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.