The First Domino? C.D. Ca. Invalidates Business Method Patent Under Bilski

Fort Properties, Inc. v. Master Lease LLC, (SACV07-365 AG) C.D. Ca., January 22, 2009

Fort Properties filed suit against Master Lease, seeking a declaration from the court that Master Lease's patent on business methods for creating an investment instrument out of real property (US patent 6,292,788) was not infringed and/or invalid.

Shortly after the CAFC decided Bilski, Fort Properties filed a SJ motion arguing that the patent was invalid under 35 U.S.C. 101. The district court agreed with Fort Properties, relying first on the prosecution history of the patent:

[T]he Court is convinced that review of the ‘788 Patent is appropriate in this case. Defendant’s application to the U.S. Patent Office was declined twice because the examiner found the claims were not “in the technological arts” and thus not patentable under Section 101 . . . The patent examiner who rejected those applications then apparently left the U.S. Patent Office, and the application was assigned to another patent examiner . . . who ultimately allowed the claims in April 2001. While the Notice of Allowance did not address the Section 101 issues, Defendant’s previous correspondence with [the examiner] discussed the “useful, concrete and tangible results” of the claims. . . . Defendant also noted [the examiner, during an interview] “explained his view that the claims as written met the statutory requirement of patentable subject matter under 35 U.S.C. § 101, and provided a useful, concrete, and tangible result.” . . . The Court finds that [the examiner's] decision to allow the claims relied in large part on the “useful, concrete, and tangible result” test rejected by Bilski. The Court thus examines the claims of the ‘788 Patent under the proper machine-or-transformation test.

Machine

Defendant explicitly acknowledged during the patent application process that the recited methods “need not be performed by a computer.” (Ex. 2:199.) In its opposition brief, Defendant acknowledges that “the ‘machine’ prong of the Benson test is not what gives rise to patentability in [the ‘788 Patent], but rather the ‘transformation of an article.’”

Transformation

Defendant points out . . . the “creation of deedshares,” arguing that “[t]he creation of the deedshare certainly qualifies as the ‘transformation and reduction of an article.’” “Certainly,” Defendant argues, “there can be no greater transformation for an article than the very creation of the article itself.” But the deedshares themselves are not physical objects or substances. See Bilski, 545 F.3d at 963. As Plaintiff explains, “what is allegedly created is nothing more than an arrangement of conceptual legal rights, which may or may not be in a printed document.” Nor do the deedshares represent physical objects or substances. See Bilski, 545 F.3d at 963. Again, the deedshares represent only legal ownership interests in property. Those ownership rights are not physical objects. Creation of a deedshare does not constitute transformation of an article or thing under Bilski.

Download a copy of the opinion here.

Study: Experienced Examiners Allow More, Cite Less

In what is sure to be an oft-cited paper in the "Great Patent Reform Debate", professors Mark Lemley and Bhaven Sampat have brandished their magnifying glasses on examiner processes at the USPTO to see if certain examiner characteristics had statistical effects on the examination process. Titled "Examiner Characteristics and the Patent Grant Rate," the paper finds that, with regard to PTO "patent quality," the effect of Office experience may be overblown, and more answers may be found in the HR department than on the Senate floor:

[W]e show that there are important differences across patent examiners, and that these relate to the most important decision made by the USPTO: whether or not to grant a patent. In particular we find that examiners differ in significant and important ways in their experience and the depth of their prior art searching, and that these examiner characteristics have qualitatively and statistically significant impacts on whether a patent application is granted.

The results are not encouraging as a public policy matter, because they suggest that the decision to allow or reject a patent application may not be driven by the merits of that application, but rather by the luck of the draw. At the same time, they suggest that human resource policies and incentive structures at the USPTO could affect patent grant rates, an important finding amidst growing concern that it grants too many "low quality'' patents and is in need of significant reform

With regard to examiner experience, the paper pulls no punches:

[W]e find that more experienced examiners are significantly more likely to grant, and, conditional on experience, examiners that conduct more intensive prior art searches are least likely to grant.

Taken alone, the result that more senior examiners are more likely to grant could suggest that they can more quickly figure out what is patentable in an application. But our data on prior art citation patterns do not support that conclusion. The finding that more senior examiners systematically cite less prior art reinforces the inference that senior examiners are doing less work, rather than that they are merely getting it right more often than junior examiners. And the fact that seniority is correlated with more first--action allowances is also inconsistent with the idea that more experienced examiners are simply negotiating the applicant to a narrower, patentable outcome; in the first--action allowance cases there is no negotiation at all . . . The tenure system, the count system, and examiner recruitment and retention policies should be a more prominent part of current patent reform deliberations.

And, lest anyone think this is the primary problem with software patents and the USPTO, the paper provides the following:

[T]he computer industry had by far the highest percentage of new examiners: more
than 60 percent of examiners in that art unit had less than a year of experience, compared with less than 20 percent in mechanics and chemistry. In our prior paper, we found that the computer industry had a surprisingly low grant rate: lower than any other industry. At least some of that result may be explained by the prevalence of new examiners in that industry.

Read/download a copy of the paper here.

WIPO: Global Economic Slowdown Impacts 2008 International Patent Filings

WIPO issued a press release today on international filings, noting that the growth of PCT filings has dropped from 9.3% in 2007 to 2.4% in 2008.

The most robust growth rates for PCT filings include the Republic of Korea (+12.0%), China (+11.9%) and Sweden (+12.5%).

The largest number of international PCT applications (32.7%) continue to be filed by inventors in the U.S. (53,521 applications), maintaining a ranking that has spanned some thirty years. The rest of the "top 15" shape up this way:

(2) Japan --- 28,774 applications
(3) Germany --- 18,428
(4) Republic of Korea --- 7,908
(5) France --- 6,867
(6) China --- 6,089
(7) United Kingdom --- 5,517
(8) Netherlands --- 4,349
(9) Sweden --- 4,114
(10) Switzerland --- 3,832
(11) Canada --- 2,966
(12) Italy --- 2,939
(13) Finland --- 2,119
(14) Australia --- 2,028
(15) Israel --- 1,882

For the first time, a Chinese company (Huawei Technologies Co. Ltd) topped the list of PCT applicants in 2008, with 1,737 PCT applications filedin 2008. Panasonic (Japan) was second with 1,729 international applications, followed by Koninklijke Philips Electronics N.V. (Netherlands, 1,551 PCT applications), Toyota Jidosha Kabushiki Kaisha (Japan, 1,364 PCT applications) and Robert Bosch GMBH (Germany, 1,273 PCT applications).

According to Mr. Francis Gurry, Director General of WIPO,

"Historically, patent filings tend to dip during periods of economic difficulty simply because fewer resources are available for investment in the innovation cycle. Once the economic cycle improves, patenting activity tends also to recover. That said, economic crises have, in the past, been a catalyst for innovation as greater emphasis is placed on improving standards of efficiency, doing more with less and identifying and developing smarter business solutions . . . In the current economic climate, technology, innovation and creativity are critical in creating opportunities for economic renewal and addressing pressing global issues such as climate change."

Read WIPO press release (PR/2009/583 ) "Global Economic Slowdown Impacts 2008 International Patent Filings" (link)

Monday Shorts: Jury Misconceptions, Patent Reform, IP Valuation Collapse?

Are Juries Misinformed in Patent Cases ? - Joe Mullin has a great piece over at Law.com titled "How Juror Misconceptions Affect Patent Trials." Despite the fact that most jurors think that infringement means inventors claiming they've been copied, research done using Stanford Law School's new IP Litigation Clearing House demonstrates that formal allegations and findings of copying are actually quite rare in patent disputes.

Because jurors think about copying even when it is not alleged, "it's vital for a defendant to talk about the fact that their product was developed independently." says jury consultant Green. "It goes to the jurors' sense of fairness." Developing a good independent invention story is vital for defendants.

[M]any jurors don't know the difference between a copyright and a patent, and many jurors believe that patents cover broad ideas, not just specific inventions. Further, jurors are hardwired to believe that corporations will "lie, cheat, and steal" to get an edge on the competition, according to polls that Kauffman has conducted with hundreds of mock jurors.

In those surveys, only 35 percent to 45 percent of jurors had a favorable opinion of corporations, while 75 percent had a favorable opinion of inventors. Nearly 70 percent agreed with the statement, "Big companies steal the secrets and inventions of their competitors." Most of the mock jurors believed that patent rights were trampled regularly, with 85 percent saying that it occurred "frequently or occasionally."

- Read the entire article here, courtesy of Law.com.

- See also, Christopher Anthony Cotropia and Mark A. Lemley, Copying in Patent Law.


"Expert Patent Judge" Pilot Program Reintroduced in Congress - Rep. Adam Schiff (D-Calif.) and Rep. Darrell Issa (R-Calif.) reintroduced legislation this week that would start a 10-year pilot program to educate district judges on patent issues. Judges from courts that meet certain criteria would be able to opt into the program, which would provide funds for them to pursue educational opportunities such as patent seminars. The participating courts would also be assigned a clerk with expertise in patent law or the technical issues associated with patent cases. The bill authorizes $5 million a year to carry out the program.

- Read Stephanie Condon, "New bill approaches patent reform 'part and parcel" (CNET News) (link)

- See also, Ars Technica, "Congress weighs patent specialization for federal judges" (link)


NYLS Help Launch Post-Issue Project to Challenge Patents - New York Law School's Center for Patent Innovations (link) is helping to release the "Post-Issue Peer To Patent" project for challenging patents at the USPTO. According to the organization, the project seeks

to improve the quality of patents by providing a framework for ferreting out weak, non-meritorious patent claims in patents that have issued. Harnessing the power of a community of peer reviewers created through Peer to Patent [], Post-Issue elicits previously unidentified prior art that may invalidate or narrow the claims of issued patents. In so doing Post-Issue provides greater freedom to innovate, removes uncertainty from the patent system, and provides greater certainty as to the value of issued patents.

See more here and here.

Pending Study Suggest IP Valuation "Collapse" - from Joff Wild's IAM Blog:

In the next issue of IAM, which publishes at the end of next week, Nir Kossovsky of the Intangible Asset Finance Society reveals that corporate intangible values in the US . . . have collapsed over the last 12 to 18 months, from a median of 70% of market capitalisation to under 50% now. To put it starkly: nobody can now claim that the majority of American corporate value is composed of intangibles or IP.

Read more here, along with a fascinating debate in the comments

EDNY Nixes Therapeutic Pharma Patent Using Bilski

King Pharmaceuticals, Inc et al v. EON Labs, Inc., E.D.N.Y (1-04-cv-05540), Jan. 20, 2009

In a highly publicized case, King Pharmaceuticals brought an action against Eon Labs on patents relating to methods of informing patients about and administering the muscle relaxant metaxalone - marketed by King under the brand name "Skelaxin®" - with food. An exemplary patent claim follows:

A method of increasing the oral bioavailability of metaxalone to a patient receiving metaxalone therapy comprising administering to the patient a therapeutically effective amount of metaxalone in a pharmaceutical composition with food.

Relying on six prior art references, Eon moved for summary judgment, alleging invalidity under 35 U.S.C. §§ 102(b), and 103(a). Eon's primary argument was that, despite the fact the prior art did not explicitly disclose the claimed features "with food," such a feature was at least inherent (or obvious) from the prior art. The district court agreed with Eon, finding the feature inherent in the prior art:

For over forty years it has been known to give metaxalone with food. The fact that King discovered a naturally occurring side effect to the known practice of administering metaxalone with food does not entitle it to a valid patent . . . Here, the overarching purpose of both the prior art and claim 1 is to treat effectively musculoskeletal disorders with metaxalone. The fact that taking it with food happened to increase bioavailability in addition to decreasing nausea is no different from the result in the Abbott Labs case [471 F.3d 1363, 1369 (Fed. Cir. 2006)], in which the addition of water neutralized Lewis acids in both the prior art and the claimed invention, even though the prior art did not recognize that particular effect of adding water. Likewise here, the prior art's failure to recognize that taking metaxalone with food also increased bioavailability does not make it a new method.

With regard to obviousness, the court ruled:

[T]he question is whether a person of such skill, confronted with [Prior Art #1] teaching to take one 400 mg tablet of metaxalone four times daily and [Prior #2] suggestion to take metaxalone with food, would have seen a benefit to administering a 400 mg tablet of metaxalone at mealtimes. It seems quite clear that the answer is yes.

The opionion became more interesting when Eon challenged claims on the basis of 35 U.S.C. § 101 and Bilski, and tying it together with inherency/obviousness. Specifically, Eon claimed that claims reciting the features of "informing the patient that the administration of metaxalone with food results in [] . . . compared to administration without food" did not distinguish certain claims from the prior art, and rendered other claims unpatentable. Again, the district court agreen with Eon:

Because the food effect is an inherent property of the prior art and, therefore, unpatentable, then informing a patient of that inherent property is likewise unpatentable . . . [The claim] fails this test, because the act of informing another person of the food effect of metaxalone does not transform the metaxalone into a different state or thing . . . Such a claim, which effectively allows a patentee to exclude others from informing people of (unpatentable) scientific discoveries is anathema to the aims of the patent statute, which favors disclosure. [The claim] is, therefore, invalid.

Regarding an independent method claim that was based on "informing a patient", the court remarked the claim "does away with all physical steps and attempts to claim a monopoly on information. This claim is unpatentable under 35 U.S.C. § 101."

Read/download the opinion here (link)

Obama Administration Orders Reconsideration/Suspension of New Rules

Yesterday, the new White House Chief of Staff Rahm Emanuel issued a memo to government agencies (e.g., the USPTO) that "no proposed or final regulation should be sent to the Office
of the Federal Register (the "OFR") for publication unless and until it has been reviewed and approved by a department or agency head appointed or designated by the President after noon on January 20, 2009."

With regard to unpublished rules, the memo order agencies to "withdraw [the unpublished rules] so that they can be reviewed and approved by a department or agency head."

Also, for published rules that have not taken effect, the memo orders agencies to "[c]onsider extending for 60 days the effective date of regulations . . . for the purpose of reviewing questions of law and policy raised by those regulations. Where such an extension is made for this purpose, [the agency] should immediately reopen the notice-and-comment period for 30 days to allow interested parties to provide comments about issues of law and policy raised by those rules."

Thus, for the Continuation Rules, even if the CAFC reverses the district court in Tafas v. Dudas, the USPTO would not be able to implement final rulemaking without submitting the rules to the Under Secretary of Commerce (appointed by Obama) for consideration and approval.

Download the memo here (link)

Hat tip: Hal Wegner

N.D. Ca.: Quality, Not Quantity of Motions Is Most Relevant For Motion to Stay

Yodlee, Inc. v. Ablaise Ltd. et al (4-06-cv-07222) CAND, Jan. 16, 2009

The litigation between the patentee and the accused parties began in 2006, while concurrent litigation was ongoing in a different district. For the following year, fact discovery was stayed in light of developments in the other litigation. On December 2008, a Reexamination Request was granted by the PTO, and the accused parties moved for a stay. The patentee opposed the motion, claiming that the litigation was already in a more advanced stage, the motion was submitted only two days away from filing the opening Markman brief and that documents related to the fact discovery in the parallel litigation were ready to go in the instant case.

The court acknowledged that the docket was "a long one", noting that 138 docket entries were made to date. However, the court went further to state that "none of those entries regard the substance of the [] patent."

The Court agrees with Ablaise that extensive motion practice on the docket should be assessed in connection with the motion to stay. However, the Court concurs with the Accused Parties that same motion practice is not automatically equated with progress in the litigation, and in this case, does not negate the fact that there have been no depositions, no documents exchanged, and, according to the Accused Parties, “virtually no discovery other than discovery that the accused parties had to engage in related to the prior art. “ Reply Br. at 5. These related cases are still at an early stage of litigation, and this factor weighs in favor of a stay.

(Source: Docket Navigator)

Mammoth Paper on Patent Case Management To Be Published by the Federal Judicial Center

Professor Peter Menell from the University of California, Berkeley School of Law, and a host of patent litigators, judges and academics are preparing to publish a paper titled "Patent Case Management Judicial Guide" that strives to provide a "best practices" overview for judges and practitioners alike. From the Abstract:

Because of the decentralized, general jurisdiction structure of federal courts in the United States, much of the experience relating to managing patent cases is silo-ed in particular judicial chambers. As one jurist aptly noted, best practices for patent case management have been transmitted largely through word of mouth. Given the crowded, diverse dockets of federal courts, the accessibility and reliability of such knowledge is far from ideal. Judges in some districts have partially codified recommended practices in the form of Patent Local Rules, standing orders, and patent jury instructions, but these documents do not address the full range of distinctive challenges posed by patent litigation. Furthermore, such judicial wisdom continues to evolve.

Recognizing these patterns, the authors undertook in 2006 to survey the range of approaches and perspectives on patent case management, foster discussion and analysis of patent case management techniques, and develop an authoritative guide for judges, law clerks, practitioners, and patent and civil procedure professors and scholars. Given the dynamism of the patent system and patent litigation, the authors plan to revise the Guide on a biennial basis.

You can download a draft copy of the paper (540+ pages) here via SSRN (link)

Patent Litigation Sinking for 2009

According to Stanford Law School's IP Litigation Clearinghouse, patent litigation dropped by 8% in 2008 (2,605 cases were filed). This is not unusual, considering that patent litigation has been dropping slightly each year since the 2004-05 peak. What is remarkable however, is that when you look at the last five months of 2008 (i.e. "the meltdown"), filings dove 23% compared to the same period one year earlier. Also, the average number of defendants in patent infringement cases last year dropped back to two following a record average of three per case in 2007. Typically, filings from July 31 to the end of the year tick up 2%, according to Stanford's data.

What does this mean? Impossible to say at this point. The obvious culprit is the economy and legal costs, along with other factors like increased ITC filings and district court delays. In the Central District of California, 2008 filings plummeted by nearly 39% from 2007 to 198, according to the Stanford Clearinghouse. In the Eastern District of Texas, filings dropped by 21% during that same time frame to 291.

See, National Law Journal, "Patent Infringement Filings Take a Nosedive" (link)

But See, Joe Mullin's article "Will the ITC Become the New Troll Hangout?" (link)

Study: Apportioned Damages Would Decrease Patent Value Between $35-85B

Yesterday a group of U.S. manufacturers released research entitled “The Likely Adverse Effects of an Apportionment-Centric System of Patent Damages.” The research was conducted by Scott Shane, Ph.D., Professor of Economics at Case Western Reserve University in Cleveland.

The study sought to answer the threshold question of whether and how much average damage awards would be reduced by apportionment legislation. The following effects of apportionment legislation were estimated:

1. Reduction in U.S. patent value of between $34.4 billion and $85.3 billion.

2. Reduction in value of U.S. public companies of between $38.4 billion and $225.4 billion.

3. Reduction in R&D of between $33.9 billion and $66 billion per year.

4. Between 51,000 and 298,000 U.S. manufacturing jobs put at risk.

5. Industries employing fewer people favored over those employing more people.

The paper is provided by the Manufacturing Alliance on Patent Policy (link), and a PDF copy of the study may be downloaded here.

Top Patent Holders: IBM Tips the 4K Mark for 2008

While the PTO has eschewed publication of "top patent holders," independent patent research companies like IFI Patent Intelligence continue to track who is filing what in the PTO. In this year's "Top U.S.-Patent Recipients" list, IFI rounds out the top 20 this way:

    1 INTERNATIONAL BUSINESS MACHINES CORP         4186
    2 SAMSUNG ELECTRONICS CO LTD KR                3515
    3 CANON K K JP                                 2114
    4 MICROSOFT CORP                               2030
    5 INTEL CORP                                   1776
    6 MATSUSHITA ELECTRIC INDUSTRIAL CO LTD JP     1745
    7 TOSHIBA CORP JP                              1609
    8 FUJITSU LTD JP                               1494
    9 SONY CORP JP                                 1485
   10 HEWLETT-PACKARD DEVELOPMENT CO L P           1424
   11 HITACHI LTD JP                               1313
   12 MICRON TECHNOLOGY INC                        1250
   13 SEIKO EPSON CORP JP                          1229
   14 GENERAL ELECTRIC CO                           912
   15 FUJIFILM CORP JP                              869
   16 RICOH CO LTD JP                               857
   17 INFINEON TECHNOLOGIES AG DE                   814
   18 LG ELECTRONICS INC KR                         805
   19 TEXAS INSTRUMENTS INC                         757
   20 HONDA MOTOR CO LTD JP                         747

To see the top-35 list, click here.

Two observations are made on the 2008 list. First, American companies captured only 49 percent of U.S. patents and hold only 4 of the top 10 slots, and 12 of the top 35 slots. Japanese companies hold 5 of the top 10 slots and 14 of the top 35. Taken collectively, the top 35 companies accounted for 26 percent of all the utility patents granted in 2008.

While American companies lead in total new patents for 2008, Japan is right behind with 23 percent; Germany is third with 6 percent, South Korea furth with 5 percent; and Taiwan fifth with 4 percent.

The second (and more glaringly obvious) observation is IBM's allowed patents - despite KSR and the PTO's "deny, deny, deny!" approach to applications over the last year, they nevertheless managed to break the 4K mark for issued patents. This mark is nearly triple that of HP, and exceeds the issuances of Microsoft, HP, Oracle, Apple, EMC, Accenture and Google -- combined. Also, IBM's issued patents for 2008 is a 133% increase over the previous year (3,147).

For more information, see:

"IFI Patent Intelligence Analysis of 2008's Top US Patent Recipients Suggests America May Be Losing Dominance" (link)

Asher Hawkins, "IBM's Brain Boom," Forbers (link)

Joff Wild, "IBM Looks For Patent Quality Solutions, But Could Big Blue Actually Be Part of the Problem?" IAM Blog (link). Joff's observation:

If pendency and quality are linked – and I don’t think that I am the only one to believe they probably are – you have to ask why patent office workloads and pendency times are going up. Is it, in fact, because companies such as IBM are submitting so many applications in the first place? Could it be that if Big Blue and many other large organisations were more rigorous about what to seek protection for and did not submit so many applications in the first place, the backlog would not be as large as it is, examiners would have more time to do their work and quality standards would not be coming under so much scrutiny?

CAFC Walks Away From Comiskey During En Banc Review

In Re Comiskey, 06-1286, January 13, 2009

In a controversial move, the CAFC decided today to reject en banc review of Comiskey, where claims directed to "a method for mandatory arbitration resolution regarding one or more unilateral documents" were held to be non-statutory subject matter under 35 U.S.C. § 101. In addition to the denial, the CAFC vacated its earlier decision and remanded the application back to the PTO:

Acting en banc, the court today vacated the September 20, 2007, judgment in this case, and the panel’s original opinion . . . was withdrawn.

[W]e conclude that Comiskey’s independent [method] claims 1 and 32 and most of their dependent claims are unpatentable subject matter under 35 U.S.C. § 101. With respect to independent [systems] claims 17 and 46 . . . we remand to the PTO to consider the § 101 question in the first instance. We therefore affirm-in-part, vacate-in-part, and remand.

To fully understand the controversy, it is important to note that Comiskey originally appeared before the CAFC to appeal an obviousness rejection. After oral arguments, the CAFC requested supplemental briefing to address issues relating to 35 U.S.C. § 101, despite the fact that the PTO did not reject the claims on this basis. Seizing the opportunity, the PTO urged the court to resolve the case on this ground to "give the Office needed guidance in this area." The CAFC obliged, and when the original Comiskey opinion was issued (see here), only issues relating to §101 were addressed.

While the majority (Michel, Dyk, Prost, Lourie) claimed the CAFC had the authourity to resolve such legal issues sua sponte, the dissent argued that the opinion is "not consistent with the need to respect and recognize agency expertise or the interests of agency or judicial economy." In any event, with regard to patentable subject matter, the CAFC concluded:

It is thus clear that the present statute does not allow patents to be issued on particular business systems—such as a particular type of arbitration—that depend entirely on the use of mental processes. In other words, the patent statute does not allow patents on particular systems that depend for their operation on human intelligence alone, a field of endeavor that both the framers and Congress intended to be beyond the reach of patentable subject matter. Thus, it is established that the application of human intelligence to the solution of practical problems is not in and of itself patentable.

While the method claims were held unpatentable, the court punted on the system claims, which recited the use of "modules":

These claims, under the broadest reasonable interpretation, could require the use of a machine as part of Comiskey’s arbitration system . . . Similarly, even though Comiskey did not separately argue his dependent claims, our decision is based on a different ground than the Board’s, and we think it is appropriate to separately consider dependent claims 15, 30, 44, and 58. Each of these claims adds the following limitation to its corresponding independent claim: "wherein access to the mandatory arbitration is established through the Internet, intranet, World Wide Web, software applications, telephone, television, cable, video [or radio], magnetic, electronic communication, or other communications means."

As to all of these claims, which under the broadest reasonable interpretation recite the use of a machine, we think that the § 101 question should be addressed in the first instance by the PTO. We therefore remand to the PTO to consider whether independent claims 17 and 46 (with dependent claims 18-29, 31, 47-57, and 59) and dependent claims 15, 30, 44, and 58 recite patentable subject matter under § 101.

Read the order (link), which includes the following opinions:

Dyk, Michel, Prost (concurring) - "Contrary to Judge Moore’s dissent, the panel decision is entirely consistent with precedent allowing an appellate tribunal to affirm an agency on alternative legal grounds or to remand to the agency to consider an alternative ground. This authority is, in fact, so well-established that the petition for rehearing did not even raise the issue. "

Lourie (concurring) - "I am sympathetic to Judge Moore’s dissent . . . However, having rendered the decision that it did, and which it now reaffirms as to the method claims, I do not believe we need to unwind the panel decision as to those claims in order to review the § 103 rejections. "

Moore, Newman, Rader (dissenting) - "Particularly puzzling is the panel’s decision to remand the § 101 issue to the PTO with regard to the machine claims, but not the process claims . . . The original panel opinion which held these machine claims were directed to patentable subject matter cited Federal Circuit and Supreme Court precedent. None of this precedent has changed."

"[R]ather than reach out to decide an issue not raised, and remand some of the claims to the PTO with a mandate that they consider an issue of our choosing, I believe we had an obligation to decide the only issue actually decided by the PTO – are Mr. Comiskey’s claims obvious? The PTO, an expert agency, is charged with examining patent applications. Courts, like us, are charged with reviewing agency determinations. There must be some limit to appellate court authority to review agency action, and in my opinion this court in Comiskey crossed the line."

Newman (dissenting): "Reconsideration of this appeal was stayed while the en banc court decided In re Bilski, 545 F.3d 943 (Fed. Cir. 2008), and although the original Comiskey opinion was withdrawn because it was producing "misunderstanding," id. at 960, the revised opinion does not clarify, changes no result, adds no analysis, but simply deletes its reasoning, leaving silence rather than understanding. The court continues to present a broad and ill-defined exclusion of "business methods" from access to the patent system, an exclusion that is poorly adapted to today’s new and creative modalities of data handling and knowledge utilization. I must protest this further contribution to the uncertainty that this court’s decisions are producing."

JPO Considers Making Software and Business Methods Patentable by 2011

Japanese newspaper Nikkei Shimbun is reporting that the JPO will begin a study in 2009 to "drastically revise" Japanese patent law. The main points of study include:

• Revising the definition of "invention" that is protected subject matter
• Making a system for promoting innovation by terminating the "right to seek an injunction"
• Revising "employee invention provisions"
• Studying ways to resolve disputes promptly and effectively
• Speeding up examination and responding to applicants' needs
• Making the text and provisions easy to understand

The study is scheduled to begin at the end of January, and is expected to last one year. A "Commissioner's Private Study Group" will be formed and will be made up of members from industry, academia, and lawyers. Conclusions from the study will be forwarded to the Industrial Structure Committee for further consideration. If necessary, changes to the law would be implemented in the ordinary session of the Diet in 2010-11.

From the Nikkei Shimbun article:

The current Patent Law went into effect in 1980, and defines the “things” that as inventions can be protected by patents. Although there are cases where things like business model patents have been considered to fall within “things” and thus protected, this revision will, once enacted, for the first time clearly establish that intangible property is protected subject matter.

A representative example of the kind of intangible assets that may become protected subject matter is software. Things like the computer algorithms needed in software architecture were not anticipated in the current Patent Law, and thus there is concern that their protection might not be totally certain.

Special thanks to Greg Aharonian who forwarded this information, and Edward Durney for providing the translation. A copy of the (translated) article can be viewed here.

-- On a somewhat related note, the JPO recently announced that the first patent under the "Super Accelerated Examination" issued. Time of pendency from the examination request? 17 days.

C.D. Cal.: Discovery "Settlement Privilege" Does Not Exist

Real Estate Alliance Ltd. v. National Association of Realtors et al. (2-08-cv-01657) CACD (December 23, 2008)

In a patent case, the plaintiff requested that defendant "produce all documents relating to its settlement with Mr. Freedman - including the settlement agreement itself, drafts thereof, all correspondence between REAL and Mr. Freedman, and any communication concerning Mr. Freedman’s Open Letter (collectively the 'Freedman Discovery')."

The defendant objected to the admissibility of the request, relying in part on a "settlement privilege." The court sided with the plaintiff:

The materials sought are relevant, or at least potentially so. If nothing else, they might lead to something that is admissible. There is no settlement privilege immunizing settlement agreements or settlement negotiations from discovery. Although the cases are not unanimous on the point, the better - and majority - view is that such a privilege does not exist . . . Defendant need not produce attorney work product that was not disclosed to Freedman, provided that such materials are listed in a privilege log.

Read the ruling here (link)

PTO Director Jon Dudas Announces Resignation

While a copy of the memo is not currently available, reliable sources (as well as Patently-O) are reporting that Jon Dudas has announced his resignation.

See the post from Patently-O here.

House Rule Change May Cloud Transparency on Patent Reform

Back in 1994, reforms to the House rules were made to tackle the issue of "secretive" legislative processes. The reforms included opening committee meetings to the public and media, term limits for committee chairmen, "truth in budgeting", elimination of the committee proxy vote, authorization of a House audit, specific requirements for blanket rules waivers, and guarantees to the minority party to offer amendments to pieces of legislation.

It is now being reported that Speaker Pelosi is looking to reverse the "House Fairness Rules" to allegedly consolidate power in the (recently expanded) Democratic majority. Needless to say, the Republicans are not happy, and the leadership has shot off a letter to voice their objections:

The American people[] stand to pay a price if the Majority [] shuts down free and open debate on the House floor by refusing to allow all members the opportunity to offer substantive alternatives to important legislation -- the same opportunities that Republicans guaranteed to Democrats as motions to recommit during their 12 years in the Minority. The Majority’s record in the last Congress was the worst in history when it came to having a free and open debate on the issues.

See a copy of the full letter here.

Connie Hair, writing for Human Events, decribes the situation this way:

Pelosi’s proposed repeal of decades-long House accountability reforms exposes a tyrannical Democrat leadership poised to assemble legislation in secret, then goose-step it through Congress by the elimination of debate and amendment procedures as part of America’s governing legislative process.

IEEE Releases Patent Portfolio Scorecard

IEEE Spectrum has released its annual patent scorecard that ranks the "pipeline power" of U.S. technology patent portfolios. The survey scores a company's "pipeline power" by considering a variety of factors, including the number of patents issued to the company in a given year, the growth of its patent portfolio and the variety of the technologies a company patents (for more on the methodology, see here).

Interestingly, the survey found that U.S. technology companies led the way in terms of patent portfolio strength, with Microsoft getting top marks, followed by Intel and IBM. Other notable companies include Micron, Nantero, SanDisk, and HP. The survey covers a wide range of industries including biotech, aerospace, chemicals, computer systems, medical equipment and semiconductor manufacturing.

See the IEEE Spectrum Scorecard here (link)

Read the IEEE Spectrum article here (link)

Coalition Challenges Digital TV Patent License Fees

Recently, an ad hoc group called the Coalition United to Terminate Financial Abuses of the Television Transition ("CUT FATT") has petitioned the FCC to require patent holders who charge "high" fees to prove that their license fees are reasonable, and have the FCC create basic rules for licensing of patents to prevent "possible price gouging."

From the press release:

Since July 1, 2007, the FCC has required that all televisions sold in the U.S. include a digital tuner built to the requirements of the Advanced Television Systems Committee (ATSC). Holders of the patents needed to meet these government-mandated requirements are demanding that American consumers pay between twenty and thirty dollars per television for the same patent rights that cost $1 or less in Europe, Japan and other parts of the world. It is estimated that in 2008 and 2009 alone, the aggregate royalty cost to American consumers will be well over one billion dollars for fees that would total only about $65 million in Europe and Japan. "Without action now, this abuse could continue for many years. We believe that the FCC must declare that any DTV royalty demands that exceed comparable international fees are a violation of FCC rules. We believe that any patent holder seeking higher fees should be required to prove to the FCC that their license fees are reasonable and non-discriminatory. We also believe the FCC should initiate a rulemaking proceeding in order to create a set of basic rules that apply to the licensing of all patents that are required to implement the FCC-mandated DTV receiver standards," states Laynie Newsome, VIZIO VP, Sales & Marketing Communications and Co-Founder.

Read more here and here.

Specification and Claim Language Helps Patent Escape "Divided Infringement" on SJ

Level 3 Communications, LLC v. Limelight Networks, Inc., E.D. Va., 2:07cv589 (December 29, 2008)

Level 3 sued Limelight over a number of patents related to a Content Delivery Network (CDN). The patent described a CDN as "a system that supports delivery of information, such as video, music, games, and software, to computer users or computers on behalf ofits subscribers (typically content providers). A CDN can have multiple servers distributed at various locations around the U.S. and/or the world. A content provider such as a website operator can subscribe to a CON service and then use the CON for delivery of that content provider's information to computer users or computers."

During litigation, Limelight moved for summary judgment of noninfringement, claiming that the CDN in the patent was different from the accused network.

Limelight argued that the term "origin server" was not provided or controlled by the defendant, thus vitiating infringement under Muniauction and BMC v. Paymentech. The district court disagreed with Limelight:

The Court finds Defendant's arguments to be unconvincing . . . [a]lthough the language of this portion of the definition of "origin server" is admittedly drawn from the Farber patents' specifications . . . the specifications immediately thereafter also provide a broader definition: "[m]ore generally, the origin server ... is any process or collection of processes that provide resources in response to requests from a client" and can be "any off-the-shelf Web server." . . . "Originate," as it is used in these contexts, does not mean that an origin server must be the server on which all subscriber resources are actually created. In other words, it need not be the ultimate origin of the subscriber resources.

[I]n keeping with the thrust of Plaintiffs arguments, the Farber patents do not purport to invent origin servers, but instead simply assume their existence as components of the system or network in which the methods of the patent are implemented. Since they are not innovations ofthe Farber patents, but instead nothing more than "off-the-shelf Web server(s)" onto which subscriber content has been loaded . . . their role in the claims is little more than that of mere presence: they are simply . . . the places from which subscriber resources can enter the CDN.

Limelight also argued against the term "subscribers", claiming that they could not be "subscribers" to their own system, and did not control the actions of actual subscribers. Again, the district court was not persuaded:

Like origin servers, subscribers are undoubtedly contemplated by the Farber patents' claims as components ofthe system in which the methods of the patents are implemented, but they are not discussed by the specifications or the steps numerated in the Farber patent's method claims in such a way that they can be read as requirements that somehow limit the scope ofthe claims.

As discussed above, the claims of the Farber patents are drafted in such a way as to allow infringement to be claimed on the basis of the actions of a single party, rendering jurisprudence regarding infringement by multiple parties in Muniauction and BMC inapposite. Although, logically speaking, the CDN must, of course, have subscribers that seek to publish content in order for there to be subscriber content for the CDN to serve using this technology, this is simply another way of saying that a business has to have customers. Obviously the Farber patents do not purport to invent the concept of customers; they purport to invent a dynamic method for serving the content of those customers over the Internet in response to client requests.

Motion for summary judgment denied.

Read/download the opinion here.