S.D.N.Y.: Patentee Estopped From Asserting Patent After 4+ Year Delay

Aspex Eyewear, Inc. et al v. Clariti Eyewear, Inc. (1-07-cv-02373) SDNY, November 26, 2008

After Clariti initiated a product release, they received a letter from Aspex on March 2003, identifying 4 patents, along with a demand, stating that the matter was "very urgent and serious." After further exchanges, Clariti responded some 3 months later denying infringement.

Aspex and Clariti had no further communications until August 2006, when Aspex again accused Clariti of infringing one of the four previously-identified patents. In March 2007, Aspex filed a complaint against Clariti for allegedly infringing the patent.

Clariti filed a summary judgment motion claiming, among other things, that Aspex should be equitably estopped by the doctrine of laches because their delay in bringing suit was misleading and inequitable.

Under equitable estoppel, a defendant must show (1) the patentee, through misleading conduct, led the defendant to reasonably infer that the patentee did not intend to enforce its patent gainst the defendant, (2) the defendant actually relied on the patentee's misleading conduct, and (3) due to the reliance, the defendant will be materially prejudiced if the patentee is allowed to
proceed with its claim. Additionally, because the defense is an equitable one, a court must "take into consideration any other evidence and facts respecting the equities of the parties in exercising its discretion and deciding whether to allow the defense of equitable estoppel to bar the suit."

After reviewing the factors, the district court ruled that Aspex was equitably estopped from enforcing its patent:

No triable fact issue exists as to the misleading nature of plaintiffs' conduct. Aspex, through its counsel, placed Clariti "on notice" about several of its patents in its March 2003 letters, and declared its policy and intention to "fully and vigorously enforce our rights." When Clariti sought additional information about which claims might be involved, however, Aspex failed to assert any claims of the '747 Patent in its May 12, 2003 response. Yet Aspex's counsel explicitly noted that it was responding to Clariti's query and included information about claims of the [other] Patents. Aspex did not mention any of the patents again until 2006. In this context, its silence and inaction were misleading as a matter of law.

* * *

Aspex's March 2003 letters were not mere invitations for a "prompt and reasonable resolution" with Clariti. Rather, Aspex characterized the matter as "very urgent and serious" in its letters, discussed litigation, and noted that courts could award attorneys' fees and treble damages for infringement. Aspex was not proposing a licensing or other arrangement in its communications; rather, it was threatening litigation. Following Clariti's June 26, 2003 response denying infringement of the [other] Patents, however, Aspex failed to follow up about any of its patents for more than three years. The only reasonable inference to be drawn from Aspex's conduct was that it had threatened litigation but no longer intended to pursue any claims against Clariti under the '747 Patent or any other patent.

* * *

For the foregoing reasons, Clariti's motion for summary judgment is granted and the complaint dismissed in its entirety under the doctrine of equitable estoppel.

Read/download the opinion here.

Interesting Claim on Big-3 Patents

James E. Malackowski, president and CEO of Ocean Tomo LLC, writes an editorial in today's Detroit News:

As Washington decides on aid to the ailing auto industry, top consideration should be given to the significant potential of these Big 3 technologies for stimulating economic and job growth and creating a greener and more fuel-efficient world . . .

Consider that:

• GM has higher average quality and newer green technology and patents than the other 14 automakers combined.

• Ford and GM together hold approximately a third of all green technology patents and the related value.

• GM has 70 percent of the patents in the emerging technology category. This domestic share increases to 85 percent if Ford is added.

• Ford owns 30 percent of all patents with a similar related value measure in
emission control innovation.

Read the entire editorial here.

Are Inter-Partes Reexams Losing Their "Staying Power"?

ESN v. Cisco Systems, Inc., E.D. Tex., 5:08-CV-20, November 20, 2008

ESN sued Cisco for patent infringment. A few months later, Cisco successfully petitioned for an inter-partes reexamination (IPR). Shortly thereafter, the PTO issues a First Office Action rejecting every claim in the patent. Cisco then filed a motion to stay.

In support of its motion, Cisco argued that (1) the PTO has a mandate to resolve inter-partes reexaminations expeditiously, (2) ESN does not practice the patent, so money damages will be sufficient, (3) ESN has no claims in the lawsuit other than those based on the reexamined patent, and (4) estoppel will prevent the duplication of prior art issues.

ESN countered that (1) the excessive length of time for resolving IPR issues will result in a "clear case of substantial prejudice"; ESN also cited the study from the Institute for Progress (see 271 Blog coverage here) that alleged that PTO's reports on IPR's are "highly misleading" and that average IPR pendency is between 34 and 53 months, (2) given the PTO delay in IPR's, granting a stay would "write off half of the life of ESN's patent", and (3) citing the Supreme Court and Cisco's V.P. and General counsel, caution should be taken "against viewing non-practicing entities as incapable of showing irreparable harm."

Weighing the factors, the court sided with ESN:

The Court finds ESN would be significantly prejudiced and suffer tactical disadvantages by a stay in this case. Mark Chandler, Cisco’s V.P. and General Counsel perhaps said it best when he noted in testimony before the Senate Subcommittee on Intellectual Property in a hearing on patent post-grant review, “The principle that justice delayed is justice denied applies with full force to the patent process.” Staying this case for six-plus years when this Court can resolve the matter more expeditiously is unfairly prejudicial to ESN. Accordingly, this factor weighs heavily against granting the stay.

* * *

When the factors are considered collectively, the Court finds the unfair prejudice to ESN in granting this stay overshadows any potential simplification of issues. Further, although the stage of this litigation is fairly early, statistics indicate that the IPR process, assuming appeals are taken, will take much longer than the schedule currently set in this case. For all of the foregoing reasons, Cisco’s Motion to Stay Litigation Pending Reexamination of U.S. Patent No. 7,283,519. (Dkt. No. 35) is hereby DENIED.

Download/read a copy of the opinion here.

NOTE: For what it is worth, this happens to be the exact case that started the Patent Troll Tracker defamation brouhaha (link)

USPTO: It's OK To Start Filing Appeal Briefs Under New Format

As a reminder, the new USPTO Appeal Brief Rules will go into effect December 10, 2008. In the meantime, ambitious appellants have already filed Briefs under the new format, in anticipation of the change. Unfortunately, some of those briefs were flagged for being non-compliant.

In response, the PTO issued a clarification that formally allows submissions under the new rules:

[A]ppeal briefs filed before December 10, 2008, must either comply with current 37 CFR 41.37 (in effect before December 10, 2008) or revised 37 CFR 41.37 (in effect on or after December 10, 2008). Appeal briefs filed on or after December 10, 2008, must comply with the revised 37 CFR 41.37. A certificate of mailing or transmission in compliance with 37 CFR 1.8 will be applicable to determine whether the appeal brief was filed prior to the effective date in order to determine which rule applies. For any appeal brief filed in the new format under revised 37 CFR 41.37, the Office will provide an examiner’s answer in the new format under revised 37 CFR 41.39 if the
appeal is maintained.

Also,

Any appellant who has received a notice of non-compliant appeal brief may request that the notice of non-compliant appeal brief be withdrawn if the sole reason for noncompliance is that the appeal brief was presented in the new format.

Read the notice here.

Thursday Shorts

Federal Circuit Updates Internal Operating Procedures - After providing proposed changes to the public on Internal Operating Procedures (IOPs), the court recently voted to approve the changes. In addition to general changes to update the IOPs, the Federal Circuit also added two new sections in response to suggestions from the public. First, the Federal Circuit added a new paragraph briefly explain how cases are assigned to merits panels. Second, the Federal Circuit added a new paragraph that briefly explains how precedential opinions are circulated before issuance. Download a copy of the procedures here.


Chamber of Commerce Publishes Draft Report on "Fixing" the PTO - classifying the Office as an "agency in crisis", the 41-page draft outlines many of the problems, and provides recommendations on:

- Improving the quality of U.S. patents
- Providing adequate resources to do the job
- Reforming the patent examiner production system
- Improving timeliness of administrative actions
- Strengthening the PTO's relationship with the user community
- Enhancing organizational management
- Appointing a well-qualified under secretary and director
- Permitting applicants to defer patent examination
- Rethinking the current fee schedule
- Enhancing efficiency of the examination process by reforming examiner/applicant incentives.

Download the draft here (courtesy of Patent Hawk)


FTC Hearings on IP Marketplace - earlier studies (2003) by the FTC were cited copiously during last year's patent reform efforts, and now, the agency wants to update its information on IP and patents.

Beginning on December 5, 2008, in Washington, DC, the FTC will examine changes in IP law, patent-related business models, and new learning about the operation of the IP marketplace since the issuance in October 2003 of the Commission report To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy (link).

The Commission seeks the views of the legal, academic, and business communities on the issues to be explored at the hearings. In its Federal Register Notice the agency set out a list of specific questions on which it is particularly seeking comments. The agency will consider any comments received as it prepares for the hearings.

Get more details from the FTC website here.

View the agenda and press release.

The FTC is also making a Webcast available, where a live webcast will be available on the day of the event (bookmark this page and come back on December 5 to link to the webcast).

Post-Bilski at the USPTO: Is the BPAI Looking to Create a "Software Per Se" Exception?

"The United States is a nation of laws: badly written and randomly enforced."

- Frank Zappa (1940 - 1993)

Ex Parte Godwin, Appeal 2008-0130, November 13, 2008

This opinion issued from a Request for Rehearing that was filed before the Bilski decision, and the opinion followed after (side note: the original Notice of Appeal was filed June 6, 2006). It is not clear if this is one of those "bad" cases, but there are a number of troubling positions taken by the BPAI.

One of the claims rejected under 35 U.S.C. 101 follows:

7. A portal server system comprising:

a portal coupled to a plurality of portlets, each of said portlets having associated portlet rendering logic;

a portlet aggregator communicatively linked to said portlet rendering logic; and,

a visual service extension to said portlet aggregator programmed to process said portlet rendering logic to transform visual style attributes in said portlet rendering logic into markup language tags which can be rendered for display in a specified type of pervasive agent.

The BPAI, acknowledging Bilski, stated that the claim did not recite patentable subject matter, as it was "directed to purely software components."

What is, well, weird about the decision is the BPAI's reasoning for upholding the 101 rejection. Apparently, the BPAI believes that, given the broadest reasonable interpretation, a claim may be rejected if non-statutory matter can be injected into the claim. Additionally, one of the issues considered by the Board is "[h]ave Appellants shown that the claimed invention recited in claims 7 and 12 is not directed to software per se? " (Freeman-Walter-Abele anyone ?)

From the opinion:

While Appellants’ position is that the "broadest reasonable interpretation of the terms ‘portal server’ and ‘portal server system’ yields a claim construction that includes a hardware device which is statutory subject matter," (Request 8), we find paragraph [0036] of the Specification contravenes appellants’ contention ("The present invention can be realized in hardware, software, or a combination of hardware and software."). A hardware device (i.e., computer) is not positively recited . . . Claims 7 and 12 do not sufficiently invoke a machine or a transformation of subject matter, and are therefore unpatentable under 35 U.S.C. § 101.

[A]s per our discussion above, in the context of a software embodiment, we maintain that a server is broadly but reasonably interpreted as a provider of services. Therefore, we are not persuaded by Appellants’ argument that the scope of independent claims 7 and 12 requires hardware (i.e., a machine) in addition to the recited software components. We also note that software components can be communicatively linked in the abstract sense.

And get ready for more weirdness. The Appellants submitted that the proper question to be asked is whether the claimed subject matter encompasses statutory subject matter, and not whether the claimed subject matter includes non-statutory subject matter. Here is how the BPAI responded, in its entirety:

[W]e note that our reviewing court has clearly stated that "[t]he four categories [of § 101] together describe the exclusive reach of patentable subject matter. If a claim covers material not found in any of the four statutory categories, that claim falls outside the plainly expressed scope of § 101 even if the subject matter is otherwise new and useful." In re Nuijten, 500 F.3d 1346, 1354 (Fed. Cir. 2007).

Read the decision on Request for Rehearing here.

Read the original BPAI decision here.

USPTO Releases Fiscal Year-End Numbers

The USPTO FY2008 report is out, and, unsurprisingly, "the USPTO met and, in some cases, exceeded its patent pendency, production, and quality targets."

According to the report,

- Patents "maintained a high level of patent quality by achieving an allowance compliance rate of 96.3 percent, exceeding its goal."

- Patents increased production by an additional 14 percent over FY 2007 by examining 448,003 applications—the highest number in history.

- Production has increased by 38.6 percent over the past four years, compared to a 21.3 percent increase in application filings during the same period.

- Patents received a record number of utility patent applications filed electronically (332,617), and achieved a record rate (72.1 percent) of applications filed electronically as well.

- Patents achieved an average first action pendency of 25.6 months and an average total pendency of 32.2 months.

- Patents received 1,765 patent application filings through the Accelerated Examination Program, 173 percent more than in the program’s introductory year of FY 2007. A 12-month or less pendency rate was also maintained for every application, with an average time to final action or allowance of 186 days.

Read/download the 162-page report here

SBA Publishes Study Regarding Impact of Small Business Patenting

Anthony Breitzman and Diana Hicks have published a report for the Small Business Administration (SBA), titled "An Analysis of Small Business Patents by Industry and Firm Size." The study is the third in a series that examines small business patent activity.

The study specifically looked at "innovative firms" that were selected from a database of 1,293 technology firms having 15 or more patents issued between 2002 and 2006. Using this database, the authors analyze the relative strengths of small and large technology businesses, including information such as the industry and technology within which the firm patents and the importance of the patent. What did the study find?

The results demonstrate that small businesses that innovate are indeed special and that the technology they create helps define the cutting edge in a number of industries. The report presents a convincing case that small firms in emerging industries are one of the greatest engines of American economic growth.

More specifically, the study found

• Of the 1,293 firms reviewed in this study, 504 had 500 or fewer employees, 760 had more than 500 employees, and no size information could be obtained for 29 firms. Thus, 40% of the firms with 15+ patents were small firms. This number is slightly lower that 2004 (41%) but significantly higher than 2003 (33%).

• Small firms obtain many more patents per employee than do large firms. This result is quantified to show that this is not a small-firm large-firm phenomenon, but is actually a firm size issue at all levels. In particular, even within the small firm domain, companies with fewer than 25 employees will have a higher patent-to-employee ratio on average than firms with 50 employees, which will in turn have a higher patent-to-employee ratio than firms with 100 employees, and so on.

• Small firm patents "outperform" large firm patents on a number of impact metrics including growth, citation impact, patent originality, and patent generality. The metrics have been validated and shown to correlate with increases in sales, profits, stock prices, inventor awards, and other positive outcomes. "This suggests that the patents of small firms in general are likely to be more technologically important than those of large firms."

• Although small firms make up only 6.5 percent of all the patents in the database, they patent at a higher rate in some technologies, particularly health-related. Ranked by broad technology areas, most small firms fall in health-related technologies (biotechnology, pharmaceutical, and medical devices) and information technology categories communications/telecommunications, semiconductors, computer hardware and software).

Read/download the (68 page) report here.

NOTE: The study also has an interesting section on "Hot Patent" and "Emerging Cluster" methodologies for evaluating patents that is worth a read.

Patent "Bounties" Attempting a Comeback

Borrowing from a page book of Peer-to-Patent and the long-defunct Bountyquest, the company Article One Partners, LLC has launched "a new global community to legitimize the validity of patents."

Basically, the system works to recruit community members (also known as "Advisors") to search and report prior art against high profile patents. Article One then analyzes the prior art to determine whether it can invalidate a specific patent. If Article One forms an opinion that patents are invalid, Advisors earn up to U.S. $50,000, with $1,000,000 total being offered for launch. Advisors who actively build the community also earn premium compensation in Article One's Profit Sharing Plan of about five percent (5%) of the company's net annual profit.

According to Article One, "the result is a highly-rewarded community providing a citizen's review of U.S. patents to justify monopoly pricing for true innovation and energize U.S. patent reform."

Read the press release here.

Visit Article One's website here.

Obama Transition Team Member Is No Fan of the U.S. Patent System

Yesterday, it was reported by Condé Nast Portfolio that President elect Barack Obama is setting up agency review teams for his transition to the White House. The teams will be responsible for reviewing all the major U.S. government departments, advise the Obama administration on policy prior to inauguration day, and keep the new administration's nominees prepped and informed as they make their way through the confirmation process in Congress.

One of the team members is Reed Hundt, who was Bill Clinton's FCC Chair from 1993 through 1997. Hundt is slated to work on the agency review team in charge of international trade and economics agencies. Since his stint at the FCC, he has taught at Yale and written several books about information politics and U.S.-China economic relations.

Here is what Hundt had to say in an op-ed piece in Forbes magazine on Janury 30, 2006:

America's patent system is a mess . . . The U.S. ought to chuck this 18th-century relic and start all over again. Here's what the ideal system would look like.

First, we should slash the number of patents granted each year by 90%. In 2004 the U.S. Patent &Trademark Office issued 165,000 patents. Sixteen thousand is more like an optimal number. This should be easy to accomplish because most technology should not be patentable.

* * *

Second, we need to spend more money on the system. The budget of the U.S. Patent & Trademark Office is $1.5 billion. That ought to be tripled to $4.5 billion . . . We don't want grossly overworked professionals trying to figure out whether specific algorithms used to refresh the pixels on a computer monitor screen ought to be patented.

* * *

Third, we should introduce an element of privatization into this public system. Firms ought to be able to pay for fast-track patent approval and for the ability to challenge a patent after it's been issued. Currently it can cost hundreds of thousands of dollars to file and prosecute a patent application. For a set dollar amount--say, $500,000--a firm ought to be able to buy a guarantee that its patent application will be reviewed and accepted or rejected within one year. The average application now takes 29 months to be processed.

* * *

Fourth, all patent case awards should be forward looking and linked to lost sales. In other words, plaintiffs who win patent-infringement challenges should be able to enjoin only future competition. They shouldn't reap rewards from past violations . . . If we can radically revamp our patent system, we'll be much more effective at the international bargaining table. We have a horribly expensive system, with huge backlogs and a daunting litigation risk. No wonder the Chinese don't want to adopt it. Let's get rid of it and start from scratch.

Read Hundt's op-ed in its entirety here.

D. Del.: "Sustainable, Reasonable" Defenses Enough to Negate Willfulness

Honeywell International Inc. v. Universal Avionics Systems Corp., No. 02-359-MPT, November 12, 2008

Honeywell sued Universal over five patents dealing with aviation warning systems. After trial and appeal to the CAFC, the case was remanded. On remand, Universal filed a motion for summary judgment of no willful infringement.

Honeywell opposed the motion for a number of reasons:

-- Universal admitted that it knew of Honeywell's patent when it released its own system ("TAWS");

-- Universal claimed that a noninfringement opinion was obtained (pre-litigation), but no written record existed to corroborate the findings, and no explanation could be given why no legal issues existed with the patent;

-- During earlier negotiations with a 3rd party (Collins), Universal was asked for, but did not provide, a noninfringement opinion letter. Universal did agree to indemnify for patent infringement.

Universal countered that (1) Honeywell had, and failed to meet, the burden of establishing willful infringement by clear and convincing evidence, and (2) the defenses raised by Universal during litigation showed that they behaved in an objectively reasonable manner.

The district court agreed with Universal:

The unrefuted testimony . . . shows that before going to market with the TAWS product, Universal performed a patent review which included technical and legal analyses . . . After consulting with patent counsel, Universal understood that no legal issues arose in relation to TAWS for any patent that was reviewed. That understanding is confirmed by Glaze's uncontroverted testimony that further implementation of the TAWS product by Universal would not have continued if the system infringed a third party's patent. A prelitigation patent review may be more relevant to the second prong of the Seagate test (whether the alleged infringer knew or should have know of the objectively-defined risk of infringement); however, performing a patent review before entering the market with a new device evidences that Universal's conduct was not reckless. Further, knowledge of a patent does not mean willfulness.

During the licensing discussions between Universal and Collins, Honeywell filed the present action. Since this litigation followed on the heels of Collins' request for an opinion of counsel on infringement, the court does not see how Universal not producing such a letter constitutes objective recklessness or an admission of infringement. Production of such a letter to a third party would operate as a waiver of the attorney client privilege, and could directly effect litigation strategy . . . Universal's indemnification offer refutes the second prong of Seagate, that it knew, believed or should have known that TAWS could infringe.

[T]he present matter is not just at the first summary judgment stage, but has undergone a summary judgment, trial and post trial review by this court, as well as, a review by the Federal Circuit. The legal issues in the case have already been vetted by two courts. This court, under its claim construction, found that Universal did not infringe. It also held that a number of the patent claims were anticipated. Such findings validate that Universal had legitimate defenses to Honeywell's infringement claims. Although this court did not agree with Universal on its other invalidity defenses, an exhaustive analysis was required, particularly of the onsale and public use bars, to reach a conclusion. This court's analysis of Universal's defenses to the patents show that its arguments were "substantial, reasonable, and far from the sort of easily-dismissed claims that an objectively reckless infringer would be forced to rely upon."

Motion for summary judgment granted

Read/download the opinion here

Wegner: 10 Steps to Reform Inter Partes Reexamination

Currently, one of the most significant flaws of inter partes reexamination is that the PTO has failed to meet the "special dispatch" statutory mandate to conclude all reexaminations within 12-18 months from filing. Since the beginning of inter partes reexaminations, there has never been even one merits appeal to reach the Federal Circuit in an inter partes reexamination.

So what can be done? Hal Wegner has circulated a proposal for reform that borrows in part from Japan's post-grant review system, where the entire process (up to a judicial appeal) averages about 7 months. The following is his 10-step proposal:

(1) Allow the Board to control all parts of the proceeding - by empowering the Board to oversee the proceedings, needless "ping-ponging" between the Board and the examiner may be eliminated.

(2) Enable electronic filing on a special website

(3) Make requester propose the first action, and limit the proceedings to the request - make the examiner more of a "judge" than an examiner. Issues for reexamination will be simplified by limiting review to only the issues raised by the requester.

(4) Make requester responsible for initial presentation of evidence - declarations, tests, etc. should be filed initially by requester. Later evidence may be allowed, but only in response to issues raised by patentee.

(5) Patentee's Response and Order - patentee may contest the order or waive; after 3 months examiner issues requester's office action, or dismisses - no new prior art searching!

(6) Patentee's First Action Response - the first action response should be the main - and perhaps only - opportunity for the patentee to amend or present new evidence via declaration.

(7) Requester's Main Response - one month from patentee's response to add counter-arguments. When new issues are presented, this may be the first (and perhaps only) time to challenge new issues raised by patentee.

(8) Examiner's Final Decision - as a judge, the examiner should conclude proceedings on the specific challenge. If examiner agreed in toto with either party, he/she may simply adopt the party's statement. Alternately, the examiner may provide a brief statement explaining his/her viewpoint.

(9) Appeal - appeals should be expedited; complex issues shoudl trigger early involvemenet by the Board

(10) Reexamination e-Certificate - no paper publication will save time

Read Hal's 10-step proposal in greater detail here.

CAFC: "Graham Analysis" Not Always Required For Double-Patenting

In Re Basell Poliolefine Italia S.P.A., November 13, 2008, No. 2007-1450.

Basell appealed two decisions of the BPAI resulting from a Director-ordered reexamination of Basell's patent. The Board affirmed the rejections of all the claims of the patent as unpatentable under 35 U.S.C. §§ 102(b) and 103(a) and the doctrine of obviousness-type double patenting.

The patent, issued in 2002, claimed priority to a chain of applications going back to an Italian application filed in 1954. During prosecution however, the BPAI determined that Basell was not entitled to claim priority back to 1954.

On appeal, Basell argued that the Board erred because it failed to conduct an analysis under Graham as of the earliest filing date, and that the Board erred by failing to apply a two-way obviousness-type double patenting analysis.

In determining double patenting, a one-way test is normally applied, in which "the examiner asks whether the application claims are obvious over the patent claims." In re Berg, 140 F.3d 1428, 1432 (Fed. Cir. 1998). In unusual circumstances, where an applicant has been unable to issue its first-filed application, a two-way test may apply, in which "the examiner also asks whether the patent claims are obvious over the application claims." Id. . . . the two-way test may be appropriate "in the unusual circumstance that the PTO is solely responsible for the delay in causing [a] second-filed application to issue prior to [a] first." Id. at 1437.

Looking at the facts of the present case, the CAFC found that any delay was squarely attributed to the applicant, thus precluding any hope of two-way obviousness:

[S]ince 1954, the patentees repeatedly submitted claims directed to claims covering other inventions, urged the examiner to declare interferences for unrelated inventions, and repeatedly filed continuing applications without appeal. During the critical co-pendent period of the applications . . . [the inventor] could have filed the present claims. [The inventor's] actions, or inactions, had a direct effect on the prosecution and thus were responsible for any delay in prosecution. We find no error with regard to the Board’s findings and agree with the Board that the two-way test for double patenting does not apply.

Regarding the Graham analysis, the CAFC affirmed that, under the one-way test, the Graham factors did not need to be expressly addressed by the Board:

Indeed, "this court has endorsed an obviousness determination similar to, but not necessarily the same as, that undertaken under 35 U.S.C. § 103 in determining the propriety of a rejection for double patenting." In re Braat, 937 F.2d 589, 592-93 (Fed. Cir. 1991). Hence, we find no basis for reversing the Board’s decision merely because the Board failed to expressly set forth each of the Graham factors in its analysis.

AFFIRMED

Newman's Dissent:

I write in dissent, first because the reexamination here conducted was in violation of the reexamination law as it then existed. Such violation should not be condoned, for the PTO is as bound by the law as are those who practice before it. If this improper reexamination were to be tolerated, as do my colleagues on this panel, it at least warrants strict scrutiny. Yet the panel majority defers to unsupported findings, permits the PTO to ignore all of the expert evidence, and joins in the PTO’s unfair allocation to the inventors of blame for the extreme delays here illustrated.

Academic Podcast Discusses Bilski

A relatively new site called the Intellectual Property Colloquium is posting round table "NPR-like" discussions relating to IP. The most recent show, hosted by Doug Lichtman from the UCLA School of Law, discusses In Re Bilski, and includes guests John Duffy (GWU) and Rob Merges (UC Berkley).

The podcast is slickly produced and is definitely worth a download. You also don't need an iPod to listen to the show - streamed audio is also available. Also, you can request CLE credit for listening.

For more, click here.

USPTO To Increase PCT Transmittal and Search Fees

From the PTO:

The Office is adjusting the PCT transmittal and search fees to recover the estimated average cost to the Office of processing PCT international applications and preparing international search reports and written opinions for PCT international applications.

Specifically, the PTO is reducing transmittal fees from $300 to $240. However, search fees and supplemental search fees will be increased $280 from $1800 to $2080.

The fee increase is scheduled to be effective on January 12, 2009.

Read the entire notice here.

USITC Study Concludes Industrial Biotech Patents are "Facilitating and Not Stifling Innovation"

A new staff research study by the U.S. International Trade Commission's ( ITC ) Office of Industries looks at innovation with regard to industrial biotechnology in the U.S. The report, titled "Patenting Trends and Innovation in Industrial Biotechnology" uses patent data, survey results, and profiles of firms in two emerging sectors ( cellulosic ethanol and bio-based plastics ) to "paint a new picture of innovation" in industrial biotechnology.

Specifically, the study's findings include:

• The USPTO issued 20,428 patents with a primary classification related to industrial biotechnology from January 1975 through December 2006. Industrial biotechnology patents were about one fifth of all biotechnology patents issued during the period.

• Industrial biotechnology patents issued each year climbed steadily beginning in the mid- 1980s, peaked in 1999, declined from 2000 through 2005, and rebounded in 2006. Although most patents were issued to domestic and foreign corporations, the share of patents issued to U.S. universities increased sharply over the period.

• New firms of all sizes are steadily entering the industrial biotechnology field by obtaining patents. Small firms, and particularly university spinoffs, hold valuable patent portfolios in the emerging areas of cellulosic ethanol and bio-based plastics. In general, firms patenting in industrial biotechnology hold a relatively small number of patents, especially when compared to other high tech sectors.

• Strategic alliances among firms, universities, and the U.S. government are prominent in the profiles of industrial biotechnology firms.

According to the study,

Patents provide an important mechanism for the transfer of knowledge between
alliance partners and are facilitating the movement of industrial biotechnology from research and development stages to commercialization.This study's findings that industrial biotechnology patents are not controlled by a small number of firms, and that patents are facilitating transfers of technology and knowledge, are consistent with survey results. According to more than 70 percent of biofuel and chemical company representatives responding to an ITC survey, "patent barriers" are one of the least significant impediments to the research, development, and commercialization of industrial biotechnology products and processes.

Download the 62-page report here.

In Re Bilski: Did Computer and Software "Machines" Get a Pass?

One certain takeaway from the Bilski opinion is that, if you expected any sort of closure whatsoever on 35 U.S.C. §101, you were sorely disappointed (see Rader dissent on that). While most practitioners have scoured Bilski to divine meaning from the opinion for computer software, it is becoming apparent that Bilski was not intended to resolve issues pertaining to computers, and especially ones considered "machines" for the purposes of section 101.

The issue before the CAFC in Bilski was broadly stated to cover "what the term 'process' in §101 means, and how to determine whether a given claim . . . is a 'new and useful process.'" However, it became apparent early in the opinion that this broad question was going to be chiseled into narrower subsets. The court immediately began to formulate and set aside narrowing rules that seemed to spiral out of control halfway through the majority opinion, and ended up in a Jacobellis-like impression that a patentable process was like pornography: we can't define it, but we know it when we see it.

Did the CAFC blow an opportunity to clarify 35 U.S.C. §101? Probably, but you can't really blame the court, given the circumstances of the case.

On problem the court had to deal with was Bilski's "all-in" approach towards the claim limitations and the resulting appeal. Bilski (just like Comiskey) openly conceded that computers/machines were not needed in the claimed process, and the CAFC used the concession to doom the application. Thus, Bilski opinion's unremarkable conclusion is that patents covering person-to-person business and/or legal transactions are not patentable.

But what if the Appellants argued (and the specification supported) that the process could also be performed on a computer?

The CAFC's majority opinion quietly punted this issue. What was very interesting was the opinion's observation in footnote 23: "We also note that the process claim at issue in this appeal is not, in any event, a software claim. Thus the facts here would be largely unhelpful in illuminating the distinctions between those software claims that are patent-eligible and those that are not." Well.

The majority opinion carefully avoided addressing software explicitly and directly (the word "software" only appears in the footnotes). Just as the CAFC needed to clarify in Bilski that State Street "addressed a claim drawn not to a process but to a machine," (see footnote 18), it is not unreasonable to conclude that Bilski was meant to address processes not tied to a specific machine. Indeed, the court was careful to point out the "issues specific to the machine implementation part of the test are not before us today" (p. 24). Since Bilski conceded that machine implementation was nonexistent, the court's invalidating decision was based only on the "transformation" leg of the Benson test (see p. 27: the operative question before this court is whether Applicant's claim 1 satisfies the transformation branch of the machine-or-transformation test").

So what types of "transformations" qualify as patentable subject matter? Well, if you're physically manipulating "stuff" in a process (e.g., curing rubber, reducing fats into constituent acids and glycerine), you're safe. If you're manipulating "public or private legal obligations or relationships, business risks, or other such abstractions", with nothing more, you are in trouble.

Certainly, computer software may satisfy the "transformation" test (see, e.g., claims 5-6 in Abele), but chances are that practitioners, in a practical sense, would rather rely on the "machine" leg of the Benson test. Alas, the CAFC will have to address this test another day:

[W]e agree that future developments in technology and the sciences may present difficult challenges to the machine-or-transformation test, just as the widespread use of computers and the advent of the Internet has begun to challenge it in the past decade. Thus, we recognize that the Supreme Court may ultimately decide to alter or perhaps even set aside this test to accommodate emerging technologies. And we certainly do not rule out the possibility that this court may in the future refine or augment the test or how it is applied.

NOTE: Given the opinion in Bilski and the test requiring "transformation or reduction of an article to a different state or thing," would a Method For Swinging On A Swing be patentable subject matter? You decide.

1. A method of swinging on a swing, the method comprising the steps of:

a) suspending a seat for supporting a user between only two chains that are hung from a tree branch;

b) positioning a user on the seat so that the user is facing a direction perpendicular to the tree branch;

c) having the user pull alternately on one chain to induce movement of the user and the swing toward one side, and then on the other chain to induce movement of the user and the swing toward the other side; and

d) repeating step c) to create side-to-side swinging motion, relative to the user, that is parallel to the tree branch.

CAFC Decides Bilski, Rules In Favor Of the USPTO

Read all the opinions (9-3, 132 pages) here

HIGHLIGHTS:

** Freeman-Walter-Abele "inadequate" and "should no longer be relied on"

*** HOWEVER, "'useful, concrete and tangible result' inquiry is [also] inadequate." Noted the CAFC: "As a result, those portions of our opinions in State Street and AT&T relying solely on a 'useful, concrete and tangible result' analysis should no longer be relied on (emphasis added)."

**** CAFC reaffirms Benson approach : claims are patent eligible under 101 if (1) it is tied to a particular machine or apparatus, or (2) transforms a particular article into a different state or thing

State Street still good law, but methods must be implemented on a machine. Noted the court in footnote 18: "In State Street, as is often forgotten, we addressed a claim drawn not to a process but to a machine."

"PURE" BUSINESS METHODS IN JEOPARDY:

From p. 28 of the opinion:

Purported transformations or manipulations simply of public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the test because they are not physical objects or substances, and they are not representative of physical objects or substances.

RETURN OF "TECHNOLOGICAL ARTS" TEST?

Heck no. The CAFC clearly rebuffed the PTO in this regard:

[W]hile we agree with the PTO that the machine-or-transformation test is the correct test to apply in determining whether a process claim is patent-eligible under § 101, we do not agree, as discussed earlier, that this amounts to a "technological arts" test . . . Neither the PTO nor the courts may pay short shrift to the machine-or-transformation test by using purported equivalents or shortcuts such as a "technological arts" requirement. Rather, the machine-or-transformation test is the only applicable test and must be applied. (p. 29)

UPDATE:

The PLI Blog is pronouncing "Federal Circuit Decides Software No Longer Patentable" - I disagree with this completely. The opinion clearly provides that if some machine exists and a well-defined data structure is manipulated, 101 will be satisfied. The large majority of software patents will be just fine.

Bloomberg is reporting that "In today's ruling, the appeals court overturned a 1998 decision involving State Street Corp. that made clear that business methods are entitled to patent protection." Again, this is not correct - the CAFC clearly stated that State Street remains good law (i.e., nothing was overturned).

I won't get into the preliminary reactions from the anti-software patent crowd, but they may want to read the opinion a little more closely before popping their champagne corks . . .

Update From the 271 Patent Blog

Many readers have been wondering what happened to the blog, as I have not posted anything for the last month. The short answer is that the blog is alive and well and postings will resume shortly.

So what happened? Well, the longer answer is a bit more complicated.

Around Labor Day, doctors found masses in my body, and I underwent surgery to remove them. About a week later, the doctors confirmed that the masses were cancerous. Thereafter, I began a regimen of radiation therapy, which continued until last week. I am currently in the process of recovering from the therapy, and I anticipate being my normal self very soon.

That being said, I consider myself quite lucky. The cancer was caught in a very early stage, and the doctors anticipate that I will make a full and complete recovery. Tests showed that there was no metastization of the cancer, and, as of this moment, I am cancer-free. I am also blessed to have many supportive friends/co-workers/colleagues (and, dare I say, concerned readers) that helped me and my family through this difficult time. I can't thank you enough for your thoughts and prayers.

- Peter

New Patent Reform Bill Introduced In Senate (Seriously!)

"And I beheld when he had opened the sixth seal, and, lo, there was a great earthquake; and the sun became black as sackcloth of hair, and the moon became as blood"

-- Revelation 6:12

As the Horsemen of the Apocalypse plod through the financial markets, Congress, suffices to say, has has a rough patch heading into the final days of the current Session of Congress. So it came as quite a surprise (at least to yours truly) that Senate Minority Whip Jon Kyl (R-AZ) introduced the latest Patent Reform Act last night.

Early reports indicate that the bill "departs substantially from the one sponsored by Judiciary Chairman Patrick Leahy and Sen. Orrin Hatch, R-Utah. The Kyl bill resulted from months of meetings with critics of the Leahy language."

Interestingly, members from the Coalition for Patent Fairness were absent from the talks leading to the latest version of the bill. While there is practically zero chance that this bill will pass in the current session, members of the Senate continue to stress that patent reform will be a "top priority" for 2009.

In short, the bill:

- Increases PTO authority on a number of administrative fronts (money, etc.).

- Introduces "applicant quality controls" (i.e., prior art search w/ analysis), but does not make them mandatory. Instead, section 123 of the bill provides that "the Director may, by regulation, offer incentives to applicants who submit a search report, a patentability analysis, or other information relevant to patentability."

- Modifies inequitable conduct, so that, if inequitable conduct is found during litigation, a court order must contain "findings of fact setting out with specificity the information relating to the conduct at issue not previously considered by the Director and upon which the court based its order." The patentee then would have to file a reissue within 2 months thereafter, and take the matter up with the PTO. If there is "probable cause" that inequitable conduct has occurred, the Director will be authorized to impose civil sanctions of up to $150,000 for each act of misconduct, or up to $1M for a "pattern of misconduct."

- Provides a 9-month "first window" for opposition, where issues related to 35 USC 101-103 AND 112 may be considered. No "lawsuit threat" showing is required for oppositions.

- Provides a "second window" for opposition, where only 102 or 103 considerations based on patents or printed publications will be allowed.

- Applies post-opposition estoppel to any subsequent litigation.

- Requires economic analysis for determining damages. Subject to specific exemptions, "the amount of a reasonable royalty shall not be determined by the use of a standard or average ratio for the division of profits, an industry average rate for royalties, or other methods that
are not based on the particular benefits or advantages of the use of the invention."

- Includes a "Check 21" exception: "With respect to the use by a financial institution of a check collection system that constitutes an infringement under subsection (a) or (b) of section 271, the provisions of sections 281, 283, 284, and 285 shall not apply against the financial institution with respect to such a check collection system."

Read/download a copy of the latest draft here, courtesy of Hal Wegner.

Study Over Impacts of Erroneous Litigation Vs. Settling Published

Last month, the Journal of Empirical Legal Studies issued a press release over a study that suggested that a majority of plaintiffs making the wrong decision to go to trial ended up with a verdict that was less money than the settlement offer. You can read previous coverage by the 271 Blog on this topic here.

Following the press release, the Journal has now published the article, and it can be read/downloaded for free here.

Happy Anti-Software Patent Day

A global coalition of more than 80 software companies, associations and developers has declared the 24th of September to be the "World Day Against Software Patents".
According to Benjamin Henrion, initiator of the StopSoftwarePatents coalition effort,

The aim behind StopSoftwarePatents is to gather a worldwide coalition of businesses and civil society in order to get laws which clearly exempt software from patentable subject matter. This is the best solution for getting rid of 'patent trolls' and uncontrollable legal risks generated by software patents. The day the software industry forms a clear front against software patents will be the beginning of the end for the 'patent trolls'.

See the press release here, along with a link to a draft petition (making reference to the "American disease" of patent law).

More at endsoftwarepatents.org

UPDATE: Apparently, it appears that the entire patent system is "stifling science" - read more at BBC News (link)

CAFC: Improper Revival of Abandoned Application Is No Defense For Infringement

Aritocrat Technologies Australia PTY Lmtd. v. International Game Tech., September 22, 2008 (08-1016)

Aristocrat accused IGT of patent infringment, where the patents-in-suit were revived in the USPTO after being abandoned for paying the national filing fee one day late. During litigation, IGT argued that the PTO improperly revived the applications under the "unintentional" standard, instead of the "unavoidable" standard. The district court agreed that the patents were "improperly revived" and invalidated the patents.

On appeal, the CAFC turned to 35 U.S.C. 282, which catalogs defenses for patent infringement: (1) noninfringement, (2) invalidity, and (3) "any other fact or act made a defense by this title." Under section 282(2), an invalidity defense may be based "on any ground . . . as a condition for patentability."

After review, the CAFC did not hold revival of an abandoned application a condition for patentability. In fact, only sections 101-103 apply:

It has long been understood that the Patent Act sets out the conditions for patentability in three sections: sections 101, 102, and 103 . . . While there are most certainly other factors that bear on the validity or the enforceability of a patent, utility and eligibility, novelty, and nonobviousness are the only so-called conditions for patentability.

* * *

The salient question . . . is whether improper revival is "made a defense" by title 35. We think that it is not. Congress made it clear in various provisions of the statute when it intended to create a defense of invalidity or noninfringement, but indicated no such intention in the statutes pertaining to revival of abandoned applications . . . Rather, these provisions merely spell out under what circumstances a patent application is deemed abandoned during prosecution and under what circumstances it may be revived. Because the proper revival of an abandoned application is neither a fact or act made a defense by title 35 nor a ground specified in part II of title 35 as a condition for patentability, we hold that improper revival may not be asserted as a
defense in an action involving the validity or infringement of a patent.

REVERSED AND REMANDED

Breathing room for prosecutors - quoting from Magnivision, Inc. v. Bonneau Co., 115 F.3d 956 (Fed. Cir. 1997), the CAFC stated:

"Procedural lapses during examination, should they occur, do not provide grounds of invalidity. Absent proof of inequitable conduct, the examiner’s or the applicant’s absolute compliance with the internal rules of patent examination becomes irrelevant after the patent has issued . . . Imperfection in patent examination, whether by the examiner or the applicant, does not create a new defense called ‘prosecution irregularities’

Thus, absent some inequitable conduct, prosecution irregularities should not be the focus in subsequent litigation:

There is good reason not to permit procedural irregularities during prosecution, such as the one at issue here, to provide a basis for invalidity. Once a patent has issued, the procedural minutiae of prosecution have little relevance to the metes and bounds of the patentee’s right to exclude. If any prosecution irregularity or procedural lapse, however minor, became grist for a later assertion of invalidity, accused infringers would inundate the courts with arguments relating to every minor transgression they could comb from the file wrapper. This deluge would only detract focus from the important legal issues to be resolved—primarily, infringement and invalidity.

First-To-File in the U.S., Small Entity Inventors, and Grace Periods

University of Virginia law professor Margo A. Bagley has published a draft paper titled "The Need for Speed (and Grace): Issues in a First-Inventor-to-File World" that looks at various issues and concerns over a first-to-file regime (FITF) proposed recently in the Patent Reform Act. A refreshing aspect of the paper is that it is less concerned on the merits of "whether" the U.S. should switch to FITF and more on "when" and under what circumstances the change should happen to be most beneficial to small entity inventors in the U.S. and beyond:

Small entity inventors include those in universities and other non-profit organizations. The patenting activity of university inventors is of particular interest not only because it is increasing but also because it is associated with entrepreneurship. According to the Association of University Technology Managers (AUTM), its members, more than 80% of whom are colleges and universities, received over $45 billion in research support, filed 15,908 U.S. patent applications (compared to 10,687 in 2001), received 3255 patents, and launched 553 start-up companies in 2006 alone. In fact, since 1980, when the Bayh-Dole Act supporting university-industry technology transfer was passed, AUTM members have founded over 5,724 new companies, or more than one company every two days.

* * *

Because academic researchers have traditionally focused on basic research, as opposed to applied research, inventions generated in universities and disclosed to Technology Transfer Offices (“TTOs”) for patent protection are often embryonic and have only speculative commercial value. University TTOs, having limited funds and an increasing number of invention disclosures, must decide which inventions to prosecute with little information on potential commercialization success. For example, in 2006, AUTM members received 18,874 new invention disclosures from researchers but filed only 11,622 new patent applications.

Interestingly, while the US remains alone in not having FITF, foreign knowledge tranfer offices view this as a good thing. According to ProTon Europe (link), the pan-European network of knowledge transfer offices and companies affiliated with universities and other public research organizations:

European universities and other public research organizations still file on average 5 times less patent applications than their U.S. counterparts, although the total research budgets are comparable. The lower propensity to patent is attributable to 2 main factors: . . . .

The fact that the U.S. patent system is much more favourable to universities than the European system. In addition to lower cost and single language, the U.S. universities are taking advantage of the protection of inventors by the first-to-invent principle, a grace period of one year, the continuation-in-part system, provisional applications, 50% reduction in filing and maintenance fees, no maintenance fees before grant, wider patentable inventions, etc. There is no question that the U.S. universities could not have achieved the reported benefits for the U.S. economy in terms of new products, new companies, and new jobs with the patent system available in Europe.

Thus, through a robust grace period, small entities can get time for commercialization assessments, revenue generation, and academic discourse. However, in order to be truly effective and "harmonized," Bagley argues that FITF in the U.S. must also be accompanied by grace periods in "absolute novelty" jurisdictions, like the EU:

A U.S. move to FITF is unlikely to signal “the end of the world” for small entity inventors, but it does not seem to offer enough benefits, as currently proposed, to justify its potential harms. Nevertheless, if the U.S. is to move to a FITF patent regime, when should it do so? Only when such a move will provide a clear advantage for small entities by facilitating the adoption of a one year grace period outside of the U.S.

[A] move by the United States to a FITF system will likely have negative ramifications for small entity inventors. Delaying a move to FITF until it can be used to facilitate the adoption of a one-year grace period in other countries will allow the United States to make the bitter pill of the race to the patent office considerably easier for many researchers and entrepreneurs to swallow by providing them with something very useful in return. The adage “haste makes waste” surely applies here: a hasty move to FITF may waste our best hope for obtaining from other countries the grace period that is so critical for small entity innovation, academic discourse and prompt dissemination of information.

Read/download a copy of Professor Bagley's draft paper here (link).

Wednesday Shorts: Myhrvold Stalks, EPO Strikes, Lehman Sinks

Nathan Myhrvold and Intellectual Ventures Set for Big Patent Play: over the last few years, Intellectual Ventures (IV) has amassed a whopping 20,000-plus patents and patent applications related to everything from lasers to computer chips. IV now ranks among the world's largest patent-holders -- and the company is ready to press tech giants to sign some of the costliest patent-licensing deals ever negotiated. From the Wall Street Journal: "Tech Guru Riles the Industry By Seeking Huge Patent Fees."

Also read transcript from WSJ interview here. According to Myhrvold, "All of this fear is from people who have guilty knowledge of their own actions. There are lots of major tech companies that grew from zero to gigantically successful in a very short period of time without investing in their own inventions. They got there by using other people's inventions."


EPO Patent Examiners Preparing for Revolt: Tomorrow, EPO examiners are preparing to go on strike for a day, claiming that the EPO Administrative Council "puts profits before patent quality." Furthermore, the examiner union is claiming that "the confidence of the workforce in the EPO President, Alison Brimelow, and her Vice-Presidents is very low. According to internal staff survey conducted in June 2008, only 6% of the workforce have confidence in the management qualities of this body. And only 9% of the patent examiners believe that Brimelow and the Vice-Presidents actively promote patent quality.”

But is the union being completely honest here? Joff Wild, over at the IAM blog, has the complete story here.


RFID Patents Surge In Korea: According to Korea Intellectual Property Office (KIPO), the number of patents filed for RFID technologies has grown by 60%. In 2001, about 70 applications were filed. That number grew to 186 in 2003, 892 in 2005 and 1,201 in 2007. The most active assignees are ETRI (293 patents), Samsung Electronics (209 patents), SK Telecom (140 patents) and LG Innotek (117 patents). Read more here.


Lehman Brothers - What About their Patent Portfolio? after last night's creditors committee meeting, there is a distinct possibility that Lehman will file a motion to approve a break-up fee and bid procedures for an asset sale. So what will they do with their patents and patent applications? Good question.

It appears that Lehman "proper" has only 9 issued patents, but possesses a much larger collection of patent applications (70+). Also, Lehman holds approximately 11 patents as a collateral agent for a company called Serena Software International, and an additional 10 patents as a security agent for Danish company CFS Slagelse A/S. See the PTO listing of Lehman patents and patent applications here. Total Lehman patent holdings are estimated to be over 500 patents and patent applications.

Interestingly, in December 2007, the PTO issued US Patent 7,310,618, titled "Automated loan evaluation system", which disclosed a system that would “… remove some of this guesswork and provide a reliable, fair, and consistent evaluation for all loans, including sub-prime loans.” The assignee? Lehman Brothers Inc. (Hat Tip: Best Mode Blog)

Most Litigious NPE's of All Time

Joff Wild over at the IAM Blog recently chatted with Dan McCurdy, chairman of PatentFreedom and CEO of Allied Security Trust, who is issuing a list of the most litigious non-practicing entities (aka "patent trolls") for the next issue of IAM Magazine.

Who are the most trigger-happy NPE patentees? According to McCurdy the most active companies in the U.S. are:

(1) Acacia Technologies (link) - 308 cases total, 239 cases since 2003;

(2) Rates Technology Inc. - 130 cases total, but only 38 cases since 2002;

(3) Millennium IP (link) - 99 cases total, 90 cases since 2003;

(4) Cygnus Telecommunications Technology - 69 cases total, 31 cases since 2003;

(5) General Patent Corp International (link) - 66 cases total, 36 cases since
2003;

(6) Plutus IP (link) - 59 cases total (all of those filed since 2003);

(7) Papst Licensing GmbH - 59 cases total, 31 cases since 2003;

(8) F&G Research - 56 cases total, 51 cases since 2003;

(9) Ronald A Katz Technology Licensing (link) - 54 cases total, 48 cases since 2003;

(10) Catch Curve (link) - 53 cases total, 36 cases since 2003.

Favorite NPE jurisdictions include:

1) E.D. Texas (surprise!)

2) N.D. California

3) C.D. California

4) S.D. New York

5) N.D. Illinois

Also, the research found that, for the 2007 year, 16.6% of all U.S. patent litigation involved NPEs. In 1997, the figure had stood at 2.4%.

See Joff Wild "Acacia tops troll litigaition league" (link)

USPTO Issues Dual Memos on 112 Rejections

Earlier in the year, the CAFC issued its opinion in Halliburton Energy Services, Inc. v. M-I LLC, 514 F.3d 1244 (Fed. Cir. 2008), where the court stated "[w]e note that the patent drafter is in tlle best position to resolve the ambiguity in the patent claims, and it is highly desirable that patent examiners demand that applicants do so in appropriate circumstances so that the patent can be amended during prosecution rather than attempting to resolve the ambiguity in litigation."

Taking this language to heart, the PTO issued dual memorandums "to remind the examining corps of the appropriate use of indefiniteness rejections-under 35 U.S.C. 112, second paragraph."

To wit:

The essential inquiry pertaining to this requirement is whether the claims set out and describe a particular subject matter with a reasonable degree of clarity and particularity. Definiteness of claim language must be analyzed, not in a vacuum, but in light of the content of the particular application disclosure, the teachings of the prior art, and the claim interpretation that would be given by one having ordinary skill in the pertinent art at the time the invention was made . . . providing a definition of a claim term in the written description does not preclude a finding of indefiniteness of the claim term. The clarity of the provided definition of a term in a claim must also be evaluated from the perspective of one of ordinary skill in the art. If an examiner, when evaluating a claim term's disclosed definition, concludes the definition is not clear and precise and one of ordinary skill in the art would consider the term indefinite (e.g., the definition's broadest reasonable interpretation results in more than one meaning and/or interpretation), then a rejection under 35 U.S.C. 112, second paragraph, would be appropriate.

Also, with regard to 112, as it applies to means-plus-function claims:

A rejection under 35 U.S.C.112, second paragraph, is appropriate if there is no disclosure (or insufficient disclosure) of structure, material, or acts for performing the claimed function. A bare statement that known techniques or methods can be used would not be a sufficient disclosure.

[F]or a computer-implemented means-plus-function claim limitation that invokes 35 U.S.C. 112, sixth paragraph, the corresponding structure is required to be more than simply a general purpose computer or microprocessor. The corresponding structure for a computer-implemented function must include the algorithm as well as the general purpose computer or microprocessor. The written description of the specification must at least disclose the algorithm that transforms the general purpose microprocessor to a special purpose computer programmed to perform the disclosed algorithm that performs the claimed function. Applicant may express the algorithm in any understandable terms including as a mathematical formula, in prose, in a flow chart, or in any other manner that provides sufficient structure. See MPEP 2181 for examples where the courts held that the corresponding structure is adequate for the computer-implemented means plus-function claim limitations. A rejection under 35 U.S.C. 112, second paragraph, is appropriate if the written description of the specification discloses no corresponding algorithm.

Read/download "Rejections under 35 U.S.C. 112, second paragraph, when examining means (or step) plus function claim limitations under 35 U.S.C. 112, sixth paragraph" (link)

Read/download "Indefiniteness rejections under 35 U.S.C. 112, second paragraph" (link)

EPO Publishes Helpful Presentations From September Program

The Organization for Economic Co-operation and Development and the European Patent Office recently held a conference on Sept. 3-4 in Vienna, titled "Patent Statistics for Decision Makers" that addressed issues such as patent valuation, patent strategies, business dynamics, and technology markets.

The EPO has been kind enough to make many of the presentations available for download (link), and all of them are worth a read. Some of the papers include:

• Ciaran McGinley, Controller, EPO, "Shining a Light" (link), arguing that the situation with patents is akin to global warming

• Roger J. Burt (Senior Counsel, Intellectual Property Law, IBM Europe): Patent strategies? Just-in-case;

• Nils Omland (WHU Otto Beisheim School of Management): The use of patent data to measure patent value: an overview;

• Jun Suzuki (National Graduate Institute For Policy Studies) [Authors: A. Goto (Japan Fair Trade Comission), K. Motohashi (University of Tokyo), Y. Naito (Artificial Life Laboratory), J. Suzuki, S. Tamada (Kansei Gakuin University and RIETI)]: Patent citations in Japan: database construction for inventor and examiner citations;

• Hugo Pillu (ERASME, Ecole Centrale Paris): Measure of international knowledge flows thorough input-based patent citation indicator;

• Alessandro Sterlacchini [Authors: F. Schettino, A. Sterlacchini, F. Venturini (Universita Politecnica delle Marche)]: Inventive productivity and patent quality: evidence from Italian inventors;

• Bart Leten [Authors: R. Belderbos, S. Kelchtermans, B. Leten (KU Leuven)]: Usage of, or involvement in science: what matters for firm technological performance?; and

• Peter Hingley (European Patent Office) [Authors: S. Bas (LMU Munich), P. Hingley]: Number and sizes of applicants at the EPO.

Forbes: Top Patent Revenue-Generating Universities

Continuing the recent media focus on universities and patents, Forbes has a great article on IP cash cows, and which universities are "bottling the most milk" from their patent portfolios:

(1) New York University

2006 Research Expenditures: $210 million
2006 Research-Related Income: $157 million
Yield: 75%

(2) Wake Forest University

2006 Research Expenditures: $146.3 million
2006 Research-Related Income: $60.5 million
Yield: 41%

(3) Stevens Institute of Technology

2006 Research Expenditures: $28 million
2006 Research-Related Income: $4.56 million
Yield: 16%

(4) Ohio University

2006 Research Expenditures: $24 million
2006 Research-Related Income: $3.26 million
Yield: 13%

(5) Brigham Young University

2006 Research Expenditures: $26 million
2006 Research-Related Income: $3.07 million
Yield: 11.7%

(6) University of Rochester

2006 Research Expenditures: $355 million
2006 Research-Related Income: $38 million
Yield: 11%

(7) University of Minnesota

2006 Research Expenditures: $594 million
2006 Research-Related Income: $56 million
Yield: 9.4%

(8) University of Florida

2006 Research Expenditures: $459 million
2006 Research-Related Income: $42.9 million
Yield: 9.3%

(9) Stanford University

2006 Research Expenditures: $699 million
2006 Research-Related Income: $61.3 million
Yield: 8.7%

(10) Northwestern University

2006 Research Expenditures: $348 million
2006 Research-Related Income: $29.9 million
Yield: 8.6%

(11) Mount Sinai School of Medicine

2006 Research Expenditures: $269 million
2006 Research-Related Income: $20.1 million
Yield: 7.5%

(12) University of Massachusetts

2006 Research Expenditures: $404.9 million
2006 Research-Related Income: $27.2 million
Yield: 6.7%

(13) University of Utah

2006 Research Expenditures: $246.5 million
2006 Research-Related Income: $16.3 million
Yield: 6.6%

(14) University of California

2006 Research Expenditures: $3.04 billion
2006 Research-Related Income: $193.4 million
Yield: 6.4%

(15) University of South Alabama

2006 Research Expenditures: $20.6 million
2006 Research-Related Income: $1.2 million
Yield: 5.9%

For all the details, read "Universities That Turn Research Into Revenue" (link)

Also See "In Pictures: 15 Top Patent-Revenue-Generating Universities" (link)

Why Academia Takes Profits Over Wonder

"In academia’s continuing pursuit of profit, the wonder of simple serendipitous discovery has been left on the curb."

- Janet Rae-Dupree, "When Academia Puts Profit Ahead of Wonder", New York Times, September 6, 2008 (link)

Over the weekend, the NYT's hand wringing editorial over the "corporatization" of university research has sparked debate in the patent community (see Patently-O, Patent Docs, Patent Hawk, IPBiz). While there are considerable points of argument over the merits of the article and the Bayh-Dole Act, the fact remains that some universities are are getting paid on their patents. Big time.

The Deal published a recent article titled "A Seller's Market," which looked at private equity investors and hedge finds, who are joining established players in funding pharmaceutical research. While the equity-academia relationship has been around for a little while, some recent activity has produced eye-popping numbers that prompted one investment manager to state that "the real biotech boom of the late '80s and early '90s has now come to fruition." From the article:

• Children's Hospital Foundation, the parent company of the Children's Hospital of Philadelphia, sold its royalty interest in sales of the oral gastroenteritis vaccine RotaTeq to Royalty Pharma of New York for $182 million in cash.

• Earlier this year, in the biggest college royalty deal to date, Northwestern University sold a portion of its worldwide royalty stake in the blockbuster pain drug Lyrica to Royalty Pharma for $700 million in cash, earmarking the proceeds for the scientists responsible for the chemical compound, the university's endowment, financial aid, research and construction of new buildings and laboratories.

• Since 2004, money spent on royalty deals with research institutions has skyrocketed almost eightfold, says Jim Webster, an early investor in healthcare royalties and managing partner and co-founder of Capital Royalty LP in Houston. In 2004, these institutions monetized royalty interests totaling about $260 million. That jumped to $750 million in 2005 and to $1.9 billion in 2007. "There are not many royalty monetizations less than $50 million," he says. Since 2004, private equity involvement in university research has boomed.

The money keeps coming, and new players continue to emerge:

• With its 15 employees scouring for deals, Paul Capital has bought royalties from a handful of research houses, including Aston University and Imperial College . . .The firm closed its first fund in April 2000 with about $300 million in equity capital commitments and three years later closed its second fund with about $650 million in capital. Paul Capital buys royalties not only from universities and other institutions but also from companies. It looks at the quality, remaining patent life and safety profile of the product and how it has performed in the marketplace . . . Capital Royalty in Houston got its start in 2003 after Webster and Harry Loveys left Toronto-based Drug Royalty Corp. (now DRI Capital Inc.) to help start the firm. The firm has established a $325 million fund for doing deals.

• Cowen, the newest royalty shop, formed its practice in January 2007, and the firm employs seven professionals, a chief financial officer and two support staffers. It began raising its first fund in November 2007 and in nine months closed on more than $500 million in capital commitments. The fund was oversubscribed by $150 million. The firm has done five royalty deals so far -- all with companies -- and committed more than $260 million in capital, though its founders, previously employed at Paul Capital Healthcare, have done deals with nonprofits and universities.

Read Cheryl Meyer, "A seller's market" in its entirety here (link)

Beating NPE Patent Holders At Their Own Game

Electronics Design, Strategy, News (EDN) magazine published an article yesterday, titled "If You Can't Beat Patent Trolls, Join Them," which covers the latest in the manufacturers-vs.-NPE's battles:

Stuck in apparent stalemate on the legislative side, large companies have formed two new organizations—Allied Security Trust (AST) and PatentFreedom LLC—that use market forces rather than laws to ward off trolls. Both entities emerged from discussions among large companies and IP experts, particularly at ThinkFire, an intellectual property advisory firm that counts Hewlett-Packard and Cisco Systems among its clients. Those two companies as well as others formed AST last year.

* * *

AST, a Delaware statutory trust, was launched in March 2007, but just came out of stealth mode in July . . . The trust buys patents on the open market, grants licenses to its members, and then sells the patents—with those licenses attached—back into the market.

* * *

PatentFreedom, a limited liability company, is a subscription service that provides detailed information on NPEs. As McCurdy sees it, operating companies are at a disadvantage because of the secretive nature of trolls. While NPEs can gather all sorts of information about the large well-known public companies that are their targets, the targets often have very little information on the NPEs

PatentFreedom’s goal is to correct this “asymmetry of information,” said McCurdy. The company had a dozen subscribers as of August and McCurdy expects that number to triple by the end of the year. Annual subscriptions range from $50,000 to $75,000 a year, a drop in the bucket for operating companies. The company also has a lower cost “pay-as-you-go” model for those companies that aren’t frequently targeted by NPEs.

PatentFreedom has identified more than 125 entities with some 800 subsidiaries holding more than 9,000 patents. “And we are confident that there are more than 20,000 US patent families now owned by trolls,” said McCurdy. “We just haven’t found them all yet.”

The article also included this little tidbit:

[N]ot all large companies think patent trolls are threats . . . It simply depends on a given company’s business strategy . . . In fact, some large operating companies even finance trolls and/or use trolls to their own advantage, according to Steve Hoffman, CEO of ThinkFire. Although he won’t name any names, he said he knows of some operating companies that sell their patents to trolls so the trolls can do the dirty work—asserting the patents against competitors without the operating company being involved.

Read the article here (link).

PTO General Counsel Toupin Continues to Promote AQS for IPO Annual Meeting

Hal Wegner distributed an interesting presentation this morning from PTO GC James Toupin which confirms that (1) despite a potential "changing of the guard" in the coming elections, the PTO continues to push for the same reform measures, and (2) despite mounting criticism, the PTO continues to see no problems with the tactics used for instituting reform.

The presentation confirms yet again that allowance rates have been plummeting since 2003. Continuation filing rates have tripled since 1998 (including RCE's), while CIP filings continue to remain steady. Average first action pendency is at 25 months, while average total pendency is about 32 months. As usual, the applicants are mostly blamed for these problems.

What is interesting is the PTO's rationale for requiring mandatory IDS's (i.e., Applicant Quality Submissions (AQS)). According to the presentation, 37 C.F.R. 11.18 (b) requires that papers filed with the PTO are certified "to the best of the party’s knowledge, formed after an inquiry reasonable under the circumstances" to be for a proper purpose and nonfrivolous.

Now - get this - the PTO's position is that (1) “reasonable inquiry” includes reviewing prior art submitted, and (2) applicants should not make filings "to create unnecessary delay includes not filing continuations to keep application pending."

While the MPEP states that "reasonable inquiry" does not create any new duty on the part of an applicant to conduct a prior art search (MPEP 410), the PTO posits that this section was "written when applications were not published and patents were not online." Accordingly,

[The] USPTO may by rule impose obligations on applicants that would not be required under inequitable conduct doctrine. In re Bogese, 303 F.3d 1362 (Fed. Cir. 2002), [and] [a]gencies are entitled to deference in promulgating rules notwithstanding prior court interpretations of statute independent of agency interpretations. National Cable & Telecommunications Assn v. Brand X Internet Services, 545 U.S. 967 (2005).

Download a copy of the presentation here (link)

CAFC: Prior Art Recycling Permitted For Reexamination

In Re Swanson, September 4, 2008 (07-1534)

In 1997, the CAFC decided In re Portola Packaging, holding that “prior art previously considered by the PTO in relation to the same or broader claims" would preclude reexamination requests on the same art.

In 2002 Congress amended § 303(a) to include an additional sentence, explaining that the amendment “overturns the holding of In re Portola Packaging" and that "[t]he existence of a substantial new question of patentability is not precluded by the fact that a patent or printed publication was previously cited by or to the Office or considered by the Office."

Swanson's (aka Abbott's) Case: Abbott Laboratories (“Abbott”) licensed Swanson's patent, and sued Syntron Bioresearch, Inc. for infringement. Syntron countered that Swanson's patent was invalid, and cited prior art that included a reference ("Deutsch") that was considered by the PTO during the original prosecution.

The district court held the patent was not invalid based on the prior art. Syntron appealed. The CAFC agreed with the district court and held that Swanson's patent was not invalid. Syntron then went to the PTO with the same art seeking reexamination. Despite the fact that (1) the prior art was previously considered in the PTO, (2) the district court considered the same art, and (3) the CAFC agreed with the district court, the PTO nevertheless found a "substantial new question of patentability" under § 303, and subsequently invalidated the patent.

On appeal, the CAFC agreed that, despite the court proceedings dealing with the same issues, the PTO had the right to institute reexamination proceedings anyways:

The the statutory language, legislative history, and different purposes underlying reexamination and federal court proceedings suggest that the determination of a substantial new question is unaffected by these court decisions . . . the legislative history for both the original and amended reexamination statute suggest that Congress was concerned only with the consideration of issues in prior PTO examinations, not prior civil litigation . . . Not once in the legislative history did Congress refer to references or issues addressed in prior civil litigation.

* * *

Section 303’s language and legislative history, as well as the differences between the two proceedings, lead us to conclude that Congress did not intend a prior court judgment upholding the validity of a claim to prevent the PTO from finding a substantial new question of validity regarding an issue that has never been considered by the PTO. To hold otherwise would allow a civil litigant’s failure to overcome the statutory presumption of validity to thwart Congress’ purpose of allowing for a reexamination procedure to correct examiner errors, without which the presumption of validity never would have arisen.

With regard to art before the PTO:

Section 303(a) now mandates that “the existence of a substantial new question of patentability is not precluded by the fact that a patent or printed publication was previously cited by or to the Office or considered by the Office.” Thus, under § 303(a) as amended, a reference may present a substantial new question even if the examiner considered or cited a reference for one purpose in earlier proceedings. Nothing in the statute creates an exception to this rule for references considered in the context of a rejection of prior claims. Indeed, such an exception would overwhelm the rule and thwart a central purpose of the amendment, to overrule In re Portola Packaging.

[T]he 2002 amendment removes the focus of the new question inquiry from whether the reference was previously considered, and returns it to whether the particular question of patentability presented by the reference in reexamination was previously evaluated by the PTO. As was true before the amendment, an “argument already decided by the Office, whether during the original examination or an earlier reexamination” cannot raise a new question of patentability.

* * *

Determining the scope of an examiner’s previous consideration of a reference will generally require an analysis of the record of the prior proceedings to determine if and how the examiner used the reference in making his initial decisions. As we believe that this inquiry is most accurately viewed as a question of fact, we will review the Board’s findings regarding the scope of consideration of a reference during prior examinations for substantial evidence.

AFFIRMED