, the court instructed the jury in light of the Seagate standard on willfulness. After trial, the jury rendered a verdict that defendants willfully infringed plaintiff's patents. The defendants moved for a judgment as a matter of law that their conduct was not willful.

The district court agreed with the defendants:

First, we find that plaintiff did not meed its burden of demonstrating that defendants acted despite an objectively high likelihood of infringement. When defendants first launched [the allegedly infringing product], plaintiff's patent had not yet issued. While defendants knew of plaintiff's patent application, this knowledge alone is not enough to demonstrate willfulness . . . Thus, the focus of a willfulness determination is generally on post-patent, rather than pre-patent conduct.

Here, plaintiff failed to provide any evidence of post-patent conduct indicative of willfulness . . . [o]nce defendants became aware of the patent there were no further sales, and they immediately began a redesign, resulting in a product that was on the market within five months of the patent's issuance, and which this court found did not infringe the patent. Plaintiff argues that during that period defendants should have pulled their infringing product from the customers who had already purchased it, or disabled the infringing screen. However, plaintiff offered no evidence that defendants could have done so. Thus, even if the likelihood of infringement could be considered objectively high, plaintiff adduced no evidence that defendants acted despite that likelihood.

The plaintiff argued that defendants' failure to assert a non-infringement defense demonstrated that they acted "despite an objectively likelihood of infringement." The district court disagreed, relying in part on the decision in Broadcom Corp. v. Qualcomm Inc. 2007 U.S. Dist. LEXIS 86627 (C.D. Cal. Nov. 21, 2007), which noted:

[w]hile a jury might find as a matter of fact that the absence of a reasonable belief of non-infringement or the invalidity on the patent in suit might on some records lead to a conclusion of disregard of an objectively high likelihood of infringement, that conclusion is hardly compelled. The two standards are not identical, even if there might be some theoretical overlap.

Thus the district court found in this situation that the analysis better rests with the consideration of defendant's subjective intent (that defendants knew or should have known of the objectively high likelihood of infringement). However, the district court noted that "the Federal Circuit provided little guidance to courts as to how to meld the new standard with a consideration of the totality of the circumstances."

Turning to the case at hand, the court noted:

Though in its preliminary injunction order this court stated that defendants appeared not to assert non-infringement of their original product, we note that the preliminary injunction inquiry did not focus on that product since it was no longer on the market. Additionally, defendants' answer to plaintiff's complaint denied that any product infringed. Furthermore, validity of plaintiff's patents has been hotly contested in this litigation. We find on this record that defendants sufficiently asserted defenses to infringement and those defenses were neither unreasonable nor frivolous.

[P]laintiff also offered [evidence noting] that defendants, like all the other independent software vendors, were attempting to create programs similar to plaintiff's in order to stay competitive. This evidence does not rise to the level of egregious copying . . . [r]ather, "[t]his is classic commercial gamesmanship under the patent system . . . not the kind of behavior courts have categorized in the past as willful infringement."

View/download the opinion here (link).

Draft Report of S. 1145 is (Unofficially) Available

The IPO recently reported that a draft of the Senate Judiciary Committee's report on S. 1145 has been circulated in the Washington lobbying community and on the internet. The draft report provides some interesting insight on the bill approved by the Senate on July 19, 2007, but does not contain any new or compromise provisions. It is anticipated that the report will undergo additional changes, and be finalized and issued as the official committee report on the July 19 bill.

The contents of the circulated draft bill provides

• Background and Purpose of S. 1145, the Patent Reform Act of 2007;
• History of the Bill and Committee Consideration;
• Section-by-Section Summary of the Bill;
• Cost Estimate;
• Regulatory Impact Evaluation; and
• Changes to Existing Law Made by the Bill, as Reported

According to the draft report, the numbered sections of the Act do the following:

(1) title the Act the Patent Reform Act of 2007;

(2) change the system to a “first-inventor-to-file” system;

(3) make it simpler for patent applicants to file and prosecute their applications;

(4) codify and clarify the standard for calculating reasonable royalty damage awards, as well as awards for willful infringement;

(5) create a relatively efficient and inexpensive administrative system for resolution of patent validity issues before the USPTO;

(6) establish the Patent Trial and Appeal Board;

(7) provide for eventual publication of all applications and enhance the utility of third
parties’ submissions of relevant information regarding filed applications;

(8) improve venue in patent cases and provides for appeals of claim construction orders whenwarranted;

(9) give the USPTO the ability to set its fees;

(10) remove the residency restriction for judges on the United States Court of Appeals for the Federal Circuit;

(11) authorize USPTO to require patent searches with explanations when a patent application is filed;

(12) codify and improve the doctrine of inequitable conduct;

(13) give the Director of the USPTO discretion to accept late filings in certain instances;

(14) limit patent liability for institutions implementing the “Check 21” program;

(15) end USPTO “fee diversion”;

(16) make necessary technical amendments; and

(17) set the effective date of the Act.

Download/view a copy of the draft report here, courtesy of the IPO (link)

IFI Releases Top Patent Filers For 2007

IFI Patent Intelligence announced its annual compilation of the world’s top-ranked U.S. patent holders for 2007. According to the report, most of the top 25 companies attained fewer grants in 2007 than in 2006, with five exceptions including Samsung (up 11%), Microsoft (up 12% and now in the top 10), Denso Corp. (up 4%); Nokia (up 14%), and Seiko Epson (up 2 patents).

"The List":

1 INTERNATIONAL BUSINESS MACHINES CORP - 3148

2 SAMSUNG ELECTRONICS CO LTD KR - 2725

3 CANON K K JP - 1987

4 MATSUSHITA ELECTRIC INDUSTRIAL CO LTD JP - 1941

5 INTEL CORP - 1865

6 MICROSOFT CORP - 1637

7 TOSHIBA CORP JP - 1549

8 SONY CORP JP - 1481

9 MICRON TECHNOLOGY INC - 1476

10 HEWLETT-PACKARD DEVELOPMENT CO L P - 1470

11 HITACHI LTD JP - 1397

12 FUJITSU LTD JP - 1315

13 SEIKO EPSON CORP JP - 1208

14 GENERAL ELECTRIC CO - 914

15 INFINEON TECHNOLOGIES AG DE - 856

16 DENSO CORP JP - 803

17 TEXAS INSTRUMENTS INC - 752

18 RICOH CO LTD JP - 728

19 HONDA MOTOR CO LTD JP - 719

20 SIEMENS AG DE - 700

21 LG ELECTRONICS INC KR - 684

22 NOKIA AB OY FI - 682

23 SHARP K K JP - 667

24 FUJIFILM CORP JP - 662

25 NEC CORP JP - 617

26 SUN MICROSYSTEMS INC - 610

27 CISCO TECHNOLOGY INC - 582

28 BOSCH, ROBERT GMBH DE - 569

29 KONINKLIJKE PHILIPS ELECTRONICS N V NL - 560

30 HONEYWELL INTERNATIONAL INC - 539

31 BROADCOM CORP - 533
SILVERBROOK RESEARCH PTY LTD AU - 533

33 XEROX CORP - 517
RENESAS TECHNOLOGY CORP JP - 517

35 EASTMAN KODAK CO - 493

See press release from IFI here (link)

Patent Litigation Down? "Bollocks!" Says the Troll Tracker

While early reports are indicating that the number of patent cases have dipped slightly in 2007, the Patent Troll Tracker has done what few others have done, and has looked at patent litigation for 2007 according to the number of defendants named in complaints. Basically, the study looked at cases from PACER/ECF from the top jurisdictions between 2006-07, counted defendants, and extrapolated. Under this approach, over two-thirds of patent cases were taken into consideration.

The conclusion? According to the Patent Troll Tracker 2007 shows a 30% increase in patent litigation over 2006, fueled by a 40% increase in the Eastern District of Texas.

• Comparing 2007 to 2006, nationwide there was a 4.6% increase in patent cases, but there was a 31.5% increase in the number of defendants sued for patent infringement.


• Comparing 2007 to 2006 just for the Eastern District of Texas, there was a 37.9% increase in the number of patent cases, and there was a 40.8% increase in the number of defendants sued for patent infringement.


• Comparing 2007 to 1990, nationwide there has been over a tripling in the number of patent cases (+221%), and a quintupling in the number of defendants sued for patent infringement (+404%).

For the top 7 jurisdictions for patent litigation, the numbers came out this way:

• ED Texas: 364 patent cases, 1,402 defendants sued (151 troll cases)
• CD California: 272 patent cases, 729 defendants sued (23 troll cases)
• D New Jersey: 187 patent cases, 349 defendants sued (13 troll cases)
• D Delaware: 147 patent cases, 350 defendants sued (18 troll cases)
• ND Illinois: 137 patent cases, 261 defendants sued (26 troll cases)
• ND California: 131 patent cases, 249 defendants sued (19 troll cases)
• SD New York: 102 patent cases, 255 defendants sued (14 troll cases)
  

Notes the anonymous Troll Tracker: "I say pshaw to the notion that patent infringement increased only 4-6% in 2007. Look at the defendants sued: there was over a 30% increase this past year. That's the number that matters. Now where will 2008 fall?"

Read the full (and quite impressive) post here (link)

EPO Proposes Punitive Fees for Excess Claims

The European Patent Office has announced a new fee schedule that plans to go into effect on April 1, 2009. Under the new schedule, applicants filing more than 15 claims in an application will pay a fee of 200 € ($ 287) per each excess claim. If the claims exceed 50, the "per-claim" fee jumps to 500 € ($ 717) for each excess claim.

See EPO schedule here (link), courtesy of IPEG.

CAFC: Unindexed Document on FTP Server Questioned as Publicly-Accessable Prior Art

SRI International v. Internet Security Systems, Inc. (2007-1065) January 8, 2008

Prior to filing its patent application, SRI posted a document on an FTP server pursuant to ongoing research. The document contained subject matter that overlapped the filed application. Just over one year prior to filing, SRI emailed certain individuals involved in the research, and informed them of the document, providing the path and filename of the document.

After the patent issued, SRI sued a number of defendants for infringement. The defendants argued that the patent was invalid under 102(b), due to the posting and directing of individuals to the FTP document. The lower court agreed and granted summary judgment on invalidity.

On appeal, SRI argued that the FTP document was not a "printed publication" and also argued that the document was not enabling as a 102 reference. On the enablement argument, the CAFC disagreed with SRI:

Both the '212 patent specification and the EMERALD 1997 paper contain similar sections explaining statistical detection . . . Furthermore, the identical figures are a graphical depiction of a network monitor to scrutinize an event stream and a diagram of a resource object that configures the network monitor. These figures show an architecture for network monitoring based on a profile engine and configurable event structures sufficient to enable one skilled in the art.

Indeed, these disclosures helped the inventors obtain issuance of the '212 patent. The issuance itself shows that the specification satisfied the enablement requirements of 35 U.S.C. § 112, ¶ 1. With the 1997 paper providing similar, or even a partially identical, disclosure to the '212 patent specification, the record meets the lower enablement standard for prior art under 35 U.S.C. § 102(b). Thus, the 1997 publication with its similarities in technical scope and description to the specification of the '212 patent meets the enabling hurdle for a prior art reference.

Regarding the FTP document being a "printed publication", the CAFC held that there was insufficient evidence showing that the document was "publicly accessible":

The record on summary judgment does not show that an anonymous user skilled in the art in 1997 would have gained access to the FTP server and would have freely navigated through the directory structure to find the Live Traffic paper. To the contrary, the paper’s author, Mr. Porras, thought it necessary to provide Dr. Bishop with the full FTP address for the file. Surely Dr. Bishop, the Program Chair for SNDSS, would have qualified as one of ordinary skill in the art in 1997. Yet, despite his knowledge of the field, FTP servers, and the paper, Dr. Bishop apparently would not have found the reference without Mr. Porras's precise directions. It is doubtful that anyone outside the review committee looking for papers submitted to the Internet Society’s Symposium would search a subfolder of an SRI FTP server. These are separate entities. It is also doubtful that anyone outside the review committee would have been aware of the paper or looked for it at all in early August 1997. These facts seem to militate against a finding of public accessibility. At least they warrant examination upon remand.

AFFIRMED-IN-PART, VACATED AND REMANDED-IN-PART

Judge Moore (dissenting-in-part):

This case is quite unlike the uncatalogued, unshelved thesis in a general university library in Application of Bayer, 568 F.2d 1357 (CCPA 1978). In this case, the Live Traffic paper existed on an FTP server that was used for cyber security work, in a subdirectory named for a specific, well-known cyber security project (EMERALD). As the district court pointed out, it is ironic that SRI, which is in the intrusion detection business, argues that those skilled in the art of intrusion detection could not detect information purposefully posted on the internet by a member of the cyber security community.

* * *

SRI does not contend that papers on an FTP server are difficult for a user to copy or print. It is undisputed that at the touch of a button, the entire Live Traffic paper could be downloaded or printed. Copying could not be simpler. Unlike Klopfenstein, where members of the public would have to quickly transcribe the text or graphics of the poster during a conference, members of the public could download or print the Live Traffic paper immediately upon accessing the paper, and at any time of the day or night during the seven days it was posted on the FTP server.

Whether the case is analyzed under the rubric of the library thesis cases or the temporary dissemination cases, the result is the same. The defendants carried their burden under Rule 56(c). Because SRI presented no evidence showing genuine issues of material fact for trial, I would affirm the district court’s ruling of invalidity based on the Live Traffic paper.

Picking and Choosing Your Battles in the ED Tex.

Blackboard, Inc. v. Desire2Learn (9:06-CV-00155) December 3, 2007

Heading into summary judgment, Judge Clark let the parties know that, when it comes to choosing issues to argue before the court, less can be more in most cases:

The parties in this case have, between them, filed 48 motions, responses and replies in less than 14 months, which, including attachments and exhibits, comprise no fewer than eleven thousand pages. They seem to share the misconception, popular in some circles, that motion practice exists to require federal judges to shovel through steaming mounds of pleonastic arguments [heh, heh] in a Herculean effort to uncover a hidden gem of logic that will ineluctably compel a favorable ruling. Nothing could be further from the truth.

In the context of a motion for summary judgment, for example, it is counsel's responsibility to hone in on the precise dispositive elements of a case, concerning which "there is no genuine issue as to any material fact" . . . If an opponent's case is so weak that a wide choice of dispositive arguments is available, it should be easy to choose one or two of the best. Inundating the court with a veritable smorgasbord of issues from which to choose leads to the conclusion that a party is unable to articulate clear grounds for judgement as a matter of law.

Apparently, things didn't get better when it came time to deciding the motion. When Desire2Learn submitted to the court a listing of all pending dispositive motions in the case, as well as associated responses, replies, and sur-replies, the court took great exception to the fact that the "grand total" of pages for the 24 documents exceeded 8000 pages. Noted the court:

Based on an eight hour, five day work week, even if the court had devoted all of its time between October 4 and November 30 to the task, it would still have had to read more than 25 pages an hour in order to burrow through the mountain of motions generated by the parties.

Having had enough from both sides, Judge Clark denied all pending motions for summary judgment:

[E]very time the court attempts to delve into the substantive issues of the six dispositive motions filed by the parties between October 4 and October 224, it is almost immediately distracted by another discovery dispute or petty squabble over page limits.

Therefore, in order to secure the just, speedy and inexpensive determination of this action pursuant to Fed. R. Civ. P. 1, the court will deny all pending motions for summary judgment. Counsel on both sides are certainly skillful enough to focus the jury’s attention on the key issues at trial, where the main disputes between the parties can be fully aired. Disposing of these motions in this manner will also free the court to devote the necessary time and attention to the pre-trial motions which will almost certainly be forthcoming, as well as the still-pending Motions to Strike and Compel.

View order striking motion for exceeding page limitations (link)

View order denying summary judgment (link)

W.D. Wisconsin - Disclosure in Specification Limits Claim Term, Vitiating Infringement

Netcraft Corp. v. eBay, Inc. (3:07-cv:00254-bbc), December 10, 2007

Netcraft Corporation owns several patents related to internet billing methods. It argued that Ebay, Inc. and PayPal, Inc. are infringing its patents by providing a third party payment system to customers wishing to make secure purchases over the Internet.

Defendants moved for summary judgment, arguing that the phrase “providing a communications link through equipment of a third party” recited in in the patents imposes a limitation that a third party, such as a company like defendants, must provide internet access to the customer. It was conceded by plaintiffs that defendants do not provide their customers with access to the Internet.

The question in dispute was whether “providing a communications link through equipment of the third party” means providing Internet access to the customer. Defendants say it does; plaintiff says the phrase is not so limited.

The court noted that the claim itself does not define “communications link” the way defendants propose, and that the lay understanding of “communications link” is much broader than “internet access.” However, relying on the CAFC's Phillips decision, Judge Crabb noted that "courts cannot look at the claims in isolation or at just the lay understanding of them, but must consider the patent as a whole."

Turning to the patents,

The phrase “communications link” is never used in the specification, which is the same in both asserted patents, but the specification makes it unmistakably clear that the invention requires that the third party provide internet access to the customer. Because the phrase “communications link” is the only part of the claim that could incorporate this requirement, I construe “providing a communications link” to mean “providing customers access to the internet.”

The first two sentences of the abstract support this construction: “An Internet billing method comprises establishing an agreement between an Internet access provider and a customer . . . The provider creates access to the Internet for the customer.” Thus, the abstract is unambiguous: the third party intermediary is “an Internet access provider” and that provider does in fact connect the customer to the internet.

[T]he same understanding of the invention is repeated throughout the Summary of the Invention as well. In describing the invention, the patent states that “a provider establishes an agreement with a customer,” and even more explicitly that “the provider creates access to the Internet for the customer through the provider’s equipment." In countless instances, the specification refers to the third party as the “provider,” which plaintiff conceded at the claim construction hearing means “internet access provider.”

Interestingly, the plaintiff argued that the dependent claims explicitly recited an “Internet access provider," and that the independent claim would be "meaningless" under the proposed construction under the doctrine of claim differentiation. Nevertheless, the court remained unconvinced:

Plaintiff’s argument has some surface appeal, but I agree with defendants that a reasonable reading of claim 6 is that it simply lists examples of entities that may provide customers with access to the internet. Thus, in claim 6, “Internet access provider” means a company like America On-Line, “whose only business is to offer connection to the Internet,” the other examples, such as “a cable television company,” are entities that may offer internet access as an additional service.

This reading is supported by the specification, which contemplates in multiple locations the possibility that a cable television company or telephone company will provide the customer with internet access. E.g., ‘739 pat., col. 1, lns. 29-30 (“[T]elephone companies and cable television companies have announced plans to provide Internet access.”); id. at col. 2, lns. 64-65 (access to internet may be provided by “cable television companies” or “telephone companies”). In any event, plaintiff’s reliance on a presumption of claim differentiation cannot overcome the plain language of the patents.

Also of interest was the fact that the court made the construction without relying on the prosecution history:

Both sides advance arguments supporting their view of how the prosecution history informs the meaning of “communications link,” but it is unnecessary to consider those arguments when the patent itself is clear. Phillips, 415 F.3d at 1317 (“[B]ecause the prosecution history represents an ongoing negotiation between the PTO and the applicant, rather than the final product of that negotiation, it often lacks the clarity of the specification and thus is less useful for claim construction purposes.”)

View/download the opinion here (link)

Patent Shorts

USPTO Gets Funding Increase - the PTO has received a budget increase of about 9 percent for the government's 2008 fiscal year. The Office received the president's full funding request of $1.9 billion in a budget bill passed by the U.S. Congress in mid-December and signed by president Bush the day after Christmas. If you thought PTO fee diversion is dead, think again - currently there is nothing preventing Congress from diverting fees as 2008 progresses (link).

Summary Judgment Motions Filed in Tafas/Glaxo v. Dudas - in addition to 31 amicus briefs filed in support of Tafas/Galxo, and 16 amicii filed supporting the PTO, all parties have submitted their briefs for summary judgment. View Glaxo's brief (link), Tafas brief (link), and the PTO brief (link). Read more at the PLI blog (link).

A "Long-Felt, Unmet Need" Gem - Johnson v. Forty-Second Street, Manhattanville & St. Nicholas Ave. R. Co., 33 F. 499, 501 (C.C.S.D.N.Y. 1888):

It would be as irrational to charge an author who has produced a sentence of surpassing power and beauty with plagiarism, because the words which he employes have long been found in the lexicon, as to over-throw a patent for a new and useful combination upon the ground that its separate elements are old. By an ingenious assembling of known appliances this inventor solved the problem the solution of which had been sought for in vain through a long series of years. Although the goal was frequently in sight, it had never been reached; always some necessary requisite to success was lacking. The practical disentanglement of the difficulty was left to Newman. He made that a success which before had been tentative and rudimentary.

Courtesy of the Fire of Genius blog (link)

Viewing Patent Searches Visually - Check out PatentScrounger.com (link)