Process Requiring Machine Doesn't Necessarily Satisfy 35 USC 101

Every Penny Counts, Inc. v. Bank of America Corp., 2-07-cv-00042 (M.D. Fla. May 27, 2009, Order) (Magnuson, J.)

Plaintiff Every Penny Counts (“EPC”) received patent number 6,112,191 (the “191 patent”) in 2000. This patent claims a system whereby consumers can save and/or donate a portion of a credit or debit transaction. EPC sued Bank of America ("BOA") for infringement, and BOA moved for summary judgment of invalidity in light of Bilski. A contested claim reads:

A system, comprising:

A network;

entry means coupled to said network for entering into the network an amount being paid in a transaction by a payor;

identification entering means in said entry means and coupled to said network for entering an identification of the payor;

said network including computing means having data concerning the payor including an excess determinant established by the payor for the accounts;

said computing means in said network being responsive to said data and said identification entering means for determining an excess payment on the basis of the determinant established by the payor, and

said computing means in said network being responsive to the excess payment for apportioning, at least a part of the excess payment amount said accounts on the basis of the excess determined and established by the payor and on the basis of commands established by the payor and controlled by other than the payee.

EPC argued that the patent does not claim a process, but a system, which is analogous to a machine. Thus, according to EPC, Bilski did not apply. Since a machine is “a concrete thing, consisting of parts, or of certain devices and combination of devices,” (In re Nuijten) EPC contended that, because claim 15 claims a “network,” an “entry means,” an “identification entry
means,” and a “computing means,” the patent is a “machine” under the above definition.

Taking a hard line against EPC, the district court rejected this argument:

Simply because the process at issue requires machines or computers to work, however, does not mean that the process or system is a machine. See, e.g., Gottschalk v. Benson, 409 U.S. 63, 71-72 (1972) (finding that “the mathematical formula involved here has no substantial practical application except in connection with a digital computer” and was therefore not eligible for a patent). The “system” described by the 191 patent “has no substantial practical application except in connection with” computers, cash registers, and networks, but it is not comprised of those devices. The 191 patent is a process, not a machine.

Bilski emphasized that the use of a machine in the process in question was not particularly relevant in determining whether that process was patent-eligible. Rather, a Court must examine whether “the use of a specific machine . . . impose[s] meaningful limits on the claim’s scope” and whether “the involvement of the machine in the claimed process [is] merely. . . insignificant extra-solution activity.” Id. at 961-62. In the process claimed by the 191 patent, a mathematical algorithm uses machines for data input and data output and to perform the required calculations. Those machines do not, however, impose any limit on the process itself. The involvement of the machine in the process is insignificant extrasolution activity and thus the process is not patentable under §101.

The 191 patent is invalid unless it “is tied to a particular machine” or “transforms a particular article into a different state or thing.” Bilski, 545 F.3d at 954. EPC does not argue that the 191 patent transforms any article into something different. Thus, the patent is valid only if it is tied to a particular machine. Because it is beyond question that the patented process is not tied to a particular computer or other device, the process embodied by the 191 patent is invalid under § 101.

As an additional "kicker", the district court judge even noted BOA's patent activities in this area and commented that BOA "cannot have its cake and eat it too":

According to EPC, BOA has attempted patent its Keep the Change program. EPC
contends that BOA changed some of the patent application language after the PTO raised Bilski issues. BOA cannot have its cake and eat it, too. If the EPC patent is invalid because it is not patentable subject matter, then the very similar process used by Keep the Change is likewise invalid.

Read/download the opinion here (link)

From Docket Navigator

Ranking the Top Patent/IP Blogs

Gene Quinn over at IP Watchdog is ranking the top patent/IP blogs. Feel free to pop over and let Gene know (1) your favorite patent/IP blog, and (2) other patent/IP blogs you read. Voting will continue through the end of June 2009, where the results will be tabulated and reported sometime at the beginning of July 2009.

Take the 2-part survey here (link)

Injury Must Be “Concrete and Particularized” For Standing In False Patent Marking Action

Stauffer v. Brooks Brothers Inc., 08-cv-10369 (SDNY, May 14, 2009)

35 U.S.C. § 292 prohibits anyone from marking an “unpatented article” with words “importing that the same is patented, for the purpose of deceiving the public.” Additionally, section 292 further provides that “any person” may sue for damages, and if damages are imposed
under the statute ("not more than $500 for every such offense”), the person suing is to receive one-half and the United States is to receive the other half. Section 292 has long been treated as a qui tam provision, meaning that the statute authorizes someone to pursue an action on behalf of the government as well as himself/herself.

Naturally, this section induces some chin-scratching for opportunistic plaintiffs; one can readily envision high-volume products, erroneously marked with one or more expired/lapsed patents, serving as fodder for litigation.

In this case, Stauffer, who is a patent attorney and pro se plaintiff, sued Brooks Brothers for violation of § 292, arguing that certain elements of an adjustable necktie were labeled as being protected by patents that have long expired (the most recent one issued in 1956) and that defendants "knew or should have known that the patents had expired and that their bow ties therefore were no longer patented articles." Further, plaintiff alleged that "Brooks Brothers has 'wrongfully and illegally advertis[ed] patent monopolies that [defendants] do not possess,' thereby causing harm to the economy of the United States' because the embroidered mark, 'has the potential to, discourage or deter' potential competitors 'from commercializing a competing bow tie.'"

Brooks Brothers moved the court to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(1). In particular, Brooks Brothers contended that Stauffer lacked standing to pursue the action because he has not alleged any injury in fact, and that dismissal pursuant to Rule 12(b)(1) is therefore appropriate.

The district court first addressed whether or not the statute limited "any person" to mean "competitors." The court concluded that it did not.

[W]hile defendants’ are indisputably correct that the vast majority of section 292 claims are brought by competitors rather than consumers, there is nothing in the text of the statute that compels such a result. Pequingnot v. Solo Cup Co., No. 07-cv-897, 2009 U.S. Dist. LEXIS 26020, at *7-8 (E.D. Va. Mar. 27, 2009) (finding the “plain language of the statute” precludes limiting “any person” to “competitors”); Pentlarge v. Kirby, 19 F. 501, 503 (S.D.N.Y. 1884) (Section 292(b) grants a cause of action to “whomsoever it may please to sue”).

On the issue of standing, the court acknowledged that any party invoking federal jurisdiction must establish (1) that it has suffered an injury in fact, (2) that is causally connected to the defendant, and (3) that is likely to be redressed by the court. Here, the court concluded that plaintiff could not show any injury:

Brooks Brothers responds that the alleged injury—which is supported by no additional factual pleadings—is insufficient to establish an injury in fact to the public and therefore, Stauffer does not have standing to bring suit on behalf of the United States. The Court agrees. An injury in fact must be “concrete and particularized” and “actual or imminent, not conjectural or hypothetical.” . . . Stauffer’s two conclusory statements set forth above but buried in a forty-page complaint are insufficient to establish anything more than the sort of “conjectural or hypothetical” harm that the Supreme Court instructs is insufficient. In particular, the complaint fails to allege with any specificity an actual injury to any individual competitor, to the market for bow ties, or to any aspect of the United States economy. That some competitor might somehow be injured at some point, or that some component of the United States economy might suffer some harm through defendants’ conduct, is purely speculative and plainly insufficient to support standing . . . Accordingly, Brooks' Brothers' motion to dismiss the complaint is granted.

Read/download a copy of the opinion here (link)

See earlier discussion from Patently-O on DC patent attorney Matthew Pequignot filing at least two Section 292 lawsuits in the Eastern District of Virginia alleging false marking. Here, the judge did not dismiss the action (link)

. . . Try and Try Again - Congress Makes Another Attempt to Ban Tax Strategy Patents

Representatives Rick Boucher (D - Va.), and Bob Goodlatte (R - Va.) introduced legislation last week aimed at prohibiting patents on "tax planning methods." Introduced on May 21, 2009, H.R. 2584 seeks to amend title 35 of the U.S.C. by adding the following:

(1) UNPATENTABLE SUBJECT MATTER.—A patent may not be obtained for a tax
planning method.

(2) DEFINITIONS.—For purposes of paragraph (1)—
(A) the term ‘tax planning method’ means a plan, strategy, technique, or scheme that is designed to reduce, minimize, or defer, or has, when implemented, the effect of reducing, minimizing, or deferring, a taxpayer’s tax liability, but does not include the use of tax preparation software or other tools used solely to perform or model mathematical calculations or prepare tax or information returns;

* * *

(b) APPLICABILITY.—The amendments made by this section—
(1) shall take effect on the date of the enactment of this Act;
(2) shall apply to any application for patent or application for a reissue patent that is—
(A) filed on or after the date of the enactment of this Act; or
(B) filed before that date if a patent or reissue patent has not been issued pursuant to the application as of that date; and
(3) shall not be construed as validating any patent issued before the date of the enactment of this Act for an invention described in section 101(b) of title 35, United States Code, as amended by this section.

According to the American Institute of Certified Public Accountants, 77 tax strategy patents have been approved and the 129 that are pending "apply to a broad range of areas affecting regular taxpayers, including charitable contributions, estate and gift taxes, pension plans and deferred compensation."

Read/download H.R. 2584 here (link)

See:

"AICPA Applauds Introduction of Bill by Representative Boucher and Representative Goodlatte to Prohibit Tax Strategy Patents" (link);

"Congress Tries Again to Ban Tax Strategy Patents" (link)

See Also:

Wayne P. Sobon, "Business methods need patents " (link)

Will the PTO Continuation Rules Find Support at the Supreme Court? Some Are Saying "Absolutely"

Donald Zuhn from the Patent Docs Blog is reporting on various events from this year's BIO Convention. On Wednesday, BIO held session on "A Model Patent Office for the Future -- Promoting and Protecting Investments in Innovation," where various leaders in the patent community discussed issues pertaining to the improving the PTO.

At one point Sherry Knowles, Vice President of Corporate Intellectual Property at GlaxoSmithKline Biopharmaceuticals, Inc., who also spearheaded the court challenge to the PTO continuation rule changes (Tafas v. Doll), asked a panel for their opinions on whether the PTO continuation rules were "substantive" or "procedural" in nature. While many on the panel (not to mention the district court and the CAFC) concluded the rules were "substantive", John Duffy, Professor of Law at George Washington University Law School (and former SCOTUS clerk) reportedly said the following, as accounted by Zuhn:

Prof. Duffy, noting his background in administrative law, suggested that Ms. Knowles would not be happy if the Supreme Court ever got their hands on the case. When Ms. Knowles stated that she thought the Supreme Court would provide a more favorable ruling for GSK than the Federal Circuit did, Prof. Duffy jokingly advised her to hire some new attorneys. When asked about his Supreme Court prediction after the session, Prof. Duffy indicated that the Supreme Court (where he once clerked) was not as familiar with patent law as it was with administrative law, and therefore, the Court would likely defer to the USPTO with respect to its interpretation of 35 U.S.C. § 120, and thus find the rule limiting continuations to be consistent with that section.

Presuming a CAFC en banc rehearing is denied, the current expectation (i.e., without knowing who will be the next PTO Director) is that a petition for certiorari will certainly be filed.

Read more about this and other happenings at BIO here (link)

Short Note on Patentability of Product-by-Process Claims

The CAFC's ruling in Abbott clarified that infringement of a product-by-process claim will occur only when a product meets all of the process limitations recited in the claim. One would presume that the corollary - patentability - would require similar consideration.

Interestingly, Judge Newman, who dissented from the Abbott majority, wrote the opinion in In re Thorpe, 777 F.2d 695 (Fed. Cir. 1985), where it was stated that

Product-by-process claims are not specifically discussed in the patent statute. The practice and governing law have developed in response to the need to enable an applicant to claim an otherwise patentable product that resists definition by other than the process by which it is made. For this reason, even though product-by-process claims are limited by and defined by the process, determination of patentability is based on the product itself. In re Brown, 459 F.2d 531, 535, 173 USPQ 685, 688 (CCPA 1972); In re Pilkington, 411 F.2d 1345, 1348, 162 USPQ 145, 147 (CCPA 1969); Buono v. Yankee Maid Dress Corp., 77 F.2d 274, 279, 26 USPQ 57, 61 (2d Cir.1935).

The patentability of a product does not depend on its method of production. In re Pilkington, 411 F.2d 1345, 1348, 162 USPQ 145, 147 (CCPA 1969). If the product in a product-by-process claim is the same as or obvious from a product of the prior art, the claim is unpatentable even though the prior product was made by a different process. In re Marosi, 710 F.2s 799, 803, 218 USPQ 289, 292-93 (Fed.Cir.1983); Johnson & Johnson v. W.L. Gore, 436 F.Supp. 704, 726, 195 USPQ 487, 506 (D.Del.1977); see also In re Fessman, 489 F.2d 742, 180 USPQ 324 (CCPA 1974).

While not stated in Thorpe, it is generally known that, when the process steps "confer a structure or characteristic of the product which distinguishes it from products made by other processes, the process steps should be considered." In re Garnero, 412 F.2d 276, 279 (CCPA 1979).

While the CAFC majority commented that the Abbott ruling "follows this court’s clear statement in In re Thorpe that 'product by process claims are limited by and defined by the process'" (slip op. p. 18), it appears this quote is taken out of context, as the full quote (highlighted above) states that "even though product-by-process claims are limited by and defined by the process, determination of patentability is based on the product itself" - which appears to mean something different from from the majority interpretation.

In fact, Judge Newman, author of In re Thorpe, called the majority out on this in the Abbott dissent:

My colleagues are mistaken in stating that Thorpe held that all such claims are to be construed as process claims, even when the product is new and the rule of necessity justifies this mode of describing the invention. In Thorpe the product was not new; it was a known color developer for carbonless paper copy systems, and this court held that the PTO correctly rejected the claim to “the product of the process of claim 1,” explaining that since the product was old it could not be claimed as a product, whether or not process steps are recited in the claim. (slip op. p. 18)

Indeed, the USPTO has been tacking its rejection of product-by-process claims using Judge Newman's interpretation of Thorpe - since the beginning of this year, the BPAI has issued roughly 35 rejections of product-by-process claims using Thorpe, and they don't appear to be construing the claims pursuant to the Abbott majority.

Yikes . . .

See recent BPAI In Re Thorpe decisions here (link)

CAFC Rules En Banc: Terms in Product-by-Process Claims are Limitations in Determining Infringement

Abbott Laboratories v. Sandoz, Inc., (Fed. Cir. 2009) (en banc in part) 07-1400

While considering an appeal of a claim construction ruling from the Eastern District of Virginia, the court suddenly found itself faced with a dilemma regarding the construction of certain product-by-process claims: the plaintiff argued that the district court erred in construing the process steps of the claims by using rule in Atlantic Thermoplastics, 970 F.2d at 846-47, which stated that "process terms in product-by-process claims serve as limitations in determining infringement." According to the plaintiff, the proper construction lied with Scripps Clinic & Research Foundation v. Genentech, Inc., 927 F.2d 1565, 1583 (Fed. Cir. 1991), which stated that "the correct reading of product-by-process claims is that they are not limited to product prepared by the process set forth in the claims."

Acting sua sponte, (or as Professor Crouch puts it: "en banc sua sponte sub secretum") the CAFC took the issue for en banc resolution, despite the fact that the court received no briefing and held no argument on the issue.

In Atlantic Thermoplastics, the CAFC considered the scope of a product-by-process claim that recited "[t]he molded innersole produced by the method of claim 1." The patentee urged that competing, indistinguishable innersoles made by a different method nonetheless infringed. The CAFC rejected the patentee’s position, and construed the product-by-process claims as limited by the process.

Looking at the line of 7 Supreme Court cases dealing with the issue (spanning over the years 1874-1938), the CAFC concluded that the Atlantic Rule "finds extensive support in Supreme Court opinions that have addressed the proper reading of product-by-process claims . . .
The Supreme Court has long emphasized the limiting requirement of process steps in product-by-process claims. " Moreover,

[T]he Supreme Court has reiterated the broad principle that "[e]ach element contained in a patent claim is deemed material to defining the scope of the patented invention." Warner-Jenkinson, 520 U.S. at 19. Although Warner-Jenkinson specifically addressed the doctrine of equivalents, this rule applies to claim construction overall. As applied to product-by-process claims, Warner-Jenkinson thus reinforces the basic rule that the process terms limit product-by-process claims. To the extent that Scripps Clinic is inconsistent with this rule, this court hereby expressly overrules Scripps Clinic.

Furthermore, the majority opinion (Chief Judge Michel and Judges Rader, Bryson, Gajarsa, Linn, Dyk, Prost, and Moore) stated that

The dissenting opinions lament the loss of a "right" that has never existed in practice or precedent – the right to assert a product-by-process claim against a defendant who does not practice the express limitations of the claim. This court’s en banc decision in no way abridges an inventor’s right to stake claims in product-by- process terms. Instead this decision merely restates the rule that the defining limitations of a claim – in this case process terms – are also the terms that show infringement.

Thus this court does not question at all whether product-by-process claims are legitimate as a matter of form. The legitimacy of this claim form was indeed a relevant issue in the nineteenth century . . . However, this court need not address that settled issue. The issue here is only whether such a claim is infringed by products made by processes other than the one claimed. This court holds that it is not.

Product-by-process claims, especially for those rare situations when products were difficult or impossible to describe, historically presented a concern that the Patent Office might deny all product protection to such claims. See In re Butler, 17 C.C.P.A. 810, 813 (CCPA 1930) ("Process claims are valuable, and appellant thinks he is entitled to them; but it is submitted that he should not be limited to control of the process when the article which that process produces is new and useful."). In the modern context, however, if an inventor invents a product whose structure is either not fully known or too complex to analyze (the subject of this case – a product defined by sophisticated PXRD technology – suggests that these concerns may no longer in reality exist), this court clarifies that the inventor is absolutely free to use process steps to define this product. The patent will issue subject to the ordinary requirements of patentability. The inventor will not be denied protection. Because the inventor chose to claim the product in terms of its process, however, that definition also governs the enforcement of the bounds of the patent right. This court cannot simply ignore as verbiage the only definition supplied by the inventor.

------------------

Newman's Dissent (Joined by Mayer and Lourie)

Heretofore a new product whose structure was not fully known or not readily described could be patented as a product by including in the product description sufficient reference to how it can be made, to distinguish the new product from prior art products. Patentability was determined as a product, independent of any process reference in the claim, and validity and infringement were based on the product itself. This expedient for patenting products whose structure was not fully known at the time of filing the patent application has been called the "rule of necessity." It was pragmatic, fair, and just, for it attuned patent law and practice to the realities of invention.

Today the court rejects this expedient and discards this practice, ruling that all claims containing a process term under the rule of necessity now must be construed, for purposes of infringement, as limited to use of any process term that was used to assist in defining the product. That is, such a product is not patented as a product, however it is produced, but is limited to the process by which it was obtained. This is a new restraint on patents for new products, particularly today’s complex chemical and biological products whose structure may be difficult to analyze with precision. It is a change of law with unknown consequences for patent-based innovation.

The court acts sua sponte, without explanation of what policy is intended to be served by this change, without consideration of the technologies that may be adversely affected by elimination of this expedient, without notice to those whose property rights may be diminished. In so doing, the court departs from statute, precedent, and practice. This change is as unnecessary as it is flawed, gratuitously affecting inventions past, present, and future. I respectfully dissent.

NOTES:

- The en banc ruling clearly mitigates a potential certiorari showdown at the SCOTUS, which would have had a good chance of review if the Scripps ruling prevailed.

- While there appears to be some legitimate concern over procedural violations on the sua sponte ruling, Hal Wegner has notes that the CAFC's actions follow previous, similar actions in Kingsdown Medical Consultants, Ltd. v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988)(Markey, C.J.)(en banc in part); Midwest Industries, Inc. v. Karavan Trailers, Inc., 175 F.3d 1356 (Fed.Cir.1999)(Bryson, J.)(en banc in part); and DSU Medical Corp. v. JMS Co., Ltd., 471 F.3d 1293 (Fed. Cir. 2006)(Rader, J.)(en banc in part).

- This ruling appears to follow a judicial trend of firming up the notice provision for patentees and their claim terms, and adding a further level of complexity to patent claim drafting: while insufficient claim detail may lead to invalidity, additional claim details may foreclose avenues of infringement.

- For whatever it's worth, 2 of the 3 dissenting judges hold PhD's in the chemical arts (Newman: PhD Yale, 1952, Lourie: Univ. of Penn., 1965).

Judge Michel Speaks About "Junk Patents", Damages, Trolls, and the PTO

Last December, Chief Circuit Judge Michel gave the keynote address at the FTC hearings on "The Evolving IP Marketplace", where Judge Michel addressed the state of patent law and patent reform. Frankly, it's one of the most sober and rational patent reform speeches in recent years, and I thought it would be worthwhile to help distribute a transcript of the speech. While the FTC has a transcript available here (link), I cleaned up the FTC version and made it available at the link provided below.

Some key "highlights" from the speech:

Addressing the oft-cited contention that too many "junk" patents are issued:

But I suggest that as we move forward . . . that it's worth pausing to consider for just a minute what do we really mean when we're talking about more patent quality. Certainly lay people and maybe some lawyers could be forgiven if they take that as a suggestion that a very large number of patents are just flat-out invalid. That is, the entire patent is a piece of junk, worth nothing, illicitly granted.

I've been on the court for twenty years and eight months, and I cannot ever remember seeing a single patent, I'm sure they're out there, but I can't remember seeing one where every single claim was invalid. I've seen innumerable patents where some of the broader claims either were indefinitely broader or were damn close, but in all of those cases, the narrower claims seemed to me equally clearly to be plainly valid. So what we really have is a problem of some over-broad claims getting through the system, slipping through the sieve that in the ideal world would catch them.

On the "litigation explosion" and "wasteful litigation":

I keep hearing that we have a ‘litigation explosion’ in patent infringement cases. I keep hearing that we have lots of ‘wasteful litigation.’ I keep hearing we have excesses and abuses of certain types of defendants or maybe plaintiffs in some of these cases. I also read that for quite a number of decades now, the percentage of extant patents sued on has remained almost exactly the same, at about percent, so if you have a lot more patents out there, you would expect more lawsuits, and that's exactly what you get.

Now, of course you can say, yeah, but they're all bad patents. Well, maybe or maybe they're partly bad and partly good, so a little hard to be sure. I'm a skeptic about whether we have an excess amount of wasteful litigation or a crisis or a patent litigation explosion.

Now, as you may have heard me already throw out the number, about 3,000 patent suits filed a year, but the more interesting numbers that start to reduce that is that about 90 percent settle voluntarily. Now, of course now you may say, but yeah, only under coercion and under threats, under a gun at your head. All those kind of arguments. Well, maybe. Maybe. But 90 percent never go to trial, so when we're talking about trial expense, trial delay, not minor matters, we're not talking about 90 percent of the lawsuits. We're talking about 10 percent of the lawsuits. What happens to the 300 that don't fall out on voluntary settlements between the parties?

Well, over two-thirds of them get resolved on summary judgment. Now, summary judgment isn't cheap. I'm not trying to make that argument, but it's a lot less expensive than a full trial, lots less, and much faster almost always, not in every case, but normally.

So now we're down to about a hundred trials per year, ball park figure. (All these figures are just ball park figures). If we step back and we say, all right, we're a nation, highly developed, high technological, fully industrialized advanced nation of 300 million people. We have something like a million and a half patents in force, and we have what, 30,000 companies in the marketplace? I don't even know the exact number, but accept the notion that it may be somewhere like 30,000 players. Are a hundred trials excessive in a country of that size and that vitality with that many patents extant? And what happens when there are trials? Most of them get affirmed on appeal. Of course, that also means some get reversed, but the numbers again are kind of instructive.

On the PTO, and it's ability to deal with patent reform:

So, of course, the magic bullet is a new kind of reexamination in the Patent Office. That's what everybody says will solve the problem. Why? It will be faster and cheaper than court trials. Well, maybe. In the real world, we've got a Patent Office that struggles to keep up with its current work. What basis would we have for confidence, particularly if it doesn't have a tripled budget, that it can run in-house what amounts to a court system with cross examination and discovery rules and a Judge presiding and making fact findings or Administrative Patent Judges even trained for this? How hard would it be to get them up to speed to function just the way District Court Judges do or ITC administrative judges in patent cases? I think these are hard questions, and I don't think the answers are too obvious, but they certainly give me a lot of pause.

* * *

Now, certainly the existing reexamination process has been less than a stellar success, and it certainly doesn't look faster than the courts, as slow as the courts are, compared to how they should be. I can't testify about how much cheaper it is, but the stories I've heard don't sound too encouraging, and then there's a big question of: Is it adequately accurate? Is it more accurate than what would happen in a well-run district courtroom? I'm not sure.

* * *

I'm told that the average examiner has been in the corps less than three years. Less than three years! That's a horrible fact in this country, even for our ongoing system of ex parte examination. If you try to lay on top of that a new beefed up litigation-like re-exam process, are there people there who can do it? Can the examiners do it? Can the supervisors do it? Even the board is also drowning in cases. They've greatly expanded in recent years. I think it's somewhere up to in the neighborhood now of 80 Administrative Patent Judges. What do they need, 160, 390? No one even knows what they would need to run these trials.

On "excess" damages:

Now, of course when you talk about the courts, their awards, people talk about excess damages. Everyone can cite some example of what they consider a horrendously excess damage award. A fair number of what I've read in print turn out to be nonexistent cases. I kept reading about the windshield wiper case where the cost of the car was used as the metric of damages, but I haven't been able to find such a case.

And Professors Jaffee and Lerner, who are very highly qualified economists, wrote in their book, which many of you read, that the courts often give double damages and actually cited a case that I was involved in as an example of double damages, and they said that I gave both lost profit damage and reasonable royalty damages to the winning patentee. Well, yeah, the Court did. Of course it did, because it was for different products and different time ranges, two different forms of damages, but they weren't -- but that's not double payment. That's paying once, so there's a lot of misunderstanding out there.

There are a lot of apocryphal cases that turn out to not really exist, and there are certainly some very large damage numbers; no question about that. On the other hand, most of those large damage amounts involve very large markets, very large profits, so we shouldn't be surprised, I wouldn't think. In any event, a few examples, if they're not very representative, hardly prove that excesses are common, but that's the charge, that half the time the damages are wildly out of proportion to anything that would be sustainable in common sense. It's easy to use words like ‘appropriate.’ The FTC talks about whether damages are ‘appropriate.’ Well, it's a little bit in the eye of the beholder. What you might think was appropriate I might think was way too little or way too much, but it's a pretty inexact yardstick.

On "trolling" and NPEs:

Then the argument keeps shifting. Well, it's not so much the number of infringement suits filed every year, it's who's filing. Well, why should we assume that a non-manufacturing patent owner shouldn't be allowed to enforce its patent? What is wrong with a university owning patents based on research of its faculty scientists or research institutes or small inventors or small innovative companies that either can or don't want to try to manufacture products themselves but license their inventions so others can make them?

Well, are these patentees really illegitimate somehow? I mean, after all, at least up until now a patent has given its owner the right to exclude, not the obligation to make. Then some say, well, it's not so much the non-practicing entities, it's certain companies that don't invent at all, but merely acquire and enforce patents, and of course calling them ‘trolls’ just confuses the analysis because obviously a troll is a bad thing.

It's a pejorative label. (Some people who used to complain about trolls allegedly have become trolls). But I don't think that it's helpful -- it's a slogan. It's a label. It's an excuse to not think carefully about the problem, as far as I'm concerned. It's like talking about ‘questionable patents.’ It's an excuse to not think carefully about the problem as far as I'm concerned. It's like talking about questionable patents. It's not helpful if we're going to try to diagnose the real illness and prescribe a useful medicine.

Besides, patents, like any other form of property, the essential element of property is it is alienable. You can sell it. You can sell it to anybody you want to for whatever price you want to sell it. Why should that be prohibited? Why should I be prohibited from buying patents if that's what I want to do, whether I invented them or not, whether I am going to practice them or not, whether I'm a research institution or a university or not? There might be some reasons. Maybe some of them are good, but it's not self-evident, at least not to me.

Then there's certainly the debate about motives. Well, they just want to acquire patents so they can squeeze royalties out of infringers. Well, yeah. Hey, this is commerce. This is about money. This is not an altruistic system. The whole constitutional idea was that the incentive of monetary gains would motivate innovation at a greater rate and to better ends than if the lure of money wasn't there, so I'm a little dismayed when I see it even creep into footnotes of Supreme Court opinions, that certain patentees were just trying to squeeze money out of the accused infringer. Well, all kinds of patentees are trying to squeeze money out of the accused infringer. That's what the lawsuit is all about, so come on. Let's be a little more adult about it than to worry about the greedy motive of the patentee. Of course the patentee is greedy.

There's much more in the speech, and it's a very informative and entertaining read - download a (cleaned-up) copy of the transcript here (link)

District Court Lets 24% Royalty Stand In Damage Calculations

Wyers v. Master Lock Co., 1-06-cv-00619 (COD May 12, 2009, Order)

Plaintiff successfully asserted that Master Lock infringed four patents relating to barbell-shaped locks with removable sleeves, and the jury awarded $5.35M in damages as a reasonable royalty. Master Lock motioned the court for Remittitur, arguing that the jury misapplied the Georgia-Pacific factors.

One issue was that the damage amount appeared to have been reached by awarding Wyers approximately half of the profits they would have received had Master Lock sold the offending locks under the private label agreement they formerly had with Wyers. Despite this, the court viewed that plaintiff's substantial evidence (e.g., reliance on the patented features, non-infringing alternatives, commercial success, etc.) was sufficient to support the jury’s verdict.


Master Lock also argued that $5.35 million—which represented 24% of Master Lock’s
proceeds from the sales of the infringing locks—exceeded its profit margin of 15%. Here, the court responded that,

At trial, [] Wyers presented evidence showing Master Lock’s profits were closer to 60%—a number similar to Wyers’s own profits. As shown by the $5.35 million amount, the jury implicitly found the actual profit margin to be higher than the 15% claimed by Master Lock. The jury was not obligated to believe Master Lock’s expert any more that it was obligated to believe Mr. Wyers. It would be inappropriate, therefore, to override the jury’s verdict based on such a credibility question. The jury could reasonably conclude hypothetical parties in the position of Wyers and Master Lock would negotiate a royalty of 24% in light of an anticipated 60% profit margin. See Rite-Hite Corp. v. Kelley Co., 56 F.3d 1539, 1555 (Fed. Cir. 1995) (holding it was “not unreasonable for the district court to find that an unwilling patentee would
only license for one-half of its expected lost profits and that such an amount was a reasonable royalty”).

Also, Master Lock argued a "damage apportionment" theory that the jury failed to discount the value of the non-patented features of the accused locks. Again, the court sided with the plaintiff:

As noted by Wyers, however, Federal Circuit authority holds that—for purposes of calculating a reasonable royalty—a patentee may recover a royalty based on the value of the entire infringing apparatus so long as the patented feature provides the basis for consumer demand. See Rite-Hite, 56 F.3d at 1549. Evidence presented at trial—including Master Lock’s marketing materials, product packaging, and sales figures, as well as Mr. Wyers’s testimony—showed the sleeve and external seal drove the market demand for the hitch pin locks Master Lock sold. Although Master Lock presented testimony suggesting that customer service, quality, and brand recognition were more important to driving sales than the claimed inventions, the jury was not obligated to find this testimony persuasive over the documentary evidence or Mr. Wyers’s testimony.

Motion for Remittitur denied.

Download the opinion here (link)

(Source: Docket Navigator)

Everything You Ever Wanted to Know About the Current State of Patents and Patent Law

Imagine a "who's who" list of patent scholars, practitioners, in-house counsel, government officials, IP brokers and policy makers - who were all placed in a single room with a microphone for 6 full days to speak individually about their experiences and opinions on various aspects of patent law. A transcript of the speeches/discussions would surely be a valuable asset to anyone looking to learn from the practices and observations of others.

The Federal Trade Commission (FTC), who recently completed a whirlwind tour of public hearings in California and Washington DC has now begun publishing transcripts of these meetings and has made many of them available, along with the presentation material provided with each session. While some of the transcripts are missing from the FTC site, the 271 Blog has done some sleuthing and has located copies elsewhere, with the exception of the May 4-5 hearings.


FTC HEARING ON THE EVOLVING IP MARKETPLACE


DECEMBER 5th (2008) HEARING
Panel 1: Developing Business Models
Panel 2: Recent and Proposed Changes in Remedies Law
Panel 3: Legal Doctrines That Affect the Value and Licensing of Patents

TRANSCRIPT (link)

Panelist Presentations:
• Thomas Cotter, Remedies for Patent Infringement: Theory and Practice
• Peter N. Detkin, To Promote the Progress…of Useful Arts: Investing in Invention
• Q. Todd Dickinson, Federal Trade Commission Workshop: Recent and Proposed Changes in Remedies Law
• Brian Kahin, The Patent Ecosystem in IT: Business Practice and Arbitrage [Written Version]
• Daniel P. McCurdy, Unique Operating Companies Involved in Patent Litigation with NPEs; Patent Litigation Involving NPEs and Operating Companies
• Roderick R. McKelvie, Seagate Plus One: How the District Courts are Implementing Seagate; Seagate Plus One (Article)
• Joseph Scott Miller, Testimony of Professor Joseph Scott Miller, Lewis & Clark Law School - Legal Doctrines That Affect the Value and Licensing of Patents (Panel 3)
• Raymond Millien, The IP Marketplace Players
• John A. Squires, Patent Remedies: Can Quanta Finish What eBay Started? [Written Version]
• Jay Thomas, Patent Damages: Principles and Current Problems
• Duane R. Valz, Yahoo! Inc- FTC Hearing on The Evolving IP Marketplace
• Mallun Yen, Cisco Systems, Inc. FTC Hearing on the Evolving IP Marketplace [Written Version]

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FEBRUARY 11th - 12th HEARING, WASHINGTON DC
February 11 - The Evolution of Remedies (Damages)
Panel 1: Patent Damages
Panel 2: Industry Roundtable discussion


TRANSCRIPT (link)


February 12 - The Evolution of Remedies (Damages)
Panel 1: Changes in Injunction Law
Panel 2: Industry Roundtable discussion

TRANSCRIPT (link)

Panelist Presentations:
• Paul Janicke, Patent Damages
• Aron Levko, 2009 Patent Damages Study - Preliminary Results
• Bryan P. Lord, Hearing on Patent Damages
• Steve Malin, Empirical Analysis Of Permanent Injunction Decisions Following eBay
• Marian Underweiser, Towards an Efficient Market for Innovation
• Donald R. Ware, Introductory Remarks and Presentation

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MARCH 18th - 19th HEARING, WASHINGTON DC

March 18 - Industry Roundtables
Panel 1: Universities and Entrepreneurs
Panel 2: The IT and Electronic Industries
Panel 3: Manufacturing and Diversified Companies
Panel 4: Life Sciences Industries


TRANSCRIPTS: Session 1 (link), Session 2 (link), Session 3 (link), Session 4 (link)


March 19 - The Operation of IP Markets
Panel 1: Economic Perspectives on IP and Technology Markets
Panel 2: Fulfilling the Patent System's Public Notice Function


TRANSCRIPTS: Session 1 (link), Session 2 (link), Session 3 (link)


Panelist Presentations:
• Ashish Arora, Markets for Technology and the Division of Innovative Labor: A View from the Ivory Tower
• James Bessen, Patent Notice and Markets for Technology
• Robert Hunt, The Federal Trade Commission’s Hearing on “The Evolving IP Marketplace”
• Ron D. Katznelson, “The Evolving IP Marketplace” Hearings on The Operation of IP Markets
• F. Scott Kieff, The Importance of Marinating on Patents
• Scott Stern, The Impact of the Patent System on the Market for Technology

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APRIL 17th HEARING, WASHINGTON DC

Panel 1: Roundtable Discussion
Panel 2: Recent Scholarship in Patent Markets

TRANSCRIPTS: Session 1 (link), Session 2 (link), Session 3 (link)

Panelist Presentations
• Iain M. Cockburn, Licensing: a view from the trenches (Selected findings from the LES Foundation Surveys)
• Stuart Graham, Patents and Technology Markets: How is the market operating, and can it be improved?
• James E. Malackowski, FTC Hearings on Developing Business Models and a National IP Economic Infrastructure
• Mark A. Lemley, Ignoring Patents; How To Make a Patent Market
• R. Polk Wagner, Patent Portfolios [Written]; Understanding Patent Quality Mechanisms

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MAY 4th-5th HEARING, BERKELEY, CA
May 4 - IP Marketplaces
Panel 1: The IP Marketplace in the Life Sciences Industries
Panel 2: The IP Marketplace in the IT Industry
Panel 3: Markets for IP and Technology: Academic Perspectives

May 5 - Notice and Remedies
Panel 1: The Notice Function of Patents
Panel 2: Patent Remedies

(Transcripts & Presentations not currently available)

--------------------------------------------------------------------------

Anyone looking to get more insight on current patent issues and read first-hand accounts from industry and academic leaders are strongly advised to read through the materials. It's a lot of information - a few hundred pages in transcript material alone - but is well worth the read.

The FTC page for these hearings may be viewed here (link), which contains much of the aforementioned material, with the exception of some of the transcripts listed above.

Defensive Patenting and Deferred Examinaton: Lessons From the German Patent Office

There has been a renewed interest in deferred examination for the USPTO, primarily because (a) it appears to enjoy some success overseas, and (b) the current backlog of pending cases at the PTO are at unsustainable levels. As many institutional patent filers recognize, a fair percentage of yearly filings are almost exclusively defensive, i.e., the filings are submitted to create "freedom-to-operate" (FTO) areas and to potentially block future filers in the technological space, and also create uncertainty for competitors analyzing filed applications.

While U.S. companies have long used defensive filings, statistics on this area are hard to find, since the U.S. system makes it almost impossible to gleam the motivation behind any filing.

However, in the EPO, and more specifically Germany, deferred examination creates two "lags" between filing and grant (or refusal): (1) the examination lag - i.e., between filing and examination, and (2) grant/refusal lag - i.e., between examination and grant or refusal. In Germany, examination does not start until it is requested by the applicant. Thus, the applicant controls the examination lag. Accordingly, applicants can achieve a very long, and cost-efficient, period of pendency, since prosecution costs are practically nil, and there is no “risk” of too early termination. As a result, competitors cannot ignore the application (since the examination request can still be made), and the applicant gains a certain leverage in the patent office on the specific technology.

(As EPO president Alison Brimelow put it: "If you spend several years waiting for a decision, you and others can play 'rich man’s poker', taking a bet on what your rights are going to be and discussing your commercial relationships in the shadow of that pending set of applications.")

Under this backdrop, EU scholars Joachim Henkel and Florian Jell looked at the German model to determine how, and how often, German patent filers avail themselves of defensive patent filings, and their motivations for doing so. Analyzing all direct first filings at the German patent office between 1986 and 2000, the authors found the following:

• While 64.7% of all applications in the GPTO were eventually accompanied by an examination request, 35.3% of all applications had no examination started. However, of the 35.3%, 51% of them had subsequent, priority-based, applications filed in other patent authorities.

• In 47.8% of all GPTO direct first filings, the request for examination was filed before the application was published, meaning the applications corresponded to an "accelerated process" pattern. The remaining 16.9% lingered as "optional" filings, presumably to create insecurity among competitors.

• 2% of all applications could turn out to have defensive publishing as their sole purpose, that is, the publication of inventions with the purpose of creating prior art.

• More than 20% of all applications are left pending for the maximum of seven years before examination is requested or the application is deemed to be withdrawn.

• In cases where the filings are withdrawn very early (when first annual fees would have been due), 85.9% of applications actively withdrawn had subsequent filings, thus indicating that the original filing was merely done to secure priority.

Other findings from the study:

[A] surprisingly large share of applications is kept pending without request for examination, in 20% of all filings even for the maximum period of seven years. For applications with low value or low probability of grant, this creates insecurity for competitors and is thus preferable to an early withdrawal or an early, and likely negative, decision by the examiner. Second, a longer pendency period gives the applicant more time to assess the value of requesting examination. We find that for 17% of all GPTO direct filings, a request for examination is made with delay, that is, after publication of the application.

Evidence from interviews suggests that firms strongly benefit from maintaining pendency of patent applications that cover rather abstract technologies whose market is considered strategically important as a whole, but which are not yet embodied in concrete products. It seems that in such cases a pending patent application offers enough protection while at the same time involving lower cost (e.g. no examination fee, no prosecution cost). As soon as “full” protection is required (e.g. when a product will be launched soon), the applicant can easily induce examination of the patent. Our data shows that this strategy is mostly used by firms (in contrast to individuals): 90.4% of all patents that were pending for seven years before examination started were filed for by corporations or institutions.

Our interviews further suggest that individual applicants who keep their filings pending do so in order to save examination cost while searching for licensees. A majority of 54.8% (which is far above average) of all early lapsed patent applications is filed by individuals suggesting low commercial value of the underlying inventions. The remaining 41.6% (more than 2 % of all filings) are early lapsed corporate or institutional filings. They are strong candidates for being DPs [defensive publications], or in any case for having a large value component related to creating FTO. While we can currently not exclude that the applicants did file initially with the intention of obtaining a patent grant, and within two years realized that a request for examination would be of little value (because of a low probability of grant, or a low value of the resulting patent, if granted), interpreting these filings as DPs is very plausible. First, this interpretation is suggested by qualitative evidence. Second, a survey among EPO applicants found that preserving FTO, after preventing imitation, is the second most important motive for patenting.

Read/download "Alternative Motives to File for Patents: Profiting from Pendency and Publication" (link)

USPTO Reform at WIPO: New PCT Procedures Being Proposed for "PCT II"

At the May 2008 session of the Working Group, the International Bureau (IB) presented a paper titled "Enhancing the Value of International Search and Preliminary Examination Under the PCT" (PCT/WG/1/3), where the paper addressed shortcomings of the PCT to exploit work product of various offices. According to the group, worksharing would greatly assist in reducing the overall workload of patent offices worldwide through the use of the international reports either as the basis for grant or at least as the basis for an accelerated examination process.


In other words, the general idea is place greater weight on reports issued from the international/national stage so that a positive report would automatically indicate a potential patent grant in all member states, referred to as a "PCT II Patentability Report." After the report issues, national offices would have a specific period of time to issue a notification of refusal.

According to the report, the system

[W]ould result in an extremely high quality final work product that should be able to be heavily relied on, if not accepted, by national offices due to the fact that it is the result of a comprehensive search of multiple offices that incorporates prior art submissions by the applicant and third parties. It will have the additional confidence factor of being prepared in conjunction with the processing of the national application [in the issuing search office], thus resulting in either a patent grant or a final rejection in that office.

Some highlights of the system include:


(1) the combining of international and national processing "that will enable more efficient processing in the Authority/national office performing the search and examination,"

(2) search/examination collaboration among Authorities,

(3) allowing for the submission of prior art by the applicant, and

(4) allowing for third party prior art submissions.

-- Read/download a copy of the report here (link)


-- Read other documents relating to the "Patent Cooperation Treaty Working Group : First Session" (May 26, 2008 to May 30, 2008) here (link).

Video: Intel, Startups Debate Patent Reform Efforts

Recently, Intel Corp.'s chief patent counsel David Simon and entrepreneur Steve Perlman faced off in a debate on patent reform yesterday, where their views showed a wide gap between the opinions of big corporations and startups over pending patent legislation, and especially apportionment of damages and first-to-file.

It's an interesting presentation - Simon makes a number of points regarding the practical effect of patent litigation on the business models and budgets of high tech companies. Perlman, who was more animated than Simon, began to pick apart, in detail, some of the contentions of the CPF, and others in the pro-reform movement. At one point, it even sounds like he calls one of the authors that contributed to matters cited in the Congressional Report a "f***ing liar" (this is not crystal clear, but you can judge for yourself at about the 7:35 point of the video)

View the 20-minute video here (link)

Also see part 2 of the video (16 min.), where Ronald Yin from DLA Piper addressed a more middle-of-the-road position, stating that "The system needs to be fixed, but I don't think it's in as dire straits." (link)

See, EETimes, "Intel, startup face off in patent debate" (link)

EDN, "Patents: fixable, or the next weapons of financial destruction?", discussing the debate and noting that the burgeoning "patent derivative market" could "further increase the risk of innovation for real technology companies" (link)

See also, Tech Daily Dose, "Lofgren 'Very Nervous' About IP Pact" (link). From the article:

Silicon Valley executives told [Lofgren] in recent meetings that a compromise bill, which last month passed the Senate Judiciary Committee, could be worse than no bill at all due to what they believe is watered down damages language. "Last year we had a strong bill," Lofgren said of the version that passed the House. The Senate measure stalled last spring after Judiciary Chairman Patrick Leahy and then-ranking member Arlen Specter could not see eye to eye on damages text. "Now we have a bill that opponents of patent reform are rallying around," she said of Leahy's legislation as amended.

BPAI Precedential Opinion: Software "Means" Must Disclose Algorithmic Structure

Ex Parte Catlin, Appeal 2007-3072 (BPAI, February 3, 2009) Precedential Opinion

The claimed invention was directed to a method for implementing an on-line incentive system at a merchant's web site. The application contained a means-plus-function recitation in the claims:

1. A method for implementing an on-line incentive system, said method comprising the steps of:

providing, at a merchant's web site, means for a consumer to participate in an earning activity to earn value from a merchant; and . . .

On Appeal, the BPAI noted the examiner's obviousness rejection (and surprisingly didn't raise any 101 issues sua sponte). However, the Art Unit SPE filed a request for rehearing seeking reconsideration of the Board's decision by arguing that the "means for" language was indefinite under section 112, second paragraph, since the Specification allegedly did not disclose adequate structure, material, or acts that perform the function recited in the claims.

Reviewing the Specification, the Board noted that "The Appellants' Specification does not provide . . . an algorithm by which the consumer is able to participate in an earning activity and earn value." Also, the Board noted that a description of prior art incentive programs "merely provides examples of the results of the operation of an unspecified algorithm."

Citing Aristocrat Techs. Austl. Pty Ltd. v Inter. Game Tech., 521 F.3d 1328 (Fed. Cir. 2008), it was stated that

For a patentee to claim a means for performing a particular function and then to disclose only a general purpose computer as the structure designed to perform that function amounts to pure functional claiming. Because general purpose computers can be programmed to perform very different tasks in very different ways, simply disclosing a computer as the structure designated to perform a particular function does not limit the scope of the claim to "the corresponding structure, material, or acts" that perform the function, as required by section 112 paragraph 6.

* * *

[A] general purpose computer programmed to carry out a particular algorithm creates a "new machine" because a general purpose computer "in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software.". . . The instructions of the software program in effect "create a special purpose machine for carrying out the particular algorithm." . . . Thus, in a means plus function claim "in which the disclosed structure is a computer, or microprocessor, programmed to carry out an algorithm, the disclosed structure is not the general purpose computer, but rather the special purpose computer programmed to perform the disclosed algorithm."

Turning to the application's disclosure, the Board found that

Appellants' Specification describes generally that the consumer can access an earning activity through the merchant's web site. The merchant's web site itself cannot be the means or structure corresponding to the function of the claims, because the claims recite providing "at a merchant's web site" means for a consumer to participate in an earning activity and earn value. It is clear from the claims that the merchant's web site is merely the location, through which the software that enables the consumer to participate in the earning activity and earn value, is provided. The Specification does not provide, however, an algorithm by which the consumer is able to participate in an earning activity and earn value.

The Board applied the 112 rejection and vacated the obviousness rejection, noting that "[a] rejection of a claim, which is so indefinite that 'considerable speculation as to meaning of the terms employed and assumptions as to the scope of such claims' is needed, is likely imprudent."

Read/download a copy of the opinion here (link)

Patent Valuation Practices of Europe's Top 500

Martin A. Bader and Frauke Rüther, on behalf of PriceWaterhouseCoopers, surveyed the top 500 patent applicants of the EPO to determine valuation procedures and methods. It has been known for a while now that the management of intangible assets is an important element of strategic corporate management that is constantly increasing in significance.

As a consequence of International Financial Reporting Standards (IFRS), intangible assets, including patents, have to be listed according to certain prerequisites on a corporate balance sheet. Regulators, as well as potential stakeholders and investors, are constantly looking for accurate and transparent valuations for determining portfolio worth. This study hopes to shed some light on this topic by seeing what the largest EU patent holders do.

At the outset, more than 90% of the interviewees emphasized the importance of innovations and patents for corporate success. With regard to patents alone, only 58% of the interviewees cited that patents were important to their business. 57% of the companies interviewed indicated that "value-oriented innovation management" is firmly entrenched in their organization; only 12% answered this question in the negative.

Despite the fact that IP requires some regular management and valuation, the interviewees
indicated that monetary valuations are conducted "relatively rarely." Also, 44% of the companies stated that they use a cost-oriented valuation process (as opposed to a value-oriented process) for normal valuation "events" (disputes, transfers, taxation, etc.). According to the authors,

This result is surprising since particularly the management who frequently asks to be informed about the potential value contribution of their patents will find it difficult to infer it from this method. It is also surprising in the light of the importance of value-oriented innovation management . . . The path from a currently dominating risk and cost approach in patent portfolio management and patent valuation to an at least application dependent opportunity and market or income based approach still seems to be steep and breathtaking for Europe’s top enterprises.

With regard to timing of valuation of patents and technologies, the survey presented a number of "events" and asked the participants to answer on a scale of 1 (never) to 5 (often) when valuations would occur. The results are as follows:

Maintenance of patent (3.8)

Compensation of employee (3.6)

Control of R&D (3.0)

Distribution of budgets (3.3)

Cross-licensing (2.8)

Strategic alliances (3.1)

Purchase/ Sale of company (2.6)

External reporting (2.5)

Compensation for damages (2.5)

Loan Collateral (1.4)

Voluntary information (2.1)

Debt / Equity financing (2.0)

Liquidation, insolvency(1.3)

Transfer pricing (2.5)

Transfer of functions (2.0)

In addition to these statistics, the report includes other statistics and some useful summaries of the 3 most common valuation methods: (1) market approach, (2) income approach, and (3) cost approach.

Read/download a summary of "The Patent Valuation Practices of Europe’s Top 500" (link)

BPAI Tightens Use of Declarations in Overcoming Obviousness Rejections

Ex Parte Jellá, Appeal No. 2008- 1619 (BPAI, November 3, 2008), Precedential Opinion

The Appellant's claimed invention relates to raised panel door sections for overhead garage doors. Claim 1, reproduced below, is representative of the subject matter on appeal.

1. A door section for an overhead garage door comprising :

a sheet metal layer having a finished height of substantially twenty-eight inches; and

support members coupled to first and second lateral edges of said sheet metal layer.

The prior art taught everything except "a finished height of substantially twenty-eight inches." The BPAI agreed with the Examiner's determination that the claimed finished height of the door section "is a matter of design choice" and that the claimed finished height of twenty-eight inches
would be "a predictable result":

The claimed finished door section height is no more than the result of the substitution of one element (three twenty-eight inch door panel sections) for another known in the field (four twenty-one inch door panel sections) to yield a predictable result (a door section with a finished height of substantially twenty-eight inches).

To rebut the prima facie finding of obviousness, the applicant submitted eight different declarations addressing various reasons for non-obviousness of the claimed configuration. Some of the declarations addressed the "highly visible features" of garage door panels and mentioned a commercial need in the market to have a garage door that "looks different from the traditional raised panel steel garage doors."

The BPAI dismissed these declarations, stating that

Evidence of commercial success for a claimed invention of a utility patent application cannot be shown, however, by industry reaction to the aesthetic appearance of the claimed invention. Such evidence is too subjective to serve as reliable objective evidence of secondary considerations of non-obviousness. Further, the ornamental appearance of a product is the purview of the design patent law. Were we to allow secondary considerations of non-obviousness to be based on the industry's reaction to the ornamental appearance of the claimed invention, we would be blurring the distinction between design and utility patent protection. Objective evidence of secondary considerations of non-obviousness should be tied to the functional aspects of the claimed invention for a utility patent application . . . we hold that unexpected results for the claimed invention of a utility patent application cannot be based on enhanced aesthetic appearance, which is a subjective factor and one more properly reserved for the confines of design patent protection.

With regard to commercial success, the Appellant submitted figures related to number of units sold, 25% increase in sales annually and attested that "eighteen of the top twenty builders" in Southern California were using these panels in new home subdivisions. Again, the Board found these declarations unpersuasive:

The Appellant's evidence of gross sales as an indication of commercial success is weak, at best. The Appellant's proof of unit sales does not indicate whether the numbers sold were a substantial quantity in the relevant market In re Huang, 100 F.3d 135, 140 (Fed. Cir. 1996) (without evidence that the sales are a substantial quantity in the relevant market, "bare sales numbers" are a "weak showing" of commercial success, if any); In re Baxter Travenol Labs., 952 F.2d 388, 392 (Fed. Cir. 1991) ("[I]nformation solely on numbers of units sold is insufficient to establish commercial success."); Kansas Jack, Inc. v. Kuhn, 719 F.2d 1144, 1150-51 (Fed. Cir. 1983) ("The evidence of commercial success consisted solely of the number of units sold. There was no evidence of market share, of growth in market share, of replacing earlier units sold by others or of dollar amounts, and no evidence of a nexus between sales and the merits of the invention. Under such circumstances, consideration of the totality of the evidence, including that relating to commercial success, does not require a holding that the invention would have been nonobvious at the time it was made to one skilled in the art.")

Also, while certain Affidavits addressed "a long-felt and growing need" for the 28 inch panels, the BPAI held that the Appellant failed to make the requisite showing that the need was "persistent":

Establishing long-felt need requires objective evidence that an art-recognized problem existed in the art for a long period of time without solution. In particular, the evidence must show that the need was a persistent one that was recognized by those of ordinary skill in the art. In re Gershon, 372 F.2d 535, 539 (CCPA 1967). The declarations submitted by the Appellant do not show that the need for a different looking door was a persistent one or that others tried to meet the need and failed. While the need for a new look to garage doors may have been a market pressure that existed at the time of the invention, the declarants fail to state how long the need existed in the industry and whether any attempts to meet the need were made by others in the industry.

As such, the BPAI affirmed the obviousness rejections.

Read/download a copy of the opinion here (link)