SDNY Finds PTO Acted Unlawfully in Reviving "Unintentionally Abandoned" Application

New York University v. Autodesk, Inc. (06 Civ. 5274) July 13, 2007

NYU asserted two patents against Autodesk, which traced back to a parent application (the '799 Application). During prosecution of the parent application, the file was in the process of being transferred from one law firm to another. A Final Office Action was issued by the PTO, and no response was received by the 6 month date. When the PTO called the new firm, the responsible attorney (who left the new firm weeks later) confirmed abandonment, and the confirmation was recorded by the examiner.

Some six months later, a petition to revive was filed, where the petition only stated that "Applicant's failure to file a response was unintentional." The petition was subsequently granted by the PTO, without further comment.

During litigation, Judge Rakoff ruled that the abandonment was not "unintentional," and that the patent should have never issued. According to Rakoff, once a deliberate act is made towards abandonment, without anything more, an application is dead for good:

Examiner Burwell’s note directly contradicts NYU’s statement. The note suggests that as of December 5, 1997, if not earlier, [the prosecuting attorney] and NYU were on notice that the PTO had deemed the ‘799 application abandoned and that some action would be necessary to revive the application. In light of that notice, without more, no reasonable factfinder could find that NYU’s decision not to take action –- and instead to “delay” seeking revival –- for the entire period between July 14, 1997 and November 4, 1998 was “unintentional” under 37 C.F.R. § 1.137(b)(3).

Also, since the PTO "entirely failed to consider" the examiner's file when reviving the application, Rakoff ruled that the agency's actions were "arbitrary and capricious":

Here, the PTO’s decision more than meets these criteria for arbitrary and capricious action. The PTO “entirely failed to consider” Examiner Burwell’s note in the PTO’s own records, which was an “important aspect of the problem” because it directly contradicted NYU’s claim of unintentional delay. Further, the PTO’s “explanation for its decision” –- that it was relying on NYU’s statement in the petition to revive –- “runs counter” to NYU’s confirmed abandonment, evidenced by Examiner Burwell’s note, and does not remotely constitute the “satisfactory explanation” that State Farm requires.

Accordingly, the PTO’s decision to revive the ‘799 application was arbitrary and capricious and is hereby “h[e]ld unlawful and set aside.” 5 U.S.C. § 706(2)(A). Further, because neither the ‘053 patent nor the ‘132 patent should have issued . . . NYU’s Complaint alleging infringement of these patents must be dismissed.

This case now joins at least two other district court cases which held that confirming abandonment is a deliberate act, which negates the possibility of reviving "unintentionally" abandoned applications without a satisfactory explanation:

Lawman Armor Corp. v. Simon, 2005 WL 1176973 (E.D. Mich. 2005)

Field Hybrids, LLC v. Toyota Motor Corp., 2005 WL 189710 (D. Minn. 2005)

Also, it is interesting that the district court did not consider remanding the case to the PTO for further findings. Lee Thomason from the ISinIP Blog makes the following comments:

In the typical APA review case, the lack of support for the agency’s decision always leads to a remand, not a final decision by in the District Court. “If that finding is not sustainable on the administrative record made, then the Comptroller’s decision must be vacated and the matter remanded to him for further consideration.” Camp v. Pitts, 411 U.S. 138 (1973) and Vt. Yankee, 435 U.S. at 549. Where the agency’s lack of a sufficient explanation overwhelms the district court’s review, then remand is typical under the APA. “If the record before the agency does not support the agency action, if the agency has not considered all relevant factors, or if the reviewing court simply cannot evaluate the challenged agency action on the basis of the record before it, the proper course, except in rare circumstances, is to remand to the agency for additional investigation or explanation.” Florida P. & L. Co. v. Lorion, 470 U.S. 729, 744 (1985).

View/download the opinion here (link)

Medical Technique Patents in the Spotlight

While the software community has decried independent programmers that sue large companies on their patents, it appears that this practice has spread to other technological areas as well. Recently, a trend has emerged where doctors are obtaining their own patents, and then asserting them against medical device companies in court. While such litigation has been around for a while, some are speculating that the practice is on the rise.

The most notable example is the case of Medtronic v. Michelson, where doctor Gary Michelson (via his licensing firm, Karlin Technology Inc.) received a $1.35 billion dollar settlement over his patented implants and spinal surgery techniques. Recently, the CAFC upheld an infringed patent on a surgical method for removing a claw from a domesticated cat (Young v. Lumenis).

And doctors suing other doctors was not unheard of, either. In the 1995 case of Pallin v. Singer, eye surgeon Dr. Samuel Pallin sued several of his peers for the infringement of a medical procedure patent covering a new cataract surgery technique. During this litigation, the American Medical Association House of Delegates voted to condemn the patenting of medical and surgical procedures, and prompted Congress to attempt to outlaw the practice. While legislation was enacted to prohibit method infringement lawsuits against doctors, medical device makers can be liable for inducing infringement of a method by a doctor.

Legal and academic organizations such as the American Association of Orthopedic Surgeons estimate that 100 medical process patents are issued each month, which is double the amount in the 1980s. When the USPTO was contacted by the National Law Journal, a spokesman commented that "because we are seeing an increase in medical/surgical method applications," more hires are being sought.

• Read "As Medical Patents Surge, So Do Lawsuits", The National Law Journal (link)

• See also "Patients v. Patents? Policy Implications of Recent Patent Legislation", St. John's Law Review (link), and "Should Patenting of Surgical Procedures and Other Medical Techniques by Physicians be Banned?", IDEA (1996) (link)

• Follow patent-related news storied on Surgery Litigation & Law Weekly (link)

Senate Marks Up Patent Reform Act

Yesterday, the Senate was hoping to complete the panel's markup of the The Patent Reform Act (S. 1145), but managed to work only two amendments after adopting a manager's amendment that eliminated the provision that would have given the Patent and Trademark Office substantive rule-making authority.

The committee rejected, 7-11, an amendment that would provide the CAFC with greater discretion in considering interlocutory appeals.

However, panel members adopted, 12-6, an amendment that would further limit venue (oddly enough, John Cornyn of Texas, usually one of strongest critics of forum shopping in lawsuits, opposed the amendment).

Highlights of the mark up includes provisions that:

1) Prohibit patent holders from "manufacturing venue" by assignment/incorporation to establish venue for a specific district;

(2) Expand venue restrictions to apply not just to claims for infringement but to declaratory judgment actions as well;

(3) Provide that venue for a US infringer will be (a) where infringer resides (the principal place of business or state of incorporation) or (b) where infringer has committed "substantial" acts of infringement and has a "regular and established physical facility" (previously referred to as "regular place of business");

(4) Provide that venue for a foreign infringer will be (a) the foreign corporation's residence, which is where its main U.S. subsidiary is located or (b) where the foreign corporation has committed "substantial" acts of infringement AND has a "regular and established physical facility";

(5) Provide a "safe harbor" for universities from venue reform restrictions by allowing venue for university plaintiffs to be where the university resides ;

(6) provides a safe harbor for individual inventor plaintiffs who qualify as a micro-entity by allowing venue where the individual resides.

View/download the venue mark-up here (link).

Is the Win Rate for Plaintiffs Slipping at the E.D. Texas?

If you've read any of the multitude of articles on patent litigation at the E.D. Texas, you almost can't help walking away with the conclusion that defendants just can't win in the jurisdiction:

• Sam Williams, A Haven for Patent Pirates,Technology Review - "patent plaintiffs whose cases go to trial in Marshall win 88 percent of the time . . . compared with 68 percent nationwide. "


• Julie Creswell, So Small a Town, So Many Patent Suits - The New York Times - "patent holders win 78 percent of the time, compared with an average of 59 percent nationwide."


• Susan Decker, Texas district is heaven for patent holders under siege, The Seattle Times - "inventors and other patent owners have won jury verdicts 90 percent of the time since 1994."

Not so fast, says Michael Smith over at EDTexWeblog.com:

As anyone that actually works in the patent docket can tell you around here, that just isn't true. Defendants have won half of the patent cases tried in the Eastern District this year, and the plaintiff's win rate in 2006 and 2007 combined is still only 66%. [Many patent cases] often show defense wins on summary judgment or other rulings.

Accordingly, he's created a new tab in his blog for "Patent Cases: Recent Rulings for Defendants" (link). Adds Michael:

[The listing] isn't exhaustive, and isn't meant to indicate any predisposition by any of the judges or the district as a whole . . . It's just meant to give readers the ammunition to explain to their elected officials, and to anyone else that is interested, that defendants can and do win here, and that the outcomes have a lot more to do with the facts of the case and the quality of the lawyering than they do any perceived tendencies by the judges or juries.

Erroneous "Skill in the Art" Triggers Obviousness

Daiichi Sankyo Co., Ltd. v. Apotex, Inc. (06-1564) July 11, 2007 (non-precedential)

Daiichi held a patent drawn to a method for treating bacterial ear infections by topically administering the antibiotic ofloxacin into the ear. During litigation, a dispute arose over the skill in the art when considering obviousness. Apotex argued that the skill in the art would be:

"a person engaged in developing new pharmaceuticals, formulations and treatment
methods, or a specialist in ear treatments such as an otologist, otolaryngologist, or otorhinolaryngologist who also has training in pharmaceutical formulations."

Instead, the district court concluded that a person of ordinary skill in the art

"would have a medical degree, experience treating patients with ear infections, and knowledge of the pharmacology and use of antibiotics. This person would be . . . a pediatrician or general practitioner—those doctors who are often the ‘first line of defense’ in treating ear infections and who, by virtue of their medical training, possess basic pharmacological knowledge."

When considering the prior art, the district court concluded that the teachings fell outside the skill in the art of an otologist with only basic pharmacological knowledge, and held the patent nonobvious. The CAFC disagreed.

The inventors of the ’741 patent were specialists in drug and ear treatments—not general practitioners or pediatricians. At the time of the invention, Inventor Sato was a university professor specializing in otorhinolaryngology; Inventor Handa was a clinical development department manager at Daiichi, where he was involved with new drug development and clinical trials; and Inventor Kitahara was a research scientist at Daiichi engaged in the research and development of antibiotics. Additionally, others working in the same field as the inventors of the ’741 patent were of the same skill level.

[M]ost of the written description details the inventors’ testing ofloxacin on guinea pigs and their findings that ototoxicity did not result from the use of their compound. Such animal testing is traditionally outside the realm of a general practitioner or pediatrician. Finally, while a general practitioner or pediatrician could (and would) prescribe the invention of the ’741 patent to treat ear infections, he would not have the training or knowledge to develop the claimed compound absent some specialty training such as that possessed by the ’741 patent’s inventors.

[T]he district court’s error in determining the level of ordinary skill in the art of the ’741 patent tainted its obviousness analysis. In view of the correct level of skill in the art and the evidence of record, we conclude that as a matter of law the ’741 patent is invalid as obvious.

REVERSED

Interestingly, KSR was not invoked in the opinion. This is now the 7th opinion (eight, if you count the Pfizer v. Apotex denial of en banc) on obviousness from the CAFC after KSR. So far, the CAFC has not explained in any of the opinions how KSR may have changed the outcome of a case, even though most of the lower court decisions came before KSR. Including Daiichi, the outcomes at the CAFC favor obviousness by a 6-1 margin:

Syngenta Seeds, Inc. v. Monsanto Co. - affirmed obviousness

Leapfrog Enterprises, Inc. v. Fisher-Price, Inc. - affirmed obviousness

Omegaflex, Inc. v. Parker-Hannifin - reversed SJ of non-obviousness

Takeda Chemical Indus. v. Alphapharm Pty., Ltd. - affirming non-obviousness

Frazier v. Layne Christensen Co. - affirming JMOL on obviousness

Pharmastem Therapeutics, Inc. v. Viacell, Inc. - reversing jury verdict and JMOL of non-obviousness

JPO Officially Added to PTO Priority Document Exchange Program

From the USPTO:

Effective on July 28,2007, the Japan Patent Office (JPO) will become the second foreign intellectual property office participating with the USPTO in a priority document exchange agreement (participating foreign intellectual property office) . . . Thus, the USPTO will have the ability to begin electronically retrieving JPO priority documents from the JPO through the Priority Document Exchange (PDX) system. Similarly, the JPO will also gain the ability to electronically retrieve US priority documents from the USPTO through the PDX system.

For US applications filed under 35 U.S.C. 111(a) on or after July 28,2007, the USPTO will automatically attempt to electronically retrieve a copy of any JPO priority document without the need for the applicant to file a request to retrieve in a separate document (e.g., form PTO/SB/38) if the US application claims foreign priority to the JPO application and identifies the JPO application in the oath or declaration under 37 CFR 1.63(c) or in an application data sheet under 37 CFR 1.76.

View the notice here (link).

More Whispers on PTO Rule Changes

It's easy to grin, when your ship comes in,
And you've got the stock market beat.
But the man worthwhile, is the man who can smile,
When his shorts are too tight in the seat.

- Judge Smails, CaddyShack (1980)

After yesterday's report on the OMB's approval of the PTO rule changes, more information is slowly leaking out on the changes (see Patently-O post here).

According to the most recent information, two sets of rules have been approved. The rules are rumored to be "softened" versions of the original proposals. According to the IPO, "The rules have not yet been made public, but are understood to contain compromise limitations on continuations and claims that are less severe than those originally published and opposed by IPO and other groups in 2006. "

Recent information reported by Hal Wegner speculates the new rules would include:

The "2+1" Limit on Continuations/RCE’s:
Each applicant gets 2 continuations and 1 RCE per application. The rules will be applied retroactively for cases that have not yet received a first action on the merits.

The "3+1 Transition Rule":
For cases that have not received a first action by the time of the new rules, a "bonus" continuation will be allowed, i.e., a total of one (1) RCE and three (3) continuations.

The "25/5" Claim Limits:
Twenty-five (25) total claims, including up to five (5) independent claims.

The new rules are expected to be published in the next month or two, and be effective around October (give-or-take a month).

OMB Gives Green Light to Continuation Rule Changes

The Office of Information and Regulatory Affairs (OIRA) has completed its review of the proposed PTO rule changes. Despite a litany of alleged improprieties regarding the manner in which the proposed changes were introduced, the OIRA has concluded that they are "consistent with change."

Unfortunately, no further information is given, which appears to be consistent with OMB procedure. According to OMB Watch, exact changes are typically difficult to document:

Unfortunately, this is difficult to assess from data reported by OIRA. All rules changed and then approved by OIRA are labeled “consistent with change.” A change for clarity, such as the insertion of a comma, is reported in the same manner as a change in substance that affects the very nature of the regulation. This label needs more specificity to distinguish the various types of changes OIRA makes.

Under Executive Order 12866, issued by President Clinton and still observed by the Bush administration, agencies are to document changes made to their rules while under review at OIRA. Yet this documentation is inconsistent and frequently inadequate. In a 1998 report, the General Accounting Office found complete documentation of OIRA changes for only 26 percent of the 122 regulatory actions it reviewed, covering EPA, the Dept. of Transportation (DOT), Housing & Urban Development (HUD), and DOL.

To view the brief conclusions of the regulatory review, click here and here.

According to David Boundy, who spearheaded the initial challenge, two avenues are being explored for further challenges. Quoting from David:

Note that OMB concluded that the rules, as amended, were not "economically significant." Perhaps they were modified to the point that they're no longer offensive. We'll see." We are exploring two avenues -

(a) Congressional oversight. Several senators and congressmen have said "Get back to me when the executve branch is done. I understand the problem, and if it still exists at the end of executive branch review, let me know, and we'll see." So I need to hear from you to add weight to our request. The more districts/states we can show to be affected, the more offices we can approach.

(b) Administrative Procedure Act judicial review. We got another reply to another FOIA request yesterday, July 9 (coincidence?) - which confirms that the PTO did absolutely NO analysis of any significant issue, and is still hiding documents. (There are several documents that we know to exist, which PTO is still hiding.) We expect that this will not go over well with a court.

If you wish to help or participate in any way, please feel free to contact David at DBoundy@Cantor.com

CAFC Flexes It's Muscle on Obviousness, Infringement

PharmaStem Therapeutics, Inc. v. Viacell, Inc. (05-1490) July 9, 2007

PharmaStem sued Viacell and 5 other defendants over broad patents related to stem cell medical treatment for persons having compromised blood and immune systems. After a 3 week jury trial, the jury returned a verdict in favor of PharmaStem, finding that the patents were not obvious and infringed. After the defendants filed JMOL motions to overturn the verdicts, the district court reversed the finding of infringement, but maintained that the patents were not invalid. Prior to, and during, the litigation, PharmaStem's patents survived 3 reexamination requests.

In a controversial split opinion, the CAFC upheld the JMOL on infringement and sua sponte held that the patents were invalid for obviousness.

Infringement:

One of the sticking points in the litigation was language in the claims that required that the recited composition contained stem cells "in an amount sufficient to effect hematopoietic reconstitution of a human adult."

Each of the defendants are in the business of servicing families with newborn infants in which blood from the infant's umbilical cord is collected and cryopreserved for possible later use. The problem was that PharmaStem could not show enough evidence that the defendants' cord blood contained a "sufficient" supply of stem cells to effect successful reconstitution of an adult. An expert provided testimony based on the defendants' marketing materials, but did not consider any data regarding the composition of the cord blood units. Accordingly, the expert's testimony was excluded.

In a more interesting move, the CAFC also determined that the method claims could not be infringed because all the steps were not performed by the same party - the defendants were responsible for collecting and cryopreserving cord blood samples, while transplant physicians unrelated to the defendants thawed the cord blood and used it for transplanting. Also, since the defendants never "owned" the blood, there was no contributory infringement:

While cord blood is certainly a product, the transaction between the defendants and their clients is plainly not the sale of "a material or apparatus for use in practicing a patented process," as is required by section 271(c) with respect to method patents. The evidence at trial showed that the cord blood remained the property of the families throughout the period in which the defendants stored it. The defendants were never owners of the blood, but instead were merely bailees; they were not free to dispose of the blood as they chose, but were contractually obligated to preserve it pending the families’ need for it at some point in the future. On those occasions when the cord blood was needed, the defendants provided the blood to transplanters in satisfaction of their contractual obligation to ship the families’ cord blood samples to a transplanter upon direction. Neither that transaction nor any earlier transaction between the families and the defendants constituted a "sale" of the cord blood.

Obviousness:

The CAFC came out of the gate framing the obviousness issue as one revolving around the "reasonable expectation of success":

The idea of using cryopreserved cord blood to effect hematopoietic reconstitution was not new at the time the inventors filed the applications that matured into the ’681 and ’553 patents . . . Accordingly, this is not a case in which there is any serious question whether there was a suggestion or motivation to devise the patented composition or process.

The more difficult question is whether the prior art would have given rise to a reasonable expectation of success in creating the process claimed in the ’553 patent and the composition claimed in the ’681 patent. In addressing that question, the parties focus on whether the inventors had a reasonable expectation that cord blood could be successfully used in transplants for hematopoietic reconstitution.

PharmaStem brought forward testimony asserting that those working in the transplant field did not believe blood would be suitable as a transplant tissue. However, the CAFC dismissed this evidence in light of statements made in the patentees own specification:

The problem with Dr. Bernstein’s testimony about the prior art references is that it cannot be reconciled with statements made by the inventors in the joint specification and with the prior art references themselves . . . [In the patentee's specification], the inventors acknowledged that it was previously known that the properties of cord blood are quite different from those of adult blood and that hematopoietic stem cells had been found in cord blood in much greater concentrations than in adult blood.

[C]ontrary to Dr. Bernstein’s contention that the prior art did not disclose the presence of stem cells in cord blood, the inventors cited several prior art references and stated flatly that "hematopoietic stem cells have been demonstrated in human umbilical cord blood." Moreover, the inventors noted that the prior art references showed that the concentration of stem cells in cord blood was "at a much higher level than in the adult." Nor can those statements in the specification be dismissed as
reflecting a careless use of the term "hematopoietic stem cell."

* * *

Accordingly, PharmaStem’s argument that stem cells had not been proved to exist in cord blood prior to the experiments described in the patents is contrary to the representation in the specification that the prior art disclosed stem cells in cord blood. Admissions in the specification regarding the prior art are binding on the patentee for purposes of a later inquiry into obviousness . . . Nor is there any unfairness in holding the inventors to the consequences of their admissions, as their characterization of the prior art as showing the presence of stem cells in cord blood is hardly unreasonable.

And then, the CAFC dropped the big one:

While the inventors may have proved conclusively what was strongly suspected before—that umbilical cord blood is capable of hematopoietic reconstitution—and while their work may have significantly advanced the state of the science of hematopoietic transplantations by eliminating any doubt as to the presence of stem cells in cord blood, the mouse experiments and the conclusions drawn from them were not inventive in nature. Instead, the inventors merely used routine research methods to prove what was already believed to be the case. Scientific confirmation of what was already believed to be true may be a valuable contribution, but it does not give rise to a patentable invention . . . Good science and useful contributions do not necessarily result in patentability.

PharmaStem also put forward secondary considerations in support of non-obviousness, but the CAFC was not receptive, stating that "there was no indication that the praise for the inventors’ work was based on any inventive contribution they made, as opposed to their proof, through laboratory work, that fetal blood contains large numbers of stem cells. As noted, the former is a basis for patentability; the latter is not. "

With regard to the reexamination, the CAFC viewed the analysis in the reexamination certificate as "flawed," based on similar reasons used to reverse the jury verdict.

Judge Newman's dissent: in a 31 page opinion (!!) Judge Newman took the majority to task over most every issue, stating that, while there was room to disagree over the jury's verdict, the majority opinion went too far in reversing infringement and non-obviousness. Also, Judge Newman came close to accusing the majority of exceeding its appellate authority by re-trying the case on appeal. Some notable quotes follow:

The discoveries of these inventors were met with universal acclaim and widespread utilization, including the founding of many commercial enterprises, all of which are reported to have licensed the patents except for these defendants. Unimpressed by these considerations, my colleagues on this panel now reconstruct these inventions by selection and inference, with perfect hindsight of the discoveries.

* * *

The panel majority scours the prior art for clues that could fit the eventual achievement, and then rules that the achievement was obvious, no matter that it eluded the others whose work is now compiled by this court so as to invalidate these patents.

* * *

My colleagues ignore not only the scientific experts who testified at the trial, but also the PTO examiners who conducted the three reexaminations . . . My colleagues do not explain where the PTO went wrong; instead, they rearrange the past, criticize the acclaim heaped on these inventors, and propose that if the people in this field knew what this court knows, they would not have been so impressed.

* * *

The question is whether the jury's verdict is sustainable on the evidence presented, not whether we could have or would have gone the other way on the evidence presented.

* * *

It is often far easier to recognize the problem than to find and demonstrate the solution. The patent law recognizes that advances of great power may be based as much on persistent and skilled investigation as on the flash of creative genius, for both serve to transcend that which was previously achieved . . . Scientific methodology usually starts with a hypothesis based on what is already known; the record shows that several scientists mentioned the idea of rebuilding destroyed blood cells. However, none achieved this long-sought goal, and the record shows the extreme skepticism concerning even the possibility of this achievement.

* * *

The district court ruled that PharmaStem had not proved infringement because PharmaStem did not separately analyze the stem cell content of each sample of cord blood . . . Every defendant testified that the blood it collected and stored was analyzed for cell content at the time of collection. The jury was not instructed that such evidence was inadequate and inadmissible -- as the district court ruled post-trial. On the evidence presented, this is not a sound basis for rejecting the jury's verdict. The tardy rejection of the testimony of PharmaStem's expert witness, Dr. Hendrix, is an inappropriate application of Daubert and its succeeding cases, on which the panel majority relies, for there was no criticism of the expert's scientific credentials or her analysis of the prior art and the state of the science.

* * *

The principles of patent infringement are not negated when the steps of a method claim are performed by more than one entity. There was no instruction as to legal impossibility of liability as to the '553 patent, and no objection was raised to the verdict questions. We are not told whether the legal theory of sale or rent was aired at the trial, but it is apparent that the jury was fully apprised of the nature of the accused activities, as reflected in the jury questions . . . It is irrelevant whether any steps of a method claim can be viewed as a "service;" infringement requires only that the steps be performed.

State of the CAFC, and New Statistics Page

Chief Judge Paul Michel pronounced the state of the Court to be “very good” in his State of the Court message delivered on June 28th to the 9th Federal Circuit Bar Association Bench & Bar Conference in Cambridge, Maryland (link). While Judge Michel was upbeat about the court's capability to handle existing cases, there was some concern over the increase of complex cases:

Several trends, visible over the last ten years that add to the court’s workload have continued. Filings of patent infringement appeals, for example, have steadily increased. Even more significantly, patent cases have become more complex and hence time-consuming. Meanwhile, MSPB cases, which tend to be much simpler, and were previously the largest portion of pending cases, no longer are. At the end of May, our pendencies were: veterans: 420; patent infringement: 343; and personnel 241. Total filings have been rising steadily, if modestly. Thus, our docket continues to grow, with an increasing proportion of difficult cases.

We have been hearing more appeals, more rapidly, by scheduling more panels each month. From September through June, a different visiting district judge has sat with the court each month. Two will sit during July, August, and September. In fact, visiting judges have been scheduled through the summer of 2008.

CAFC Statistics Page: The CAFC also released a statistics page for 1997-2006 (link). The statistics are broken down into the following listings:

Appeals Filed, by Category, FY 2006 (link) - patent (29%) and trademark (2%) cases make up 31% of the CAFC's workload.

Adjudications by Merits Panels, by Category, FY 2006 (link) - Patent (33%) and Trademark (1%) cases make up 34% of adjudications.

Appeals Filed and Terminated, by Category, FY 2006 (link) - 453 patent appeals were filed from the district courts, with 259 being adjudicated on the merits (57%); 42 patent appeals were filed from the USPTO, with 17% being adjudicated on the merits (40%).

Appeals Terminated on the Merits, FY 2006 (link) - of the district court cases (which include some non-patent cases), 60% were affirmed on the merits (167 of 278), 20% were affirmed-in-part (56 of 278), and 13% were reversed (36 of 278).

Ten Year Historical Caseload 1997-2006 (link) - about 400 appeals were filed in 1997 and 2001 for district court cases (both patent and non-patent). The number of filings have increased steadily since then, to about 525 for FY 2006

Historical Patent Filings 1997-2007 (link) - in 1997, 330 patent infringement appeals were filed. In 2006, the number of patent infringement appeals reached 453 (tying the number of cases heard in 2002). In 2007, 429 patent infringement appeals are projected.

Historical Caseload 1983-2006 (link) - in 2006, almost 1800 appeals were filed. While there is an upward trend in the caseload, the largest caseload continues to be 1985, where over 2400 appeals were filed.

Is KSR Actually Helping Applicants at the BPAI?

Earlier in the month, the 271 Blog reported on post-KSR appeals at the BPAI related to obviousness (link), and reported that "only" 36% of obviousness cases were reversed on appeal. This inevitably lead to the question: "what was the reversal rate before KSR?"

This resulted in further digging, and a bit of controversy. The BPAI traditionally publishes statistics in the Official Gazette (OG), and similarly posts statistics on the BPAI link of the Office's web page.

Back in 2005, a widely-distributed analysis was made on reversal rates, based off of the OG, and reported that the reversal rate was around 60%:

Disposition-------% of Dispositions--------[% decided cases]
Affirmed------------------- 36. 6%------------------[40 % decided]
Affirmed-in-Part---------12.6 %-------------------[14 % decided]
Reversed-------------------40.9 %------------------[45 % decided]
Reversals-------------------53.5 %------------------[59 % decided]

Partial Remands, Dismissals--------9.9 %

TOTAL, 100.0%

Now, the 59% "reversal" number was a combination of decisions that outright reversed a rejection (40.9%), and partial reversals (i.e., "affirmed-in-part" - 12.6%). It is important to note here, that the reversals included ALL rejections, and not just obviousness rejections.

Turning to the published numbers on the BPAI site (link), the numbers tell a slightly different story:

FY 2005 (link) -- reversed = 39.6%; partial reversals = 12.5%; total reversals = 52.1%

FY 2006 (link) -- reversed = 34.8%; partial reversals = 12.1%; total reversals = 46.9%

FY 2007, through April (link) -- reversed = 29.6%; partial reversals = 13.9%; total reversals = 43.5%

Judging from the "reversed" numbers alone, the 36% rate of reversal on obviousness rejections for May 2007 suggests an increased rate of reversal at the BPAI. Again, the early numbers (2005-2007) combined all reversals, which may or may not have been based on obviousness. Thus, it can be extrapolated that the reversal rate of 36% on "obviousness-only" rejections suggests an increase in the overall reversal rate. It follows that the likelihood of reversal on 103 grounds increased as well.

The BPAI is expected to publish its May numbers shortly, and they will be posted when they come out.

Kicking the Peer-to-Patent Tires

On June 15, the USPTO launched the Peer-to-Patent project (see OG Notice here), where the public was invited to participate in the examination of patent applications (for a Project Summary, click here).

Now that a week has passed, it appears that the project is off to a decent start. So far, the USPTO has listed 5 patent applications (link), and the boards appear to be quite lively with discussion. Participants range from engineers and computer professionals, to students, writers and even other lawyers. So far, participants have contributed 5.6 prior art submissions, and 18.8 discussion threads, per application. Also, the comments are often detailed and are mostly well-reasoned.

To get an idea of the process, click on any of the listed applications (link) and feel free to browse through the prior art, discussion and research links to see how participants have been interacting with the system. If you feel inclined to sign up with the project, click here (link).

• Listen to interview with Jon Doll on the Peer-to-Patent Project (link)
• Read recent interview with Beth Noveck, co-creator of the project (link)
• Article from the Washington Post (link)

Hell Hath No Fury - Attack Launched on USPTO Continuation Rule Changes

On June 15, David Boundy from Cantor Fitzgerald and Mike Strickland from GlaxoSmithKline appeared at a White House meeting with the Office of Management and Budget (OMB) to discuss the PTO's rules to limit patent applications (link). Attendees included:

• John Love - USPTO
  
• Jennifer McDowell - USPTO
  
• David Rostker - OMB/ Office of Information and Regulatory Affairs (Desk Office covering Commerce Dept)
  
• Lisa Branch - OMB/ Office of Information and Regulatory Affairs, Counselor to Administrator Dudley
  
• Aaron Flynn - Office of Science and Technology Policy
  
• Peter Robbins - Dept of Commerce, Office of General Counsel
  
• Carrol Barnes - Small Business Administration/Office of Advocacy
  
• Rob Alderfer - OMB
  
• Nikesh Jindal - OMB

The conference was in regard to numerous concerns over the implementation of the rule changes, namely:

1. The USPTO’s alleged failure to adhere to the regulatory philosophy and principles of Executive order 12,866 (link)
   
2. The USPTO’s alleged violation of the Information Quality Act and Office of Management and Budget’s implementing guidelines; and
   
3. Significant discrepancies being found between the USPTO’s claimed savings in paperwork burden and the increase in actual burden specifically mandated by the Limits on Claims Rule.

These concerns were summarized in a letter to the honorable Susan Dudley, Office of Information and Regulatory Affairs (OMB), and signed on behalf of numerous organizations and companies that oppose the changes.

• To download/view the cover letter, see here (link)


• To download/view the joining signatories, along with opposition statements (attached as Appendix A), see here (link)

Attached to the letter are numerous exhibits, which contained detailed arguments against the implementation of the continuation rule changes. THe exhibits are arranged as follows

• Appendix A - Public Comments Submitted by Signatories to USPTO on its Notices of Proposed Rulemaking

• Appendix B - The Draft Rules are “Economically Significant” under Executive Order 12,866

• Appendix C - The Draft Rules Are Not Required by Patent Law or Necessary to Implement Patent Law, and are Therefore Impermissible Under EO 12,866 § 1(a)

• Appendix D- USPTO’s Written Rationale is Insufficient

• Appendix E - The Rules Exceed the Authority Delegated to USPTO under the Administrative Procedure Act and Patent Act

• Appendix F - Existing Regulations or Administrative Practices Created or Contributed to the Problems USPTO Seeks to Remedy (EO 12,866 Sec. 1(b)(2))

• Appendix G - USPTO Did Not Rely on the Best Available Scientific, Technical, Economic and Other Information (EO 12,866 Sec. 1(b)(7))

• Appendix H- USPTO’s Claimed Reduction in Backlog Is Unlikely to Materialize

• Appendix I - USPTO Cannot Show that the Proposed Rules are the “Most Cost Effective” Solution

• Appendix J - USPTO’s Promises of Procedural Remedies Against Substantive Harshness are Illusory

• Appendix K - USPTO Failed to Comply with Applicable Information Quality Principles and Guidelines

• Appendix L - USPTO Has Withheld Data and Analysis Essential for Evaluating its Proposals

• Appendix M - USPTO’s Estimates of Paperwork Burden are Invalid and Unreliable (Paperwork Reduction Act)

• Appendix N- Materials Received from USPTO in Response to FOIA Request,
Including Chicago “Town Hall” Slides

• Appendices O-Q - Relevant Statutes/C.F.R./MPEP

To view the attachments (Appendices B-Q), click here (link) (91 pages)

The attachments total hundreds of pages and allege numerous improprieties with regard to the manner in which the continuation rule changes were implemented, including:

- The PTO apparently did not conduct any studies to identify the source of its backlog problem (Appendix C-4, footnote 24);

- The PTO breached its duties of candor and good faith (Administrative Procedure Act, Freedom of Information Act) by failing to disclose its data, assumptions, and models, refusing to provide them when required, and then further refusing to provide them in response to a FOIA request (Appendix C-3, and Appendices L, N(1) and N(2));

- The rationales provided by PTO are insufficient to meet the requirements of Executive Order 12,866 (Appendix D);

- The PTO violated both the Executive Order and Administrative Procedure Act by failing to discuss alternatives to the proposed rules in the Notices of Proposed Rulemaking (Appedix D, Appendix I-1 to I-6);

- The backlog may well be due to internal disincentives provided to examiners, and not any burden imposed on the office by applicants (Appendix F-8 to F-11);

- The Proposed Rulemaking breached statutory obligations, including the Information Quality Act (Appendix K);

- The paperwork burden estimated for the Examination Support Documents (ESD),
which were noted to be extraordinarily burdensome by many of the comment letters, were estimated by PTO to be zero (Appendix M). Interestingly, John Whealan, PTO Solicitor, stated at a Duke Symposium, that "If you want all your claims examined up front, you can have it done, but it's going to cost you, you're going to have to do some work, which in the current law of inequitable conduct, nobody's going to want to do" (Appendix M-6).

To view the FOIA requests click here (link1 - PTO budget, pendency, attrition (79 pages)) and here (link2 - request for files on rulemaking proceedings (continuation, claim examination, IDS) (117 pages)).

It is likely that this material will serve as a basis for a subsequent lawsuit if the USPTO decides to enact the proposed rule changes.

FeedBlitz Alert

To readers of this blog that have tried to subscribe in the last week or so, it has come to my attention that the FeedBlitz service is experiencing difficulties. If you've had problems subscribing, please try again later. Sorry for the inconvenience.

-271 Blog

More Patent Reform News

• Chief Judge Michel's new letter to the Senate (link) - Judge Michel expounds on his concerns over mandatory interlocutory appeals, and apportionment of damages. In the latest letter, Judge Michel offers some alternatives:

[T]he third avenue of [interlocutory] appeal could be limited to cases in which, despite the absence of a grant of summary judgment, the trial court determines that claim construction will likely control the verdict on infringement. Under such a provision, the number of interlocutory appeals on this third avenue would, I expect, be far fewer than under the provision as currently drafted.

With regard to Section 5, on apportionment of damages when calculated as a reasonable royalty, the current language requires the court to conduct a massive macroeconomic analysis. The analysis requires determining the economic value of all prior art technology and the economic value of everything in the accused product or process not attributable to the asserted patent . . . Perhaps the Committee would consider making this analysis discretionary with the court so that it could be limited to those cases where it might be truly necessary. A second alteration would be to require the accused infringer to establish a basis by submitting sufficient evidence before the undertaking would occur.

• More than 200 organizations signed a letter similarly opposing the apportionment of damages provision, and also opposing the "second window" provision and the expanded rulemaking authority for the USPTO. The letter can be viewed/downloaded here (link)

• Senator Kennedy admitted recently that Congress is having problems grappling with the esoteric issues of patent law. "All of us are generalists, we're elected as generalists, and this is an enormously technical issue," Kennedy said. He also remarked that the biotech and high-tech sectors should work out differences by themselves -- otherwise, "it comes down to who has more lobbyists."

• In a bit of a twist, Democratic presidential candidate and former Sen. John Edwards (N.C.) on Thursday in Detroit offered details of his universal health care proposal, which included overhauling the patent process for breakthrough pharmaceuticals. His proposal will explore the possibilities of offering "prizes" for breakthrough discoveries. From Edwards' website (link):

Edwards will convene an expert panel to explore whether there are certain key disorders where prizes for breakthroughs – as an alternative to patent monopolies—would offer new incentives to researchers, guaranteed gains to companies, and lower costs to patients. Prizes would supplement, but not replace, the current patent system.

CAFC: Lack of Corresponding Structure Invalidates Means-Plus-Function Claim

Biomedino, LLC v. Waters Technologies Corp. (2006-1350) June 18, 2007

Biomedino appealed the judgment of the district court that claims 13-17 and 40 of U.S. Pat. No. 6,602,502 ("the ’502 patent") were invalid for indefiniteness under 35 U.S.C. § 112, ¶ 2.

The claims recited "control means", but the only references in the specification to the "control means" are a box labeled "Control" in one figure and a statement that the regeneration process of the invention "may be controlled automatically by known differential pressure, valving and control equipment."

The CAFC distilled the issues down to the following:

Essentially this case asks the following question: for purposes of § 112, ¶ 6, is sufficient corresponding structure disclosed when the specification simply recites that a claimed function can be performed by known methods or using known equipment where prior art of record and the testimony of experts suggest that known methods and equipment exist?

Even though one skilled in art could identify known methods, the CAFC concluded that some type of disclosed structure was required to meet § 112, ¶ 6:

In the present case, there is nothing to suggest a structure for the claimed control means. As we have previously explained, § 112, ¶ 6 requires some disclosure of structure in the specification corresponding to the claimed means. "[W]hile it is true that the patentee need not disclose details of structures well known in the art, the specification must nonetheless disclose some structure." Default Proof, 412 F.3d at 1302; see also Atmel, 198 F.3d at 1382 ("There must be structure in the specification" and the requirements of § 112, ¶ 6 will not be met when there is "a total omission of structure.") . . .

The inquiry is whether one of skill in the art would understand the specification itself to disclose a structure, not simply whether that person would be capable of implementing a structure . . . Accordingly, a bare statement that known techniques or methods can be used does not disclose structure. To conclude otherwise would vitiate the language of the statute requiring "corresponding structure, material, or acts described in the specification."

AFFIRMED

E.D. Tex. Grants Permanent Injunction for Non-Practicing Patent Holder

CSIRO v. Buffalo Technology, Inc., E.D. Tex. (6:06-CV-324), June 15, 2007

CSIRO is the principal scientific research organization of the Australian Federal Government. Established in 1926, CSIRO conducts scientific research and applies the efforts of that research to benefit the public at large. CSIRO is similar to the United States’ National Science Foundation and National Institute of Health.

On January 23, 1996 CSIRO was granted U.S. Patent No. 5,487,069 (“the ‘069 patent”) which is directed to addressing the "multipath" problem for indoor wireless networks (WLANs). CSIRO’s intent from the beginning was to derive revenue from its invention through licensing the ‘069 patent. The patent is considered by CSIRO to be a "core" patent for the IEEE 802.11a and 802.11g standards.

CSIRO successfully sued Buffalo in the E.D. Tex. for infringing the '069 patent, and sough a permanent injunction. Buffalo countered that CSIRO was not entitled to an injunction since eBay, since it did not produce any products or otherwise compete in the relevant wireless market.

Judge Davis disagreed, stating that formal research institutions may avail themselves of injunctive relief when their patents are infringed.

Irreparable Harm to CSIRO

Relying on the TiVo, Paice and Visto cases, Buffalo argued that, since eBay, district courts have typically granted injunctive relief in favor of competitors but denied injunctive relief to non-competing licensors. The court rejected this argument:

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.

Adequacy of Remedies Available at Law:

In his concurrence, Justice Kennedy instructed courts to be cognizant of the nature of the patent being enforced and the economic function of the patent holder when applying the equitable factors. eBay, 126 S. Ct. at 1842 (Kennedy, J., concurring) (“When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest.”) . . . The right to exclude becomes more urgent when the product is the invention.

This case is not the situation that concerned Justice Kennedy; Buffalo’s infringing use of CSIRO’s technology is not limited to a minor component of the technology. The ‘069 patent is the core technology embodied in the IEEE’s 802.11a and 802.11g standards. Buffalo’s products are designed to provide the wireless functionality of the IEEE’s 802.11a and 802.11g standards. Since Buffalo’s infringement relates to the essence of the technology and is not a “small component” of Buffalo’s infringing products, monetary damages are less adequate in compensating CSIRO for Buffalo’s future infringement.

Balance of Hardships

Finding the CSIRO suffered irreparable harm, the court found Buffalo's hardship was not sufficient to find in its favor: "The hardship to Buffalo of permanently enjoining its infringing conduct is limited to the injury ordinarily expected when an injunction is imposed. Mere hardship incurred in the process of ceasing operations is not sufficient."

The Public Interest

Research institutions, such as CSIRO, make substantial scientific advances. The work of research institutions is often at the forefront of scientific awareness. Although their work may not always have immediate applications, the work of research institutions has produced enormous benefits to society in the form of new products and processes. Because the work of research institutions such as CSIRO is often fundamental to scientific advancement, it merits strong patent protection. Furthermore, the public interest is advanced by encouraging investment by research
organizations into future technologies and serves to promote the progress of science and the useful arts. Thus, the public interest factor favors CSIRO’s motion for permanent injunction.

View/download the order here (link)

US, EU Patent Examiners Issue More Warnings Over Quality

Butch: You okay?

Marsellus: Naw man. I'm pretty far from okay.

Butch: What now between me and you?

Marsellus: I tell you what now between me and you. There is no me and you. Not no more.

- Pulp Fiction (1994)

As more and more pressure is put on patent offices to increase patent quality, examiners have started to push back, and have expressed a sense of isolation from most patent quality initiatives. For the most part, the sentiment from the examining corps has been that "we know what you want from us, we're just not sure how we are expected to do it."

Back in April, a Coalition of Patent Examiner Representatives from the US, Canada and the EU issued a letter to their respective patent office Commissioners/Presidents, warning that insufficient time and resources were available for effective examination of patents:

Patent offices worldwide continue to focus on their backlogs of applications and ways to increase examiner productivity. Unfortunately, in many patent offices, the pressures on examiners to produce and methods of allocating work have reduced the capacity of examiners to provide the quality of examination the peoples of the world deserve. Quality examination requires skilled, well-trained and motivated examiners, powerful and efficient search and examination tools and, most importantly, the time necessary for examiners to apply those skills, training and tools to the examination of patent applications. The pressure on productivity has greatly reduced the sense of job satisfaction of examiners, who feel unable to take the time to do the job justice. This has damaged the motivation of the examiners with concomitant impact on the operational effectiveness and the quality of output of Patent Offices.

Consequently, we, the undersigned representatives of patent examiners, join together in declaring that the combined pressures of higher productivity demands, increasingly complex patent applications and an ever-expanding body of relevant patent and non-patent literature have reached such a level that, unless serious measures are taken, meaningful protection of intellectual property throughout the world may, itself, become history.

Shortly after the letter was issued, Robert Budens, president of the Patent Office Professional Association (POPA) spoke with Managing Intellectual Property magazine (link), and repeated the call for more time and resources for patent examination. "Everyone except management believes that we need more time to do the job. Their rationale is that if we get more time, then the backlog will grow. I disagree. In the short term that's right, but in the long term it means that the retention level doesn't drop."

In the EU, an interesting development came to light this week as an internal survey entitled "Governance of the EPO: A Staff Perspective" was leaked to the press. The EPO confirmed that the document is authentic, but did not offer any official comment on its findings. After reading the study, it is apparent that the examiners have some serious issues with the logistical workings of the office:

• Only 8% of examiner agreed with the statement that "the MAC is actively supporting the quality development process."

• Only 6% of the examiners agreed with the statement "I identify with the views put forward by the MAC" (down from 12% in 2004).

• When asked to identify "opportunities to improve efficiency," the most frequently
chosen were "better functioning of the computer systems," "clear and consistent instructions" and "better balance between workload and capacity."

• The research group (Research International) concluded in the study that EPO staff perceives their management as “totally disconnected from my reality.”

• In the open comments portion of the survey, 93.7% of the comments were negative, 5.5% neutral (mostly "no comment") and only 0.7% positive.

View/download "Governance of the EPO: A Staff Perspective" (link)

View/download the Coalition of Patent Examiners letter (link)

Notably, Amitrajeet Batabyal and Gregory DeAngelo have conducted theoretical analysis on the issue of stringent examination versus backlog reduction at the PTO. Unfortunatly, the findings in the study were inconclusive:

Our theoretical analysis shows that there is no definite answer to this question [whether there is or isn’t a tradeoff between the twin objectives of backlog reduction and error minimization]. Hence, we use numerical methods and our numerical analysis leads to two conclusions. For many values of the model parameters that describe the stringency of examinations, a more stringent examination process does lengthen the pendency period. In contrast, for most values of the model parameter that describes the volume of patent applications handled by the PTO under study, a more stringent examination process does not lengthen the pendency period.

See: "Average Patent Pendency and Examination Errors: A Queuing Theoretic Analysis" (link)

See also: "Is there a Tradeoff between Average Patent Pendency and Examination Errors?" (link)

More Voices Speak Out on Patent Reform

As the Patent Reform Act of 2007 makes its way through the Senate, more and more entities are making sure their concerns are being heard by Congress. To be sure, the swell of dissent is increasing, and is expected to further increase over the coming weeks. Some recent letters to Congress include:

Chief Judge Michel: his letter includes a biting criticism over the apportionment of damages:

• "As promised, I have since reviewed some of the Federal Circuit decisions that address aspects of this subject [damages], and I have also identified and attached an article that should help you more than reading individual opinions. Significantly, it was written by a seasoned patent litigator with direct experience in how such damage theories are actually litigated in court. Lawyers employed by particular companies, like most law professors, have little or no experience from that perspective. Mr. Rooklidge, by contrast, has several decades of litigation experience in precisely these types of cases."

• In short, the current provision has the following shortcomings. First, it requires a massive damages trial in every case and does so without an assignment of burden of proof on the proper party and articulation of a clear standard of proof associated with that burden. Second, the analysis required is vastly more complicated than that done under current law. Third, the meaning of various phrases in the bills would be litigated for many years creating an intervening period of great uncertainty that would discourage settlements of disputes without litigation or at least prior to lengthy and expensive trials.

View/download Michel letter here (link).

View Rooklidge article here (link).


Advanced Medical Technology Association (AvaMed): the world's largest association of medical device manufacturers stated the following:

• "We agree with the position taken by many other industry groups, as well as Chief Judge Michel of the Federal Circuit, in opposing any apportionment of damages."

• "AdvaMed’s IP Working Group also opposes the “second window” of post-grant oppositions.Unlike many other industries, the life cycle of medical devices is relatively short—often no longer than seven to ten years. The ability to quickly capture, and then maintain, market share over this short period is critical."

• "Inequitable Conduct Should be Reformed and Substantive Rulemaking Should Not be Delegated to the PTO . . . With respect to the delegation of substantive rulemaking to the PTO, we oppose this provision. Such rulemaking likely would result in litigation challenging the PTO, which would create further uncertainty. In addition, giving the PTO power to make substantive rules, while bypassing legislation that is subject to debate and commentary, would inevitably lead to specialized lobbying groups."

View/download AvaMed letter here (link).

Massachusetts Medical Device Industry Council (MassMEDIC): Massachusetts ranks second among all states in the number of medical device patents filed each year. In a letter to Senator Kennedy, MassMEDIC states:

• "MassMEDIC opposes an open-ended post-grant opposition that allows for a second window of review after the initial post-issuance challenge period. Having a second, open-ended window prevents conveyance of patent certainty, validity, and exclusivity, which are essential to justify the millions of investment dollars needed to bring these types of inventions through to commercialization."

• "MassMEDIC opposes the bill’s limit on patent infringement damages to the economic value attributable to the patent’s “improvement over the prior art.” As Judge Michel of the Court of Appeals for the Federal Circuit (which has exclusive jurisdiction over appeals for patent cases) has recognized, a “prior art subtraction” standard would add complexity and uncertainty to patent litigation and result in more costly and lengthy court proceedings."

• MassMEDIC opposes [the] delegation of expansive rulemaking authority [to the USPTO] provided under S1145.

View/download MassMedic letter here (link).


Medical Device Manufacturer's Association (MDMA):

• The Patent Reform Act of 2007 includes provisions that, when combined with the changes that have already taken place, threaten to devastate life sciences investment, and thereby, innovation. MDMA is particularly concerned with the provisions dealing with PTO rule making authority, apportionment of damages, the open-ended nature of the post-grant review window, and the lack of redress for the growing use of the inequitable conduct defense.

View/download MDMA letter here (link).

Patent Reform Act Hits a Snag

Senators Coburn, Grassley, Kyl, Sessions and Brownback issued a letter today to Senator Leahy expressing concerns over patent reform. The letter reads as follows (w/ emphasis added):

Dear Chairman Leahy and Ranking Member Specter:

We write to you about S. 1 145, the Patent Reform Bill of 2007. We commend you for tackling the important issue of patent reform. We agree that if is important to update our nation's patent system to ensure better patent quality and to preserve property rights in the inventions that drive our economy. However, after last week's hearing, it is obvious that there are multiple issues that need to be reviewed and discussed before the Committee is prepared to mark up the bill.

We believe that the testimony at the hearing reflected the need for further discussion among members, staff, the Patent and Trademark Office, the Department of Justice, and stakeholders. Accordingly, we ask that you not move the patent reform bill until we have had time to work through certain issues. Some of us plan to submit Questions for the Record for the hearing which are not due to be submitted until Wednesday June 13--one day before the scheduled markup. The Committee should be afforded appropriate time to fully review and evaluate those answers. It is likely that those answers will give insight into changes that should be made to improve the legislation.

We believe that more hearings are necessary to adequately address a number of important issues with broad implications for our economy. Specifically, we believe that the issue of mandatory apportionment of damages, past-grant opposition, and broad rulemaking authority for USPTO need to be more carefully examined to ensure that they do not undermine innovation, increase frivolous litigation, or undermine property rights. Many prominent American businesses on the cutting edge of innovation are expressing concerns about the impact of sweeping patent reform. These concerns merit thoughtful deliberation, and we believe that more hearings will help to inform the committee before we proceed to markup.

Additionally, mare attention should be given to the issue of how to improve patent quality. It is critical to America's global innovative edge that Congress ensures that the U.S. Patent and Trademark Office is as effective as possible in issuing valid patents.

Finally, more attention should be given to examining the problem of speculative litigation and
alternatives to stopping unnecessary and costly litigation.

Although the Committee's Intellectual Property Subcommittee did hold four hearings on the general issue of patent legislation in the 109th Congress, the hearings preceded any specific legislative proposal. Now that we have specific bill text, the Committee should dig into the legislation and fully educate itself as to the implications while giving Members full opportunity to suggest alternative language.

Thank you for your consideration of our request. We stand ready to work with you to move
responsible patent reform legislation that protects innovation and protects America's competitive edge.

• View/download the letter here (link).
• The letter is significant, since the signatures represents a majority of Republican members on the Senate Judiciary Committee (to view members, click here)

SDNY Takes on KSR - And Finds Patent Obvious

McNeil-PPC, inc. v. Perrigo, Co., 05 Civ. 1321 (SDNY, June 5, 2007)

Since KSR, there have only been 3 published district court decisions that addressed the new standard of obviousness:

• Technology Licensing Corp. v. Gennum Corp., No. 01-04204, 2007 WL 1319528, at *18 n.38 (N.D. Cal. May 4, 2007)


• Smith & Nephew, Inc. v. Arthrex, Inc., No. 04-29, 2007 WL 1467228 (D. Or. May 17, 2007)


• Abbott Labs. v. Sandoz, Inc., No. 05-5373, 2007 WL 1549498 (N.D. Ill. May 24, 2007)

This week, the SDNY published a 4th and sweeping decision that invalidated J&J/Merc's U.S. Patent 5,817,340 which was related to the antacid "Pepcid Complete." An exemplary claim recites:

5. A method for manufacturing a solid oral dosage form comprising:

a) forming granules containing famotidine for the treatment of gastric disorder;

b) coating the granules with a coating impermeable to aluminum hydroxide or magnesium hydroxide to form impermeably coated famotidine granules;

c) mixing a therapeutically effective amount of aluminum hydroxide or magnesium hydroxide with a therapeutically effective amount of impermeably coated famotidine granules and pharmaceutically acceptable excipients to form a compression mixture; then

d) pressing the compression mixture to form a solid oral dosage form.

The evidence established that all of the limitations in the '340 patent were found in four different prior art documents. The patentee argued that it was improper to combine the teachings related to famotidine and antacids (which reduced the bitter taste). Alternately, the patentee argued that the prior art did not provide an apparent reason to combine an impermeable coating with antacid, since other alternatives existed at the time that were less expensive than an impermeable coating.

The district court disagreed, relying in part on statements the patentee made earlier to the FDA. With regard to the famotidine, the district court noted:

Plaintiffs contend that the composition at issue is the combination of famotidine and antacid, not famotidine alone, and that Perrigo has failed to show that the combination product has a bitter taste. Yet the NDA Plaintiffs submitted to the FDA for Pepcid Complete states: "Taste masking of famotidine is necessary in [the combination famotidine-antacid product] due to the bitterness of the drug substance." . . . Internal McNeil memoranda also indicate Plaintiffs' belief that famotidine has a bitter taste in the combination product . . . The record evidence therefore establishes that a skilled formulator would have reason to mask the bitter taste of famotidine even with the addition of antacid.

Regarding the impermeable coating, the court stated the following:

In the alternative, Plaintiffs contend that other modes of taste-masking are preferable to impermeable coating. Coated granules are "much more" expensive "than simply using flavorants and sweeteners." . . . Plaintiffs assert that because of this cost disparity, a skilled formulator would resort to coating only if a bitter taste remained after the addition of flavorants and sweeteners . . . Plaintiffs assert that in light of the alternatives, a person of ordinary skill would not have been motivated to use impermeable coating for taste-masking purposes.

This Court disagrees. Under KSR, "[t]he combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results." . . . The '340 patent does no more than combine the predictable results of Davis and Wolfe with the predictable results of the '072 and '1 14 patents. Of course, obviousness is not established "merely by demonstrating that each of [an invention's] elements was . . . known in the prior art," because "it can be important to identify a reason that would have prompted a person of ordinary skill in the relevant field to combine the elements in the way the claimed new invention does." . . . But pre-KSR precedent refutes Plaintiffs' theory of non-obviousness, which is that the costs of the coating process would have dissuaded a skilled formulator from combining the references. "[T]he fact that the [prior art] would not be combined by businessmen for economic reasons is not the same as saying that it could not be done because skilled persons in the art felt that there was some technological incompatibility that prevented their combination. Only the latter fact is telling on the issue of nonobviousness." Orthopedic Equip. Co. v. United States, 702 F.2d 1005, 1013 (Fed. Cir. 1983).

KSR casts doubt on the continuing validity of Federal Circuit precedent on the issue of obviousness. The Supreme Court did suggest, however, that some Federal Circuit caselaw may have appropriately applied the broad conception of the teaching, suggestion or motivation test that the Supreme Court has endorsed . . . This Court perceives no conflict between KSR and the portion of Orthopedic Equipment cited above.

Interestingly, the patentee argued that an inventor's comments outside the four corners of the patent should be ignored, because, under KSR, "[t]he question is not whether the combination was obvious to the patentee but whether the combination was obvious to a person with ordinary skill in the art." The district court dismissed this argument as well:

The notion that contemporaneous admissions by the skilled inventor of the patent in suit must be ignored finds no support in any of the cited precedents, let alone KSR. "Common sense" dictates that if these admissions raise an inference of obviousness, then the patent is invalid under § 103.

Read/view the decision here (link).

WebCast of Senate Patent Reform Hearings

The Senate will conduct a hearing today before the Senate Judiciary Committee on “Patent Reform: The Future of American Innovation.” The final witness list is as follows:

Panel I

The Honorable Jon W. Dudas Undersecretary of Commerce for Intellectual Property Director of the U.S. Patent and Trademark Office Department of Commerce Alexandria, VA

Panel II

Mr. Bruce G. Bernstein Chief Intellectual Property and Licensing Officer InterDigital Communications Corporation King of Prussia, PA

Ms. Mary Doyle Senior Vice President, General Counsel and Secretary Palm, Inc. Sunnyvale, CA

Mr. John A. Squires Chief Intellectual Property Counsel Goldman, Sachs & Co. New York, NY

Ms. Kathryn L. Biberstein Senior Vice President General Counsel and Secretary, and Chief Compliance Officer Alkermes, Inc. Cambridge, MA


The hearings are scheduled to begin shortly (10:00AM EST) - to watch them over webcast, click here (.ram format)

KSR and the BPAI: Analysis of Appeals for May, 2007

Over at the Fire of Genius blog, Joe Miller has been tabulating post-KSR decisions from the CAFC, the district courts and the BPAI (link) . Now that we have passed the one-month anniversary of KSR, how have Appellants fared at the USPTO?

Not so hot. For the month of May, Examiners have enjoyed a 64% affirmance rate on obviousness rejections.

The following list was made after reviewing 45 reported cases from the BPAI through May 29, 2007:

32 Appeals affirmed:

1. Ex parte Teng, 2007 WL 1378835 (BPAI May 10, 2007) (No. 2007-0954, Tech. Ctr. 2100)
2. Ex parte Askeland, 2007 WL 1418543 (BPAI May 14, 2007) (No. 2007-0960, Tech. Ctr. 2800)
3. Ex parte Jha, 2007 WL 1433429 (BPAI May 15, 2007) (No. 2007-0708, Tech. Ctr. 2100)
4. Ex parte Toyoyama, 2007 WL 1433430 (BPAI May 15, 2007) (No. 2007-0803, Tech. Ctr. 2800)
5. Ex parte LeRose, 2007 WL 1433432 (BPAI May 15, 2007) (No. 2007-1289, Tech. Ctr. 2100)
6. Ex parte Almog, 2007 WL 1451798 (BPAI May 15, 2007) (No. 2006-2968, Tech. Ctr. 1700)
7. Ex parte Valiulis, 2007 WL 1451799 (BPAI May 16, 2007) (No. 2006-3003, Tech. Ctr. 3600)
8. Ex parte Amigh, 2007 WL 1451803 (BPAI May 16, 2007) (No. 2007-0485, Tech. Ctr. 1700)
9. Ex parte Mihalos, 2007 WL 1451806 (BPAI May 16, 2007) (No. 2007-1390, Tech. Ctr. 1700)
10. Ex parte Cohen, 2007 WL 1460347 (BPAI May 17, 2007) (No. 2006-2886, Tech. Ctr. 2800)
11. Ex parte Inala, 2007 WL 1460346 (BPAI May 17, 2007) (No. 2007-0221, Tech. Ctr. 2100)
12. Ex parte Elman, 2007 WL 1460351 (BPAI May 18, 2007) (No. 2007-1204, Tech. Ctr. 3700)
13. Ex parte Roseth, 2007 WL 1460343 (BPAI May 18, 2007) (No. 2006-3311, Tech. Ctr. 3700)
14. Ex parte Cheung, 2007 WL 1460349 (BPAI May 18, 2007) (No. 2007-0717, Tech. Ctr. 2100)
15. Ex parte Shin, 2007 WL 146035 (BPAI May 18, 2007) (No. 2007-0002, Tech. Ctr. 1700)
16. Ex parte Mangold, 2007 WL 1511937 (BPAI May 21, 2007) (No. 2007-0088, Tech. Ctr. 1700)
17. Ex parte Zimmerman, 2007 WL 1494282 (BPAI May 22, 2007) (No. 2007-1308, Tech. Ctr. 3600)
18. Ex parte Lacasse, 2007 WL 1522947 (BPAI May 22, 2007) (No. 2006-2816, Tech. Ctr. 1700)
19. Ex parte Atwood Mobile Prods., 2007 WL 1511938 (BPAI May 23, 2007) (No. 2007-0128, Reexamination No. 90/006, Pat. No. 5,573,648, Tech. Ctr. 1700)
20. Ex parte Garelli, 2007 WL 1511955 (BPAI May 23, 2007) (No. 2007-1922, Tech. Ctr. 1700)
21. Ex parte Paulus, 2007 WL 1511948 (BPAI May 23, 2007) (No. 2007-1104, Tech. Ctr. 2800)
22. Ex parte Higashi, 2007 WL 1511945 (BPAI May 23, 2007) (No. 2007-1004, Tech. Ctr. 1700)
23. Ex parte Van Den Bergh, 2007 WL 1511943 (BPAI May 23, 2007) (No. 2007-0835, Tech. Ctr. 2800)
24. Ex parte Lee, 2007 WL 1511941 (BPAI May 23, 2007) (No. 2007-0642, Tech. Ctr. 2600)
25. Ex parte Goto, 2007 WL 1522956 (BPAI May 24, 2007) (No. 2007-0693, Tech. Ctr. 1700)
26. Ex parte Pisarsky, 2007 WL 1522961 (BPAI May 24, 2007) (No. 2007-2005, Tech. Ctr. 3700)
27. Ex parte Capoccia, 2007 WL 1522959 (BPAI May 24, 2007) (No. 2007-1365, Reexamination No. 90/006, Pat. No. 6,289,548, Tech. Ctr. 1700)
28. Ex parte Brookshire, 2007 WL 1537599 (BPAI May 25, 2007) (No. 2006-2311, Tech. Ctr. 3600)
29. Ex parte Rafal, 2007 WL 1537602 (BPAI May 25, 2007) (No. 2006-3144, Tech. Ctr. 2100)
30. Ex parte Clark, 2007 WL 1537609 (BPAI May 25, 2007) (No. 2007-0561, Tech. Ctr. 2800)
31. Ex parte Swanson, 2007 WL 1537613 (BPAI May 25, 2007) (No. 2007-1765, Tech. Ctr. 1700)
32. Ex parte Hubacek, 2007 WL 1537606 (BPAI May 25, 2007) (No. 2007-0127, Tech. Ctr. 1700)

9 Appeals Reversed

1. Ex parte Kalliokulju, 2007 WL 1378833 (BPAI May 10, 2007) (No. 2007-0834, Tech. Ctr. 2100)
2. Ex parte Erkey, 2007 WL 1406641 (BPAI May 10, 2007) (No. 2007-1375, Tech. Ctr. 1700)
3. Ex parte Umberger, 2007 WL 1451804 (BPAI May 16, 2007) (No. 2007-0965, Tech. Ctr. 2100)
4. Ex parte Mayer, 2007 wl 1522953 (BPAI May 16, 2007) (No. 2007-0403, Tech. Ctr. 3700)
5. Ex parte Napolez, 2007 WL 1460353 (BPAI May 18, 2007) (No. 2007-1916, Tech. Ctr. 3600)
6. Ex parte Bodin, 2007 WL 1481832 (BPAI May 21, 2007) (No. 2007-0257, Tech. Ctr. 2100)
7. Ex parte Diehl, 2007 WL 1522949 (BPAI May 24, 2007) (No. 2007-0125, Tech. Ctr. 1700)
8. Ex parte Katoh, 2007 WL 1540192 (BPAI May 29, 2007) (No. 2007-1460, Tech. Ctr. 3600)
9. Ex parte Rinkevich, 2007 WL 1552288 (BPAI May 29, 2007) (No. 2007-1317, Tech. Ctr. 2100)

4 Appeals Reversed-in-Part, Affirmed-in-Part

1. Ex parte Fokken, 2007 WL 1540195 (BPAI May 16, 2007) (No. 2007-1565, Tech. Ctr. 1700)
2. Ex parte Blanchard, 2007 WL 1460352 (BPAI May 18, 2007) (No. 2007-1364, Tech. Ctr. 3700)
3. Ex parte Ratcliff, 2007 WL 1494281 (BPAI May 22, 2007) (No. 2007-1302, Tech. Ctr. 2100)
4. Ex parte Nolte, 2007 WL 1494275 (BPAI May 22, 2007) (No. 2007-0563, Tech. Ctr. 2100)

Thus, Appellants have managed to overturn obviousness rejections in only 36% of the Appeals decided in May. Notably, 2 of the affirmed 103 rejections were from reexamination requests (Ex parte Atwood Mobile Prods., Ex Parte Capoccia) .

As Joe previously noted, the Board has overwhelmingly attached itself to the "precise teachings" and "inferences and creative steps" language used in the KSR decision:

“[A]nalysis [of whether the subject matter of a claim is obvious] need not seek out precise teachings directed to the specific subject matter of the challenged claim, for a court can take account of the inferences and creative steps that a person of ordinary skill in the art would employ.”

In cases where the rejections were reversed, combinations were rejected by the Board when they were at odds with "common sense." For example,

From these facts, there is no apparent reason to provide any phase change material (cooling medium), much less a phase change material having a different melting point, between two insulation layers. To do so would run counter to common sense of a person of ordinary skill in the art and the purpose of using the phase change material since the insulation layers would prevent the phase change material from performing its desired cooling function. Thus, contrary to the Examiner’s contentions at page 4 of the Answer, we determine that a person having ordinary skill in the relevant art would not have been led to the claimed subject matter within the meaning of 35 U.S.C. § 103. (Ex Parte Mayer).

Ine one case, the Board found that the Examiner relied on improper hindisght reasoning in formulating the rejection:

"In the instant case, we conclude that a person of ordinary skill in the art having common sense at the time of the invention would not have reasonably looked to Wu to solve a problem already solved by Savill. Therefore, we agree with Appellants that the Examiner has impermissibly used the instant claims as a guide or roadmap in formulating the rejection." Ex parte Rinkevich (emphasis in the original).

In a few cases (Ex Parte Jha, Amigh, Mayer), the Board relied on the CAFC Dystar and Alza decisions for the proposition that the obviousness test was "flexible" and "motivation need not be found in the references sought to be combined, but may be found in any number of sources, including common knowledge, the prior art as a whole, or the nature of the problem itself."

In one interesting case, the Board affirmed the rejection despite a 1.132 declaration that argued unexpected results (Ex Parte Hubacek).

• To view individual decisions, see the USPTO e-FOIA page (link). Decisions may be searched by inventor name, appeal no., application no., etc. Since the PTO severs these links after a short while, there was little reason to link each of the decisions in this post.

California Healthcare Institute Releases White Paper on Patent Reform

The California Healthcare Institute (CHI) issued a white paper yesterday, titled “Impact of Patent Law Changes on Biomedical Investment and Innovation.” The paper analyzes several recent developments related to patent law that could have serious implications to the biomedical industry in California and nationwide. The paper addresses three specific topics:

(1) Recent U.S. Supreme Court decisions that weaken patents

Like many others, the CHI is concerned with the apparent anti-patent stance taken by the SCOTUS.

In several recent cases, the Supreme Court appears to have been taking an increasingly anti-patent stance . . . In the May 2006 eBay, Inc. v. MercExchange, L.L.C., the U.S. Supreme Court reduced the availability of permanent injunctions, even if infringement has been found. This decision weakens the value of patent rights for patent owners who are not commercializing their inventions by making it more difficult for those parties to enjoin an infringer. In January 2007, the Supreme Court turned to patent license agreements. In MedImmune, Inc. v. Genentech, Inc., the Court made it easier for a patent licensee to challenge the validity of the patent being licensed. In its most recent patent opinion, KSR International Co. v. Teleflex, Inc. the U.S. Supreme Court lowered the standards used to evaluate obviousness, making it harder for applicants to obtain a patent in the USPTO and easier for defendants to invalidate a patent in litigation.

(2) Patent reform legislation being considered by Congress

The CHI maintains the position that the current round of reforms that are directed to tech companies do not address the business concerns of life science companies.

In general, life science inventions require years of development, extensive clinical testing and regulatory approval before they can be marketed. In contrast, the software, IT, and other high-tech industries operate on a far shorter innovation cycle. Such products are quickly developed and commercialized, with no regulatory delay. Once in the market, such products are soon superseded by improved products, whereas life science products are long-lived. The high-tech sector is currently procuring patents at a much higher rate than the life sciences sector. Accordingly, unlike life sciences products, hundreds, or thousands, of patents, often cover software, IT and other high-tech products. Therefore, the relative value per patent is much higher in the life sciences. Investors must be able to rely on such patents to justify the vast investments in time and money needed to bring a life science product to market. The Patent Reform Act of 2007 includes provisions, tailored to meet the needs of the software, IT, high-tech and financial services industries, that threaten to devastate life sciences investment and innovation. Specific concerns include provisions dealing with apportionment of damages, the post-grant review "second window," and expansive PTO rulemaking authority.

(3) The hostile approach taken by the USPTO toward making and promulgating new patent rules.

The PTO’s proposed changes regarding the limitation of continuation claims would significantly change the way applicants file their applications and would decrease an applicant’s ability to obtain full patent coverage for its inventions. As proposed, the rules would have a devastating effect on mid-sized and start-up life science companies. Additionally, because there is a critical window during which an applicant must demonstrate value to a prospective investor, an applicant may be motivated to accept narrower claims in return for prompt issuance of a patent. Limiting continuations would decrease an applicant’s ability to file for the broader protection and would limit the opportunity to develop an adequate prosecution record for eventual appeal. While the PTO suggests that filing an appeal remains a possibility, the length of time required to complete the appeal process will likely extend beyond the time allotted for investment decisions. Consequently, the inventor may not obtain the critical funding needed.

One additional point that is worth mentioning is that there appears to be little coordination between the courts, Congress, and the PTO during the reform process. The CAFC has already pointed out some of the serious logistical problems in the Reform Act in the May 4 letter from Chief Justice Michel (link). But what about the district court judges? What steps will the PTO take to incorporate the proposed post-grant opposition procedure to ensure a smooth transition?

Hopefully some of these questions will be answered in the June 6 Senate hearings, where Jon Dudas will provide his comments on the Patent Reform Act of 2007.

Read California Healthcare Institute White Paper (link)

View CHI membership list (link)