ED Tex: Attorney Does Not Have to "Do the PTO's Job For Them" To Negate Inequitable Conduct

Tyco Healthcare Group LP v. Applied Medical Resources Corp., No. 9:06-CV-151 (E.D. Tex., June 26, 2009 Order) (Giblin, K.)

Tyco sued Applied Medical for patent infringement. One of the asserted patents was previously subjected to an interference (when the patent was at an application stage), where Tyco argued that the other patent was invalid over a prior art reference ("Yoon"). After the argument was made of record, the BPAI ultimately entered a judgment that there was no interference-in-fact, based on the agreement of the parties. In a footnote, the BPAI directed the Examiner to consider the prior art in connection with the application.

The examiner did not consider the prior art "Yoon" patent, and the applicant did not submit the reference independently. As the district court noted, "with the exception of the interference proceeding, the Yoon patent is not mentioned anywhere in the file history of the[] patent, nor was it disclosed during prosecution of the [related] patents."

Naturally, Applied Medical alleged inequitable conduct, and moved for such a finding on summary judgment.

While the court found numerous disputed issues of material fact, the court had some interesting things to say under these circumstances on the "intent to deceive" prong of the inequitable conduct test:

Applied suggests that [prosecuting counsel] “gamed” the system by using the Yoon patent to his advantage before the BPAI during the interference proceeding, while simultaneously hiding the reference from the Examiner during prosecution of the ‘854 patent application – in effect, that [counsel's] strategy was to hope the PTO’s left hand – the Examiner – did not know what its right hand – the BPAI – was doing.

Applied is correct that because the Examiner and the BPAI are different units within the PTO, identifying the Yoon reference to the BPAI is not the same thing as identifying it to the Examiner. See, e.g., A.B. Dick Co. v. Burroughs Co., 798 F.2d 1392, 1399 n.7 (Fed. Cir. 1986) (noting that the district court pointed out that “the PTO cannot realistically be thought of as the equivalent (say) of a small law office, in which notice to one person may fairly be deemed notice to all. It is not necessarily true that the PTO Examining Division will have access to proofs filed in the course of an interference.”). However, the problem with Applied’s argument – and the distinction from A.B. Dick Co. – is that in this case, the APJ, in an order adopted by the BPAI, specifically directed the Examiner to consider a number of references referred to in the parties’ motion papers, including the Yoon patent.

Applied argued that, at a minimum, the prosecuting counsel should have realized that something was wrong when the Examiner did not cite the Yoon patent as a reference that was considered and presupposes that the counsel believed the reference to be material. The district court found this to be weak:

Even assuming that a reasonable attorney in [counsel's] position would or should have thought something was wrong when the Yoon reference was not cited, Applied cites to no statute, regulation, or case that requires a patent attorney to do the PTO’s job for them . . . [counsel] has a duty of candor and good faith to the PTO, but Applied has not cited any rule that imposes on counsel an obligation to point out to the Examiner the ways in which he or she thinks the Examiner might be wrong . . . Applied is entitled to second-guess the Examiner’s allowance of the ‘854 patent’s claims under an invalidity theory, but the court is unaware of any authority that requires [counsel] to either analyze the examination process for flaws and inform the Examiner of his mistakes, or be charged with inequitable conduct.

There is little, if any, evidence before the court of intent to deceive with respect to the ‘854 patent. However, because the overall determination of inequitable conduct is a sliding scale, where more evidence of materiality means that less evidence of intent to deceive is permissible, the court finds that granting summary judgment in favor of Tyco is inappropriate at this time.

Read/download the opinion here (link)

USPTO Posts Selected Material on Bilski

The PTO recently announced that "in view of the high level of interest sparked by the case, the USPTO is posting selected court documents from Bilski v. Doll on this Web site."

Currently the site only contains PTO material related to the Federal Circuit Panel Proceedings, Federal Circuit En Banc Proceedings, and Supreme Court Briefs.

To visit the page, click here (link)

Thomson Reuters Publishes "Innovation Hot Spots"

Today, the IP Solutions business of Thomson Reuters published a research paper, titled "Innovation Hot Spots: Mining Patent Data for Tomorrow's Breakthroughs," which tracks unique inventions published in patent applications and granted patents from 2003, 2008 and 2009 to identify technology areas showing the sharpest growth over the last five years.

The study identified three general areas as "hotbeds of inventive activity over the last 5 years: biofuels, telecom and bio-related nanotechnology.

Not surprisingly patenting activity in biofuels has exploded. In 2003, global patents on biofuels numbered only 341, and the patents were predominantly filed by Japanese companies (70% patented by Japanese companies in top 13 patenting companies; 31% of patents were filed in Japan). By 2008, patenting activity had risen by 550% to 1,878 patents. In the latest period (January 2008 to April 2009) the number of biofuel patents was 2,466. China has moved in significantly (31% of patents were filed in China); China shared top position with Japan (three companies) in the Top 10 patenting companies.

For telecom, the hot area is patents related to convergence (mobile/Internet computing and communication). In 2003, there were a total of 8,705 patents focused on the convergence between telecoms and computing, e.g. mobile phones with common Internet access features that enable the use of both cellular and wireless access networks via gateways and the like. By
2008, that number increased 290% to 25,283 patents. Within that category, cell phone
data/wireless network roaming is showing particularly strong growth.

One of the more exciting areas is the fusion of nanotechnology with genetic engineering to develop lab-on-a-chip systems. These devices integrate one or several lab functions on a single chip of only millimeters in size. Innovation in bio-related nanotechnology in 2003, as represented by global patenting activity was a small but well-established area (4,611 patents) led by US companies (70% patented by US companies in top 10 patenting companies; 48% of patents were filed in the US). In 2008, patenting activity had risen by 160% to 7,399 patents. In the latest period (January 2008 to April 2009) the number of bio-related nanotechnology patents was 9,842. China has not moved into the space significantly (only one Chinese company, listed 20th in top assignee list) but it is clearly seen as an important country to seek patent protection in (16% of patents were filed in China).

In addition to tracking the growth of patenting activity in each field, the report also identifies the companies who are most active in these spaces and the countries which they are seeking patent protection.

Read/download the report here (link)

NPEs Speak at the IP Business Congress 2009

On Tuesday at the IP Business Congress 2009, a breakout session was conducted on NPE's titled "Meeting the NPE Challenge" where NPE business models were discussed. On the plaintiff side, members of Acacia Technologies and Altitude Capital Partners presented their views on the NPE debate, and on the defendant side was RPX Corp. and Allied Security Trust.

For Acacia/Altitude, their business model is based on patent aggregation and is rooted in tapping revenue distribution from licensing - despite the fact that 60% of existing patents are owned by small entities, only 1% of licensing revenue flows to them. Since most small entities are unable (or unwilling) to license and enforce patented technologies, the end result is that 60% of patented R&D in the U.S. is sitting in disaggregated IP. This in turn creates inefficiency and waste in the market. This is where the patent aggregators look to fill the gap. To date, NPE's have raised over $6B in private capital to acquire patents for licensing and enforcement.

Both Acacia and Altitude pride themselves on diligence - each commented that enforcing weak patents "makes no rational business sense." Thus every patent gets reviewed by patent engineers, attorneys, and licensing executives to establish value and enforceability prior to any licensing efforts. As a result, many of the litigated patents are upheld in court (or at least survive summary judgment). And while NPEs continue to be disparaged, Acacia commented that operating companies have become "much more serious" and more open with them during negotiations.

On the other side was Allied Security Trust (AST) and RPX, both of which are self-described "defensive patent aggregators." In AST's case, their goal is to reduce patent assertion risks by diminishing the exposure of patents on the market. Similar to Acacia and Altitude, AST has a network of subject matter experts to analyze patents to determine their strength. When a particular patent is deemed of sufficient quality and value, they purchase the patent and offer licenses to interested parties. After holding the patent for 12 months, they turn around and sell the patent, subject to the license(s). AST has reviewed about 1200 patent portfolios totaling about 20,000 patents, but has only placed bids on 20-30 patents. According to AST, they win about 80% of the bids that they make. AST solicits members having annual revenues of $1B or greater, where, in addition to licensing costs, members share in the annual cost of administration (roughly $200k).

RPX works along the same lines as AST, but differs in two relatively minor ways: (1) unlike AST, RPX is run by outside investors (Kleiner Perkins Caufield & Byers and Charles River Ventures); and (2) RPX is also a subscription-based service. Membership fees range from $35K - $4.5M, depending on the size of the company, and any member will have access to the entire portfolio. So far, RPX claims to have acquired 350 patent assets totaling $90M in value. This action has led to 4 resolutions of active litigation, 3 resolutions of asserted patents, and 6 open-market purchases of patents that would have otherwise been asserted.

During the session, it was interesting to see that the room was mostly respectful - even mildly deferential - towards Acacia/Altitude (notwithstanding the fact that a fair number of attendees were in the IP buying/selling business). When Acacia was asked what they thought of the defensive aggregators, they responded that these recently-formed defensive models "validate what we have been doing for years" on the offensive side. Previously, large companies "wouldn't dream of talking to you" when non-litigious licensing attempts were made. According to Acacia, there now appears to be a growing recognition that reflexively dismissing a properly-vetted patent is not good business strategy. Interestingly, during Q&A, some corporate members in the audience even asked questions to the NPEs on how communication could be improved to facilitate negotiation of "legitimate" and "potentially valuable" patents.

It was a very engaging session, which left some serious questions needing answers. Specifically, the public perception of NPE's has currently been couched in terms of "bad" patents being asserted to extract "illegitimate" licensing fees. No doubt this practice exists and is a horrific drain on resources (even Acacia/Altitude disparaged such opportunistic litigation, claiming it "makes little business sense", but commented that it is a "dwindling" practice). However, what about the "good" patents? Suppose a particular NPE patent is independently reviewed by scientists and lawyers and is objectively determined to have innovative merit. What then?


(as a side note, Ralph Eckardt, from 3LP Advisors, and co-author of "The Invisible Edge: Taking Your Strategy to the Next Level Using Intellectual Property" was at the conference, but spoke at a different session. He had a good line about NPEs, which I will paraphrase: "People talk about working the invention as a prerequisite for IP protection, but does that make any sense? Do we deny protection for a composer because he doesn't perform the music? Do we deny an inventor protection on a windshield wiper because he can't start his own auto company? Do we deny protection to an architect because he doesn't build the building?")

USPTO Bailout Bill Introduced

From National Journal's "Tech Daily Dose":

Senate Judiciary Chairman Patrick Leahy and ranking member Jeff Sessions came to the rescue of the Patent and Trademark Office on Wednesday night when they introduced a bill that will allow the agency to use funds designated for its trademark portfolio to be used to address its growing backlog of patent applications. The trademark budget, which is statutorily untouchable, has a $60 million-$70 million surplus. CongressDaily reported this week that Commerce Department and PTO officials had been making the rounds on Capitol Hill to let key lawmakers know how the office was struggling in the recession and offering up legislative ideas like the loan plan.

The PTO, which is funded through fees collected from its users, suspended overtime pay for patent examiners effective Sunday and earlier this year instituted a hiring freeze amid a slump in the number of patent applications filed. Under the bill, the PTO can make use of the money "to support the processing of patents and other activities, services, and materials relating to patents" if the office's director certifies to Congress the use of funds "is reasonably necessary to avoid furloughs or a reduction-in-force." The borrowed money would have to be put back in the trademark basket no later than Sept. 30, 2011.

Read"Leahy Offers Patent Office Bailout Bill" (link)

See also "U.S. patent office shortfall worsens"(link)

Report From IP Business Conference 2009

Today, IAM kicked off the IP Business Congress at the Four Seasons Hotel in Chicago. This morning’s sessions were quite packed, with an estimated 370+ people from various sectors of technology gathering to talk about IP valuation, prosecution and enforcement.

One of the plenary sessions involved the “state of play” in global IP. Specifically, the session covered 5 key jurisdictions (China, EU, India, Japan and the U.S.) to see what the “IP climate” was, and what resultant opportunities/obstacles existed. The following briefly summarizes the presenters and their views:

China – Speaker: Ian Harvey, Chairman, Intellectual Property Institute. According to Ian, Chinese IP laws continue to develop and are becoming among the best in the world. The quality of patents were described as “particularly good,” even for applications filed by foreign firms. CIPO recognizes that more examiners are needed, and is in the process of instituting a massive training program to get examiners specialized in examining patents in their technical fields. Costs for prosecution is reasonable, but not cheap. Currently, China is aiming to become one of the top 5 patentees in the world by 2015.

On the enforcement side, very sophisticated judgments have emerged from Chinese courts, but most judges do not have significant training in IP. Again, the Chinese government is stepping in to help judges with more training. Litigation is quick – most cases last between 12-14 months, and costs around $120-150K. While outsiders do not view China as a litigation powerhouse, Ian stressed that there is more patent litigation in China than anywhere else in the world, including the United States. So far, most of the litigation is between Chinese firms. Even more surprising was Ian’s assertion that the current level of patentee litigation success in China is 2 ½ times higher than in the U.S. (37%).

EU – Speaker: Ciarán McGinley, Head of the Controlling Office, EPO. Ciarán’s presentation focused mostly on application pendency. Ciarán pointed out that the pending stock of applications in the trilateral offices is nearing 2 million applications. Currently, there are more pending applications than there are actively maintained patents. Ciarán hypothesized that one of the primary reasons for this is the was patent offices are financed – currently, they are run like “a pyramid scheme.”

Typically patent office cash reserves comprise of prepaid fees for work that has not been performed yet. Of course, these reserves quickly become very vulnerable to government “diversion” which has led to financial shortfalls. While there are numerous ways that patent offices can deal with fee diversion, the bottom line is that a patent system funded by low upfront fees (e.g., filing, examination, etc.) set off by large back end fees (e.g., issue, maintenance fees) “is not workable.” According to Ciarán, this situation creates “perverse” incentives for the patent office – as you increase quality and work faster, the office earns less. At the same time, applicants keep pushing more and more work on the offices that they themselves don’t want to do.

India – Speaker: Shamnad Basheer, Professor, National University of Judicial Sciences. After taking advantage of weak IP laws for 30 years, efforts to enforce IP in India has been met with great resistance. The current political culture is not supportive of IP rights. Pre-grant opposition, post-grant opposition and invalidation provisions provide many areas for challenging patents, and people are not shy to use any and all mechanisms to dispose of threatening patents. Coupled with compulsory licensing, the IP regime in India is weaker than it should be. Local working law also suggests that if you don’t manufacture in India, you subject yourself to compulsory license laws.

Japan – Speaker: Philip Parker, President & CEO PJ parker & Co. Domestic patent system very insular – only about 10% of issued patents are granted to non-resident applicants. Japan has started to develop a very active technology transfer programs, mostly in early stage R&D. Currently, there is almost no trading/selling of IP between Japanese companies except in a M&A situation. Due to an intense competitive environment, selling IP to competitors is seen as giving an unwarranted advantage. While licensing is common, only specific technologies get licenced, and it is rare to see extensive cross-licenses.

Hi-tech and auto industry dominate foreign filing; not a single pharma company or material science company ever appears as a “top patent filer.” Interest in selling IP has risen sharply, but interest in buying is much more limited. No Japanese auto manufacturer or major supplier will sell patents at this time.

United States – Speaker: Todd Dickinson, Executive Director AIPLA. Broadly praised Kappos nomination, and discussed issues related to patent reform (opposition, damages apportionment, etc.). Despite legislative efforts, lots of reform has already come from the courts, and many of the previous issues are no longer as pressing. Getting through the backlog with be the greatest challenge for the USPTO; reviewing the “count” system for examiners may be necessary. Lots of polarization exists between stakeholders and PTO, and working through differences will be important for the future. Again, PTO work-sharing will be key – other offices (JPO) have already identified this issue as a top priority. End the potential for fee diversion. While it doesn’t get much attention, the Intellectual Property “Czar” position will be significant. Health care and “Green” technologies may receive special attention from the USPTO. While programs like the “peer-to-patent” program received some positive feedback, the PTO has no plans on renewing the program in the near future.

David Kappos - The Next USPTO Director

Comment Of Senator Patrick Leahy (D-Vt.),
Chairman, Senate Judiciary Committee,
On The Designation Of David J. Kappos
To Be Undersecretary Of Commerce For Intellectual Property
And Director Of The U.S. Patent And Trademark Office
June 18, 2009

“I am pleased that the President has announced his intent nominate David J. Kappos to be the Undersecretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office.

“His experience both as a development engineer and as a leading intellectual property attorney make Mr. Kappos exceptionally qualified to lead the Patent and Trademark Office. While serving as Vice President and Assistant General Counsel at IBM, Mr. Kappos has managed IBM’s vast patent and trademark portfolios. He also serves on the Board of Directors of the American Intellectual Property Law Association, the Intellectual Property Owners Association, and the International Intellectual Property Society.

“The USPTO faces serious challenges in this difficult economic environment, and the office requires strong leadership. David Kappos is such a leader. I look forward to working with him on issues confronting the USPTO, including reducing the backlog and pendency of patent applications and modernizing the patent system as Congress considers the Patent Reform Act.”

View the press release here (link)

PPAC Meeting Sets the Stage for Patent Quality Improvements

The Patent Public Advisory Committee (PPAC) held a Public Session today (link) at the PTO Headquarters to discuss various issues relating to the USPTO and patent practice. One of the big topics during the meeting was patent quality, which was addressed by Marc Adler(member, Andrew Hirshfeld, Acting Deputy Commissioner for Patent Examination Policy). Marc identified some areas of consideration for the PTO:

• Defining "Quality" - the term should be defined in terms of the validity of the granted patent, and not the commercial value of the invention. Quality should be composed of 3 main elements: (1) drafting quality of the patent application; (2) quality of search and examination, and (3) quality of prosecution.

• 35 U.S.C. §112 - compliance to §112 is "critical" to improving quality

• Nix the Status Quo - improving quality will require behavioral modification by applicants and examiners. Quality improvement may be done without adding new rules.

• Worksharing - identified as "key" to improving quality.

• Incentives - provide incentives for applicants to be up-front about the prior art. One suggestion included a priority "bump" for applicants that identify the 5 most relevant prior art references for new applications.

Also Peggy Focarino, Acting Commissioner for Patents, identified some areas the PTO was exploring to improve quality:

• Interview training - provide training for examiners on when and how to conduct interviews, and set up system to track interview requests. Currently, the PTO does not have interview-related data to identify pockets of "interview resistant" examiners. PTO data strongly suggests that early interviews lead to early indications of allowable subject matter. Incentives should be provided to examiners for interviews conducted before and after 1st office action

• Compact prosecution training - train examiners in how to shorten examination processes; create focus on "high-quality" first office actions.

• Ombudsmen - set up a neutral facilitator for each TC to get applications "back on track." The ombudsman would essentially resolve issues and help applicants experiencing breakdowns in communication and/or hesitant to contact SPEs. The ombudsman would also serve as a source of information and perform independently from the examiner's chain of command. (Note - the ombudsman proposal was previously tried in TC 1600, to mixed reviews).

• Examiner collaboration - create environments where examiners can freely exchange ideas on searches and examination techniques. Currently the PTO is getting ready to launch a beta "FaceBook" application to allow examiners to share best practices in searching.

• Reduce continuations - PTO is still holding fast to the goal of eliminating "unnecessary" continuing applications. The PTO is fully aware that premature final rejections contribute greatly to continuation filings and longer pendencies. Interestingly, the PTO is reconsidering examiner credit for continuing application, and even mentioned disincentives for continuation filings for examiners.

• Management training - just like the examining corps, PTO management is quite junior. The PTO intends to start "management skills enhancement" programs to make sure SPEs are following best practices in reviewing cases. A mentoring program is also said to be in the works.

• Next steps - the PTO is looking to formulate the 5 most important criteria that would drive improved patent quality and reduce pendency. After agreeing on 5 key metrics, the PTO will propose any necessary changes to the public and move forward with implementing policies.

Also, other points of interest:

- The yet-to-be-named PTO Commissioner will likely have to wait "several weeks to a couple of months" before stepping into the job, as the Supreme Court nomination will likely bump confirmation.

- Patent reform legislation will have to wait for the next session of Congress, as the reform prospect "doesn't look good" for the current session.

- USPTO is currently experiencing a 7% decrease in filings, leading to an estimated $140M shortfall. Of that amount, $110M was directly cut from the PTO budget (mostly in hiring)

Bilski at the BPAI - What a Mess (Part 1)

SCOTUS review notwithstanding, the process of determining patentable subject matter after Bilski has become a weird, metaphysical endeavor. It has gotten to the point that a given claim may receive 4 different interpretations from 4 different people, and each of them could be arguably correct. In the case of computer-related inventions, the end result of a patentability analysis is rarely supportable with a single, cogent rationale.

Worse still, and unless the SCOTUS decides to radically shift section 101, Bilski will ultimately provide only a portion of the patentable subject matter puzzle. Remember that the CAFC only addressed one aspect of patentability, i.e., "transforms a particular article into a different state or thing" - the "tied to a particular machine or apparatus" prong was largely untouched. This gap has the potential for lots of mischief: without any definitive guidelines, how does one determine what qualifies as "a particular machine or apparatus"?

While the district courts are only beginning to deal with this question, the BPAI has been churning out decisions on a fairly regular basis. Since the beginning of 2009, the BPAI has issued 59 decisions based on Bilski. The results have not been pretty for Applicants. Out of the 59 decisions,

• 1 decision remanded the case to clarify the record,

• 9 decisions "passed" on the question and remanded (these decisions came aound the time the PTO issued the “Clarification of 'Processes' under 35 U.S.C. § 101” memorandum),

• 22 decisions affirmed all of the examiner's 101 rejection,

• 19 issued new grounds of rejection on appeal based on section 101,

• 4 affirmed certain rejections, but reversed others, and

• 4 reversed all of the examiner's 101 rejection.

Thus, section 101 rejections currently have a 92% rate of being at least partly affirmed at the BPAI in 2009. It is worthwhile to note that all of the BPAI's Bilski cases in 2009 dealt with business methods and algorithmic processes. The 92% rate is remarkable, given the fact that, as recently as 2005, the BPAI did not uphold a single rejection based on patentable subject matter.

So what was so special about the reversed 2009 cases? See for yourself:

Ex Parte Holmstead et al., Appeal No. 2009001485
Ex Parte Myka et al., Appeal No. 2008003874
Ex Parte Buhan et al., Appeal No. 2008003441
Ex Parte Borenstein et al., Appeal No. 2008003475

And for the partially-reversed cases:

Ex Parte Petculescu et al., Appeal No. 2008002859
Ex Parte Altman et al., Appeal No. 2008002386
Ex Parte Bodin et al., Appeal No. 2008004315
Ex Parte Nawathe et al., Appeal No. 2007003360

As you will see, there is nothing unusual or remarkable about the claimed features. Nevertheless, the BPAI found reason to reverse the examiner and find the claims recited patentable subject matter. Some examples follow:

Claim: (Ex Parte Holmstead) A computer-readable medium having stored thereon instructions that, when executed, direct a printer to . . .

BPAI: The Specification indicates that computer-executable instructions (in the form of logic or computer code) are stored on one or more computer readable media, such as ROM 106 and/or as firmware 110. (FF 1.) The Specification further explains that firmware 110 is a component of the printer 100, and is (1) implemented as a permanent memory module stored on ROM 106; (2) programmed and tested like software; and (3) contains programming constructs used to coordinate operations of hardware within the printer. (FF 2.) Based on this functionality, we find that the recited computer-readable medium fully comports with the definition of a “machine”

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

Claim: (Ex Parte Myka) A method for wireless bonding of devices and communicating media file transfer parameters, the method comprising . . .

BPAI: The steps of claims 14 and 24 are performed by a master device or a bondable/bonded slave device. (FF 1-2.) As argued by the Appellants, for example, the independent claims include 'communicating information between the master device and the bonded device.' (Appeal Br. 7.) Therefore, the methods recited in independent claims 14 and 24 are each tied to a particular machine or apparatus.

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Claim: (Ex Parte Buhan) A method for storing content encrypted by control words in a receiver/decoder unit having a local storage unit and being connected to a security unit, said control words as well as a necessary right for the access to the content being transmitted in entitlement messages that can be decrypted by system keys, the method comprising . . .

BPAI: We note a receiver/decoder unit having a local storage unit is mentioned in the preamble, which storage unit is embodied in the first step of storing the encrypted content. We also note in the preamble a security unit, which is embodied in the second step of storing the system keys. Both the local storage unit and the security unit constitute tangible, solid, real-world machines, the former exemplified by a magnetic hard disk, and the latter by a smart card (See Fig. 1). We find these elements sufficient for satisfying the “particular machine” prong of the Bilski machine or transformation test, and thus find the Examiner erred in rejecting these method claims.

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

Claim: (Ex Parte Borenstein) A method for providing catalog information for presentation to a user of a store in an electronic commerce system, comprising the steps of . . .

BPAI: while the storage of information in independent claim 1 could arguably be done as a mental process, the recitation of a structured relationship between multiple stores that requires “path information” inherently implies that this information must be stored on a computer or database. This “particular” computer or database is sufficient structure to meet the machine prong of the machine-or-transformation test of In re Bilski. As independent claim 15 recites a computer program product, it is not a method claim that must be analyzed under In re Bilski.

To view the complete listing of 2009 Bilski decisions at the BPAI, click here (link)

(TO BE CONTINUED)

USPTO Website Undergoing a Facelift

From the USPTO's new "Beta" website:

The USPTO is pleased to announce the beta test release of its new Web site. The new site has been redesigned to improve the look and feel, as well as to enhance the user experience with improved navigation. The USPTO's goal is to make the Web site technologically up-to-date, user-friendly, and responsive to customer feedback.

Please keep in mind this is the initial release of the beta site and the content is not currently up to date. The Office of the Chief Information Officer (OCIO) is still in the process of migrating and reorganizing the content.

We invite you to explore the beta Web site and give us your constructive feedback. Your comments and suggestions will help us to build a site that better serves your needs.

Please submit your feedback either through moderator, or send your comments to betafeedback@uspto.gov.

To see the beta website, click here (link)

"Patent Reform: Damages" Audio Session

UCLA Law School professor Doug Lichtman continues his excellent "IP Colloquium" audio series with a new installment titled "Patent Reform: Damages." The show covers the question of how, if at all, Congress should change the way courts calculate patent damages. The show examines a series of edited excerpts from testimony recently given before the Senate, and, separately, the FTC, all on the question of damages reform. Show guest include Thomas F. Cotter (U of Minn. Law School) and Anne Layne-Farrar (LECG), both of which testified separately at the aforementioned hearings.

The show is about an hour long, and CLE credit is available. For more information and to listen to the show, click here (link)

IAM IP Business Congress Converges on Chicago June 21-23

Next week, hundreds of patent practitioners, analysts and executives - including Chief IP Officers from Fortune 500 companies, heads of IP at other major companies, global IP thought leaders and senior policy makers - are gathering in Chicago for two days of top-level discussion at the "IP Business Congress 2009."

The event will feature plenary sessions addressing issues such as, strategic IP and business alignment, IP value creation and the state of play in major IP markets, as well as a range of breakouts examining legal, financial, strategic and business-related topics. The faculty of confirmed speakers includes:

Marshall Phelps, Corporate VP for IP Policy and Strategy, Microsoft
Ruud Peters, CEO, Philips IP & Standards
Carl Horton, Chief IP Counsel, GE
Scott Frank, President and CEO, AT&T Intellectual Property
Todd Dickinson, Executive Director, AIPLA
Ciarán McGinley, Head of the Controlling Office, European Patent Office
Beatrix de Russé, Executive VP of IP and Licensing, Thomson
Keith Bergelt, CEO, Open Invention Network
Sherry Knowles, Senior VP and Chief IP Counsel, GlaxoSmithKline
Marcella Watkins, Managing Counsel, IP, Shell Oil Company
Don Merino, General Manager Acquisitions, Intellectual Ventures
Damon Matteo, Chief IP Officer and VP IP, Palo Alto Research Center

For more information on the event and to register, visit http://www.IPBC2009.com/PR. It's not too late to register - IAM is offering a reduced rate of $1,350 (standard rate $1,500) for those that register online and enter the code WC10.

I will be attending, along with numerous other bloggers, including David Donoghue from the Chicago IP Litigation Blog, who also happens to be organizing a "meet the bloggers" session on the evening of June 23 (link). Many of us should be providing "on the scene" reports from the event. Hope to see you there!

Congress Introduces IP Protections for Foreign Climate Change Agreements

Lat night the House voted overwhelmingly to establish new U.S. policy that will oppose any global climate change treaty that weakens the IP rights of American "green technology." The measure is part of the Foreign Relations Authorization Act (H.R.2410) and reads, in part, as follows:

SEC. 329. PROTECTION OF INTELLECTUAL PROPERTY RIGHTS.

(a) Resources To Protect Intellectual Property Rights- The Secretary of State shall ensure that the protection in foreign countries of the intellectual property rights of
United States persons in other countries is a significant component of United States foreign policy in general and in relations with individual countries. The Secretary of State, in consultation with the Director General of the United States and Foreign Commercial Service and other agencies as appropriate, shall ensure that adequate resources are available at diplomatic missions in any country that is identified under section 182(a)(1) of the Trade Act of 1974 (19 U.S.C. 2242(a)(1)) to ensure--

(1) support for enforcement action against violations of the intellectual property rights of United States persons in such country; and

(2) cooperation with the host government to reform its applicable laws, regulations, practices, and agencies to enable that government to fulfill its international and bilateral obligations with respect to intellectual property rights.

The vote comes in anticipation of the upcoming negotiations in December as part of the U.N. Framework Convention on Climate Change.

Previously, there was sufficient chatter (link) in international circles on compulsory licenses, IP seizures and the outright abolition of patents on low-carbon technology, that Congress felt it necessary to clarify the US's IP position up front. Interestingly, Steven Chu, the US Energy Secretary was quoted by the NYT in March (link) saying the following:

If countries actively helped each other, they would also reap the home benefits of using less energy. So any area like that I think is where we should work very hard in a very collaborative way — by very collaborative I mean
share all intellectual property as much as possible. And in my meetings
with my counterparts in other countries, when we talk about this they say, yes,
we really should do this.

Of course, subsequent clarifications indicated that the statement was not to be taken literally, but it nevertheless made the industry uncomfortable.

To read the Foreign Relations Authorization Act, click here (link)

See also National Journal Online, "Foreign Affairs Bill Passes With IP Text" (link)

NJO, "Groups Back Stronger 'Green' IP Rights" (link)

Distric Court Warns that "Patentee's Time For Trolling" Will End Without More Definite Infringement Contention

Diagnostis Systems Corp. v. Symantec Corp. et al., SACV 06-1211 DOC (C.D. Cal., June 5, 2009 Order) (Nakazato, A.)

DSC is a wholly-owned subsidiary of Acacia Research Corporation (“Acacia”), and both entities are in the business of acquiring, licensing, and enforcing patented technologies. DSC filed suit against Symantec and others in 2007 alleging patent infringement. At the time DSC's Preliminary Infringement Contentions ("PICs") were due, DSC did not set forth a specific theory of infringement.

In June 2008, DSC was given the source code to 8 of the accused software products, along with executable copies and operating manuals for the accused products. Despite having this information, DSC did not elaborate further on the PICs.

Fed up, the defendants moved the court under Rules 26(e)(1)(A) and 37, as well as for an order compelling DSC to provide a more definite infringement statement. Rule 26(e)(1) states:

“[a] party who has made a disclosure under Rule 26(a) -- or who has responded to an interrogatory, request for production, or request for admission -- must supplement or correct its disclosure or response: (A) in a timely manner if the party learns that in some material respect the disclosure or response is incomplete or incorrect, and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process or in writing; or (B) as ordered by the court.”

Naturally, DSC opposed the motion, claiming that the motion seeks to obtain protected work product information, and that more time and information was needed.

The court flatly rejected DSC's arguments:

The bottom line is that, after a plaintiff-patentee has had a reasonable opportunity to review the source code for the defendant’s accused software product, the patentee’s time for trolling the proverbial waters for a theory of infringement comes to an end, and the patentee must fish or cut bait with respect to its specific theory of infringement by providing PICs to the defendant that clearly identify and explain how the source code for the accused product infringes upon specific claims for the patent-in-suit. For DSC, trolling time is over.

DSC contends that “MicroStrategy inappropriately seeks to invade the work product
privilege that protects DSC’s consulting experts’ opinions from inadverent or unintentional disclosure.” (JS at 16:2-19.) This contention is frivolous and misleading because MicroStrategy is not asking DSC to disclose its expert’s opinions. Rather, MicroStrategy is merely asking DSC to provide PICs that specifically describe or explain its theory of infringement and, specifically, how the source code for its accused products, and other aspects of its accused products, purport to infringe upon the claims for DSC’s ‘590 Patent so that MicroStrategy can properly evaluate its defense.

Download a copy of the opinion here (link)

Source: Docket Navigator

Looking at the Most-Litigated Patents

John Allison, Mark Lemley & Joshua Walker continue to mine information from Stanford's IP Litigation Clearinghouse and have come up with a new study titled "Extreme Value or Trolls on Top? The Characteristics of the Most-Litigated Patents."

The authors sifted through mounds of data to identify the patents litigated most frequently between 2000 and 2007, and compare those patents to a control set of patents that have been litigated only once in that period. As a benchmark, the "most litigated" patents were those that were litigated eight or more times during the time period, and the study identified 106 such patents (astoundingly, one of the patents on the list was litigated 97 times). Altogether, these 106 patents accounted for 2,987 infringement suits represent about 14% of the patent suits filed from 2000 through 2007.

After breaking the patents down into technology areas, industry areas, "NPE Class" owner, and patent characteristics, a number of observations were made:

• The most-litigated patents made extraordinary use of patent continuations. Litigated patents in the control set had an average of two priority applications – the original application and one continuation or divisional. And fully half of the patents in the control set filed no continuation applications at all. By contrast, the most-litigated patents had an average of 4.3 applications each, and the median patent in this set had three applications.

• The most-litigated patents are cited more than twice as often as the control set patents. After adjusting the number of forward citations received by patents to account for their different ages, the differences between the two data sets are significant to an exceptional degree.

• The most litigated patents more than 50% more claims than the control set, 39.3 on average compared with 24.5 for once-litigated patents.

• The most-litigated patents cite nearly three times as many U.S. and foreign patents as other litigated patents, and nearly ten times as many non-patent prior art references as other litigated patents.

With regard to technological areas:

• The most-litigated patents are overwhelmingly likely to be software patents. Nearly three-fourths of the most-litigated patents are software patents, compared with just over a quarter of the once-litigated patents. Similarly, software-implemented business method patents are overrepresented in the most-litigated patents group (15% vs. 4%).

• Imaging patents are much more heavily represented in the most-litigated category (11% vs. 2%) as well.

• By contrast, mechanical and electronics patents make up the bulk of the once litigated patent cases, but they are only of minor significance in the most-litigated patent set. Mechanical inventions make up only 8% of the most-litigated patents, but 53% of the once-litigated patents; electronics inventions make up only 1% of the most-litigated patents but fully 25% of the once-litigated patents.

When considering the nature of the patent owner:

• Traditional product companies – those who are participants in the market in which they are enforcing the patent – represent 83.3% of the once-litigated patents but only 45.6% of the most-litigated patents.

• More than 80% of the most litigated patent suits are filed by NPEs. Overwhelmingly these are filed by inventor-owned or inventor-developed companies; those companies account for 74.4% of the most-litigated patent lawsuits. The share of suits filed by licensing shops actually falls to 6.7% of all suits. Non-practicing entities are a small share of once-litigated patents, but they represent an overwhelming share of the suits filed on the most-litigated patents.

• NPE's fall almost entirely into only two classes: licensing companies who are in the business of buying up and enforcing patents (“trolls” by virtually anyone’s definition) and companies started by the inventor but which do not make products. Licensing companies account for 11.7% of the most-litigated patent suits, and inventor companies account for 41.7% of those suits.

To read more about this, other findings, and a full listing of the most-litigated patents, see "Extreme Value or Trolls on Top? The Characteristics of the Most-Litigated Patents" (link)

The Quest For Managerial Control at the USPTO - Is Fee Regulation the Answer?

Despite numerous efforts to improve the U.S. patenting process, the PTO is largely seen as a struggling agency that continues to sink deeper into a managerial hole. Congress explicitly gave the PTO rulemaking authority under section 2(b)(2) of the Patent Act, but, as recently demonstrated in the Tafas v. Dudas case, the PTO's ability to regulate conduct is somewhat limited.

So what can the PTO do to get itself on track? Professor Arti Rai from Duke University School of Law recently published an article titled "Growing Pains in the Administrative State: The Patent Office's Troubled Quest for Managerial Control" where she examines many of the PTO's existing problems, as well as some potential solutions.

One area Rai identifies as problematic is the fee-based system at the PTO, which is skewed so that patentees, in effect, subsidize unsuccessful applicants:

Specific numbers from recent years illustrate the magnitude of the cross-subsidy. The PTO estimates that in fiscal years 2005 to 2008, the average examination cost per patent has ranged between $3773 and $3961.49. By contrast, the initial filing fee, which is supposed to cover filing, search, and examination, is $1090. Issuance fees are seventy-four percent higher ($1480), and maintenance fees (due at 3.5, 7.5, and 11.5 years) are $1020, $2320, and $3580, respectively.

Not only do applicants who secure and maintain patents dramatically subsidize those whose patents are denied, but the current fee structure also sets up an obvious financial incentive for the PTO to grant patents. The skewed incentive structure may be based on a policy judgment that patent applications, even those that ultimately end up being nonmeritorious, should be encouraged.

Interestingly, Rai points out that this policy may be causing much of the PTO's backlog and quality problems. Instead, Rai argues, a patent system that may be susceptible to denials of ostensibly patentable inventions may be better in the long run:

[The skewed incentive structure] could be based on the supposition that false positives, in the form of patent applications that are improperly granted, are better than false negatives, in the form of patents that are not applied for in the first instance. But the case for such a policy judgment has not been made. Meanwhile, the skewed structure creates additional patent applications that add to backlog. Additionally, in contexts where quality concerns counsel in favor of granting a relatively small percentage of applications, the structure creates the potential for significant revenue shortfalls.

To address the shortfalls, fees would need to be adjusted. And one of the areas commonly suggested for fee adjustment is the technology sector dominated by information and communications technology (ICT) firms. Since many of these firms file patent applications en masse, fee adjustments would be made to essentially "tax" (i.e., charge a slightly increased fee) application filings that exceed a certain amount in a given year. While the idea appears attractive on its surface, Rai correctly points out that companies could circumvent the tax by creating shell companies and other mechanisms. Also, it appears that ICT firms are prepared to tolerate quite a lot when it comes to government fees; according to Rai, "an intellectual property attorney at one of these large ICT firms recently argued that a filing fee as high as $50,000 (applicable, he would suggest, only to large firms) might be necessary to curb filing significantly."

The paper goes further to address issues such as limits on authority over PTO fees, examiner incentives, prior art searching and inequitable conduct reform. Of course, professor Rai touches on the PTO's effort to curb continuations as well (she was one of the contributors to the "Law Professors Amici Curiae" Supporting Appellants in Tafas).

In the end, professor Rai suggests that one way to quickly enact reform in the PTO is to liberalize the PTO's fee-setting abilities to allow it to regulate applicant behavior:

The key step Congress must take involves giving the PTO significantly greater authority over fee setting. At a minimum, this fee-setting authority should include the authority to recoup expenses incurred on behalf of the applicant.

As a supplement to the authority to recoup expenses, Congress could also consider granting the PTO some authority to use fees to regulate applicant behavior. To protect against the possibility of the PTO using this authority recklessly (and against nondelegation concerns), Congress could set out guidelines and criteria for the PTO. Congress could also provide that this grant of authority be reviewed periodically to determine whether it should be renewed.

Read/download a copy of "Growing Pains in the Administrative State: The Patent Office's Troubled Quest for Managerial Control" (link)

For the first time, the PTO will soon have in-house professional economic assistance to help it make decisions about substantive examination criteria. As one of its final moves, the Bush administration spearheaded the establishment of an Office of the Chief Economist within the PTO Director’s Office. To see the job announcement, click here

Tafas, GSK File Petitions For En Banc at the CAFC

I'm on travel this week, and have had very little time to post, so apologies in advance for the brevity . . .

Tafas, GSK filed petitions for en banc rehearing. From the Tafas brief, the questions presented :

1. Does the standard "foreclose effective opportunity to present patent applications for examination" or "effectively foreclose[] [applicants] from obtaining patent rights to which they are entitled" comport with United States Supreme Court and Federal Circuit precedent classifying "substantive" rules as those which cause a change in existing law or policy affecting individual rights and obligations?

2. Are Final Rules 75, 114, and 265 impermissibly inconsistent with law
so as to exceed the scope of the United States Patent and Trademark Office's
limited rule making authority under Section 2(b)(2) of the Patent Act?

From the GSK brief, the questions presented:

I. Whether the Panel maJonty erred in rejecting the test fo determining whether a Patent and Trademark Office ("PTO") rule is "substantive," as set forth in the controlling precedent of Chrysler, supra; Animal Legal Defense Fund, supra; and Cooper Technologies, supra.

II. Whether the Panel majority erred in holding that the challenged Final Rules, 72 Fed. Reg. 46,716 (Aug. 21, 2007), fall within th PTO's limited, non-substantive rulemaking authority.

Download a copy of the Tafas brief here (link)

Download a copy of the GSK brief here (link)

SCOTUS Grants Certiorari for Bilski

Bilski v. Doll, No. 08-964 (Supreme Court 2009)

CNNMoney.com: "US Supreme Court To Hear Case On Patents For Business Methods" (link)

Bloomberg.com: "Business-Method Patents Will Get U.S. Supreme Court Scrutiny" (link)

Legal Times Blog: "Supreme Court Will Hear Bilski Patent Case" (link)

See Patently-O listing of briefings, arguments, etc. (link)

Waiting on the Naming of USPTO Director

Back on April 30, reports started to surface that Secretary of Commerce Gary Locke has announced that he has chosen the next Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office, and that the chosen candidate was "being vetted."

Well. Presuming that the original reports were accurate, either the candidate situation has changed, or the Department of Commerce is being extra-fastidious in "vetting" said candidate. Currently, the three most-mentioned names for the position remain Q. Todd Dickinson, former PTO Director under President Bill Clinton; David Kappos, VP, AGC for IP at IBM; and Jim Pooley, a Silicon Valley lawyer who was recently nominated to become deputy director of WIPO (and thus presumed to be out of the running).

Joff Wild, at the IAM Blog, noticed that Todd Dickinson, who recently spoke at the BIO Conference, gave a rather detailed account of the problems at the PTO and how to fix them. This led Joff to wonder if Dickinson indeed was "the one" since he wondered "whether Dickinson would have felt able to be so open in his analysis if he believed he was still in the running for the job."

Now, a new report has surfaced that Doug Luftman, associate general counsel for smartphone manufacturer Palm, has been nominated by Rep. Michael Honda for the position. According to the report from Tech Daily Dose:

Luftman has at least one cheerleader in Congress, Rep. Michael Honda, D-Calif, vice-chair of the House Appropriations Legislative Branch Subcommittee, who wrote to the White House director of presidential personnel recommending him for the job. Although the letter was not made public, a spokesman for Honda said his boss believes Luftman's key asset "is his knowledge of the patent process from idea to product." Luftman has followed the product development process from the industry viewpoint at Palm and before that as general counsel of Caspian Networks; at CIENA Corp., and at Intel. He also worked for Fenwick & West's Silicon Valley office. Honda's aide said Luftman "recognizes the disarray" of the PTO and has management experience that could help.

Doug would be a fantastic candidate for the position and holds a great measure of respect from peers, practitioners and commentators alike (even PTO critic Greg Aharonian cheekily commented that "as a measure of his wisdom in the IP world, Doug has been a reader of PATNEWS for over ten years.")

Thus it appears that we may be waiting a while longer for a formal decision. For those keeping track of timelines, Bruce Lehman was nominated in April during Clinton's first year in office, Bush nominated Jim Rogan in May of his first year in office.