*** USPTO Announces First Satellite Office In Detroit ***

"Take him to . . . Detroit!"
- Dr. Klahn, Kentucky Fried Movie (1977)

Commerce Secretary Gary Locke announced today that the USPTO will be opening a satellite office in Detroit, Michigan.  Detroit is the first of (hopefully) a larger number of satellite offices planned for the agency, and is initially slated to house 100 examiners, plus a smaller number of support and administration personnel. Detroit beat out more than a dozen other cities across the nation to get the satellite office - congratulations!

While a specific site has not been selected yet, Commerce Department officials expect to sign a lease as soon as February, with hiring to begin in the spring.  As residents of the area know very well (I was born and raised there), it would be shocking if the agency selects a location in the city itself (God forbid).  Likely candidates would be locations in the northern suburbs (Troy, Rochester), or possibly on the west side, near the airport. 

Why Detroit?  Because of research and development done by the auto industry, Michigan has more applicants than most other states (see here for the USPTO statistics).  Also, real estate prices are dirt cheap - the home value index of Detroit properties are almost half that of properties in, say, New Orleans or Des Moines, Iowa.

Most of the hiring for the office will be done from the Detroit area and that announcements for vacancies should be posted on the agency’s website -- www.uspto.gov – and on the federal government’s employment site - www.usajobs.opm.gov – in early spring.



See Detroit Free Press: "Eureka! Patent Office picks Detroit" (link)

See also Gene Quinn at the IP Watchdog: "Detroit, Michigan Announced as First Regional Patent Office"

(link)

*** Intellectual Ventures Launches Massive Litigation Across 3 Industries ***

"Gentlemen, you can't fight in here - This is the War Room!
         -- President Merkin Muffley (Dr. Strangelove, 1964)

For some, this was a surprise.  For most everyone else, it was a matter of "what took so long?"

From this morning's newswire:

Today Intellectual Ventures ("IV") enforced its rights and filed patent infringement complaints in the U.S. District Court of Delaware against companies in the software security; dynamic random access memory (DRAM) and Flash memory; and field-programmable gate array (FPGA) industries.

"Over the years, Intellectual Ventures has successfully negotiated license agreements with some of the top technology companies in the world. However, some companies have chosen to ignore our requests for good faith negotiations and discussions," stated Melissa A. Finocchio, Chief Litigation Counsel, Intellectual Ventures. "Protecting our invention rights through these actions is the right choice for our investors, inventors and current licensees."

Despite the creation of a "Patent Defense Fund" (to protect against patent trolls, don't-you-know) and assurances that IV is "opposed to litigation" (for more on that, see here), IV has decided to launch 3 lawsuits involving over 10 patents in the following industries:

Software Security - defendants include Check Point Software, McAfee, Inc., Symantec and Trend Micro.  To view the complaint, click here.

DRAM / Flash RAM Memory - defendants include Elpida Memory Inc., and Hynix Semiconductor.  To view the complaint, click here.

Field-Programmable Gate Arrays (FPGA) - defendants include Altera Corp., Lattice Semiconductor and Microsemi.  To view the complaint, click here.

Interestingly, IV refers to itself in the complaint as "Intellectual Ventures I" and "Intellectual Ventures II" and notes that "[a] significant aspect of Intellectual Venture's business is managing the two plaintiffs in this case, Plaintiff Intellectual Ventures I and Plaintiff Intellectual Ventures II."  No explanation is given as to how this split is arranged from a business perspective.

However, IV does mention that it "has purchased more than 30,000 assets and . . . has earned nearly $2 billion by licensing these patents to some of the world's most innovative and successful technology companies who continue to use them."

IV also describes itself as a scientific research entity that "has a staff of scientists and engineers who develop ideas" and "has invested millions of dollars developing such ideas . . . [and] has also invested in laboratory facilities to assist with the development and testing of new ideas."

This could be significant, since research entities are given a little more slack when seeking injunctions in a post-eBay world.  In CSIRO v. Buffalo Technology, Inc., E.D. Tex. (6:06-CV-324), June 15, 2007, the district court made the following "irreparable harm" determination on CSIRO (a non-practicing entity) when it granted a permanent injunction:

The majority opinion in eBay rejected the conclusion that “a ‘plaintiff’s willingness to license its patents’ and ‘its lack of commercial activity in practicing the patents’ would be sufficient to establish that the patent holder would not suffer irreparable harm if an injunction did not issue.”


CSIRO has shown that its harm is not merely financial. While CSIRO does not compete with Buffalo for market share, CSIRO does compete internationally with other research groups—such as universities—for resources, ideas, and the best scientific minds to transform those ideas into realities. CSIRO’s reputation is an important element in recruiting the top scientists in the world. Having its patents challenged via the courts not only impugns CSIRO’s reputation as a leading scientific research entity but forces it to divert millions of dollars away from research and into litigation costs. Delays in funding result in lost research capabilities, lost pportunities to develop additional research capabilities, lost opportunities to accelerate existing projects or begin new projects. Once those opportunities have passed, they are often lost for good, as another entity takes advantage of the opportunity. Delays in research are likely to result in important knowledge not being developed at all or CSIRO being pushed out of valuable fields as other research groups achieve critical intellectual property positions. Thus, the harm of lost opportunities is irreparable. They cannot be regained with future money because the opportunity that was lost already belongs to someone else.

Hang on to your hats . . .

PwC Publishes 2010 Patent Litigation Study

PriceWaterhouseCoopers (PwC) recently published its annual 2010 Patent Litigation Study, and this year's publication has some interesting data:

•  Despite a small uptick of granted patents in 2009, the number of filed patent actions dropped to 2,744, a decrease of over 6% from 2008.  This broke a 3-year trend of growth in case filings, since the last drop in 2005.  NPEs are involved in almost 20% of reported decisions


•  Annual median damages continue to hold steady - between 1995 and 2009, median damages ranged between $2.4M to $10.5M.  However, damage awards for NPEs averaged more than triple those for practicing entities since 2001 ($12.9M vs. $3.9M).


•  NPEs continue to be vulnerable to summary judgment - overall, NPEs have a 31% success rate versus 40% for practicing entities.  In instances when a final decision is made at summary judgment, NPEs are successful only 13% of the time (vs. 20% for practicing entities).  However, both have about a 2/3 win rate at trial.


•  NPEs have increased their success rate over the last 4 years.  In 2005, NPEs suffered from a decade-low success rate of 23%.  In 2009, the success rate jumped to 48%.


•  Declaratory judgment actions increase win rates fort alleged infringers.  However, the increased win rate is only significant when the patent holder is an NPE.


•  Despite the large volume of patent cases, median time-to-trial holds steady: 69% of cases reached trial within 3 years from the filing date of the initial complaint.


The Fastest Jurisdictions (Median Time-To-Trial, In Years):

1. ED Virginia -- 0.93
2. WD Wisconsin -- 1.07
3. MD Florida -- 1.71
4. D. Delaware -- 1.89
5. SD Texas -- 2.00
6. ED Texas -- 2.04
7. SD Florida -- 2.27
8. CD California -- 2.28
9. ND Texas -- 2.42
10. D. Minnesota -- 2.45
11. SD New York -- 2.50
12. D New Jersey -- 2.71
13. ND California -- 2.95
14. ND Illinois -- 3.42
15. D. Massachusetts -- 3.64

The Most "Patent Friendly" Jurisdictions:

1. ED Virginia
2. D. Delaware
3. ED Texas
4. MD Florida
5. CD California
6. SD Texas
7. WD Wisconsin
8. ND California
9. ND Texas
10. ND Illinois
11. D Minnesota (tie)
12. D. New Jersey (tie)
13. D Massachusetts
14. SD New York
15. SD Florida

Top 5 Districts by Overall Success:

1. MD Florida -- 59.1% overall, 80% trial success rate
2. ED Texas -- 55.3% overall, 66.7% trial success rate
3. D. Delaware -- 47.3% overall, 64.5% trial success rate
4. CD California -- 47% overall, 72.4% trial success rate
5. ED Virginia - 45.9% overall, 70.6% trail success rate

Bottom 5 Districts by Overall Success:

1. SD Florida -- 26.5% overall, 42.9% trial success rate
2. D. New Jersey -- 32.2% overall, 57.9% trial success rate
3. SD Texas -- 32.4% overall, 66.7% trial success rate
4. WD Wisconsin -- 32.4% overall, 40% trial success rate
5. ND California -- 33% overall, 71.1% trial success rate

For more details, you can download a free copy of the PwC study here (link)

Tuesday Shorts

UK Announces "Patent Box" Tax Cut - The UK government has published a new paper outlining details of its corporate tax reform program. The reforms are designed to increase the tax competitiveness of the UK by reducing rates.  One of the features highlighted in the reform include a so-called "patent box" that lowers the tax rate on profits from successful product launches that result from a patent registered and then manufactured in the U.K to 10%, compared with the main corporation tax rate of 28%.  In response, GSK announced that it will be investing $779M for building a new biopharmaceutical manufacturing plant in the UK.

Google Joins Forces With EPO to Provide Translation Services - The EPO and Google have signed a Memorandum of Understanding where the EPO will use Google's machine translation technology to translate patents into the languages of the 38 countries that it serves. In return, it will provide Google with access to its translated patents, enabling Google to optimize its machine translation technology. Google technology will be used to translate patents originating in Europe as well as patents originating in other regions of the world (link).

How Complete is the USPTO Online Search Database?  Despite previous concerns over gaps in the USPTO patent search database, Michael White at the "Patent Librarian's Notebook" blog ran a few quick tests on the PTO's website to see how complete the patent listings were.  What did he find?  The listings are quite complete - out of nearly 4 million documents, he only found a 12 document discrepancy, or % 0.00003.  You can read more about his test and methodologies used here (link).

Supreme Court Prepares to Chop Down "Clear and Convincing" Standard for Proving Patent Invalidity

In the case of Microsoft Corp. v. i4i Ltd., patentee i4i was awarded a $290M judgment against Microsoft and an order barring the infringing sale of Word in the U.S.  The patent was directed to a method for editing documents using XML, a language that tells a computer how text should appear. I4i's invention claimed a technique that stores the content and the XML codes separately, making it easier for users to work alone with either the content or the codes.

During litigation, Microsoft submitted allegedly invalidating prior art (in the form of a prior public sale by i4i), which was not considered during prosecution at the USPTO.  Microsoft argued that, since the prior art was not considered, the "clear and convincing" standard of proving invalidity was not in play, and that a lower standard of proof should be applied.  The district court rejected this argument, as did the Federal Circuit.

On petition to the Supreme Court, Microsoft presented the following question:

The Patent Act provides that “[a] patent shall be presumed valid” and that “[t]he burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.” 35 U.S.C. § 282. The Federal Circuit held below that Microsoft was required to prove its defense of invalidity under 35 U.S.C. § 102(b) by “clear and convincing evidence,” even though the prior art on which the invalidity defense rests was not considered by the Patent and Trademark Office prior to the issuance of the asserted patent. The question presented is:

Whether the court of appeals erred in holding that Microsoft’s invalidity defense must be proved by clear and convincing evidence.

Today, the Supreme Court granted certiorari and agreed to hear the case, making it (in the words of Hal Wegner) "the most important Supreme Court patent case of the new century."

NOTE 1:  At least a few Justices have appeared to be sympathetic to Microsoft's argument in the past - as recently as KSR v. Teleflex, the Supreme Court noted (in dicta):

We need not reach the question whether the failure to disclose Asano during the prosecution of Engelgau voids the presumption of validity given to issued patents, for claim 4 is obvious despite the presumption. We nevertheless think it appropriate to note that the rationale underlying the presumption - that the PTO, in its expertise, has approved the claim - seems much diminished here.

 NOTE 2: For reasons unknown, Justice Roberts has recused himself from this case.

 NOTE 3:  I4i Chairman Loudon Owen stated to Bloomberg News that Microsoft’s argument has a “simplistic appeal” that “does not take into consideration at all what the patent office actually does . . . What it’s going to result in is tremendous uncertainty for anyone who owns a patent . . .  It would be a sea change in the operations of the patent office and would be a dramatic body blow to the health of the U.S. patent industry and the value of patents.”

Effect on patent practice: In the meantime, the USPTO applicants will likely inundate the USPTO with prior art submissions.  As the issue before the Supreme Court deals with prior art not considered by the Patent Office, the trick will be to cover as many areas as practicable to minimize the risk of being exposed to the effects of this case.

Wednesday Shorts

Not So Fast, One-Click-Patent . . . :  Last month, Amazon scored a big victory when the

Federal Court of Canada overturned the Patent Commissioner's decision to refuse a patent to Amazon.com for its “one click” business method patent (link).   On Monday the federal Department of Justice filed the Notice of Appeal that challenges the Federal Court's ruling (link).

 

Anti-Gene-Patent Fever Spreads to Australia - On May 12, 2009, the ACLU and the Public Patent Foundation (PUBPAT) filed a now-famous lawsuit in the U.S. charging that patents on two human genes associated with breast and ovarian cancer are unconstitutional and invalid. The lawsuit was filed against the USPTO, as well as Myriad Genetics and the University of Utah Research Foundation, which hold the patents on the genes, BRCA1 and BRCA2. The lawsuit charges that patents on human genes violate the First Amendment and patent law because genes are "products of nature" and therefore can't be patented. 

 

In June of this year, a similar lawsuit was filed in Australia challenging the validity of a patent directed to BRCA1 (known as Patent 686,004) which is held by companies including Myriad Genetics Inc and Melbourne-based Genetic Technologies Ltd.  The lawsuit is spearheaded by national consumer organization Cancer Voices Australia and a Brisbane woman with breast cancer, and both argue that biotech "monopoly" on cancer genes is unlawful (link). 

 

Celebrating the Bayh-Dole Act (Officially) - on November 16, 2010, the House passed H.CON.RES.328 "Expressing the sense of the Congress regarding the successful and substantial contributions of the amendments to the patent and trademark laws that were initially enacted in 1980 by Public Law 96-517 (commonly referred to as the 'Bayh-Dole Act') on the occasion of the 30th anniversary of its enactment." 

One Year Later:  Round Rock Research LLC - In December 2009, former Kirkland & Ellis litigator John Desmarais helped form NPE Round Rock Research LLC and bought 4,500 patents from Micron Technology Inc.  Licensing and litigation efforts began tout de suite, and shortly thereafter a rumor was floated that the  patents were part of a $280 million patent licensing deal with Samsung.  In addition to Samsung, Round Rock is rumored to be in current negotiations with Sony, Apple and Nokia.  On top of that, Round Rock is currently involved in litigation against HTC.

So who is behind Round Rock and how are they doing?  Joff Wild From IAM magazine has been sleuthing about and had the following report from his blog:

My information, which comes from an excellent source, is that [Round Rock] was organised through a company called Gemas Capital Inc, which was established in June 2009 by  Zahid Rahimtoola, who is the chief financial officer of IP Value. In 2009 Round Rock signed a deal with IP Value to help commercialise its patent portfolio. IP Value's two investors are both financial heavyweights - General Atlantic and Goldman Sachs; though whether they backed Round Rock is not known. Whoever did is laughing all the way to the bank if what I have been told is correct. Apparently, they have recouped their money already.

USPTO Looks to Streamline Appeals by Amending BPAI Rules

Yesterday, the USPTO announced proposed changes to the rules governing ex parte patent appeals before the Board of Patent Appeals and Interferences. (BPAI).  According to Director Kappos, “we hear often from stakeholders that the patent appellate process is too complicated and burdensome . . . the goal of this proposed rulemaking is to simplify the appellate process in a way that reduces the burden on appellants and examiners to present an appeal to the Board.”

The notable changes in the proposed rule, as compared to the current Board rule, are:

(1) The Board would presume that an appeal is taken from the rejection of all claims under rejection
unless cancelled by an amendment filed by appellant;

(2) the Board would take jurisdiction upon the filing of a reply brief or the expiration of time in which to file such a reply brief, whichever is earlier;

(3) the requirements to include statements of the status of claims and grounds of rejection to be reviewed on appeal and the requirements to include a claims appendix, an evidence appendix and a related proceedings appendix would be eliminated from the appeal brief;

(4) the Board may apply default assumptions if a brief omits a statement of the real party-in-interest or a statement of related cases;

(5) for purposes of the examiner’s answer, any rejection that relies upon new evidence shall be designated as a new ground of rejection;

(6) the appellant can await a decision on a petition seeking review of an examiner’s failure to designate a
rejection in the answer as a new ground of rejection prior to filing a reply brief and thereby avoid having to file a request for extension of time in which to file the reply brief; and

(7) the examiner’s response to a reply brief would be eliminated.

Last, but not least, the proposed 2008 Final Rule on Appeals would be rescinded.

Comments on the proposed rules should be submitted to BPAI.Rules@uspto.gov by January 14, 2011.

Read/download the Fed. Reg. Notice here (link)

Unbridled "Optimization" Term in Software Patent Claim Leads to Finding of Indefiniteness

Data Retrieval Technology v. Sybase, Inc. et al., No. 3-08-cv-05481 (N.D. Ca., Nov. 8, 2010)

DRT sued defendants on patents directed to computer-implemented methods for retrieving information stored in databases without the need for human analysis of the source data.  One of the claims in the patent recited a driver that automatically obtains information about the data structure of a data source "wherein said information about the data structure leads to optimization of a new database in which information from said first database is to be stored."

One of the defendants moved for summary judgment of invalidity under 112(2), arguing that the claimed optimization feature rendered the claim insolubly ambiguous.  Under DRT's proposed claim construction, a database would be "optimized" when its performance “with respect to a given characteristic” is superior to that of the data source from which it was created.  The problem here was that a specific "characteristic" was not provided in the patent.

The district court found this fatal to the patent:

The fundamental flaw here is that no such characteristic is in fact given. Thus, if one could identify a single characteristic of a database that is superior to that of the original source, the database would be “optimized” within the meaning of the claim. As DRT’s expert Paul Bertucci stated in his deposition, “[t]here are hundreds of [] potential characteristics” of a database that may be improved. . . . Further, Mr Bertucci admitted in his second declaration that “the process of optimization involves tradeoffs -  i e, one design/configuration may provide improved performance for certain types of queries while at the same time, diminishing performance for other types of queries and database operations.”

It is clear that DRT’s proposed construction of “optimization” fails to define any meaningful limitation. . . . The claim [] requires that the new database be “optimiz[ed],” id, but under the proposed construction any such database could be considered optimized. One must only identify one of the hundreds of possible characteristics of the new database that performs better than that of the original data source. And because optimization necessarily involves tradeoffs, a database that is demonstrably inferior to the original data source with respect to the most important characteristics would still be superior with respect to some characteristic and therefore “optimized.” A competitor would have no way to know whether a process for transforming a data source into a new database led to “optimization” and would be subject to an infringement suit if the patent holder could locate a single characteristic of the database that is superior to that of the data source. Accordingly, DRT’s proposed construction is indefinite.

With regard to a narrowing construction of "optimization", the opinion noted that

The court is unable to adopt any narrowing construction of “optimization” that is consistent with the language of the claim. DRT notes that “the patent provides a number of examples of characteristics for which a database may be optimized” and suggests that “the claim term is further limited when read in light of the specification by the examples provided by the specification.”  This suggestion fails to grasp “the distinction between using the specification to interpret the meaning of a claim and importing limitations from the specification into the claim.” Phillips, 415 F3d at 1323. Although the specification can be used to help define unclear claim terms, it cannot be used to limit them. The patent specification provides examples of “different systems which are optimized for different purposes,” specifically those “optimized for data entry or storage vs speed or flexibility or data analysis and reporting, optimized for accounting data vs company data, and the like.” ’392 Patent at 1:34-37. But DRT does not argue that these examples actually define “optimize,” which, as discussed above, means to improve performance with respect to any of a large number of possible characteristics. . . . Informatica’s motion for summary judgment of indefiniteness is supported by clear and convincing evidence and is accordingly GRANTED.

Read/download the opinion here (link)

Source: Docket Navigator

Fed. Cir. Removes Limitations on New Evidence in §145 Civil Actions Against USPTO

Hyatt v. Kappos, 2007-1066 (November 8, 2010) (en banc)

When Applicants are dissatisfied by a USPTO action, there are 2 avenues for potential relief: (1) appeal to the Federal Circuit, and (2) file a §145 civil action in district court. While an appeal limits review of an application to the evidence of record, §145 actions afford an applicant the opportunity to introduce new evidence after the close of administrative proceedings.

In Hyatt v. Kappos, the applicant filed a mammoth application in 1995 ultimately containing 238 pages, 40 drawings, and 117 claims. The application claimed priority to a chain of applications dating back to 1975.

The examiner issued a final office action that contained an avalanche of rejections - all told, 2,546 separate rejections were made of Hyatt's 117 claims. Hyatt appealed, and the BPAI reversed 93% of the rejections, but maintained rejections directed to written description, noting that "merely pointing to the occurrence of isolated words in the specification . . . did not adequately establish that the specification contained written description for the particular combination of elements that made up each limitation."

Hyatt filed a civil action under 35 U.S.C. §145 to the District Court for the District of Columbia, asking the court to reverse the BPAI's rejections. In support of the action, Hyatt filed a written declaration in which he identified portions of the specification that one of skill in the art would understand to describe the limitations challenged by the USPTO.

The district court rejected the declaration, and granted summary judgment to the PTO.

The court found that the Board’s written description rejections were substantively identical to, albeit more detailed than, the rejections issued by the examiner. The court found that the Board’s written description rejections were substantively identical to, albeit more detailed than, the rejections issued by the examiner. . . . Because Mr. Hyatt’s declaration was directed to those written description rejections, the court concluded that he could have presented the declaration earlier, "certainly by the time his patent application was considered by the Board."  Finding that Mr. Hyatt had no explanation for why he failed to offer his declaration during the proceedings before the Board, the court determined that "[Mr.] Hyatt's failure to explain why he didn’t submit his declaration earlier is negligent, and the district court need not consider evidence negligently submitted after the end of administrative proceedings."

On appeal to the Fed. Cir., the majority ruling noted that "it is clear from the record that Hyatt willfully refused to provide evidence in his possession in response to a valid action by the examiner" and affirmed the district court.

After en banc review, the majority opinion (6-2-1) vacated the earlier ruling and remanded the application:

We hold that 35 U.S.C. § 145 imposes no limitation on an applicant’s right to introduce new evidence before the district court, apart from the evidentiary limitations applicable to all civil actions contained in the Federal Rules of Evidence and Federal Rules of Civil Procedure. In doing so, we reject the Director’s proposal that only "new evidence that could not reasonably have been pro-vided to the agency in the first instance" is admissible in a § 145 action. . . .While the proceedings before the Patent Office do not limit the admissibility of new evidence in the district court, they may be considered by the district court if they cast doubt on the reliability of late-produced evidence, as with inconsistent statements or new recollections of previously forgotten events. As with any evidence introduced in a civil action, the district court as factfinder may give less weight to evidence introduced by an applicant in a § 145 action if the district court questions its credibility or reliability. Because the district court abused its discretion when it excluded Mr. Hyatt’s declaration under the wrong legal standard, we vacate the decision of the district court and remand.

The majority further held that, while evidence of record is reviewed using the "substantial evidence" standard of the Administrative Procedure Act (APA), "new" evidence submitted by the applicant would be reviewed de novo.

The ruling is important for applicants in that it provides flexibility for the submission of evidence during appeals. One of the issues raised in the dissent was that applicants were now free to withhold evidence from the USPTO in hopes that a de novo review on the withheld evidence would yield more favorable results. While the majority opinion acknowledged this possibility, the court remarked that "[a]lthough we agree that encouraging full disclosure to administrative tribunals is sound policy, Congress—not the Federal Circuit—must decide how best to do this."

Moreover, as the majority opinion recognized, intentionally withholding evidence is not a good tactic when considering the substantial costs involved:

To deter applicants from exactly the type of procedural gaming that concerns the Director, Congress imposed on the applicant the heavy economic burden of paying "[a]ll the expenses of the proceedings" regardless of the outcome. 35 U.S.C. § 145. An applicant has every incentive to provide the Patent Office with the best evidence in its possession, to obtain a patent as quickly and inexpensively as possible. "It would be counterintuitive for an applicant to deliberately withhold non-cumulative evidence that would help persuade the BPAI.  Indeed, the fact that the vast majority of applicants pursue an on-the-record appeal instead of a § 145 action indicates that applicants generally consider the evidence before the Patent Office to be sufficient.

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

Chisum: Gottschalk v. Benson is a "Failure"

Donald Chisum released an interesting article titled "Patenting Intangible Methods: Revisiting Benson (1972) After Bilksi (2010)" where he cogently points out that most of the problems pertaining to patentable subject matter can be attributed to the Supreme Court's decision in Benson, and that the decision "served noone's interest . . . Its ambiguity allowed software patent proponents to subvert any bar that software patent opponents desired [and] also deterred legitimate inventors of software-implemented inventions from applying for patent protection."

Chisum provides some interesting background information on the state of technology heading into the Benson decision:

Through the 1960's, programming (software) for the giant computers was perceived as a service that a computer vendor, such as IBM, would provide so as to adapt a computer system to a customer's particular needs. There was essentially no distinct software industry or market, and it was not in the interest of the vendors that there be one. A big vendor did not relish being subject to copyright or patent claims by smaller companies and independent inventors. Hence, in that era, IBM opposed both copyright and patent protection for software.  Subsequently, as its interests changed, IBM changed its positions. In a  dispute with a Japanese rival, Fujitsu, over mainframe computer operating systems, IBM championed copyright protection for software in the United States and around the world. With its development of the "PC" personal computer, IBM pursued patents on the PC system and successfully licensed them.

And the PTO

Pre-1972, policy and practice in the Patent Office favored IBM's no-patents-on-software position. Supporting the position was a recommendation in 1966 by a "President's Commission on the Patent System."

And who was responsible for the Benson patent?  Bell Laboratories of AT&T, one of the few large, non-vendor entities doing independent research applicable to computer programming.

When the Benson opinion was announced, Chisum noted that an interested observer should have had immediate concerns:

First, the opinion came down on November 20, 1972, only a month after argument (October 16, 1972), hardly long enough for a thoughtful deliberation . . . Second, and more importantly, the author of the opinion was Justice William O. Douglas.  Justice Douglas was notoriously hostile toward the patent system. That Justice Douglas was unreasonably biased against patents is supported by the fact that two provisions of the 1952 Patent Act were intended to correct hyperbolic statements in Douglas opinions.

Chisum then takes on the oft-quoted sentence from Benson: "Phenomena of nature, though just discovered, mental processes, and abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work."

How did the Court derive this supposedly well-established triple exclusion? First, the "phenomena of nature" exclusion comes from decisions such as the 1948 Funk case.  But the Court makes no attempt to explain how a natural phenemenon exclusion relates to the algorithm claims in question. If a newly created algorithm is a "phenomenon of nature," so must be all human inventive activity. That cannot be true. Humans are indeed "part of nature," but there could be no patent system if all human inventions are phenomena of nature.

Second, the Court refers to "mental processes" as unpatentable but cites no authority, even though there was extensive prior case law on the "mental steps doctrine" in the lower courts.

Third, and most distressingly, the Court's exclusion of "abstract intellectual concepts" stems from an out-of-context combination of two statements from old cases that did not even involve intangible processes.  The first statement--"an idea of itself is not patentable"--is from the 1874 Rubber-Tip Pencil decision.  The second statement--"a principle, in the abstract" is not patentable--is from the 1852 Le Roy opinion.  The tenor of the two cases is, contrary to the implication of Benson, a positive one: that an "idea" or a "principle" is patentable when applied to create a novel and useful process or product even though the idea or principle itself is not patentable because it is either well known or too abstract. Rubber-Tip Pencil held that a patent on attaching a rubber eraser to a pencil was invalid for lack of novelty. The Benson-quoted phrase--"An idea of itself is not patentable"--was meant, in context, to say that a "good idea" for a product (good from a business or marketing point of view) did not meet the patentability requirements if the product itself lacked novelty (or was an obvious modification of the prior art from a technical point of view).

Finally,

The Court, per Justice Douglas, concluded the short opinion with a discussion of the then-raging debate on patenting computer programs. It quoted the Presidential Commission recommendation against patenting computer programs. It noted that "extending" the patent laws to cover "these programs" was a matter not for the courts but for Congress . . . Congressional action was not forthcoming. In the 38 years since Benson, Congress has not directly addressed patent eligible subject matter.

Read/download the paper here (link)

See also Donald S. Chisum, "Weeds and Seeds in the Supreme Court's Business Method Patents Decision: New Directions for Regulating Patent Scope" (link)

CAFC Denies En Banc Review of "Distorted" Law of Double-Patenting

Sun Pharma. Ind. Ltd. v. Eli Lilly and Co., No. 2010-1105, (Nov. 1, 2010, Order)

Eli Lilly filed a first application describing a new class of chemical compounds having antiviral utility, including the compound named gemcitabine. Thereafter, Lilly filed a continuation-in-part application disclosing but not claiming the anticancer utility of gemcitabine, and on the same day Lilly filed a separate application (ultimately issuing as the '826 patent) having a different inventive entity, describing and claiming the use of gemcitabine to treat cancer.

Nevertheless, the Federal Circuit struck down the ’826 patent this past July on double-patenting grounds, holding that a patent is invalid if it claims a method of using a chemical compound if that method was described (even if not claimed) in an earlier patent.

This decision was seen as a "dramatic expansion" of the double patenting doctrine. The judicially-created double patenting doctrine prevents a patentee from receiving two patents for one invention.  However, when a second patent covers matter described in a prior patent, the second patent is still valid so long as the invention is patentably distinct from the invention claimed in the first patent. By applying the doctrine in this case, it was argued that the CAFC limited Eli Lilly to one patent for two inventions.

Eli Lilly filed for en banc review, and the Federal Circuit denied the motion by a narrow 5-4 margin.  A dissenting opinion authored by Newman (and joined by Rader, Lourie and Linn) argued that the law of double patenting "has become distorted by divergent statements":

Until recently it was beyond dispute that the law of double patenting is concerned only with what is patented—that is, what is claimed. To determine whether there is double patenting it is the claims that are compared; thus, obviousness-type double patenting occurs when the claims of a later patent are an obvious variant of the claims of an earlier patent. The specifications of the patents are irrelevant to the double patenting analysis, other than to guide in construing the claims. A double patenting analysis occurs only when the earlier patent is not prior art against the later patent.

* * *

“Obviousness-type double patenting is a judicially created doctrine intended to prevent improper timewise extension of the patent right by prohibiting the issuance of claims in a second patent which are not ‘patentably distinct’ from the claims of a first patent.” Braat, 937 F.2d at 592. The panel failed to explain how Lilly’s claims to the use of gemcitabine to treat cancer, discovered after gemcitabine’s antiviral use was disclosed in the original application, improperly extend the patent right to gemcitabine as a compound, let alone how these claims would “shock one’s sense of justice.” For purposes of this case, there is no dispute that Lilly would be entitled to a separate patent on the anticancer use if Lilly had not included the disclosure of anticancer use in the specification of the continuation-in-part filed the same day. Such disclosure does not “improperly extend” any patent.

The amici curiae explained that particularly for biological/pharmaceutical products, new uses may be discovered as research continues after the initial filing. . . . A change of law “in ways that negatively impact the patentability of important later-discovered uses” serves no public purpose in areas in which commercial development requires patent protection. If the majority of the court now believes, as a matter of policy, that the law should be changed in this new direction, en banc treatment is particularly appropriate, for the court’s rule is that the earlier precedent prevails unless overruled en banc. A situation in which the court ignores this rule, and applies whatever law the panel prefers, is an indictment of the ability of this court to provide stable law in the areas entrusted to us.

The denial of Eli Lilly’s petition for rehearing en banc leaves the innovation community without guidance on which the trial courts, and the users of the patent system, can rely. I respectfully dissent.

Read the dissenting opinion here (link)

Commerce Dept. Continues to Drop Hints on Establishing Regional Patent Offices

Secretary of Commerce Gary Locke was in Detroit for an export conference this week and participated in a roundtable discussion with local small business owners at the Detroit Regional Chamber.  Just prior to leaving, Locke dropped a hint that the Dept. of Commerce was looking to open regional patent offices, and that one of them may be in Detroit.


From Crain's Detroit Business:

The U.S. Commerce Department is considering opening regional offices of the U.S. Patent and Trade[mark] Office as part of its work to help President Barack Obama meet his goal of doubling exports within five years.

When asked how Michigan's manufacturing-heavy industrial base would play a role in meeting that goal, Locke brought up the possibility of a local patent office.

There are currently no regional patent offices in the U.S.

"We're also looking at, for instance, having regional offices for our patent offices. We know that there's a lot of innovation occurring here in Michigan and the Detroit area, so Detroit is a candidate for a separate patent office," Locke said, while scrambling to get to the airport as Tuesday's windstorm hit metro Detroit.

He said it now takes almost three years for an applicant to get a decision on a patent.  "Our goal is to get that down to one year. But a key of that is allowing the patent examiners to talk with the innovators and inventors instead of just trading letters and correspondence or e-mails," Locke said.

Forming regional patent offices is seen as a vital step in decentralizing and improving the patent examination process. Judge Michel has been a very vocal supporter of regional patent offices, and provided the following commentary during an interview (Aug. 2010) with Gene Quinn at the IP Watchdog:

Almost every federal agency I know of has regional offices. The patent office is the odd man out. This isn’t something we don’t know how to do. We do this every year, every day, in practically every agency in the country. They all have regional offices other than the patent office. This is not a hard problem to engineer. This is a question of authority: you have to have the authority to do it. I’m told he doesn’t have the legal authority to open an office in Detroit or Los Angeles, or wherever it might be. Congress has to give it to him or he can’t do it. It’s that simple.

[L]ook at those parts of the country where there are thousands of unemployed engineers who are experienced, competent people, many of whom are experienced in the patent system as well as their scientific or engineering discipline. They’d make the perfect patent examiner and you could solve an employment problem and a backlog problem very efficiently by hiring those experienced people where they are now. Detroit, Houston, wherever it is. Maybe several different places. I think it’s an obvious good idea. Of course it has challenges to it. Anything involving growth and expansion has challenges but I think it would pay off in a very short timeframe and be an extremely efficient way to solve a series of problems. And it’s kind of shocking that these things aren’t even being discussed. 

Are regional offices needed?  You bet.  The PTO has been kicking this idea around for the last five years or so, but no one knows exactly how serious the Office (or Congress) is on the subject.  In 2006, the PTO highlighted the "consideration of establishing regional offices" as a main part of the Strategic Plan; in 2010, there's barely a mention of it . . .

USPTO, EPO Work on Establishing Common Patent Classification System

The USPTO's classification system has been different from the International Patent Classification System (IPC) because (a) the USPTO's classification system came first, and (b) WIPO decided to take a different classification path when developing the IPC.  As a result, two sets of classification codes are used during examination.

That is about to change.  The USPTO and the EPO (which observes the IPC) announced today that they are working on a joint classification system that "will be more detailed than the IPC to improve patent searching. As a result, the two offices would move closer to eliminating the unnecessary duplication of work between the two offices, thus promoting more efficient examinations, while also enhancing patent examination quality."


This effort is part of a larger harmonization effort being pushed by "Five IP Offices" or "IP5."  The USPTO and EPO issued a joint statement stating that

In view of the significant benefit to stakeholders of developing a transparent and harmonized approach to a global classification system for patent documents; in order to make the search process more effective; and in the belief that cooperation between their two offices will facilitate progress in undertaking classification harmonization projects under the IP5 Common Hybrid Classification initiative, the USPTO and the EPO have agreed together to work toward the formation of a partnership to explore the development of a joint classification system based on the European Classification system (ECLA) that will incorporate the best classification practices of the two offices. This system would be aligned with the World Intellectual Property Organization (WIPO) classification standards and the International Patent Classification (IPC) structure. Accordingly, they have initiated discussions on governance and operational aspects of such a partnership.

Read the USPTO press release on the joint classification effort here (link)
 
Visit the IP5 website here (link)
 
The IP5 also posted a presentation given to the WIPO General Assembly discussing upcoming projects that include
 
- IP5 Common Hybrid Classification
- IP5 Common Documentation
- Common Application Format
- Common Access to Search and Examination Results
- Common Training Policty and Mutual Machine Translation
- Common Examination Practice Rules and Quality Management and
- Common Search and Examination Support Tools
 
You can download the entire presentation (74 pages) here (link)

Blame Canada! Amazon Wins Argument at the CA Federal Court Over "One-Click" Patent

After a decade-plus battle at the Canadian Patent Office and Patent Review Panel, the Canadian Federal Court made the following ruling on business method patents:

At its core, the question is whether a “business method” is patentable under Canadian law. For the reasons which follow, the Court concludes that a “business method” can be patented in appropriate circumstances.

In making the ruling, the Federal Court made some interesting, almost State-Street-like, findings:

There are thus three important elements in the test for art as articulated by Wilson J.: i) it must not be a disembodied idea but have a method of practical application; ii) it must be a new and inventive method of applying skill and knowledge; and iii) it must have a commercially useful result: Progressive Games, Inc. v. Canada (Commissioner of Patents), 177 F.T.R. 241 (T.D.) at para. 16, aff’d (2000), 9 C.P.R. (4th) 479 (F.C.A.).

The practical application requirement ensures that something which is a mere idea or discovery is not patented – it must be concrete and tangible. This requires some sort of manifestation or effect or change of character. However, it is important to remain focused on the requirement for practical application rather than merely the physicality of the invention. The language in Lawson must not be interpreted to restrict the patentability of practical applications which might, in light of today’s technology, consist of a slightly less conventional “change in character” or effect that through a machine such as a computer.

Also there was this also-interesting interpretation of Bilski:

Jurisdictions with patent regimes similar to our own have also struggled to pin down what is required to bring an idea or a discovery beyond simply that. As mentioned above, the US Supreme Court delivered the decision in Bilski/USSC quite recently, squarely addressing patentable processes. While the decision does not answer all questions of US patentability of business processes, it appears that the US Supreme Court rejected the “machine or transformation” test as in violation of the expansive interpretation which should be given to §101 (the equivalent to our s. 2) – they saw nothing in the statute or in the plain meaning of language which would require “process” to be tied to a machine or an article. In essence, they rejected the type of physicality advocated by the Commissioner. The majority called it “a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under § 101” (slip op. At 8). Four of the justices went on to discuss the changing nature of technology and the limitations posed by this type of thinking:

The machine-or-transformation test may well provide a sufficient basis for evaluating processes similar to those in the Industrial Age – for example, inventions grounded in a physical or other tangible form. But there are reasons to doubt whether the test should be the sole criterion for determining the patentability of inventions in the Information Age.

Furthermore,

Read the entire opinion here (link)

There is no basis for the Commissioner’s assumption that there is a “tradition” of excluding business methods from patentability in Canada.


The Court finds that a purposive construction of the “system claims” (e.g. claim 44 and its associated dependant claims) clearly discloses a machine which is used to implement Amazon.com’s one-click ordering system. The described components (e.g. a computer) are essential elements in implementing an online ordering process. This is not merely “a mathematical formula” which could be carried on without a machine or simply a computer program. A machine is patentable under s. 2 of the Patent Act. The Commissioner herself found that “in form” the claims disclosed such an invention; it was only when she took a second step to subjectively consider the “substance” that she found otherwise. As discussed, this is unsupported in law. The Court therefore finds the machine claims to be patentable subject matter.Turning to the process claims, the Commissioner clearly erred by “parsing” the claims into their novel and obvious elements in order to assess patentability. When viewed as a whole it is clear that the claimed invention is a process which uses stored information and ‘cookies’ to enable customers to order items over the internet simply by ‘clicking on them’. It is accepted that the “one-click” method is novel; the Court finds that an online ordering system which facilitates this adds to the state of knowledge in this area.

The new learning or knowledge is not simply a scheme, plan or disembodied idea; it is a practical application of the one-click concept, put into action through the use of cookies, computers, the internet and the customer’s own action. Tangibility is not an issue. The “physical effect”, transformation or change of character resides in the customer manipulating their computer and creating an order. It matters not that the “goods” ordered are not physically changed.

It is undisputed that this invention has a commercially applicable result and is concerned with trade, industry and commerce. Indeed, its utilization in this very realm seems to be at the root of the Commissioner’s concern.

In light of the above, the Court finds the process claims to be a patentable as an art and process. As discussed at length earlier in this decision, there is no need to continue the analysis once this has been determined. There is no exclusion for “business methods” which are otherwise patentable, nor is there a “technological” test in Canadian jurisprudence. Even if there was some technological requirement, in this case the claims, when viewed as a whole, certainly disclose a technological invention.

Legislation Introduced to Curb False Marking Claims

Congressman Bob Latta (R- Bowling Green) recently introduced H.R. 6352, the Patent Lawsuit Reform Act of 2010.

If passed, H.R. 6352 would strengthen the vague language to revert back to the pre-Forest Group decision and assess one $500 fine if found guilty of deceiving the public under Section 292 and not allow for the interpretation of being fined for each product on the market. The legislation will also require the individual bringing the lawsuit to have suffered a competitive injury as a result of the violation.


“Because of the Forest Group decision, this legislation is now needed to help companies fend off frivolous lawsuits and strengthen current law. During this time of economic uncertainty, companies should not have to worry about expending additional resources on lawsuits based on one court’s interpretation of current law,” Latta stated after introducing the legislation.

H.R. 6352 has been referred to the House Judiciary Committee.

Read the press release here (link)

While the US Government Printing Office has not released text of the legislation yet, you can track the bill's progress here (link)

Does GM Now Have a "Pass" to Use IP From Other Car Makers?

From the abstract of Adam Mossoff's latest essay:

"This essay explains how a 2006 court decision arising from the manufacture of the F-22 Raptor fighter jet paves the way for government-owned General Motors to steal intellectual property. In Zoltek v. U.S., the Court of Appeals for the Federal Circuit held that a loophole in the Tucker Act (28 U.S.C. § 1498) prevented owners of patented processes from suing the federal government for certain types of unauthorized uses of their patents. The Zoltek court also held that patents are not secured as constitutional "private property" under the Takings Clause of the Fifth Amendment. At the time, many judges and lawyers thought that these statutory and constitutional loopholes for patent-owners were insignificant; at worst, they argued, this benefits only military contractors and the like.

Fast forward four years and the federal government now owns the "new GM." It was inconceivable in 2006 that Uncle Sam soon would be in the business of making cars, not to mention in the businesses of banking and insurance, setting salaries of CEOs, purchasing mortgages, etc., etc. This dramatic turn of events means that court decisions that once seemed exceedingly narrow have acquired new breadth and scope. This essay thus explores how Zoltek justifies extensive infringement of U.S. patents by GM and other firms now working for the federal government. Although it is arguable that denying patent-owners their constitutional rights is insignificant in any situation, the events since 2006 at least suggest that many people spoke too soon when they claimed that Zoltek was of little import or concern."

Read/download "How the 'New GM' Can Steal from Toyota"

Using R&D Tax Credits to Fund Patent Portfolio Development

The Research and Development (R&D) Tax Credit was created by Congress as part of the Economic Recovery Tax Act of 1981 to encourage U.S. industries to invest in R&D activities, and to stimulate innovation through tax incentives.  While the tax credit initially benefited Fortune 500 companies, more recent changes to the tax code have allowed almost any manufacturing or technology company to take advantage of the credit.

While the application process is quite vigorous, innovative companies have found it worth the effort: depending on the state and country, tax credits can range from 6% to 50% of qualified R&D expenditures.  To be eligible, an activity must:

1. Have a "permitted" purpose, i.e., one in which the company is developing a new product or process;
2. Must be "technical" in nature, i.e., involving research and development in a particular field of science;
3. Eliminate uncertainty by attempting to overcome a technological obstacle; and
4. Involve a process of experimentation that is geared towards eliminating the uncertainty.

Broadly speaking, U.S R&D tax credits are approximately 6% of eligible expenditures. When combined with state credits, the total credit can be increased to around 10%. The R&D tax credit earned can be offset against current, future, and past taxes paid. Most profitable companies receive a refund in installments or prior taxes paid upon filing their first R&D tax credit claim. After that, the company applies its credits against taxes it otherwise owes.

Under the product R&D credit, the term “product” includes a formula, invention, patent, pilot model, process and technique. For the purpose of the credit, R&D expenditures the IRS has stated that it “generally include all expenditures incident to the development or improvement of a product,” which includes costs of obtaining a patent, such as attorney’s fees related to the patent.

While some companies have used this credit to their advantage in IP management, many others have not.  Given that potentially significant changes will happen next year in Congress on the credit, now would be a good time as any to see how these creadits could potentially bolster your patent filing strategies (and budgets!).

See MDDI Magazine, "Uncovering Value In R&D Tax Credit Processes Through Strategic IP Management"
 
See also MedCity News: "Minnesota’s R&D tax credit: the best little tool you never heard of"

A medical device firm, for instance, can claim a credit for the money it pays to a contract manufacturer that makes the prototypes and the labs that tests the devices. It can also receive a credit for fees it pays to intellectual property lawyers to obtain a patent, even if they’re unsuccessful.