Patent Litigation Sinking for 2009

According to Stanford Law School's IP Litigation Clearinghouse, patent litigation dropped by 8% in 2008 (2,605 cases were filed). This is not unusual, considering that patent litigation has been dropping slightly each year since the 2004-05 peak. What is remarkable however, is that when you look at the last five months of 2008 (i.e. "the meltdown"), filings dove 23% compared to the same period one year earlier. Also, the average number of defendants in patent infringement cases last year dropped back to two following a record average of three per case in 2007. Typically, filings from July 31 to the end of the year tick up 2%, according to Stanford's data.

What does this mean? Impossible to say at this point. The obvious culprit is the economy and legal costs, along with other factors like increased ITC filings and district court delays. In the Central District of California, 2008 filings plummeted by nearly 39% from 2007 to 198, according to the Stanford Clearinghouse. In the Eastern District of Texas, filings dropped by 21% during that same time frame to 291.

See, National Law Journal, "Patent Infringement Filings Take a Nosedive" (link)

But See, Joe Mullin's article "Will the ITC Become the New Troll Hangout?" (link)

Study: Apportioned Damages Would Decrease Patent Value Between $35-85B

Yesterday a group of U.S. manufacturers released research entitled “The Likely Adverse Effects of an Apportionment-Centric System of Patent Damages.” The research was conducted by Scott Shane, Ph.D., Professor of Economics at Case Western Reserve University in Cleveland.

The study sought to answer the threshold question of whether and how much average damage awards would be reduced by apportionment legislation. The following effects of apportionment legislation were estimated:

1. Reduction in U.S. patent value of between $34.4 billion and $85.3 billion.

2. Reduction in value of U.S. public companies of between $38.4 billion and $225.4 billion.

3. Reduction in R&D of between $33.9 billion and $66 billion per year.

4. Between 51,000 and 298,000 U.S. manufacturing jobs put at risk.

5. Industries employing fewer people favored over those employing more people.

The paper is provided by the Manufacturing Alliance on Patent Policy (link), and a PDF copy of the study may be downloaded here.

Top Patent Holders: IBM Tips the 4K Mark for 2008

While the PTO has eschewed publication of "top patent holders," independent patent research companies like IFI Patent Intelligence continue to track who is filing what in the PTO. In this year's "Top U.S.-Patent Recipients" list, IFI rounds out the top 20 this way:

    1 INTERNATIONAL BUSINESS MACHINES CORP         4186
    2 SAMSUNG ELECTRONICS CO LTD KR                3515
    3 CANON K K JP                                 2114
    4 MICROSOFT CORP                               2030
    5 INTEL CORP                                   1776
    6 MATSUSHITA ELECTRIC INDUSTRIAL CO LTD JP     1745
    7 TOSHIBA CORP JP                              1609
    8 FUJITSU LTD JP                               1494
    9 SONY CORP JP                                 1485
   10 HEWLETT-PACKARD DEVELOPMENT CO L P           1424
   11 HITACHI LTD JP                               1313
   12 MICRON TECHNOLOGY INC                        1250
   13 SEIKO EPSON CORP JP                          1229
   14 GENERAL ELECTRIC CO                           912
   15 FUJIFILM CORP JP                              869
   16 RICOH CO LTD JP                               857
   17 INFINEON TECHNOLOGIES AG DE                   814
   18 LG ELECTRONICS INC KR                         805
   19 TEXAS INSTRUMENTS INC                         757
   20 HONDA MOTOR CO LTD JP                         747

To see the top-35 list, click here.

Two observations are made on the 2008 list. First, American companies captured only 49 percent of U.S. patents and hold only 4 of the top 10 slots, and 12 of the top 35 slots. Japanese companies hold 5 of the top 10 slots and 14 of the top 35. Taken collectively, the top 35 companies accounted for 26 percent of all the utility patents granted in 2008.

While American companies lead in total new patents for 2008, Japan is right behind with 23 percent; Germany is third with 6 percent, South Korea furth with 5 percent; and Taiwan fifth with 4 percent.

The second (and more glaringly obvious) observation is IBM's allowed patents - despite KSR and the PTO's "deny, deny, deny!" approach to applications over the last year, they nevertheless managed to break the 4K mark for issued patents. This mark is nearly triple that of HP, and exceeds the issuances of Microsoft, HP, Oracle, Apple, EMC, Accenture and Google -- combined. Also, IBM's issued patents for 2008 is a 133% increase over the previous year (3,147).

For more information, see:

"IFI Patent Intelligence Analysis of 2008's Top US Patent Recipients Suggests America May Be Losing Dominance" (link)

Asher Hawkins, "IBM's Brain Boom," Forbers (link)

Joff Wild, "IBM Looks For Patent Quality Solutions, But Could Big Blue Actually Be Part of the Problem?" IAM Blog (link). Joff's observation:

If pendency and quality are linked – and I don’t think that I am the only one to believe they probably are – you have to ask why patent office workloads and pendency times are going up. Is it, in fact, because companies such as IBM are submitting so many applications in the first place? Could it be that if Big Blue and many other large organisations were more rigorous about what to seek protection for and did not submit so many applications in the first place, the backlog would not be as large as it is, examiners would have more time to do their work and quality standards would not be coming under so much scrutiny?

CAFC Walks Away From Comiskey During En Banc Review

In Re Comiskey, 06-1286, January 13, 2009

In a controversial move, the CAFC decided today to reject en banc review of Comiskey, where claims directed to "a method for mandatory arbitration resolution regarding one or more unilateral documents" were held to be non-statutory subject matter under 35 U.S.C. § 101. In addition to the denial, the CAFC vacated its earlier decision and remanded the application back to the PTO:

Acting en banc, the court today vacated the September 20, 2007, judgment in this case, and the panel’s original opinion . . . was withdrawn.

[W]e conclude that Comiskey’s independent [method] claims 1 and 32 and most of their dependent claims are unpatentable subject matter under 35 U.S.C. § 101. With respect to independent [systems] claims 17 and 46 . . . we remand to the PTO to consider the § 101 question in the first instance. We therefore affirm-in-part, vacate-in-part, and remand.

To fully understand the controversy, it is important to note that Comiskey originally appeared before the CAFC to appeal an obviousness rejection. After oral arguments, the CAFC requested supplemental briefing to address issues relating to 35 U.S.C. § 101, despite the fact that the PTO did not reject the claims on this basis. Seizing the opportunity, the PTO urged the court to resolve the case on this ground to "give the Office needed guidance in this area." The CAFC obliged, and when the original Comiskey opinion was issued (see here), only issues relating to §101 were addressed.

While the majority (Michel, Dyk, Prost, Lourie) claimed the CAFC had the authourity to resolve such legal issues sua sponte, the dissent argued that the opinion is "not consistent with the need to respect and recognize agency expertise or the interests of agency or judicial economy." In any event, with regard to patentable subject matter, the CAFC concluded:

It is thus clear that the present statute does not allow patents to be issued on particular business systems—such as a particular type of arbitration—that depend entirely on the use of mental processes. In other words, the patent statute does not allow patents on particular systems that depend for their operation on human intelligence alone, a field of endeavor that both the framers and Congress intended to be beyond the reach of patentable subject matter. Thus, it is established that the application of human intelligence to the solution of practical problems is not in and of itself patentable.

While the method claims were held unpatentable, the court punted on the system claims, which recited the use of "modules":

These claims, under the broadest reasonable interpretation, could require the use of a machine as part of Comiskey’s arbitration system . . . Similarly, even though Comiskey did not separately argue his dependent claims, our decision is based on a different ground than the Board’s, and we think it is appropriate to separately consider dependent claims 15, 30, 44, and 58. Each of these claims adds the following limitation to its corresponding independent claim: "wherein access to the mandatory arbitration is established through the Internet, intranet, World Wide Web, software applications, telephone, television, cable, video [or radio], magnetic, electronic communication, or other communications means."

As to all of these claims, which under the broadest reasonable interpretation recite the use of a machine, we think that the § 101 question should be addressed in the first instance by the PTO. We therefore remand to the PTO to consider whether independent claims 17 and 46 (with dependent claims 18-29, 31, 47-57, and 59) and dependent claims 15, 30, 44, and 58 recite patentable subject matter under § 101.

Read the order (link), which includes the following opinions:

Dyk, Michel, Prost (concurring) - "Contrary to Judge Moore’s dissent, the panel decision is entirely consistent with precedent allowing an appellate tribunal to affirm an agency on alternative legal grounds or to remand to the agency to consider an alternative ground. This authority is, in fact, so well-established that the petition for rehearing did not even raise the issue. "

Lourie (concurring) - "I am sympathetic to Judge Moore’s dissent . . . However, having rendered the decision that it did, and which it now reaffirms as to the method claims, I do not believe we need to unwind the panel decision as to those claims in order to review the § 103 rejections. "

Moore, Newman, Rader (dissenting) - "Particularly puzzling is the panel’s decision to remand the § 101 issue to the PTO with regard to the machine claims, but not the process claims . . . The original panel opinion which held these machine claims were directed to patentable subject matter cited Federal Circuit and Supreme Court precedent. None of this precedent has changed."

"[R]ather than reach out to decide an issue not raised, and remand some of the claims to the PTO with a mandate that they consider an issue of our choosing, I believe we had an obligation to decide the only issue actually decided by the PTO – are Mr. Comiskey’s claims obvious? The PTO, an expert agency, is charged with examining patent applications. Courts, like us, are charged with reviewing agency determinations. There must be some limit to appellate court authority to review agency action, and in my opinion this court in Comiskey crossed the line."

Newman (dissenting): "Reconsideration of this appeal was stayed while the en banc court decided In re Bilski, 545 F.3d 943 (Fed. Cir. 2008), and although the original Comiskey opinion was withdrawn because it was producing "misunderstanding," id. at 960, the revised opinion does not clarify, changes no result, adds no analysis, but simply deletes its reasoning, leaving silence rather than understanding. The court continues to present a broad and ill-defined exclusion of "business methods" from access to the patent system, an exclusion that is poorly adapted to today’s new and creative modalities of data handling and knowledge utilization. I must protest this further contribution to the uncertainty that this court’s decisions are producing."

JPO Considers Making Software and Business Methods Patentable by 2011

Japanese newspaper Nikkei Shimbun is reporting that the JPO will begin a study in 2009 to "drastically revise" Japanese patent law. The main points of study include:

• Revising the definition of "invention" that is protected subject matter
• Making a system for promoting innovation by terminating the "right to seek an injunction"
• Revising "employee invention provisions"
• Studying ways to resolve disputes promptly and effectively
• Speeding up examination and responding to applicants' needs
• Making the text and provisions easy to understand

The study is scheduled to begin at the end of January, and is expected to last one year. A "Commissioner's Private Study Group" will be formed and will be made up of members from industry, academia, and lawyers. Conclusions from the study will be forwarded to the Industrial Structure Committee for further consideration. If necessary, changes to the law would be implemented in the ordinary session of the Diet in 2010-11.

From the Nikkei Shimbun article:

The current Patent Law went into effect in 1980, and defines the “things” that as inventions can be protected by patents. Although there are cases where things like business model patents have been considered to fall within “things” and thus protected, this revision will, once enacted, for the first time clearly establish that intangible property is protected subject matter.

A representative example of the kind of intangible assets that may become protected subject matter is software. Things like the computer algorithms needed in software architecture were not anticipated in the current Patent Law, and thus there is concern that their protection might not be totally certain.

Special thanks to Greg Aharonian who forwarded this information, and Edward Durney for providing the translation. A copy of the (translated) article can be viewed here.

-- On a somewhat related note, the JPO recently announced that the first patent under the "Super Accelerated Examination" issued. Time of pendency from the examination request? 17 days.

C.D. Cal.: Discovery "Settlement Privilege" Does Not Exist

Real Estate Alliance Ltd. v. National Association of Realtors et al. (2-08-cv-01657) CACD (December 23, 2008)

In a patent case, the plaintiff requested that defendant "produce all documents relating to its settlement with Mr. Freedman - including the settlement agreement itself, drafts thereof, all correspondence between REAL and Mr. Freedman, and any communication concerning Mr. Freedman’s Open Letter (collectively the 'Freedman Discovery')."

The defendant objected to the admissibility of the request, relying in part on a "settlement privilege." The court sided with the plaintiff:

The materials sought are relevant, or at least potentially so. If nothing else, they might lead to something that is admissible. There is no settlement privilege immunizing settlement agreements or settlement negotiations from discovery. Although the cases are not unanimous on the point, the better - and majority - view is that such a privilege does not exist . . . Defendant need not produce attorney work product that was not disclosed to Freedman, provided that such materials are listed in a privilege log.

Read the ruling here (link)

PTO Director Jon Dudas Announces Resignation

While a copy of the memo is not currently available, reliable sources (as well as Patently-O) are reporting that Jon Dudas has announced his resignation.

See the post from Patently-O here.

House Rule Change May Cloud Transparency on Patent Reform

Back in 1994, reforms to the House rules were made to tackle the issue of "secretive" legislative processes. The reforms included opening committee meetings to the public and media, term limits for committee chairmen, "truth in budgeting", elimination of the committee proxy vote, authorization of a House audit, specific requirements for blanket rules waivers, and guarantees to the minority party to offer amendments to pieces of legislation.

It is now being reported that Speaker Pelosi is looking to reverse the "House Fairness Rules" to allegedly consolidate power in the (recently expanded) Democratic majority. Needless to say, the Republicans are not happy, and the leadership has shot off a letter to voice their objections:

The American people[] stand to pay a price if the Majority [] shuts down free and open debate on the House floor by refusing to allow all members the opportunity to offer substantive alternatives to important legislation -- the same opportunities that Republicans guaranteed to Democrats as motions to recommit during their 12 years in the Minority. The Majority’s record in the last Congress was the worst in history when it came to having a free and open debate on the issues.

See a copy of the full letter here.

Connie Hair, writing for Human Events, decribes the situation this way:

Pelosi’s proposed repeal of decades-long House accountability reforms exposes a tyrannical Democrat leadership poised to assemble legislation in secret, then goose-step it through Congress by the elimination of debate and amendment procedures as part of America’s governing legislative process.

IEEE Releases Patent Portfolio Scorecard

IEEE Spectrum has released its annual patent scorecard that ranks the "pipeline power" of U.S. technology patent portfolios. The survey scores a company's "pipeline power" by considering a variety of factors, including the number of patents issued to the company in a given year, the growth of its patent portfolio and the variety of the technologies a company patents (for more on the methodology, see here).

Interestingly, the survey found that U.S. technology companies led the way in terms of patent portfolio strength, with Microsoft getting top marks, followed by Intel and IBM. Other notable companies include Micron, Nantero, SanDisk, and HP. The survey covers a wide range of industries including biotech, aerospace, chemicals, computer systems, medical equipment and semiconductor manufacturing.

See the IEEE Spectrum Scorecard here (link)

Read the IEEE Spectrum article here (link)

Coalition Challenges Digital TV Patent License Fees

Recently, an ad hoc group called the Coalition United to Terminate Financial Abuses of the Television Transition ("CUT FATT") has petitioned the FCC to require patent holders who charge "high" fees to prove that their license fees are reasonable, and have the FCC create basic rules for licensing of patents to prevent "possible price gouging."

From the press release:

Since July 1, 2007, the FCC has required that all televisions sold in the U.S. include a digital tuner built to the requirements of the Advanced Television Systems Committee (ATSC). Holders of the patents needed to meet these government-mandated requirements are demanding that American consumers pay between twenty and thirty dollars per television for the same patent rights that cost $1 or less in Europe, Japan and other parts of the world. It is estimated that in 2008 and 2009 alone, the aggregate royalty cost to American consumers will be well over one billion dollars for fees that would total only about $65 million in Europe and Japan. "Without action now, this abuse could continue for many years. We believe that the FCC must declare that any DTV royalty demands that exceed comparable international fees are a violation of FCC rules. We believe that any patent holder seeking higher fees should be required to prove to the FCC that their license fees are reasonable and non-discriminatory. We also believe the FCC should initiate a rulemaking proceeding in order to create a set of basic rules that apply to the licensing of all patents that are required to implement the FCC-mandated DTV receiver standards," states Laynie Newsome, VIZIO VP, Sales & Marketing Communications and Co-Founder.

Read more here and here.

Specification and Claim Language Helps Patent Escape "Divided Infringement" on SJ

Level 3 Communications, LLC v. Limelight Networks, Inc., E.D. Va., 2:07cv589 (December 29, 2008)

Level 3 sued Limelight over a number of patents related to a Content Delivery Network (CDN). The patent described a CDN as "a system that supports delivery of information, such as video, music, games, and software, to computer users or computers on behalf ofits subscribers (typically content providers). A CDN can have multiple servers distributed at various locations around the U.S. and/or the world. A content provider such as a website operator can subscribe to a CON service and then use the CON for delivery of that content provider's information to computer users or computers."

During litigation, Limelight moved for summary judgment of noninfringement, claiming that the CDN in the patent was different from the accused network.

Limelight argued that the term "origin server" was not provided or controlled by the defendant, thus vitiating infringement under Muniauction and BMC v. Paymentech. The district court disagreed with Limelight:

The Court finds Defendant's arguments to be unconvincing . . . [a]lthough the language of this portion of the definition of "origin server" is admittedly drawn from the Farber patents' specifications . . . the specifications immediately thereafter also provide a broader definition: "[m]ore generally, the origin server ... is any process or collection of processes that provide resources in response to requests from a client" and can be "any off-the-shelf Web server." . . . "Originate," as it is used in these contexts, does not mean that an origin server must be the server on which all subscriber resources are actually created. In other words, it need not be the ultimate origin of the subscriber resources.

[I]n keeping with the thrust of Plaintiffs arguments, the Farber patents do not purport to invent origin servers, but instead simply assume their existence as components of the system or network in which the methods of the patent are implemented. Since they are not innovations ofthe Farber patents, but instead nothing more than "off-the-shelf Web server(s)" onto which subscriber content has been loaded . . . their role in the claims is little more than that of mere presence: they are simply . . . the places from which subscriber resources can enter the CDN.

Limelight also argued against the term "subscribers", claiming that they could not be "subscribers" to their own system, and did not control the actions of actual subscribers. Again, the district court was not persuaded:

Like origin servers, subscribers are undoubtedly contemplated by the Farber patents' claims as components ofthe system in which the methods of the patents are implemented, but they are not discussed by the specifications or the steps numerated in the Farber patent's method claims in such a way that they can be read as requirements that somehow limit the scope ofthe claims.

As discussed above, the claims of the Farber patents are drafted in such a way as to allow infringement to be claimed on the basis of the actions of a single party, rendering jurisprudence regarding infringement by multiple parties in Muniauction and BMC inapposite. Although, logically speaking, the CDN must, of course, have subscribers that seek to publish content in order for there to be subscriber content for the CDN to serve using this technology, this is simply another way of saying that a business has to have customers. Obviously the Farber patents do not purport to invent the concept of customers; they purport to invent a dynamic method for serving the content of those customers over the Internet in response to client requests.

Motion for summary judgment denied.

Read/download the opinion here.

When Considering PTO Reform, Look to KIPO For Clues

Earlier in the month, The US Patent Policy Advisory Committee issued its 2008 report that explored ways to tackle various quality and pendency issues affecting the PTO. The report concluded that application backlog "reached truly unacceptable levels in 2008."


Not long after, various former PTO officials testified before Congress on the same issues, and referred to the backlog problem as "horrendous."


More recently, The US Chamber of Commerce officially released Recommendations for Consideration by the Incoming Administration Regarding the US Patent and Trademark Office. This report cited the 750,000-application backlog as a significant contributor to "an agency in crisis."


While it is convenient to think of this as a "USPTO problem", the EPO and the JPO have experienced similar backlogs, and other national patent offices (e.g., SIPO) have comparable problems. However, as Joff Wild from the IAM blog puts it, "there is one country that has managed to do something" about application backlogs - the Korean Patent Office (KIPO).

From the most recent annual report (link):

To swiftly and accurately grant rights for the ever-growing number of IP applications, we undertook various measures to drastically improve the efficiency of our examination process. For instance, we adopted the Six Sigma method of management; we expanded our outsourcing of certain examination tasks; and we promoted online and at-home examinations. As a result, by the end of 2007, we succeeded in shortening the first action pendency period for patent examinations to a mere 9.8 months, which means we now have the fastest patent examination service in the world. Moreover, the examination periods were shortened to 5.7 months for trademarks and 5.5 months for designs.

This is quite remarkable, considering that pendencies as recent as 2002 were averaging 22.6 months (and as long as 21 months in 2004).

In addition, KIPO made recent changes in their patent laws to allow "customer-tailored" examination schedules that come in 3 varieties: accelerated, normal, and delayed examination.

Under the "accelerated" examination track, applicants receive office actions within 2-3 months of filing their petition; certain applications should include a prior art search from one of the four authorized organizations (designated by KIPO). Under a "delayed" examination track, applicants can choose the time for KIPO examination ranging from 18 months to 5 years after the filing date. For the "normal" examination track, KIPO claims to keep the average pendency of the first office action to less than 16 months (see here and here).

Of course, nothing here is new to the USPTO. And with the exception of delayed examination, these programs have already been in use by the Office. So the question is, how did KIPO manage to do it, and how can the USPTO replicate their success?

More on Article One Patent Project

Earlier the 271 Blog covered Article One's entry into the "patent bounty" space, where the company claimed to be something akin to a "Peer-to-Patent" project that compensated participants. While Article One's presence is heralded as something of a welcome addition, the company's operation appears to be more than a reheated "Bountyquest" effort.

In an earlier Forbes article, the following was written about the company:

The business model of Article One executes on the value of the research, which can be sold directly to parties interested in the subject patent, or used to execute market trades based upon expert opinions drawn from the research. This powerful, self-supporting revenue model provides for the significant bonuses of up to $50,000 for specific prior art found, and rewards the community through a powerful Profit Sharing Plan compensating all members who actively participate and build the Advisor community.

Thus, vetted prior art will not only be offered for sale to defendants, but to anyone (including Article One) looking to take a market position on the prior art information. Indeed, Article One's terms of use state the following:

Article One and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of the material on our Site, may from time to time have "long‟ or "short‟ positions in, act as principal in, or buy or sell the securities (or derivatives thereof) of, the companies mentioned on the Site.

Clever stuff. You can sell invalidating art and short the company at the same time. A more recent Forbes article on Article One states the following:

Say a visitor sends Article One evidence (an article in an obscure academic journal, for example) that calls into question the validity of one of Pfizer's patents for cholesterol reducer Lipitor. Milone would make that information public on the site--and, at the same time, she could short the stock of Pfizer and go long on the stock of competitors eager to sell a generic version of Lipitor. In theory, she'd make a bundle once the industry finds out what she knows.

And if Milone doesn't see a way to make money on the markets using her newfound information? She could try selling the information to Pfizer directly--or to one of its competitors. "Our interest is first to monetize our research, to maintain our revenue stream," Milone says.

Time will tell how this business model will succeed.

In any event, another interesting tidbit about Article One is that one of the founders has a series of patents on file at the PTO that is best described as the polar opposite of Halliburton's "patent acquisition and assertion by a (non-inventor) first party against a second party" application. The title? "Method and System For Requesting Prior Art From the Public In Exchange For A Reward" (US Patent Pub. 20080270255). From the looks of the claims, the novelty appears to be directed to the "trading a financial instrument" and "realizing profit" from the information:

Claim 1. A method for providing a monetized value of information, said method comprising the steps of:

a) displaying on a computer network for access by a plurality of information providers, (i) an information request, and (ii) a description of compensation for at least one of said information providers who provides information responsive to said information request, wherein said compensation comprises a variable component;

b) receiving at least one response from at least one of said information providers;

c) reviewing said at least one response to form a conclusion, said conclusion comprising whether said information responsive to said information request has been provided;

d) executing a financial transaction, wherein said financial transaction comprises trading a financial instrument;

e) displaying said conclusion or information describing said conclusion on said computer network;

f) realizing profit from said financial transaction; and

g) determining and providing said compensation for said at least one of said information providers, wherein said variable component is determined based on said profit from said financial transaction, thereby providing said monetized value of said information.

Of course, there are plenty of Bilski issues to contend with, but that's another story . . .

CAFC Provides Further Guidance on Means-Plus-Function

Welker Bearing Co. v. PHD, Inc. 08-1169, December 15, 2008

Welker appealed the district court's summary judgment of noninfringement. As part of the appeal, Welker challenged the district court's interpretation of "mechanism for" as a means-plus-function term under §112 ¶ 6. Finding the word "mechanism" to be insignificantly different from "means", the CAFC found that

In this instance, the ’254 patent’s claim language does not include the word “means,” but instead the similar word “mechanism.” . . . This court noted that “[t]he generic terms ‘mechanism,’ ‘means,’ ‘element,’ and ‘device,’ typically do not connote sufficiently definite structure [to avoid means-plus function treatment] . . . The term ‘mechanism’ standing alone connotes no more structure than the term ‘means.’” . . . [t]he unadorned term “mechanism” is “simply a nonce word or a verbal construct that is not recognized as the name of structure and is simply a substitute for the term ‘means for.’”

With regards to infringement, defendant PHD argued that one of the accused products did not "infringe" because they were prototype units that were provided to 3rd parties, but never entered production, sold, or or otherwise used commercially. The CAFC agreed with PHD:

Mere possession of a product which becomes covered by a subsequently issued patent does not constitute an infringement of that patent until the product is used, sold, or offered for sale in the United States during the term of the patent . . . PHD did not have any burden to prove it retracted any putative offer for sale. Rather the burden remains with the patentee to prove infringement, not on the defendant to disprove it. In any event, this court observes that the district court properly concluded, “Defendant’s flat denial, backed by evidence, of any commercial activity after September 7, 2004 stands uncontradicted by anything in the record.” . . . For that reason, this court holds that the district court did not err in granting
summary judgment of noninfringement of the ’478 patent.

Also, with regard to the doctrine of equivalents and §112 ¶ 6, the CAFC clarified that

Structural equivalents and the doctrine of equivalents are “closely related.” . . . They are related in the sense that both § 112 ¶ 6 and the doctrine of equivalents apply “similar analyses of insubstantiality of the differences” between a disclosed structure and an accused infringing structure . . . However, an important difference between the two inquiries “involves the timing of the separate analyses for an ‘insubstantial change.’” . . . Namely, an equivalent structure under § 112 ¶ 6 “must have been available at the time of the issuance of the claim,” whereas the doctrine of equivalents can capture after-arising “technology developed after the issuance of the patent.”

AFFIRMED

Read/download the opinion here.

Friday Shorts: PTO Backlog, More Bilski, Linux Defenders, 2007 Defendant Spike

Former PTO Officials Testify Before Congress: former PTO leaders sharply criticized the PTO’s failure to address the 1.2 million case backlog, one former commissioner calling the problem "horrendous" (link)

Bilski Starts to Pop Up in the District Courts: in the case of Every Penny Counts, Inc. v. Bank of America, plaintiff asserted a business method patent directed to a "rounder system" in which "individual consumer transactions [are] operated on in various ways via a ‘rounder function.’" The function operates "to create and distribute excess funds from consumer spending transactions." Did the recent Bilski decision invalidate the patent? The defendant thinks so, and has recently (Dec. 8) filed a motion to open discover and briefing on this very issue. Read/download a copy of the motion here.

Linux Defenders Want Your Code: Open Invention Network (OIN) has launched a "Linux Defenders" program, co-sponsored by the Software Freedom Law Center (SFLC) and the Linux Foundation (LF). The program is designed to make prior art more readily accessible to patent and trademark office examiners. The program plans to develop a set of Web-based forms to let interested parties generate "defensive publications." The program will also offer direct consulting, and establish a "Wiki"-like contribution model that calls upon community involvement. Linux Defenders will then post the publications to the IP.com database. Read more here, here, and here.

Patent Defendants Spiked in 2007: Stanford's IP Litigation Clearinghouse was recently unveiled, including data on 78,000 copyright, patent, trademark, and trade secret lawsuits. Recently, data surrounding 23,000 patent suits was made public. One of the findings found that, despite the relatively steady number of patent lawsuits, the number of defendants spiked over 30% in 2007. Joe Mullin has more at The Prior Art Blog here.

"Untenable" Claim Construction Leads to Plaintiff Rule 11 Sanctions

Triune Star Inc. v. The Walt Disney Co., Case No. 07-1256 (C.D. Ill., November 24, 2008)

Triune sued defendants over a patent relating to a “telecommunications locating system.” Defendants moved for summary judgment of noninfringement, claiming, among other things, that prosecution history estoppel unequivocally cleared them of any infringement whatsoever.

During prosecution, the independent claims recited "video means" that were rejected by the PTO. However, dependent claims recited that "the video means is a miniature infrared camera."
The Examiner indicated that the independent claims “would be allowable if rewritten in independent form including all of the limitations of the base claim and any intervening claims.” An amendment was submitted to include the infrared camera, and the patent subsequently issued.

Defendants argued that (1) none of their devices used infrared cameras, (2) a conventional visible-light camera includes an IR cut filter to almost completely inhibit or block infrared radiation, and (2) had plaintiff conducted a reasonable Rule 11 inquiry, they would have known this.

During litigation, Triune alternatively construed the term “infra-red” as either: (1) “the mechanism by which the portions of the camera function” or (2) “a camera that has a spectral response sufficient to capture visible images of the area in the vicinity of the remote unit.” Defendants countered that such a construction is frivolous, as it effectively cuts-out "infra-red" from the claims.

Perhaps unsurprisingly, the district court agreed with the defendants on the claim construction issue, and granted SJ of noninfringement. However, the court took the remarkable step of imposing sanction against Triune for proposing an "untenable" claim construction:

[N]either of Triune’s constructions pass the red face test. There is simply no valid or remotely reasonable basis for ignoring the substantive addition that the specification of an infrared camera made to the claims in Triune’s patent.

Given the undisputed facts in this case, the intrinsic evidence of record, the Court’s construction of the claims . . . and the finding of noninfringement as a matter of law, the Court must conclude that any reasonable pre-suit investigation would have revealed that the allegedly infringing devices did not contain any type of miniature infrared camera and therefore could not have literally infringed Triune’s patent. Likewise, in light of the prosecution history and the doctrine of prosecution history estoppel, there is no nonfrivolous argument for the finding of infringement after applying the doctrine of equivalents.

Accordingly,

The imposition of Rule 11 sanctions is therefore appropriate in this case against
both Triune and its counsel, who represented Triune during the prosecution of the [] patent and were directly involved in the amendment of the claims in question to require a miniature infrared camera in order to overcome the obviousness objection. The direct involvement of Triune’s counsel in the prosecution and amendment of the claims in question negates any reasonable suggestion that Triune’s position was merely erroneous rather than frivolous.

Read/download the order here (link)

BPAI Appeal Brief Rules Delayed, According to Last-Minute PTO Notice

A FR notice will (officially) be published tomorrow, stating that the Appeal Brief Rules will be delayed, pending further OMB review.

From the Notice:

On October 8, 2008, the Office published a 30-Day Federal Register Notice stating that the proposal for the collection of information under the final rule was being submitted to OMB and requesting comments on the proposed information collection be submitted to OMB. The proposed information collection is currently under consideration by OMB. Since the review by OMB has not been completed, the Office is hereby notifying the public that the effective and applicability date of the final rule is not December 10, 2008. The effective and applicability dates will be identified in a
subsequent notice.

DATES: The effective date for the final rule published at 73 FR 32938, June 10, 2008, is delayed, pending completion of OMB review of the proposed information collection under the PRA. The Office will issue a subsequent notice identifying a revised effective date on which the final rule shall apply.

Interestingly, the document is signed and dated for December 5, 2008, yet nothing appears yet on the PTO site.

Read/download the notice here (link)

Hat Tip: David Boundy

Claim Construction Estoppel Heads to the CAFC

Shire LLC v. Sandoz, 07-CV-00197-PAB, December 5, 2008 (D. Co.)

The district court issued an Order and Memorandum construing the claims in the patents at issue. In the Order, the Court declined to apply the doctrine of issue preclusion to another district court’s claim construction with respect to the same patents.

Defendant moved the Court to certify the Order for immediate interlocutory appeal pursuant to 28 U.S.C. § 1292(b). Specifically, defendant requested that the Court certify two issues addressed in the Order, one of which was “whether collateral estoppel and/or stare decisis applies to a previous court’s unappealed claim construction."

After further review, the district court determined that appeal to the CAFC was warranted:

The Court further finds that there is substantial ground for difference of opinion as to the application of issue preclusion to another district court’s unappealed claim construction. There is no definitive guidance from the Supreme Court, the Tenth Circuit, or the Federal Circuit on this question. District courts have reached conflicting positions. Compare, e.g., TM Patents, L.P. v. Int’l Bus. Mach. Corp., 72 F. Supp. 2d 370, 377 (S.D.N.Y. 1999) (holding that claim construction in a Markman hearing is a final judgment for purposes of issue preclusion), with Kollmorgen Corp. v. Yaskawa Elec. Corp., 147 F. Supp. 2d 464, 469 (W.D. Va. 2001) (holding that issue preclusion applies only if the earlier claim construction “was essential to a final judgment on the question of the patents’ infringement”), and Graco Children’s Prods., Inc. v. Regalo Int’l, LLC, 77 F. Supp. 2d 660, 663 (E.D. Pa. 1999) (holding that, “despite a previous court having held a hearing on the claim construction of a patent pursuant to Markman,” issue preclusion would not apply under the facts of the case). Thus, the question presents a novel legal issue whose correct resolution is not substantially guided by prior precedent, as required by 28 U.S.C. § 1292(b).

Read/download the opinion here (link)

Tafas v. Dudas Oral Arguments Completed at the CAFC

Today, a panel of the Court (Rader, Bryson, Prost) heard oral argument in Tafas v. Dudas before a jam-packed courthouse. Early reports indicate that the CAFC recognized, despite PTO assertions to the contrary, that the proposed continuation rules effectively set a “hard limit” of two continuing applications, and are potentially in conflict with the statute.

The court also seemed wary of the Examination Support Document (ESD) requirement (Tafas' counsel refered to it as an "Express Suicide Document"), and sharply questioned the PTO in this regard. From Hal Wegner's account:

The [PTO] General Counsel was asked whether – if he were counsel to a pharmaceutical client – he could recommend the ESD: He answered unequivocally in the affirmative. To this answer, and accompanied by laughter from the packed courtroom, the presiding judge advised the General Counsel to seek employment in the electronics or other industries.

Read more detailed accounts on the oral arguments at the PLI Blog (link1) (link2)

Also, the oral arguments are available in MP3 fromat from the CAFC website (link)

Study: Patent Pools May Discourage Innovation

Stanford University's Ryan Lampe and Petra Moser saw that regulators favor patent pools as a means to encourage innovation in industries where overlapping patents and excessive litigation cause problems. While the theory appears sound in principle, does the aggregation of patent rights actually spur innovation? Lampe and Moser decided to look at this issue in their recently published paper titled "Do Patent Pools Encourage Innovation? Evidence from the 19th-Century Sewing Machine"

As you can tell from the title, Lampe and Moser had to go quite a ways back to see how innovation was affected - after all, it takes decades, if not a century, to determine the effects of patent pooling on an entire industry. More specifically, the authors looked at the first patent pool in U.S. history, the Sewing Machine Combination (1856-1877) to see and analyze the final result.

So what did they find?

Our data confirm that pools reduce litigation risks for members and that pool members patent more in the years leading up to the pool. Pool members, however, patent less as soon as the pool is established and only resume patenting after the pool dissolves. We construct objective measures of performance to examine whether such changes reflect changes in strategic patenting or actual effects on innovation. Performance data suggest that innovation slowed as soon as the pool had been established and resumed only after the pool had been dissolved. Why might patent pools discourage innovation? Our data indicate that pools may discourage innovation by increasing litigation risks for outside firms and by diverting research by outside firms to inferior technologies.

Read the entire paper here (link).

IEEE Publishes Interesting Study on Solar Panel Patenting

IEEE reported on a a study from Semiconductor Insights analyzing U.S. patents in solar technology and trends in U.S. solar patents by company and technology. The study found that Canon, TSMC and Samsung are among the largest patent holders in solar photovoltaic panels, although they have no products in the field today. By contrast, the study found that many of the world's biggest producers of solar panels hold relatively few patents on the technology.

From the article:

The panel makers may be adopting a strategy of getting to market quickly by licensing or acquiring existing technology, the report said. "Surely, they may face big challenges from companies with more solid patent portfolios and who are savvier when it comes to protecting their intellectual property," it added.

As many as 600 companies are involved in solar panel market, with as many as 60 new companies joining each year since 2000, according to the report. "This has produced an extremely fragmented market and will no doubt provide many opportunities for consolidation over the next decade," it concluded.

Read the article here (link)

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.