CAFC: DJ Plaintiff Must Take "Significat, Concrete Steps To Conduct Infringing Activity" To Satisfy MedImmune Test

Cat Tech LLC v. TubeMaster, Inc. (2007-1443), May 28, 2008

TubeMaster developed a method of putting catalyst into reactor tubes using loading devices. Tube Master designed four different configurations for its devices, and has generated detailed computer drawings drawings for each of its configurations.

Cat Tech sued TubeMaster for patent infringement when one of TubeMaster's four configurations was commercially released ("configuration 3"). TubeMaster counterclaimed seeking a declaration that the accused configuration, along with the other configurations ("configurations 1, 2, and 4"), did not infringe. On summary judgment, the district court found that none of the configurations infringed.

On appeal, Cat Tech challenged the district court's authority to issue a declaratory judgment on all the configurations.

Since the SCOTUS decision in MedImmune, declaratory judgments must satisfy 2 prongs: (1) the party seeking DJ must, "under all the circumstances, show that there is a substantial controversy, between the parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment"; and (2) show that there had been "meaningful preparation" to conduct potentially infringing activity.

Here, the DJ was not challenged on the first prong, but on the second prong, namely, that TubeMaster's "other configurations" were not developed enough to quality as potentially infringing activity. While MedImmune did not directly address the second prong, the CAFC concluded that "the issue of whether there has been meaningful preparation to conduct potentially infringing activity remains an important element in the totality of circumstances which must be considered in determining whether a declaratory judgment is appropriate."

Thus, if a declaratory judgment plaintiff has not taken significant, concrete steps to conduct infringing activity, the dispute is neither "immediate" nor "real" and the requirements for justiciability have not been met.

Immediacy

TubeMaster has taken significant, concrete steps to conduct loading activity with configurations 1, 2 and 4. It has developed two basic loading device designs - one with circular plates and one with circular plates with tabs - and has developed four loading device configurations. TubeMaster has generated AutoCAD® drawings for each of its four configurations . . . Because TubeMaster’s loading device designs are customized based upon the dimensions of each customer’s reactor, it can take no further steps toward manufacturing its loading devices until it receives an order from a customer with the appropriate dimensions.

TubeMaster has already successfully manufactured and delivered a loading device using configuration 3 . . . It is prepared to produce loading devices using configurations 1, 2 and 4 as soon as it receives an order with the appropriate dimensions. Furthermore, it expects that it can produce devices using these configurations "within a normal delivery schedule" once it receives an order. Constitutionally mandated immediacy requirements have been satisfied because once the threat of liability to Cat Tech has been lifted, it appears likely that TubeMaster can expeditiously solicit and fill orders for loading devices using configurations 1, 2 and 4.

Reality

In the context of patent litigation, the reality requirement is often related to the extent to which the technology in question is "substantially fixed" as opposed to "fluid and indeterminate" at the time declaratory relief is sought . . . TubeMaster’s technology is "substantially fixed." TubeMaster’s four basic loading device designs are designed "to cover virtually all of the reactor configurations that might be encountered at customers’ facilities." Thus, TubeMaster does not expect to make substantial modifications to its loading device designs once production begins. The dispute with Cat Tech is "real," not hypothetical, because it appears likely that, once the cloud of liability for infringement is eliminated, the accused products can be produced without significant design change.

AFFIRMED

CAFC: Notice Must Be Provided For JMOL When Factual Disputes Exist

Southwestern Bell Telephone Co. v. Arthus A. Collins, Inc. (2007-1577), May 27, 2008 (nonprecedential)

After a pretrial hearing, both parties briefed the district court on issues of prosecution history estoppel. The next day, in a telephone conference, the district court granted Southwestern Bell's motion in limine on prosecution history estoppel and also granted JMOL that one of the claim limitations ("randomly receive") was not literally present in the accused device. On appeal, Collins argued that the district court improperly ruled on noninfringement when it resolved the motion in limine on the limited issue of prosecution history estoppel.

The CAFC agreed with Collins:

The district court’s ruling cannot properly be considered one for judgment as a matter of law under Rule 50. Rule 50 only applies when a "party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue." . . . When the district court granted judgment "as a matter of law," trial had not even begun in this case. Collins had not been fully heard on the issue of the literal presence of the "randomly receive" limitation in the accused combination.

[I]n the Fifth Circuit, Rule 56(c) requires ten days notice to a non-moving party, even when summary judgment is granted sua sponte . . . This ten-day requirement is intended to allow the non-moving party "to make every possible factual and legal argument." . . . Collins did not receive ten days to make every possible factual and legal argument with respect to whether the accused combination literally satisfies the "randomly receive" limitation in claims 1-3 of the ’589 patent.

Prosecution History Estoppel - during prosecution, Collins stated in the record that amendments were made "to more particularly define the present invention and distinguish over the '621 reference." The CAFC noted that "[a]n amendment is directly, and not tangentially, related to patentability when an applicant’s narrowing additions to a claim along with an applicant’s own statements in the prosecution history indicate that the amendment was made to distinguish over a reference."

Reexamination for Improper Purpose - during reexamination of one of the patents-in-suit, Collins stated that additional amendments were made "to preclude any interpretation of the claims in accordance with the district court’s opinions . . . in the litigation with Nortel."

Under 35 U.S.C. § 305, a patent owner may propose an amendment to its patent to distinguish the claimed invention from the prior art or to respond to an adverse decision as to the patentability of one of the claims. Claim amendments during reexamination are limited to amendment in light of prior art raising a substantial new question of patentability. In this case, "Collins cannot use reexamination for the purpose of amending its claims to address an adverse claim construction . . . We therefore affirm the grant of summary judgment that claims 4-14 of the ’589 patent are invalid."

Singapore "Image Linking" Patent Causing Waves In The Web Community

Over the weekend, the IT blogosphere exploded (along with my inbox) over news of Singapore-based Vuestar Technologies' claim that they hold "significant Technology Patents focusing on Internet searching via visual images, identity security and copyright assets."

As you can probably guess, the claims to the technology have not irked people as much as the demand letters that started appearing in various mailboxes from Vuestar's Singapore legal counsel over the last few weeks (to see a copy of a typical letter, see here).

According to one source, "Vuestar has sent invoices for around S$5,000 (US$3,676) to various parties in Singapore asking them to enter into such license agreements, or to cease allowing images on a parties' Web site to be downloaded or used in Singapore . . . We believe that this development would have a wide-ranging impact on the Internet community in Singapore, given the wide claims made by Vuestar on the intellectual property covered by the patents . . . Parties operating Web sites, offering Web services or developing Web-based and WAP-based products and services need to be especially careful."

While the number of letters sent on behalf of Vuestar haven't been disclosed, one outside counsel for Vuestar allegedly remarked that there have been "enough to keep my phone busy." Also, while the current letter-writing campaign has apparently been focused on Singapore for the time being, VueStar will begin enforcing its patent claims in Australia and the US "soon", and the firm is working on sending "invoices" for Internet heavyweights like Google and Microsoft.

The Singapore Patent referenced in the letters is patent number 95940 - a copy of the patent, as downloaded from IPOS (in .tif format), can be viewed here. An exemplary claim follows:

A method for locating a web-page, the method including the steps of:

a user submitting a search request to a server-side application via a terminal;

the server-side application searching a database in accordance with the submitted
search request; and

identified database entries being transmitted to the terminal as a search results list, each entry containing a hyperlink to a web-page;

whereby, each entry of the search results list contains visual content, the visual content related to the web-page for which the entry contains a hyperlink, the user able to view the visual content without being required to activate the hyperlink to obtain the visual content, and contact information for an organization is provided as a component of an entry of the search results list.

Related filings have been made in the United States (Patent No. 7,065,520; Pub. Nos. 2004/049728, 2006/149721), Australia (AU 755035B2), Japan (JP 2004515846T), and Canada (CA 2421661A1). Most of these filings stem from WO 0229623A1, which can be viewed on eSpace here.

See:

"S'pore firm claims patent to image search", ZDNet Asia (link)

"No Love for VueStar" from Thinking Nectar (link)

"Imaging linking is patented, websites and blogs affected, Advertlets, Nuffnang and Blog2U may have to call it a day" Simply Jean Blog (link)

From Vuestar's webpage: "Among the billions of pages now on the worldwide web a new needle was needed to accelerate search capabilities. The Company had the foresight to realize that visual images held the key to penetrate the massive search and advertising opportunities for a market estimated to exceed online sales of over US$10 billion dollars per quarter."

Another Critical Study on Inter Partes Reexamination

Heralded as an "alternative to litigation," recent research strongly suggests that Inter Partes Reexamination has become "an augmentation of litigation strategy rather than an alternative" (more than half (52%) of patents in inter partes re-exams are known to be in litigation during that time). People from the recently formed Institute for Progress (IFP) have published a study titled "Reexamining Inter partes Reexam" to look more closely at the statistics, and what they found doesn't look good.

Since 2003, Inter Partes Reexams have experienced a sixfold increase, and the PTO has acknowledged this increase, and promised early on that steps would be taken to properly accommodate requestors and patent holders to reduce pendency. In December of 2007, the PTO attested that the average pendency of Inter Partes Reexams was 28.5 months. However, according to the IFP study, the 28.5 month pendency was based mostly on reexaminations where the patent holder failed to respond to the Office Action.

When all Inter Partes Reexams are analyzed, the IFP study concludes that "[w]hile mathematically accurate, the pendency statistic provided by the USPTO is highly misleading . . . It takes significantly longer to get to a resolution if the patent holder participates in the process."

According to the study:

Based on our calculations, it takes more than 3 ½ years (43.5 months) for the average case to proceed through the basic reexam process to a final conclusion – this assumes that the case is not appealed to the BPAI or beyond. A 95% confidence interval suggests a range of between 34 and 53 months for average pendency for an un-appealed inter partes reexam . . . average pendency (assuming no “rework” by the patent office and no secondary appeals to the BPAI, the Federal Circuit, or the Supreme Court) is 78.4 months – slightly longer than 6.5 years. A 95% confidence interval suggests an average pendency for appealed cases (again, assuming no rework) is between 5 and 8 years (60-97 months)! Given that the only three inter partes reexam cases that have received a BPAI decision all require further “rework” and are subject to further appeal, these estimates may be highly conservative.

Other findings in the comprehensive study conclude:

The inter partes reexamination process is not linear: While the majority of patents follow the main sequence (Request ---> Grant ---> Non-final Office Action ---> ACP ---> Reexam Certificate), some cases skip steps, and others repeat steps multiple times.

One-quarter of all inter partes reexam decisions are appealed, but none has ever proceeded through appeal to the end of the process: Through mid-April 2008, only nineteen cases have ever proceeded past the Notice of Right to Appeal. Of these, approximately one-quarter (5 cases - 26%) have been appealed to the BPAI, one case (~5%) went back for another Action Closing Prosecution, and the remaining 13 cases (68%) moved on to “Intent to Issue a Reexam Certificate."

The study concludes:

The inter partes reexam process requires special attention by the U.S. Patent Office. At present, the time to complete these cases far exceeds the expectation of “special dispatch” embodied in the patent statute. Federal judges, administrative law judges, and litigants should take special note of these facts as they can significantly impact the progress of patent litigation.

Download a copy of the study's report here.

Download the research statistics accompanying the report here.

Hat tip: Joff Wild

Protective Orders and Reexamination Requests (W.D. Wis.)

In an interesting order from Silicon Graphics v. ATI Technologies, Inc., No. 06-cv-611-bbc (W.D. Wis., April 22, 2008), a situation arose where the defendants and the plaintiff expressly agreed to a protective order to limit the use of confidential information related to the patents-in-suit.

A reexamination request was filed while litigation was pending. The defendants sought a stay based on the reexamination but were denied since the court case "was on track for resolution well before any reexamination proceedings could be completed."

During discovery, defendants uncovered certain non-public documents issued to the PTO relating to a continuation application that stemmed from a patent-in-suit. The defendants were convinced that this information undermined the validity of the patent, and made an effort to pass this information to non-litigation counsel. As part of the effort, defendants motioned the court to modify the protective order and allow the disclosures to take place.

Not only did the magistrate judge deny the defendant's motion (which is not terribly surprising), but went further to sanction the defendants for proposing the modified order in the first place, in light of the signed protective order:

Defendants wanted an exemption from the protective order to allow its litigation team to disclose to defendants’ in-house decisionmakers and non-litigation counsel certain non-public documents issued to the United States Patent and Trademark Office relating to plaintiff’s prosecution of a continuation application based on the ‘327 patent (a patent at issue in this case). Defendants’ litigation counsel believed that these documents show that the original ‘327 patent should never have issued. If the documents were disclosed to defendants and outside counsel, it was litigation counsel’s opinion that the documents would help defendants decide whether to ask the PTO to reexamine the ‘327 patent. It is not surprising that the magistrate judge saw this request for a modification as not “substantially justified.” Defendants argued that they had no way of knowing when they signed the order that they might discover information that would bear on matters outside the litigation; this argument did not make their case for disclosure any stronger.

The more interesting question is whether the magistrate judge was correct when he imposed fees on defendants for bringing the motion and when he directed the legal teams of both parties to wall themselves off from their clients “to prevent the dissemination of legal advice on other matters that might be tainted by information gained from reviewing the opposing party’s confidential information.” Defendants argued that a motion to modify a protective order does not come within Fed. R. Civ. P. 37(a) so as to be subject to a monetary sanction, but they did not support their argument with any case law. Nothing in the rule suggests that it does not apply to contested motions to modify a protective order and, as the magistrate judge pointed out, the Court of Appeals for the Seventh Circuit has awarded fees in Rickels v. City of South Bend, Ind., 33 F.3d 785, 786 (7th Cir. 1994), a case involving a protective order.

It is perfectly possible to imagine a motion for modification of a protective order that is so innocuous that it would not merit an award of fees. The modification that defendants sought was far from innocuous and for that reason, bound to provoke a hard-fought defense from plaintiff. The fees that the magistrate judge imposed were appropriate, given the importance to plaintiff of insuring that the protective order was not modified to allow plaintiff’s confidential information to be employed in a new forum as defendants were proposing.

View the opinion here (link)

Weekend Shorts - CAFC Statistics, China, Patent Reform, and New IAM Publications

State of the Federal Circuit: On May 15, 2008,Chief Judge Michel addressed the Federal Circuit Judicial Conference and gave a "State of the Court" speech on the CAFC. The transcript, along with some statistical charts, may be downloaded here (link). Some of the interesting factoids include:

• Despite over 100 Petitions for Rehearing En Banc each year (slide), the CAFC grants approximately zero to one each year.

• According to Chief Judge Michel, "[d]espite news reports of a surge in the last three years in the Supreme Court review of our patent cases, the data shows little change (slide). I believe these data illustrate how well our panels do in nearly all appeals."

• Cases continue to move faster in the CAFC. The court now approaches the ideal of achieving a disposal rate such that if no new appeals were filed, the CAFC would conclude all pending appeals in just six months (which is the standard recommended by the ABA).

Patent Filings in China: Domestic patent filings continue to skyrocket; this year, China becomes the first country to break the 700,000 patent filings per year barrier. Protection of design patents continues to be an untapped resource for foreign filers - the U.S. and other foreign entities make up about 5% of the 270,000 Chinese design patent applications. View the latest statistics from SIPO here (hat tip to professor Hal Wegner).

Bush Administration Looks to Re-Ignite Patent Reform: U.S. Secretary of Commerce Carlos Gutierrez reportedly met with technology leaders in San Jose to discuss ways in which Patent Reform can be salvaged for this year. According to Gutierrez, "arguably the first serious effort in 50 years to systematically improve our innovation pipeline has stalled in the Senate, in large part because of an inability to agree on how patent holders should be compensated in cases of infringement." View last week's op-ed piece in the Mercury News here.

Two New IAM Publications Available (Free) Online: (From the IAM Blog) IAM has just published two guides, both of which are available online and completely free of charge:

• Brands in the Boardroom, released to coincide with next week’s INTA meeting in Berlin, examines how Playboy and E&J Gallo manage their respective brands portfolios, and also takes an in-depth look at Google’s controversial AdWords program. In addition, there are a series of other articles detailing key trademark issues in some of the world’s major jurisdictions.

• Patents in Europe, first made publicly available the other week at the European Patent Forum in Ljubljana, has been produced in association with the European Patent Office. The publication is divided into two parts: in the first, chapters – including an introduction from EPO President Alison Brimelow – look at recent developments inside the EPO and in Europe generally; in the second, there are detailed guides on how patent litigation is conducted in 21 European jurisdictions, including all the big players.

For more info, see here.

CAFC: Lack of Diligence Does Not Convert PTO Error Into An Applicant Error

E.I. DuPont v. MacDermid Printing Solutions (2007-1568), May 14, 2008

When DuPont asserted its patent and sought a preliminary injunction, MacDermid countered that the patent was invalid for public use prior to the 102(b) critical date. While DuPont initially conceded the critical date, a closer examination discovered that the patent stemmed from a provisional application that was listed in the application, but priority was not properly claimed due to a PTO oversight. DuPont successfully petitioned for correction, and continued with the litigation.

MacDermid argued that DuPont was not entitled to the provisional application because (1) the non-provisional application names inventors not named in the provisional application; (2) DuPont did not use the “proper language” in claiming priority to the provisional; (3) the filing receipt, published application, and issued patent did not reference the provisional, showing that the PTO did not recognize priority to the provisional; (4) DuPont did not alert the PTO that the priority information was missing until the patent issued; and (5) the Certificate of Correction that added the priority information was wrongly issued. MacDermid also argued that it would be unfairly prejudiced by DuPont’s change of position.

The district court found it could not grant a preliminary injunction on the record because DuPont did not sufficiently prove it was entitled to the earlier critical date, and that DuPont's earlier admission as to the later critical date raised a substantial question as to validity.

On appeal, the CAFC found that the lower court abused its discretion on the issue of priority. It was particularly significant that, while priority wasn't formally claimed, the Application Data Sheet on the non-provisional application identified priority to the provisional application. Noted the court, "[s]ince MacDermid admittedly was aware of the provisional application, it is difficult to see how MacDermid would be prejudiced by its consideration in evaluating validity."

With regard to the other issues, the CAFC found that the provisional application shared one common inventor (see MPEP 201.03), had supporting disclosure under section 112, and was filed less than one year before the nonprovisional application. Accordingly:

The only issue is the legal significance of these facts, i.e. whether the non-provisional application is entitled to claim the priority date of the provisional application. Determination of the priority date (e.g., the effective filing date) is purely a question of law if the facts underlying that determination are undisputed . . . it is unclear what necessary evidence the district court thought was missing from the preliminary injunction record.

With regard to DuPont not using the "magic"(i.e. PTO-approved) language for priority,

Here, rather than the precise language suggested in the MPEP, the ADS in the non-provisional application stated: “Continuity Data: This application is a non-provisional of provisional 60/273669 2001-03-06 WHICH IS PENDING.” Contrary to MacDermid’s argument, this reference did not run afoul of the MPEP by failing to use magic words. The MPEP provision requires only that the applicant use a statement “such as” the one provided in Section 201.11. A reasonable person reading the language in the ADS would have concluded that the applicant was claiming priority to an earlier provisional application. Thus, we find no defect in the language used to reference the provisional application here.

And with regard to the certificate of correction:

By putting the continuity data in the ADS, DuPont expected that the PTO would capture the information and place it on the title page of its patent. As MacDermid notes, however, there were some indications during prosecution that the PTO had failed to capture the information. MPEP § 201.11. We hold that a lack of diligence during prosecution, at least under the facts of this case, does not convert a PTO error into an applicant error for the purpose of seeking a post-issuance certificate of correction.

VACATED AND REMANDED

Congress Requests Answers From The USPTO; Rough Times Ahead?

"The ancient Romans had a tradition: whenever on of their engineers constructed an arch, as the capstone was hoisted into place, the engineer assumed accountability for his work in the most profound way possible: he stood under the arch."

-- Michael Armstrong

On April 29, Howard Berman, Chairman, Subcommittee on Courts, the Internet, and Intellectual Property shot off a letter to USPTO Director Jon Dudas, asking some rather pointed questions on USPTO management and practice. What is apparent from the letter is that someone (or some group) has gotten the ear of Congress and is publicly unleashing some pent-up grievances held by practitioners against the PTO.

Of course, there is no hellfire and brimstone in Berman's letter, but is is clear from the tone that something doesn't smell quite right to the Congressman (e.g., pointing out multiple PTO shortcomings, referring to "USPTO estimates" in quotations), and you can feel the sweat rolling off your brow if you imagine yourself being tasked with answering the questions posed.

Some of the highlights of the letter:

• According to the recent GAO report titled "Hiring Efforts Are Not Sufficient to Reduce the Patent Application Backlog, " the GAO found that the USPTO cannot hire enough patent examiners to reduce patent pendency in the next five years. 1t seems, however, that this projection is based on estimates provided by the USPTO. . . . Please provide all data related to these "USPTO estimates, " including mathematical models, and underlying statistics and assumptions such as examiner retention and productivity. Under these same assumptions, hypothetically, how many patent examiners would have to be hired in the next five years in order to reduce the patent backlog?

• After release of the above mentioned GAO report, the USPTO issued"a press release on October 4, 2007 that stated the USPTO would"review assumptions the agency uses to establish production goals for patent examiners." (See attachment 5). Then, before the Subcommittee, Director Dudas confirmed that the USPTO has begun to study patent examiner production goals. Please provide details on the methodology of the study and personnel conducting it. What is the current progress of the study and when can Congress expect the study to be completed? To what extent is the Patent Office Professional Organization and the Patent Public Advisory Committee involved in this study?
  

• As evidence of greater quality, Director Dudas mentioned in his testimony that in 2000, 70% of all applications led to a patent while in the first quarter of2007, only 44% ofall applications led to a patent. How did the USPTO account in these statistics for Request for Continuing Examination (RCE) applications, continuation applications and the applications that had to be abandoned in order to file continuation applications?
  

Also a question from Representative Darrell Issa:

• Examination on Request (or, as the USPTO called it, Deferred Examination) is used in many countries such as Canada and Japan. Under such a system, applications are not examined automatically, as in the U.S., but only upon a specific Request for Examination within a set time period, say 3 years. If no request is filed within that period, the application is deemed abandoned and is never examined. From experience of other patent offices, 10% to 40% of applications are never examined under Examination on Request systems, resulting in substantial workload reduction. This is due to applicants' voluntary abandonment of obsolete applications prior to the Request for Examination deadline. Under current USPTO practice, applications that become obsolete, but receive examination by the USPTO, are the worst investment the USPTO can make because their obsolescence means that the patents are unlikely to fetch any renewal fees.

• Why did the USPTO reject such a method that has the potential to reduce its workload and increase efficiency?
  

Last, but not least, it appears that "RIM-Gate" continues to hound the PTO. From Berman's letter:

• According to a Time article dated April 2, 2006, and supported by an email allegedly from James Toupin dated January 3, 2005, senior USPTO officials met with Research in Motion (RIM) CEO Jim Balsillie while a reexamination concerning patents owned by NTP and at issue in a lawsuit filed by NTP against RIM, was before the USPTO (See attachments 10 and 1I). Did this meeting take place? What was discussed at this meeting? What is the USPTO's policy concerning ex parte communications between senior USPTO officials and parties who have an interest in the outcome of proceedings before the Office? In what other instances, if any, did senior USPTO officials engage in similar ex parte communications with parties that had an interest in the outcome ofa proceeding being conduct before the Office?
  

For more information, see Patently-O (link), and also take a good look at NTP's April 2006 response during reexamination (hint: start at page 74), where many of the juicy bits are displayed for the public.

Download a copy of Berman's letter here (link)

Updates on Congressional IP/Legal Legislation

House Passes H.R. 4279 - Last Thursday, the House passed H.R. 4279, titled "Prioritizing Resources and Organization for Intellectual Property Act of 2008" (PRO-IP). While patent reform continues to stumble, copyright protection is getting stronger than ever. Under H.R. 4279, federal copyright law would be amended to:

(1) provide a safe harbor for copyright registrations that contain inaccurate information;
(2) provide that copyright registration requirements apply to civil (not criminal) infringement actions;
(3) require courts to issue protective orders to prevent disclosure of seized records relating to copyright infringement;
(4) revise standards for civil damages in copyright infringement and counterfeiting cases; and
(5) prohibit importing and exporting of infringing copies of copyrighted works.

Also, the federal criminal code would be amended with respect to copyrights/TM's to:
(1) enhance criminal penalties for infringement of a copyright, for trafficking in counterfeit labels or packaging, and for causing serious bodily harm or death while trafficking in counterfeit goods or services; and
(2) enhance civil and criminal forfeiture provisions for copyright infringement and provide for restitution to victims of such infringement.

- View a copy of H.R. 4279 here.

Upcoming Amendments to Attorney/Client Privilege (S. 2450) - While this isn't necessarily "new", it is worth noting that amendments to the Federal Rules of Evidence were approved last February in the Senate, and continue their way through the House. Under S. 2450, the Federal Rules of Evidence would be amended with respect to the disclosure of a communication or information covered by the attorney-client privilege and work product protection.

The proposed legislation provides that, when such a disclosure is made and waives the attorney-client privilege or work-product protection, the waiver extends to an undisclosed communication or information in a federal or state proceeding only if: (1) the waiver is intentional; (2) the disclosed and undisclosed communications or information concern the same subject matter; and (3) they ought in fairness to be considered together.

Also, when the disclosure is made, it does not operate as a waiver in a federal or state proceeding if: (1) the disclosure is inadvertent; (2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and (3) the holder promptly took reasonable steps to rectify the error.

- View a copy of S. 2450 here

Friday Shorts: Bilski, Troll Tracker, Patent Reform

Bilski Oral Arguments Aweigh! Yesterday, the CAFC heard oral arguments for In re Bilski, No. 2007-1130 to consider what, and what is not, patentable subject matter. To listen to an MP3 of the oral arguments, click here.

Eyewitness accounts are rolling in - over at the PLI Blog, Gene Quinn has a good play-by-play of the oral arguments (link). Josh Sarnoff over at the AU Program on Information Justice and Intellectual Property Blog (link) has an eyewitness account and some additional thoughts. Charley Mecedo kindly emailed me his account of the argument

InformationWeek also has an article here (link), and the Associated Press weighed in here (link).

No one has a sense of how the CAFC will exactly rule on this issue. The consensus, at this point, is that State Street will likely be intact, software will still be patentable, and we can expect another layer of analysis to be added to the onion skin of patentable subject matter (e.g., post-solution activity, etc.).

Patent Troll Tracker Litigation Update: Joe Mullin has the latest on the fireworks surrounding the defamation lawsuit against Frenkel (aka The Patent Troll Tracker). There's a lot in his latest post (link), including commentary from none other than Ray Niro.

Is Patent Reform Getting Ready For a Tapout? From the Economist: "While the arguments rage in the courts, Congress seems content to do nothing at all about patent reform. On May 5th the Senate removed the bipartisan Patent Reform Act from its calendar."

D.C. District Court Unleashes On Patent Holding Company

In Re Papst Licensing GMBH & Co. KG Litigation, District Court For the District of Columbia, May 6, 2008, Misc. Action No. 07-493 (RMC)

A spat broke out between the parties during discovery that resulted in an order levying multiple sanctions against the patent holder, Papst. Papst objected to the Magistrate Judge’s ruling that it waived all objections based on attorney client privilege, consulting expert privilege, protection under the work product doctrine, and relevance and that Papst is liable for monetary damages. Papst asserted that waiver is too harsh because Papst’s conduct grew out of a misunderstanding of the court order for discovery “to proceed.”

Needless to say, Judge Collyer was not pleased with Pabst's litigation tactics, and was certainly not swayed by the objection:

Before addressing the merits of the parties’ positions, the Court describes the nature of the parties and this litigation to put this matter in context. Casio USA sells digital cameras in the United States. Papst is a German company that produces no products; it acquires patents on products or methods allegedly invented by others and then searches the world for patents it might challenge for infringement. At one of the first status conferences of the MDL, when the Court queried whether this was old-fashioned “claim-jumping,” counsel for Papst readily agreed that it had been called worse. Of course, this is a perfectly lawful and respectable business. But it underscores that the business of Papst is litigation, not invention or production. Litigation is the business model whereby Papst, when successful, achieves royalty payments from others. As is clear from this record, the threat of litigation alone often achieves royalty payments.

* * *

The Court finds that waiver of privileges is not too harsh a sanction under the circumstances presented here. Papst’s failure to respond to Casio USA’s discovery requests, as directly ordered, was entirely unjustified and inexcusable and smacks of bad faith. How difficult is it to understand a district court order that discovery is “to proceed”? Were there any doubt, Papst might have inquired. It did nothing. It merely delayed—a delay that continues, in part, to this day. It may be a successful business model, when the “business” of a business is litigation, to interpose delay at any possible opportunity. Delay costs money to opponents and may, in the end, cause an opponent to settle a case. Ultimately, Papst offers no good reason why its experienced counsel should be allowed, without sanction, to ignore totally a court order on which they had been heard fully.

Accordingly, Papst is required to respond to Casio USA’s initial discovery requests without objection based on attorney client privilege, consulting expert privilege, or attorney work product. Casio has agreed, and there is now a Protective Order entered by the Court, that will shield Papst’s confidential documents from public display.

* * *

Finally, Papst argues that the sanction requiring it to pay Casio USA’s costs and attorney’s fees is unjust. Again, Papst contends that it was merely mistaken regarding its interpretation of the district court’s order for discovery “to proceed.” As explained above, this contention by Papst’s experienced counsel is not credible. The sanction shall remain in place.

Download a copy of the opinion here.

Thomson Reuters Publishes New Study on Patents and Innovation

Thomson Reuters recently published two issues of World IPToday, analyzing global patent activity and technology innovations for2007. The first report, "World IP Today: A Thomson Reuters Report On Global Patent Activity in2007" highlights patent output from the G8 countries (Canada, France, Germany,Italy, Japan, Russia, the United Kingdom and the United States) plus Chinaand South Korea. The findings indicate:


• Global patent activity has grown by 21% between 2003 and 2006, with 2007 shaping up as another year of growth for patents.

• Japan is still the world’s leading filer of patents, but continues to decline slowly. Its lead over the U.S. and China is eroding as their patenting activity increases.

• Academic innovations are at their highest ratio in China and Russia where they represent nearly 25% of total patenting activity.

• South Korea safeguards more inventions worldwide than ever before, while the U.S. has greatly
decreased the number of patents it files across the key patent regions.

To download a copy of the report, click here.

The second report, World IP Today: A Thomson Reuters Report On Global Technology Innovationsin 2007, reviews technology innovations developing globally in 2007, highlighting tri-lateral inventions or inventions that have been filed in theU.S., Europe and Japan. Among the key findings:

• Four areas of technology are truly exemplary in protecting high volumes of inventions: consumer electronics, computing, telecommunications and entertainment and business services technology.

• Protection for computing inventions in the three largest markets, Japan, the U.S. and Europe, has been more prevalent than in other technology sectors.

• Innovation within the computing industry is far more evenly distributed between countries than with other technologies.

• Of the top ten patent assignees based on innovations filed in the United States, Europe and Japan during 2007, most are from Japan.

• When the technology produced by the top ten patentees were further analyzed, some
interesting changes were found in the volumes between 2001 and 2007. Specifically, there has been a significant drop in innovation within the industrial and audio/visual and data recording sectors, as well as a dramatic fall in the semiconductors field which decreased by 26% between 2001 and 2007.

One interesting note is that patenting in the computer industry "is far more evenly distributed between the countries than with other technologies." Notes the report:

Here, Japan and the U.S. comprise only about 40%, whereas in other disciplines these two countries normally hold about 60% of the global patenting. This shows that generally patenting organizations feel that protecting computing inventions in the three largest markets, Japan, the U.S. and Europe, is much more important for innovation within computing than in other technology sectors.

Also, the report tabulates the top ten patent assignees based on innovations filed in the U.S., the EU and Japan during 2007. The "top ten" list includes:

(1) Konink Philips Electronics NV
(2) Matsushita Electric Ind. Co. Ltd.
(3) Sony Corp.
(4) Samsung Heavy Ind. Co. Ltd.
(5) Canon KK
(6) General Electric Co.
(7) 3M Innovative Properties Co.
(8) Bayer AG
(9) Hitachi Ltd.
(10) Siemens AG

Download a copy of the report here.

CAFC: Unasserted/Cancelled Claims are "Probative Evidence" of Embodiments Covered

PSN Illinois, LLC v. Ivoclar Vivadent, Inc. (2007-1512)

After reexamination, PSN was left with a single claim in a patent covering a method of fabricating porcelain veneers for teeth. The method recited the step of eroding away a "statute" of a tooth from a porcelain veneer restoration "leaving said restoration ready for mounting on said tooth." The claim language did not define what was meant by "ready for mounting," and the specification provided no explicit definition.

While the summary of the invention provided additional examples of a restoration that was "ready for mounting," the district court focused on a preferred embodiment in the detailed description, which was stated to be "a feature of this invention." Taking this narrow construction, the district court granted summary judgment of noninfringement.

On appeal, the CAFC found the district court incorrectly placed greater weight on the detailed description, noting that the detailed description expressly provided that the embodiment "may" be used when performing the claimed method. Also, PSN cited the recent CAFC case of Oatey Co. v. IPS Corp., 514 F.3d 1271, 1277 (Fed. Cir. 2008), which held that

At leas[t] where claims can reasonably [be] interpreted to include a specific embodiment, it is incorrect to construe the claims to exclude that embodiment, absent probative evidence on the contrary (emphasis added).

While finding discrepancies in the claim construction, the CAFC nevertheless found that "'ready for mounting' can and should be construed in a way that encompasses the preferred embodiment."

We note that Oatey is not a panacea, requiring all claims to cover all embodiments. Instead, courts must recognize that disclosed embodiments may be within the scope of other allowed but unasserted claims. Likewise, during prosecution, an applicant may have cancelled pending claims but not amended the specification to delete disclosure relevant only to the cancelled claims. In such cases, unasserted or cancelled claims may provide "probative evidence" that an embodiment is not within the scope of an asserted claim.

AFFIRMED

New Precedential KSR Decision From the BPAI

Ex Parte Fu (Appeal 2008-0601), March 31, 2008

In a somewhat unremarkable, yet meaningful decision, the BPAI upheld a 103 rejection on an application related to an electrostatographic imaging member having a charge transport layer containing a specified surfactant that reduces crystallization of the charge transport layer material. The charge transport layer element was recited in the claim as "consisting of" specific compunds.

The rejection was based on a primary reference (Yamamoto) that taught most of the features recited in the claims, except that a generic surfactant was disclosed, without specifying any particular compound. Secondary references were relied on to show that the claimed compounds were used in charge transport materials.

While recognizing the broad genus disclosed in Yamamoto, the BPAI nevertheless determined that the genus was finite, and thus qualified as 103 art under the circumstances:

While Yamamoto's genus of surfactants is arguably broad, it nevertheless consists of only a finite number of known perfluoroalkyl surfactants that predictably solve the dispersion problem of the charge transport agent into the binder resin. Accordingly, a person having ordinary skill in the art would have had "good reason to pursue" the use of GF-300, the claimed surfactant species. It would have been within the "technical grasp" of that person having ordinary skill in the art to understand that this known surfactant, which was readily available in commerce, has the
perfluoroalkyl group as required by Yamamoto.

The most noteworthey part of the BAPI's rationale in this case is that the disclosure of the genus alone would be grounds for obviousness:

Because that person having ordinary skill in the art would have "anticipated success" in trying GF-300 perfluoroalkyl surfactant in view of Yamamoto's teachings, the subject matter of appealed claim 1 would have been prima facie obvious over Yamamoto alone.

Adds the BPAI:

We expressly reject the notion that a claim reciting a species is per se patentable when the prior art discloses a genus encompassing a broad but finite number of known options which include the claimed species. We hold that such aper se approach would be contrary to the clear command of our reviewing court [In re Ochiai, 71 F.3d 1565, 1572 (Fed. Cir. 1995)("[R]eliance on per se rules of obviousness is legally incorrect and must cease.")]. That is not to say, however, that an applicant would never be entitled to a patent in a situation as here. For example, KSR and Graham, as well as a myriad of precedents of our reviewing court, teach that secondary considerations such as unexpected results may confer patentability. Also, for example, patentability may be shown if the prior art teaches away from the species within the genus. But here, Appellants did not rely on any such persuasive evidence in support of nonobviousness.

AFFIRMED

Download a copy of the opinion here.

USPTO / EPO / JPO Progress on "Common Application Format" For Expedited Examination

The USPTO, EPO and JPO have been meeting for a while to establish an application format for expediated examination among the offices. Recently, the offices signed a "memorandum of understanding" that allowed a framework for applicants to prepare a single application in a common application format for acceptance in each of the three offices.

Under the BasicPriciples of that Trilateral Work Group, "An application which complies with the Common Application Format shall be accepted without any further amendment by any of the Trilateral Offices as a national/regional application as far as the agreed-upon formal requirements are concerned. Each of the Trilateral Offices may provide requirements which are more favorable for applicants than the requirements provided for by the Common Application Format."

The USPTO released a Pre-OG Notice providing more details on the format that will allegedly "simplify and streamline application filing requirements in each Office to allow applicants to prepare a single application in the common application format for acceptance in each of the three Offices."

The USPTO confirms that the Common Application Format is consistent with current USPTO rules and procedure, and, while some of the requirements of the Common Application Format (CAF) go beyond what the USPTO requires, the USPTO will accept an application in the Common Application Format.

The EPO is planning to implement the (CAF) in the beginning of 2009. Paper, PDF and XML format will be accepted. The JPO is preparing for the introduction of CAF in early 2009, except that the sequence listing is a separate part of the description and that the request contains the number of the figure of the drawings which the applicant suggests should accompany the abstract are scheduled to be introduced in 2011.

For more background on the Common Application Format, see the "Website of the Trilateral Cooperation" with the links to the following information from November 20, 2007:

Basic Principles of the Common Application Format

Annex I: Common Requirements for All Types of Documents

Annex II: Comparative Table of Examples for Each Type of the Applications

As noted by Patent Docs on April 28, 2008, Annex I previously clarified that:

• Applicants will not be required to remove National Legends (i.e., cross references to related applications and statements regarding federal funding) from the description.
• A statement of industrial applicability shall be included when it is not obvious from the description or nature of the invention.
• Applicants will not be required to remove any reference citation list from the description.
• Applicants shall use the International System of Units (SI) in the description, but may use additional alternative unit systems as long as SI units are placed in parentheses.
• Paragraphs of the description (but not the title or section headings) shall be numbered consecutively using Arabic numerals.
• Mathematical or chemical formulae shall be preceded by a sign indicating that the formula is mathematical ("Math.") or chemical ("Chem."), followed by a space, and then by an Arabic numeral (e.g., Chem. 1).
• Tables shall be preceded by a sign indicating that the table is a table ("Table"), followed by a space, and then by an Arabic numeral (e.g., Table 1).
• Claims shall be preceded by a sign indicating that the claim is a claim ("Claim"), followed by a space, and then by an Arabic numeral (e.g., Claim 1).

Hat Tip: I/P Updates - for more info and examples of application format, click here.

New Study On Claim Construction Reversal Rates

"Learn from the mistakes of others - you can never live long enough to make them all yourself"

- John Luther

With all the talk of claim construction and CAFC reversal rates, Professor David Schwartz from the John Marshall Law School set out to see if there was any empirical data that could signal a possible solution to the courts and the claim construction conundrum (the "Safire-esque" sound to this phrase is purely coincidental). Specifically, a core premise of the U.S. legal system is that legal doctrine is taught by the higher courts, and applied by the lower courts (i.e., the "teacher-learning theory"). Applying this theory to the CAFC, the court would presumably teach district courts how to construe claims, and they would apply CAFC tautology to a given set of facts to achieve a relatively predictable result.

However, this is clearly not happening, especially on issues of claim construction. Professor Schwartz poked at some statistics to see if he could uncover why. A few of his findings follow.

Active Judicial Districts

Theory: Jurisdictions that appear the most before the CAFC on claim construction issues would absorb the most institutional knowledge and, thus, have the more accurate take on claim interpretation during litigation.

Finding: Not really. In fact, the second busiest district (C.D. Cal.) had the highest reversal rate of claim construction (43.5%). The most active judicial districts, appearances at the CAFC on claim construction, and % of claim construction appeals reversed or vacated because of claim construction error are:

(1) N.D. Cal. - 84 (28.6% reversed or vacated)
(2) C.D. Cal. - 69 (43.5% reversed or vacated)
(3) N.D. Ill. - 65 (26.2% reversed or vacated)
(4) D. Del. - 54 (22.2% reversed or vacated)
(5) S.D.N.Y. - 45 (28.9% reversed or vacated)
(6) D. Mass. - 42 (26.2% reversed or vacated)
(7) D. Minn. - 33 (36.4% reversed or vacated)
(8) E.D. Mich. - 29 (31.0% reversed or vacated)
(9) D.N.J. - 28 (32.1% reversed or vacated)
(10) E.D. Va. - 27 (22.2% reversed or vacated)
(11) N.D. Tex. - 21 (42.9% reversed or vacated)
(11) S.D. Tex. - 21 (23.8% reversed or vacated)
(13) W.D. Wisc. - 19 (21.1% reversed or vacated)
(14) W.D. Wash. - 18 (38.9% reversed or vacated)
(14) D. Col. - 18 (27.8% reversed or vacated)

Thus the average % of cases reversed or vacated among the top 15 is about 30.12%, and 4 out of the top 10 exceed this amount. Since Markman, 32.4% of overall claim terms were "wrongly" construed by the lower court, and 38.2% of cases had at least one term wrongly construed. Moreover, 30% of cases overall had to be reversed, vacated or remanded because of an erroneous claim construction. As a point of reference, the CAFC's overall reversal rate of district court judges' judgments in patent cases was 13% for each of the years 2004-06.

Number of Previous Appeals

Theory: A district court judge with more prior CAFC feedback should have a lower reversal rate than a judge with less experience.

Finding: "There does not appear to be a clear trend that the reversal rate decreases when a district court judge appears multiple times before the Federal Circuit on claim construction."

Looking at judges having 1, 2, 3, 4, or "5 or more" previous appeals, the reversal rates appear to be the same throughout, with the exception of judges that had exactly four prior claim construction appeals. In this case, the chances of an erroneous claim constructions upticks to 56.7%, and the chance of a case being reversed or vacated jumps to 50%.

Prior Reversals

Theory: When a particular district court judge has been reversed, vacated or remanded at least once due to an erroneous claim construction, the judge will "learn the lesson" and perform better on subsequent constructions.

Finding: "The first reversal does not have a substantive or statistically significant effect on future performance . . . It does not appear that district court judges improve their claim construction accuracy after their first reversal from the Federal Circuit."

Judges With Experience

The paper also looked at Judges with the most patent experience, and overall judicial experience. While a slight decrease was detected for judges with the most overall experience, no substantive effects were detected.

Age of Judges

Interestingly, the trend in reversal rates generally decrease until the district court judge is 70 years old. Thereafter, the reversal rate spikes to nearly 35-40%. One possible explanation for this is that judges seventy or older are more likely to have taken senior status, and that senior status affects claim construction accuracy.

The study concludes:

As to the specific problem in patent law, the article points to three possible explanations for the lack of improvement: (1) an indeterminate nature of claim construction; (2) a failure of the Federal Circuit to teach properly how to construe claims; and (3) a failure of district court judges to learn claim construction. The data suggests that quasi-specialized patent trial judges, as proposed in pending legislation, will not automatically reduce the reversal rate . . . Further, with regard to the court system more broadly, the data leads one to consider whether the teaching-learning hypothesis should be revisited. Further empirical studies should be considered to see if what is happening in the patent context, namely a failure to learn or teach, occurs in other areas of law. If trial courts do not learn from appellate courts, a different model of understanding the entire court system, not just as applied to patent law, may be necessary.

Download a draft copy of Professor Schwartz's paper here (70 pages).