Which Patent Office Does It Best? Survey Says: "The EPO"

Joff Wild at the IAM Blog reported on an on-going benchmarking survey being conducted by IAM magazine and Thomson Reuters on various patent-related topics.  Recently they asked questions to various professionals regarding patent quality at the larger patent offices.

IN-HOUSE SURVEY RESULTS:

Examination Quality is "Excellent" or Very Good"

EPO - 70%

USPTO - 56%

JPO - 54%

KIPO (Korea) - 25%

SIPO (China) - 18%

Overall, Patent Quality Has Improved/Stayed the Same/Gotten Worse

EPO:  improved = 26%, stayed the same = 71%, got worse = 3%

USPTO: improved = 23%, stayed the same = 61%, got worse = 16%

JPO: improved = 17%, stayed the same = 78%, got worse = 5%

KIPO: improved = 34%, stayed the same = 61%, got worse = 5%

SIPO: improved = 58%, stayed the same = 37%, got worse = 5%

(interestingly, the USPTO's "got worse" rating is over triple the amount of any other office)


PRIVATE PRACTICE SURVEY RESULTS

Examination Quality is "Excellent" or Very Good"


EPO - 56% (-14)

USPTO - 38% (-18)

JPO - 40% (-14)

KIPO (Korea) - 21% (-4)

SIPO (China) - 20% (+2)

Overall, Patent Quality Has Improved/Stayed the Same/Gotten Worse

EPO: improved = 28%, stayed the same = 64%, got worse = 7%

USPTO: improved = 20%, stayed the same = 62%, got worse = 18%

JPO: improved = 19%, stayed the same = 77%, got worse = 4%

KIPO: improved = 30%, stayed the same = 67%, got worse = 3%

SIPO: improved = 56%, stayed the same = 42%, got worse = 2%


When asked "what are the biggest impediments to quality," the answers were
 
(1) the pressure to get examinations done more quickly;
(2) the sheer number of applications being submitted; and
(3) government regulations.
 
Joff notes

Clearly, the EPO is regarded as the pace-setter among the world's leading patent offices; both the Koreans and the Chinese have improved significantly, but still have work to do. What our respondents are telling us about the USPTO, meanwhile, only goes to emphasise the job that David Kappos has in front of him. That said, it seems to me that there are still far too many people who believe that none of the offices we asked about offer high enough standards. There is room for all of them to up their game, at least as far their users are concerned.

Read the post in its entirety here (link)

BPAI Gives Green Light to Nixing "Black Box" Software Patents Under 35 USC 112

Ex Parte Rodriguez, Appeal 2008-000693, October 1, 2009 (Precedential Opinion)

The application was directed to a computer-based system and method for configuring and verifying a "structurally variable and complex system."  Exemplary claim 1 reads as follows:

1. An apparatus comprising:

a system configuration generator configured to generate a random system configuration file of a structurally variable and complex system;

a system builder configured to (i) build a system level netlist and (ii) generate system parameters in response to said random system configuration file; and

a simulation verification environment configured to verify said structurally variable and complex system in response to said system level netlist, wherein said simulation verification environment is configured to provide automatic random verification of said structurally variable and complex system in response to said random system configuration file.

The text in the specification generally mirrored the claim language, where generic block diagrams were used for describing system components.  Importantly, the disclosure was based on "a conventional general
purpose digital computer" and the specification did not provide any examples of how algorithms were constructed.  Instead, the specification stated that "appropriate software coding can readily be prepared by skilled programmers based on the teachings of the present disclosure, as will also be apparent to those skilled in the relevant art(s)."

The BPAI reviewed the claims and found them to be indefinite under 35 U.S.C. 112.

Starting with the means-plus-function (MPF) claims, the BPAI relied on Aristocrat Techs. Austl. Pty Ltd. v. Inter. Game Tech., 521 F.3d 1328 (Fed.Cir. 2008) for the proposition that MPF claims in which the disclosed structure is a computer, or microprocessor, programmed to carry out an algorithm, the disclosed structure is not the general purpose computer, but rather "the special purpose computer programmed to perform the disclosed algorithm."  As such,  the corresponding structure for a 112 ¶ 6 claim for a computer-implemented function is the algorithm disclosed in the specification.

Turning to the application, the BPAI found that the disclosure was similarly lacking:

The cited portion of the Appellants' Specification describes generally that the system 100 may provide automated random verification of complex and structurally variable systems. However,  the cited portion of the Specification does not provide an algorithm by which the system is able to perform the functions recited in claim 10 to provide automated random verification of complex and structurally variable systems.

The Appellants have failed to disclose any algorithm, and thus have failed to adequately describe sufficient structure, for performing the functions recited in the means elements contained in claim 10 so as to render the claim definite. Accordingly, claim 10 is unpatentable under 35 U.S.C. 112, second paragraph, as indefinite. Aristocrat, 521 F.3d at 1333.

The BPAI next turned to a claim that recited features such as "a system configuration generator configured to . . .", "system builder configured to . . ." and "simulation verification environment configured to . . ." and found that these claims were also subject to 35 USC 112 ¶ 6:

We agree that the claim elements do not use the term "means" which would normally indicate that the claim element is intended to be a "means plus function" element . . . However . . . [w]e must determine "whether the term is one that is understood to describe structure, as opposed to a term that 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.'

We have looked to both general and subject matter specific dictionaries and we find no evidence that any of these terms have achieved recognition as a noun denoting structure. Therefore, based upon our consultation of dictionaries, a review of the record before us, and a search of the prior art patents in this field, we conclude that none of these three terms is an art-recognized structure to perform the claimed function, and claim 1 does not recite any other structure that would perform these claimed functions . . . we conclude there is no structural context for determining the characteristics of these claim elements other than to describe the function of each element. We further conclude that these claim elements are verbal constructs that are not recognized as the name of a structure and are simply a substitute for the term "means for."

Again, the BPAI found the lack of algorithmic disclosure in the specification rendered the claim indefinite.

Alternately, the BPAI rejected the claims under section 112, first paragraph, ruling that the claim elements are purely functional (i.e., there is no particular structure to support the function being performed) and thus were not enabled without undue experimentation.

Turning to the Wands factors for determining undue experimentation (In re Wands, 858 F.2d at 737) the BPAI considered: (1) the quantity of experimentation necessary, (2) the amount of direction or guidance presented, (3) the presence or absence of working examples, (4) the nature of the invention, (5) the state of the prior art, (6) the relative skill of those in the art, (7) the predictability or unpredictability of the art, and (8) the breadth of the claims.  The BPAI ruled

We recognize that functional language does not, in and of itself, render a claim improper . . . [however] the scope of the functional claim language here in claim 1 is not enabled to its entire scope . . . Appellants' claim recites no meaningful structure. Instead, the scope of the functional claim language of claim 1 is so broad and sweeping that it includes all structures or means that can perform the function. It is not limited to any corresponding structure, material, or act disclosed in the specification and equivalents thereof.

[W]ith this opinion we do not mean to imply that all functional language will violate the Halliburton rule as it does here. We note that functional claim language tied to a definite structure in the claim . . . is unlikely to give rise to an enablement rejection where a person of ordinary skill in the art would likely know how to make and use the embodiments that give rise to the structure. However, in this case and those like it, the purported "structures" in the claims are essentially black boxes not connoting any structure to the skilled artisan, and are merely circularly defined by their desired functions. For the reasons expressed above, these "structures" are not enabled and are properly rejected under 5 112, first paragraph.

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

Patent Officials: "Worst Is Yet To Come"

From today's EurActiv.com:

Gerard Torres of the United States Patent and Trademark Office (USPTO) said an analysis of patent filings at his organisation suggests there is usually a lag of about one year between a recession and its effect on patent filings.


"The current recession is typical in this manner, as monthly patent filings did not begin to display weakness until late 2008, early 2009. This may mean the worst is yet to come in terms of the decline in patent filings. Total patent filings are expected to be down by about 1% to 2%," he said.


The EPO acknowledged that a similar picture is evident in Europe where the full impact of the recession on patent filings will not be clear for some time. A spokesperson said companies follow a range of patterns when filing patents in several countries, with timescales ranging from 12 to 32 months.

"We may get the full picture of how the patenting activity was influenced by the crisis later this year, or perhaps only next year," a spokesperson said.

Read "Patents suffer as crisis hits innovation" (link)

USPTO Looks to Reduce "Stress" of Data Delivery, Seeks High-Volume Dissemination for Future

Currently, the USPTO is looking to unload about 2 petabytes (i.e., 2000 terabytes) of patent-related data sets to an outside vendor in an effort to segregate public data from the examiner systems, and to make "virtually all public information from the USPTO accessible on the Internet. " Importantly, the PTO wants to make this information free of charge to the public, including current pay-for-service data products (e.g., XML Grants). Also, this change appears to be part of a longer-term "data dissemination solution" for allowing high-volume dissemination.

These data sets include:

• Application documents (Specification, Claims, Amendments, etc.)
• Meta Data associated with the Applications (Application Data/Transaction History/Patent Term Adjustment/Patent Term Extension Foreign Priority/Attorney Address/Continuity Data/Published Documents)
• Assignment Data, including history of assignments
• Fee Data Associated with the Patent Application/Patent
• Application Meta Data (document or paper type/ date of the paper/ page size)

Notably, the USPTO has no current plans to scan or convert paper files into electronic form.

According to the USPTO:

One of the agency’s potential solutions is to enter into one or more no cost contract(s) where the vendor(s) will fund the development of a secure infrastructure at the USPTO that will permit unrestricted delivery (exceptions to this may be treaties with foreign countries or data considered to be sensitive if shared with certain other specific countries/entities) of the data in bulk or a common machine readable format to the vendor. The vendor will be responsible for funding the ongoing operation of the infrastructure, including the maintenance of the historical data and the periodic updates to the data. The vendor will also be required to make the data that is provided by the USPTO available to the public on a no charge basis. As part of any resulting agreement, the vendor will be allowed to maintain, repackage (add value), distribute, and sell any resulting enhanced data sets and retain any fees collected.

For more information, see "USPTO's Data Dissemination Solution" via Fed BizOpps.gov (link)

Read the PTO's Q&A document on the project here (link)

For a timeline on the project, click here (link)

For a list of interested vendors competing for this work, see here (link)

See also, "Patent office wants help reselling data" (link)

Study Concludes U.S. Would Benefit From EPO-Style Opposition

Professors Stuart J.H. Graham and Dietmar Harhoff published a paper recently that analyzed the potential effects of a post-grant review procedure (opposition) in the U.S. One particularly interesting aspect of their paper is the comparison of litigated U.S. patents versus their EU counterparts. The paper found that:

• EPO opposition rates of the twins of U.S. litigated patents are about 3 times higher than for non-litigated patents (20% versus 6%). Not surprisingly, EPO applications relating to litigated patents are broader in scope, have more claims, contain more references to earlier patents, and receive more citations from subsequent patents;

• On the opposition outcomes, between 22.6 and 24.4% of litigated patents are revoked at the EPO. This is lower compared to the 27.6-39.5% of non-litigated patents. Surprisingly, approximately 14% of oppositions are abandoned by the owner.

• EPO applications that directly relate to U.S. litigated patents have a higher grant rate (80.3%) than equivalents of non-litigated patents (67.9%); and

• The European model tends to exclude equivalents of litigated U.S. patents due to an increased likelihood of opposition, and not by virtue of lower grant rates, or less favorable opposition outcomes;

Professors Graham and Harhoff then performed certain societal "welfare calculations" to conclude that instituting a post-grant review (PGR) system in the U.S could have quite a significant impact on social welfare, provided that the cost of the PGR system is kept reasonably low (<$500k):

[O]ur analysis and welfare calculations suggest that the benefit from PGR review in terms of social welfare per year—when put in dollar terms—could be nearly $25 billion. The main parameter affecting this estimate is not savings on the cost of litigation, but the social costs of currently unlitigated patents that bestow excessive market power on some applicants. This market power either allows the patentee to extort licensing fees, or force competitors to invent around the respective patent. But even when we draw a conservative scenario, and assume a very low social cost figure of $1 million on average for these patents, our benefit-cost ratios still indicate that the benefits of such an institution compares very favorably to its costs.

For more information, read/download "Separating Patent Wheat from Chaff: Would the U.S. Benefit from Adopting a Patent Post-Grant Review? " (link)

Arti Rai Heads to USPTO; More Patent Reform News

While it has not yet been announced officially, Arti Rai appears to be on her way to becoming the USPTO's next Administrator for External Affairs. In this position Rai will oversee the Office of International Relations , the Office of Congressional Relations and Office of Enforcement. According to at least one report, Rai is expected to arrive "any day now" to take the position.

While being well respected in academic circles, Rai has been a controversial figure on the patent front (see, e.g., "Professor Arti Rai to the Patent Office? I Sure Hope Not!" (link)), particularly for her strong endorsement of the PTO's patent continuation rules; a copy of the "law professor amicus brief" - cheekily referred to as the "dirty dozen" brief - in support of the rules can be downloaded here (link). Also, contrary to the beliefs of many in the patent bar, Rai argues that the patent system would benefit from the USPTO having more control over rulemaking authority (link). Finally, Rai also supports the idea of creating a "gold-plated" patent system applicants, where the "clear and convincing" validity standard would be applied only to patents that have undergone a more rigorous (and expensive) examination process. You can here Rai discussing her views on this, and other topics, here (link)

In related news, Peter Pappas, who previously served in several capacities in the Clinton administration, has been brought on to head up the USPO's communications and public outreach operation.

On the Patent Reform front, reports are surfacing that attempts are being made to schedule debate on the Patent Reform Bill before the end of the year. According to CongressDaily:

Senate Judiciary Chairman Patrick Leahy said Thursday he wants to work with Majority Leader Harry Reid to schedule debate before the end of the year. Leahy made his comments the same day that PTO Director David Kappos told the American Intellectual Property Law Association's annual meeting that a legislative fix is needed immediately. "Not everyone is getting everything they want" in the bill, Kappos said, but it is a "major positive step" for the stakeholders involved.

At this time, at least 12 Senators have written Leahy expressing concern over the "problematic" nature of re-examination requests, arguing that "additional work" needs to be done in that regard:

These so-called post-grant review provisions, as currently crafted, are quite problematic. This language, which would permit serial challenges to patents at the U.S. Patent and Trademark Office and in the courts, threatens to diminish the value and enforceability of U.S. patent rights at a time when America's economic recovery is dependent on the strength of U.S. innovation. Ideally, we hope these issues can be fully resolved before the bill comes to the floor.

Red the letter here (link)

Kappos to Speak at ACCA Meeting in Boston

The Association of Corporate Counsel (ACC) announced this week that it will feature USPTO Director David Kappos at its 2009 Annual Meeting in Boston next week. Kappos will appear on an interactive panel discussion, “Meet the USPTO Brass”, on Tuesday, October 20 at 9 am Eastern at the Hynes Convention Center. The event is presented as part of the ACC Annual Meeting in conjunction with the ACC Intellectual Property Committee.

According to the ACCA website, high-level USPTO personnel will be on hand to "discuss current patent and trademark issues, and more importantly, listen to you — the customer." In addition to Kappos, Commissioner for Trademarks Lynne G. Beresford and POPA President Robert Budens will be on hand to participate and take questions.

For more information, click here (link)

Chinese Gov't to Fund Foreign Patent Filings for SMEs

The Chinese Ministry of Finance (MOF) announced today that approximately 100 million yuan ($14.65 million) will be made available to small- and medium-sized enterprises (SMEs) applying for patents abroad. According to one report,

SMEs, 95 percent of which are privately-owned, have played an increasingly important role in China's economy over the last several years. SMEs contribute to 60 percent of China's GDP, 50 percent of tax revenues, 68 percent of exports and 75 percent of new jobs every year, according to official statistics.

SMEs accounted for 66 percent of patent applications in China in 2008, but overseas is a different story.

Ma Hongya, an official from the Beijing Intellectual Property Bureau, told the Global Times that the Chinese firms applying for patents abroad are mainly large companies, and SMEs cannot afford to carry out the procedures and research an application requires.

In order to be eligible, patents must be in PCT format and must first be approved by the State Intellectual Property Office (SIPO). State-owned enterprises will not eligible for the subsidy. Additionally,

[F]oreign patent application projects must either help exert China's industrial advantage and be internationally competitive; be expected to explore the international market or expand its international market share; or have patented products with an expected large capacity in the international market and good market prospects.

Under the proposed policy, the government will provide SMEs as much as 500,000 yuan ($73,238) for each patent application abroad.

Read People's Daily Online "Central government to subsidize foreign patent applications" (link)

See also, "MOF to support overseas patents" (link)

Ranking Government Patents

Government Agencies do not patent heavily, as they account for approximately 1% of all utility patenting per year. Many government agency patenting efforts are more for defensive purposes. However, governments contribute significantly to patenting innovations through funding and grants to both private and public sectors.

Tammy D'Amato of Patent Board has released rankings for the top 10 government agencies having the greatest "technology strength" in their patent portfolios. The rankings, and the 2009 patent grant rate, follow:

(1) Electronics & Telecommincations Research Institute (KR) (286 patents)
(2) United States Navy (236 patents)
(3) United States Department of Energy (194 patents)
(4) United States Army (137 patents)
(5) NASA (85 patents)
(6) Japan MEXT (Ministry of Education, Culture, Sports, Science & Technology) (190 patents)
(7) US Dept. of Health and Human Services (123 patents)
(8) Agency for Science Technology and Research (Singapore) (39 patents)
(9) Japan METI (Ministry of Economic Trade & Industry) (82 patents)
(10) CNRS (Centre Nationale de la Recherche Scientifique) (France) (96 patents)

See the complete statistics here (link)

Read BusinessWeek.com "U.S. Slips to Second in Patents" (link)

Examining Patent Examination

Continuing their earlier work on patent examination and prosecution, professors Mark Lemley and Bhaven Sampat released a draft copy of their paper title "Examining Patent Examinations," which statistically analyzes patent applications filed in the month of January 2001 - the year PAIR was introduced - through April 2006. Here are some of the things they found:

• 85% of the PTO's first office actions are non-final rejections; only 13.5% of granted patents issued on the first office action without any argument or negotiation.

• Almost three-fourths of the applications that do issue (73.1%) do so without ever receiving a "final" rejection. More than half of those applications that received a final rejection had ultimately resulted in a patent

• Amendments are key to obtaining a patent: over 94% of issued and pending applications had some form of amendment during prosecution. After a final rejection, 66.1% of amended applications are patented (versus 29% pf those that were not amended)

• Despite the fact that Examiner amendments are allowed as of right only after a non-final rejection, 77.2% of interviews come after the final rejection. While 50.91% of applications with a final rejection but no interview are eventually patented, 62.6% of those with an interview after final are patented.

• 14.4% of all applications have children (continuations, CIPs, divisionals); 15.9% of all applications have RCEs. Of the continuation types, 30.16% are continuations, 20.96% are CIPs and 38.19% are divisionals.

The technology areas with the greatest percentage of continuations:

(1) AU1600 Biotechnology and Organic Chemistry -- 27%
(2) AU1700 Chemical and Materials Engineering -- 20%
(3) AU3700 Mechanical Engineering, Manufacturing, and Products -- 17%
(4) AU2800 Semiconductors, Electrical and Optical Systems and Components -- 15%
(5) AU2600 Communications -- 11%
(6) AU2100 Computer Architecture, Software, & Information Security -- 10%
(7) AU3600 Transportation, Construction, Electronic Commerce -- 10%

The paper concludes:

The evidence illuminates the patent prosecution process as a continuing negotiation between examiner and applicant. That negotiation does not end with an initial or even a final rejection. Interviews and amendments after final play an extremely significant role in generating patents, and in limiting the scope of those claims as well. Nor is that the end of the process. Continuation applications are flourishing. They have broken into two roughly equal groups, with different uses. Many applicants are using RCEs to keep fighting for claims that the examiner wasn’t willing to give them. The second group is filing continuation applications rather than RCEs. They have opted for a slower process, either because they want delay so that they can modify their application to track developments in the marketplace or because they want multiple patents to build an effective fence around a single invention.

Read/download a draft copy of the paper here (link)

USPTO Continuation Rules *DEAD* (More-or-Less)

Today the USPTO announced that it has filed a joint motion with Plaintiff GlaxoSmithKline to dismiss the lawsuit related to continuation rules. From todays' PTO press release:

Under Secretary of Commerce for Intellectual Property and Director of the USPTO David Kappos has signed a new Final Rule rescinding highly controversial regulations, proposed by the previous administration, that patent applicants felt unduly restricted their capacity to protect intellectual property. The regulations, which addressed the number of continuation applications as well as the number of claims that could be included within each application, were published in the Federal Register in August 2007, but were enjoined and never came into effect.

The USPTO also announced that it will file a motion to dismiss and vacate the federal district-court decision in a lawsuit filed against the USPTO that sought to prevent the rules from taking effect. GlaxoSmithKline - one of two plaintiffs in the Tafas v. Kappos lawsuit - will join the USPTO’s motion for dismissal and vacatur.

“The USPTO should incentivize innovation, develop rules that are responsive to its applicants’ needs and help bring their products and services to market,” Kappos said. “These regulations have been highly unpopular from the outset and were not well received by the applicant community. In taking the actions we are announcing today, we hope to engage the applicant community more effectively on improvements that will help make the USPTO more efficient, responsive, and transparent to the public.”

Interestingly, plaintiff Tafas has not agreed to drop the action and maintains that the district court decision should be upheld to limit the USPTO’s substantive rulemaking power.

Read the USPTO press release here (link)

First Action Interview Pilot Program Expanded by the USPTO

Lat week the USPTO announced that it is expanding its First Action Interview Pilot Program, where an applicant is entitled to an interview with the patent examiner prior to the first office action on the merits in a new utility application.

Previously, the program was limited to two computer-related technology areas, but now includes additional technology areas for a six-month period beginning on October 1, 2009. According to the USPTO, the initial pilot program showed that

[T]he patent process benefits when interaction between the applicant and the examiner are enhanced at the beginning of examination because patentability issues can be resolved early when the applicant and the examiner discuss them one-on-one. For the applications involved in the initial pilot, the First-Action Allowance rate increased six-fold when compared to applications from the same technology area not involved in the pilot.

Currently, an applicant may request an interview prior to a first action. However, granting of an interview is within the discretion of the examiner who has not yet reviewed the case, and the applicant may be required to identify relevant documents and explain how the invention is patentable over these documents.

Under the expanded pilot program, the examiner will conduct a prior art search and provide the applicant a pre-interview communication, which is a condensed preview of objections or rejections proposed against the claims. Within 30 days from the issue date of the pre-interview communication, the applicant must either choose not to have a first action interview with the examiner, or schedule the interview and file a proposed amendment or remarks (arguments).

Should the applicant choose not to have a first action interview, a First Action Interview office action will be promptly issued and the applicant will have one month or 30 days, whichever is longer, to reply. If an interview is scheduled, the applicant must be prepared to discuss issues related to the patentability of the claims. In this interview, if the applicant and the examiner reach agreement on all claims in regards to patentability, a notice of allowance and fees due will be issued. If agreement is not reached on all claims in regards to patentability, the applicant will be given a First Action Interview office action setting forth any requirements, objections and rejections to which the applicant will be given one month or 30 days, whichever is longer, to reply, with limited extensions of time. It is this First Action Interview office action that is considered the first action on the merits in the application.

There have been several improvements made to the program since the initial pilot. For example, the response period to reply to the pre-interview communication can now be extended by 30 days. Also, the applicant can now waive receipt of the First Action Interview office action during the interview with the examiner, convert the previously-submitted draft amendment to a formal amendment and proceed directly to the second substantive examination. This may be preferable to those who would prefer not to wait for the First Action Interview office action and refile the proposed amendment formally.

For details regarding eligibility and criteria for participation in the pilot, click here (link) (to see the enhanced page, click here)

Read the USPTO press release here (link)

- Generally, an applicant's request to participate in the program must be filed during the six month life of the program and at least one day before a first Office action on the merits of the application appears in the Patent Application Information Retrieval (PAIR) system.

- The request to enter the Pilot Program must be made via EFS-Web

USPTO Alert: Software Not Calculating National-Stage Patent Term Adjustments Correctly

The following notice from the PTO is important for any overseas patent filer having recently allowed or issued patents stemming from § 371 applications:

The USPTO is in the process of correcting an error in the computer program that it uses to calculate the patent term adjustment that affects patents issuing from international applications entering the national stage as to the United States pursuant to 35 U.S.C. § 371. The USPTO's computer program incorrectly calculates the three-year pendency provision of 35 U.S.C. 5 154(b)(l)(B) in international applications as being measured from the date that the requirements of 35 U.S.C. 9 371 were fulfilled rather than the date the national stage commenced under 35 U.S.C.4 371(b) or (f) in the international application.

Read the full notice here (link)

N.D. Illinois Issues Local Patent Rules

From the Northern District of Illinois website:

"The judges of the Northern District of Illinois have enacted the Court’s Local Patent Rules to guide the pretrial procedures in patent cases. The Local Patent Rules are effective as of October 1, 2009, and are available on the court’s web site, www.ilnd.uscourts.gov, under Local Rules."

Click here to view the local rules from the court's website.

DOWNLOAD:

Final Local Patent Rules (link)

Final Estimated Patent Case Schedule (link)

Appendix A (link)

Appendix B (link)

Judge Michel on the Patent System

On the nomination of Kappos as USPTO Director:

I think the selection of David Kappos as the director of the USPTO is the clearest indication of the new administration's appreciation of IP issues . . . This appointment is salutary - Kappos is a highly experienced lawyer with a worldwide perspective and strong management, as well as legal and technical, skills.

On USPTO funding:

The US Congress decided some years ago that the USPTO must be self-supporting. However, this works only if the fees are adequate to generate the revenue needed for a high-quality, speedy process for both trademarks and patents. I think the reality is that the fees, although they have been raised over the years, are still woefully inadequate to support the examination and IT resources required on the patent side and they barely cover the internal costs incurred on the trademark side. In my opinion, Congress has relied excessively on fee revenue to support the office. During the current economic crisis it would make sense to alter the financing arrangements in place for the USPTO so that it can draw on both taxpayer and fee-generated funds. I am not suggesting that this dual-funding option should be ongoing, but I do think it would be justified as an emergency stop-gap measure. A transfusion of public money to the USPTO would help rescue it from its current mission impossible. It simply cannot do the job needed by industry, the corporate world and ultimately the national economy with the totally inadequate resources it currently commands.

Michel's remarks can be viewed in full at World Trademark Review (registration required). You can also read comments from Joff Wild at the IAM Blog here (link).

Also, Judge Michel does not appear to be enamored with the tenor of arguments in favor of patent reform, or the diversity of voices - recently, he implored a group of lawyers to "voice their views" in the congressional debate over patent reform, and "lamenting that California technology companies are currently driving the discussion." Michel remarked:

Patent legislation is an opportunity for things to get much better, but it's also a risk for things to get much worse, and it's not entirely clear which direction it's going to head in . . . It will depend a lot on what people in the profession do. If we each do our part, then I think the odds go up greatly that the outcome will be favorable to the broad mass of companies.

From today's article from Law.com:

Michel estimates that 14 Silicon Valley companies, which mainly produce computer and telecommunications equipment, are influencing the debate the most. The interests of many other industries and geographic regions and the bulk of some 30,000 U.S. companies with more than 100 employees, he suggested, are not being heard.

In reviewing most of the congressional testimony from the past five years, Michel said he found it lacking. Specifically, he said statements that the patent system has been ruined by an explosion of litigation and that there have been rampant and excessive damage awards are wrong. Both the number of patent infringement cases filed and the median award in those cases have been stable for the past 15 years, he said.

Read Law.com "Judge Michel Calls for More Voices in Patent Reform Debate" (link)

"That's One Small Step . . ." Kappos Starts PTO Reform By Tweaking Examiner Productivity Metrics

Yesterday, the PTO published a briefing paper that was provided to the USPTO examining corps (via POPA) on a proposal that would change the "count system" in the USPTO, which is universally blamed as being a large contributor to the current backlog. Under the current count system, examiners are paid using a modified GS schedule and earn more money through productivity "count" incentives. As examination progresses, examiners get counts to earn incentive credits at various stages. The more "counts" an examiner gets, the more money he/she typically earns.

Of course, this has led to accusation of examiners (as well as applicants) "gaming" the system to gain an advantage (e.g., "RCE churning"). The current proposals are aimed at curbing these practices.

The modified count proposal rests on the following:

• Combining count system with more time for examiners;

• Providing more time overall for examiners by: (1) adding 2 hours to each examiner’s FY09 Hrs/BD); and (2) add additional time, if necessary, to account for reduction in RCE counts so that every examiner gets at least 1 net additional hour over their FY09 expectancy;

• Give more time for First Action on the Merits - shift counts so FAOMs get more credit, and subsequent actions get less;

• Diminish credit for Requests for Continued Examination (RCEs);

• Provide time for examiner-initiated interviews - one hour of non-examining time would be granted for conducting the interview and preparing the post-interview documentation for examiner initiated interviews (interviews for restrictions would be excluded); and

• Provide consistent credit for transferred or “inherited” amendments - initial or first Office Action done by the new examiner on the transferred or “inherited” amendment will get a set amount of counts (non-RCE transfers = 1.5 additional counts total; RCE transfers = 1.75 counts).

With regard to patent quality review:

- No examiner shall receive an oral warning based upon a single clear error in Patentability Determination.

- No examiner shall be deemed to have failed an oral warning improvement period on the basis of a single clear error in Patentability Determination.

- However, an examiner may receive an oral warning for multiple clear errors in Patentability Determination over a period of two or more consecutive quarters during a fiscal year.

As a side note, the Kappos proposal is not final - the modifications must still be approved by agency employees in the coming weeks. If enacted, the modifications to the count system would be the first major change since 1976.

Applicants should be encouraged that this proposal came so quickly after Kappos took over in the USPTO. Additionally, the USPTO has traditionally been less-than-eager to post or otherwise publish these types of internal documents - the openness of the current regime is certainly refreshing.

To view the briefing paper, click here (link)

PTO Extends Comment Period for 101 Interim Examination Instructions

After releasing the interim examination instructions for evaluating patent subject matter eligibility under 35 U.S.C. 101 on August 29, the USPTO issued a notice on Sept. 17 requesting comments from the public. Strangely, the PTO only provided 11 days for the public to submit all comments (Sept. 28). The USPTO has now extended the comment period to October 17. From the the latest notice:

The USPTO is extending the comment period to ensure that members of the public have sufficient opportunity to submit comments on the Interim Patent Subject Matter Eligibility Examination Instructions. A notice extending the comment period will be published in the Federal Register, and it will provide a new comment deadline of 30 days from the publication date of the notice in the Federal Register. The USPTO will revise the instructions as appropriate based on comments received. Comments that have already been received are under consideration.

Read the full notice here (link)

Do Assignments Require Express Language to Cover CIP Patents?

Gerber Scientific Int'l v. Satisloh AG, No. 3:07-CV-1382, (D. Conn., September 25, 2009, order) (P. Dorsey)

Gerber obtained patents via a broadly-worded assignment conveying all "rights, title and interest" in "the inventions covered thereby and any division reissues and extensions thereof." Notably absent from the assignment was the conveyance of continuation-in-part (CIP) patents and applications.

During litigation, Satisloh moved to dismiss the enforcement of a patent stemming from a CIP related to the previously-assigned patents, arguing that Gerber did not own the patent, and thus had no standing to bring suit. The district court initially dismissed Satisloh's motion. However, on further motion by Satisloh, the court amended the dismissal and certified the issue for interlocutory appeal for the Federal Circuit.

Although the entire ruling will be certified, the Court believes that the issue over which substantial grounds for disagreement exist is whether the Pilkington to Coburn Assignment included the continuation in part (“CIP”) which resulted in the ‘771 patent. The ruling held that although the assignment did not specifically use the term “continuation in part,” the CIP was included in the assignment. The assignment was broadly worded and specifically assigned all “rights, title and interest” in “the inventions covered thereby and any division, reissues, continuations and extensions thereof.”

However, Defendants convincingly argue that reasonable grounds exist for a difference of opinion. Although courts have found variously worded assignments to include CIPs, Defendants are correct that there is no binding precedent holding that an assignment with the exact terms cited above includes CIPs. Furthermore, a substantial ground for difference of opinion can be found even in Rowe Int’l Corp. v. Ecast, Inc., 500 F. Supp. 2d 887, on which the Court heavily relied. Although Rowe held that an assignment’s failure to use the “magic words” [CIP]” “is of no consequence,” the Rowe assignment specifically included “improvements.” Rowe, 500 F. Supp. at 891. The Pilkington to Coburn assignment, in contrast, did not mention “improvements” or use other language that referred specifically to CIPs.

[F]or the reasons stated above, Defendants’ Motion to Amend and Certify for Interlocutory Appeal is granted. All further proceedings in this case are stayed, pending resolution of the interlocutory appeal by the Court of Appeals for the Federal Circuit.

Read/download the order here (link)

Read/download Satisloh's brief for interlocutory appeal here (link)

BPAI: 101 Rejections Shouldn't Be Based on Implication If Hardware is Disclosed

Ex Parte Azuma, Appeal 2009-003902 (BPAI, September 14, 2009)

The Appellant filed a patent application which claimed, among other things,

“[a] computer program product for causing a computer to translate a text in a first language into a second language, the computer program product comprising: a computer usable medium having computer usable program code embodied therewith.”

The specification disclosed that storage media could be a memory, hard disk, floppy/disk drive and "various other hardware configurations" such as, a CD-ROM or DVD-ROM drive. The computer program for controlling the CPU was disclosed as being stored upon such computer usable media as “a distributed magnetic disk, an optical disk, semiconductor memory, or other recording media, or distributed over a network.”

In light of this, the Examiner rejected the claims as being directed to nonstatutory subject matter.

Specifically, the Examiner argued that, even though the Specification suggests that the computer usable medium may be a CD-ROM or DVD-ROM, the Specification also suggests that "other configurations are possible as well." The Examiner therefore concluded that the computer usable medium is open to any reasonable interpretation and that one of ordinary skill in the art can appreciate that a computer usable medium can be interpreted as a carrier wave or a network signal, both of which are considered non-statutory under 35 U.S.C. § 101.

The BPAI ruled that since hardware was disclosed, the Examiner could not implicate non-statutory subject matter into the meaning of the claim term

Referring to the Examiner’s finding that the Specification also suggests that "other configurations are possible as well," we find that the Specification teaches in particular that “various other [hardware] configurations are possible” . . . Since hardware is a tangible medium, we find that the reference to “various other [hardware] configurations” meets the tangibility requirement to be a manufacture.

Thus, based upon the Specification as a whole, we find that Appellant’s description of a ‘computer usable medium’ is based upon tangible storage media, such as a server, floppy drive 109, main memory 103 and hard disk 105 as specified by Appellant.

We find that the Examiner erred in finding that the cited claims implicate the use of carrier waves that embody a machine executable program or data structure. Therefore, since Appellant’s independent claim 13 is limited to being recorded on a (tangible) computer-readable medium, we reverse the Examiner’s rejection of independent claim 13 under 35 U.S.C. § 101 as being directed to nonstatutory subject matter.

The BPAI should consider issuing a precedential or informative opinion on the practice of reading non-statutory features into claims by implication. This has become a common practice in certain areas of the USPTO that creates needless conflict for Applicants when a Specification contain catch-all statements ("other configurations are possible") with regard to mediums.

Read/download the opinion here (link)

USPTO Seeking Comments on Interim Patentable Subjet Matter Guidelines

Earlier, the USPTO issued interim examination instructions for evaluating patent subject matter eligibility under 35 U.S.C. 101 (Interim Patent Subject Matter Eligibility Examination Instructions) pending the Bilski decision. According to the USPTO, the Interim Patent Subject Matter Eligibility Examination Instructions will be used by USPTO personnel in their review of patent applications to determine whether the claims in a patent application are directed to patent eligible subject matter under 35 U.S.C. 101.

Last Thursday, the USPTO requested comments from the public regarding the Interim Patent Subject Matter Eligibility Examination Instructions. Written comments must be received on or before September 28, 2009. No public hearing will be held.

In case you're wondering why the USPTO has provided a scant 11-day lead time for comments,

[T]he Interim Patent Subject Matter Eligibility Examination Instructions relate only to interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice. The USPTO is providing this opportunity for public comment because the USPTO desires the benefit of public comment on the Interim Patent Subject Matter Eligibility Examination Instructions; however, notice and an opportunity for public comment are not required under 5 U.S.C. 553(b) or any other law. See Cooper Techs. Co. v. Dudas, 536 F.3d 1330, 1336–37, (Fed. Cir. 2008) (stating that 5 U.S.C. 553, and thus 35 U.S.C. 2(b)(2)(B), does not require notice and comment rule making for ‘‘ ‘interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice.’ ’’)

Comments should be sent by electronic mail message over the Internet addressed to AB98.Comments@uspto.gov.

Comments may also be submitted by facsimile to (571) 273–0125, marked to the attention of Caroline D. Dennison.

Although comments may be submitted by mail or facsimile, the USPTO prefers to receive comments via the Internet.

Read the notice here (link)

WIPO Report 2009: Recession Hits Patent Filings (But Not So Much In Asia)

WIPO held a two-day international symposium that concluded on September 18, 2009, where over 40 heads of IP offices participated in various discussions on IP issues. One primary focus of the event was to address the need to pool efforts at the international level to address the problem of backlogs in patent applications.

WIPO Director General Francis Gurry referred to recently published data that showed that the global backlog in unprocessed patent applications around the world in 2007 was a "staggering" 4.2 million. Considering that backlogs have grown on average at a rate of 8.7% over the past five years, Gurry concluded that “this is unsustainable.” The USPTO accounted for around 28% of this backlog, followed by Japan, the EPO and the ROK.

The symposium comes on the heels of WIPO's World Intellectual Property Indicators 2009 (formerly known as the "World Patent Report"), which showed that, prior to the 2008 meltdown, IP filings were still robust, with 1.85 million patent (+3.7% increase), almost 3.3 million trademark (+1.6%) and approximately 0.62 million industrial design (+15.3%) applications being filed worldwide.

While the recessionary impact on filings is not known yet, international patent filings in the first half of this year were down 14 percent from a year earlier in the United States, but up 19 percent in China. Japanese international patent filings grew 11 percent while Britain's rose 6 percent in the first half of this year, although domestic filings in both countries fell by over 10 percent.

More from the report:

- While patent filings increased by 3.7%, the growth is less than the 5.2% growth recorded the previous year. Approximately, 59.2% of total patent applications in 2007 were filed in China, Japan and the US.

- Companies continued to seek IP protection outside their domestic markets. In 2007, non-residents accounted for 43.3% of the patents filed worldwide, maintaining a level that was established in 2001.

- The JPO is now number 1: while the USPTO traditionally issued the highest number of patents since 1998, this year the Office was surpassed by the JPO. Additionally, China 's SIPO replaced the EPO as the fourth largest office in terms of issuing grants. The five largest patent offices (the patent offices of Japan, the USA, the Republic of Korea, China and the EPO) accounted for 74.4% of total patent grants.

- Some 6.3 million patents were in force in 2007, with residents of Japan and the USA owning approximately 47% of this total.

- In 2008, approximately 163,600 PCT applications were filed, representing a 2.3% increase on 2007 figures. Applicants from the USA accounted for around 32.7% of all PCT filings.

To read/download the 110-page report, click here (link)

See also

"WIPO Report Shows Growth in IP Rights before Onset of Economic Crisis" (link)

"WIPO Symposium Concludes Global Patent Application Backlogs Unsustainable" (link)

See WIPO web page and materials for "Global Symposium of Intellectual Property Authorities," September 17, 2009 to September 18, 2009 (Geneva, Switzerland) (link)

Coverage from AGIP News: "WIPO Symposium Concludes Global Patent Application Backlog Unsustainable" (remarking that participants in the symposium concluded that the PCT should serve as the backbone for work sharing) (link)

"And We're Off!" - Companies Turning To Congress on Patent Reform Issues

While other issues (i.e., health reform, bailouts) continue to dominate the attention of Congress, it appears that patent reform is coming back on the radar, as a recent letter from 59 tech companies point out that, "[w]hile some versions of the legislation have been improved this Congress, additional improvements are in order to ensure that the end product avoids serious unintended consequences."

Specifically, the letter comes out against post-grant review and argues that the PTO is not equipped to handle the inevitable flood of requests:

[T]these proposals represent a huge risk for the Patent and Trademark Office, which already is under severe strain as indicated in Congress’ emergency approval to use trademark fees for patent functions. Adding new obligations to the agency at this time seems extraordinarily unwise. Almost inherently, the basic patent examination function will suffer, with the result of longer patent pendency and lower patent quality. . .

Another troubling aspect of the post-grant review and inter partes reexamination proposals is that, as written, they are vulnerable to a high level of abuse. Specifically, the current construct of the proposals will allow infringers to subject valid patents to lengthy and repeat challenges.

* * *

We agree on the goal of reducing the amount and cost of patent litigation. We do not believe, however, that the post-grant and inter partes provisions, as drafted, will achieve this goal. We urge you to push for improvements to these provisions which will limit the ability of infringers to undermine the very system the legislation attempts to strengthen.

Read/download the entire letter here (link)

See also, "Tech cos. protest patent reform in letter to Locke" (link)

Fed. Cir.: Section 121 "Safe Harbor" Provision Does Not Apply to Continuations

Amgen, Inc. v. F. Hoffman-La Roche, Ltd., No. 09-1020 (Sept. 15, 2009)

Amgen prosecuted a series of patent applications relating to the production of the protein erythropoietin ("EPO") using recombinant DNA technology. All of the patents stemmed from a common specification disclosed in "the '298 application."

During prosecution, the '298 application was subjected to a 7-way restriction. The applicants elected prosecution of one group of claims, which ultimately issued as a patent. Prior to issuance, Amgen prosecuted withdrawn claims as continuation applications, where a number of patents issued as "product patents" and "process patents."

During litigation, Rouche alleged at the summary judgment phase that certain patents stemming from the continuation application were invalid for obviousness-type double patenting, since later-claimed products were covered by earlier-claimed processes. The district court granted summary judgment in favor of the patentee Amgen, ruling that the later patents were shielded from double patenting by 35 U.S.C. § 121, which, in pertinent part states:

A patent issuing on an application with respect to which a requirement for restriction under this section has been made . . . shall not be used as a reference . . . against a divisional application or against the original application or any patent issued on either of them, if the divisional application is filed before the issuance of the patent on the other application.

In other words, § 121 shields patents that issue on applications filed as a result of a restriction requirement from double patenting invalidation.

Rouche argued that § 121 cannot shield the later patents because they issued from solely continuation applications to which § 121 is inapplicable. Roche contended that § 121 applies exclusively to divisional applications and patents issuing therefrom. Amgen countered that, although the applications were technically filed as "continuations", a court should look to an application’s substance—not its designation—to determine whether it qualifies as a divisional application under § 121’s safe harbor.

The Fed. Cir. dealt with a similar issue recently in Pfizer, Inc. v. Teva Pharmaceuticals USA, Inc., 518 F.3d 1353 (Fed. Cir. 2008), where the court ruled that CIP's were not eligible for protection of the § 121 safe harbor:

§ 121 on its face refers to "divisional application[s]." . . . Turning to the legislative history, the court observed that a House Report also referred specifically to "divisional application[s]." Notably absent from the legislative history, in the court’s view, was a suggestion "that the safe-harbor provision was, or needed to be, directed at anything but divisional applications." From there, the court "conclude[d] that the protection afforded by section 121 to applications (or patents issued therefrom) filed as a result of a restriction requirement is limited to divisional applications." Accordingly, the court decided that the § 121 safe harbor did not apply to the patent before it, which issued from a continuation-in-part application.

Noting that the application of § 121 should be "strict", the court ruled that continuation applications were also not eligible:

We recognize that, unlike a continuation-in-part application, a continuation application can satisfy the definition of a "divisional application" in MPEP § 201.06. . . . This distinction, however, does not justify departing from a strict application of the plain language of § 121, which affords its benefits to "divisional application[s]."

* * *

Amgen does not dispute that it denominated the [] applications continuations, that it checked the continuation application box on the submitted form, or that its applications met the PTO’s definition of a continuation application in MPEP § 201.07. . . . Instead, Amgen argues that, because the [] continuation applications could have been filed as divisional applications, we should treat them as such for purposes of § 121. While this argument convinced the district court to regard the [] continuation applications as divisional applications, we are not likewise convinced. We decline to construe "divisional application" in § 121 to encompass Amgen’s properly filed, properly designated continuation applications.

Interestingly, the court noted that, if Amgen filed the continuation applications originally as divisionals, and then filed continuations off of the divisional, the safe harbor provision would be left intact ("intervening continuation applications do not render a patent ineligible for § 121 protection so long as they descended from a divisional application filed as a result of a restriction requirement.").

In vacating summary judgment on the issue of double-patenting, the court added that the continuation provision of section 120 ("[an] application for patent for an invention . . . shall have the same effect . . . as though filed on the date of the prior application") would allow the patentee to rely on "post-invention" developments to show distinctiveness in combating issues of double-patenting. In other words,

[W]hen an issued patent claims a product and discloses, but does not claim, a process for making that product, the patentee, when later seeking a patent on the disclosed process, may present evidence of post-invention, alternative processes that produce the patented product, in order to show that the process and product are patentably distinct.

The 81-page opinion also dives into a multitude of different issues relating to distinctiveness, anticipation, indefiniteness, claim construction and infringement, and DOE - you can read/download the entire opinion here (link).

"Patent Troll Tracker" Trial Begins in E.D. Tex.

Anyone who has followed the patent blogs since last year is familiar with the now-defunct "Patent Troll Tracker Blog", penned by Rick Frenkel, who, at the time, was in-house patent counsel for Cisco. When commenting on patent holding company ESN and it's lawsuit against Cisco, Frenkel alleged on the blog that the filing date for that patent suit was changed after ESN's local counsel "called the EDTX court clerk, and convinced him/her to change the docket to reflect an October 16 filing date, rather than the October 15 filing date." This change was made, according to Frenkel, in order to "try to manufacture subject matter jurisdiction."

ESN's counsel Eric Albritton claims that Frenkel's remarks were defamatory and sued Frenkel together with his employer Cisco, alleging that the company was complicit in posting the allegedly defamatory remarks.

On Monday, the "Patent Troll Tracker" lawsuit began with jury selection and opening arguments. Joe Mullin, who is a reporter at IP Law and Business magazine and author of the Prior Art Blog, is sitting in on the trial and is providing blow-by-blow reporting from the courtroom. From Mullin's post:

• James Holmes [for plaintiff Albritton] said his team will show that Frenkel's posts accused Albritton of a felonious "conspiracy" and were "hurtful, painful, [and] disturbing" to Albritton. Cisco, a $33 billion company, should be taught a lesson by being forced to pay punitive damages, the lawyers said.
• Holmes showed e-mails exchanged between Frenkel, former Cisco patent chief Mallun Yen, and former PR man John Noh--who told his boss he liked to 'play a game' with journalists by pretending he didn't know that the Patent Troll Tracker was actually a Cisco employee.

• Defense lawyers Babcock and McWilliams said Frenkel's post about the changed docket date was dead-on true, noting that no court clerk in the Eastern District could remember ever having changed a docket before. In any case, they maintain Albritton hasn't suffered any financial harm, and he has no real evidence to support his claim of "mental anguish."
• Babcock also argues the defamation lawsuit is intended to gain some leverage against Cisco in ongoing patent lawsuits—and, not coincidentally, squashing Frenkel's attempt to shine a light on the murky world of patent trolls.

Get the complete story from Mullin here (link)

See also Texas Lawyer, "Trial to Begin in Suit Against Cisco, Patent Troll Tracker Blogger" (link)

Kappos Gives First Public Address at IPO Annual Meeting

IPO has now concluded its annual meeting here in Chicago, where one of the many highlights was David Kappos serving as the "kick-off" speaker. In his speech (now posted on the USPTO site), Kappos discussed future plans and goals for the USPTO:

- Reengineer the examiner count system - "we’re going to have a count system that helps everyone get to the point without requiring two or three RCEs."

- Cut pendency across the board, by allowing an applicant to select an application to advance in the queue in exchange for each application they withdraw before substantive examination.

- Focus on global worksharing—which Kappos believes "is key to helping us meet the increasing challenge of efficiently managing the USPTO’s workload."

- "Our biggest challenge – Funding."

- Future objectives include:

• Reducing first action pendency to 10 months and overall pendency to 20 months;

• Decreasing the size of the patent application backlog to approximately 300,000 cases;

• Reducing patent appeals pendency to 3 months;

• Reducing reexamination pendency to 1 year;

• Bringing the quality of PCT processing to world-class level; and

• Implementing a robust IT system capable of supporting all the USPTO’s operations on a 24/7 basis, and capable of facilitating full electronic patent and trademark processing.

Read the speech in its entirety here (link)

MORE: According to the Just a Patent Examiner Blog, Kappos has started a blog. For the time being, it's only hosted on the internal USPTO servers. However, according to the blog, "we plan to make the blog available to the public in the coming weeks." Also, internal USPTO announcements indicate that a joint union and management task force will begin the work of "addressing the patent examiner count system."

Fed. Cir. Chops Back $358M Lucent Verdict; Gives Clinic on "Patent Damages Apportionment"

Lucent Technologies, Inc. v. Gateway, Inc., No. 08-1485 (Sept. 11, 2009)

Microsoft appealed the lower court's findings and jury verdict of $358M against Microsoft Corp. for use of its “pop-up calendar” in Microsoft Outlook. With regard to validity, the court affirmed the lower court's finding that the patent-at-issue was not obvious. Regarding infringement, the Fed. Cir. also found Microsoft liable for indirect infringement, but noted that "Lucent's direct evidence of infringment was limited . . . [n]evertheless, [the] circumstantial evidence was just adequate to permit a jury to find that at least one other person within the United States during the relevant time period . . . had performed the claimed method."

The remainder of the 64-page opinion addressed the issue of damages, where the court provided its most detailed analysis of the Georgia-Pacific factors in recent memory. Specifically, the court looked at the most common approach for determining damages - the "hypothetical negotiation" approach to determine the proper royalty upon which the parties would have agreed had they successfully negotiated an agreement just before the infringement began

Prior to its analysis, the court noted the following with regard to the district court's "gatekeeping" role for damages:

Microsoft does not argue on appeal that any of the evidence relevant to the damages award was improperly before the jury. At times, Microsoft’s briefs seem to suggest that the district court judge "abdicated" her role as a gatekeeper. The responsibility for objecting to evidence, however, remains firmly with the parties. Here, the record reveals that, at trial, Microsoft objected neither to the introduction of any of the licenses discussed below nor to the testimony of Lucent’s expert as it related to those licenses. In this instance, the district court judge had no independent mandate to exclude any of that evidence.

One of the first issues regarding damages was the fact that the jury issued a lump-sum royalty that amounted to approximately 8% of the sale price of Outlook. This was problematic to the Fed. Cir. for a number of reasons:

First, no evidence of record establishes the parties’ expectations about how often the patented method would be used by consumers. Second, the jury heard little factual testimony explaining how a license agreement structured as a running royalty agreement is probative of a lump-sum payment to which the parties would have agreed. Third, the license agreements for other groups of patents, invoked by Lucent, were created from events far different from a license negotiation to avoid infringement of the one patent here . . . Lucent submitted no evidence upon which a jury could reasonably conclude that Microsoft and Lucent would have estimated, at the time of the negotiation, that the patented date-picker feature would have been so frequently used or valued as to command a lump-sum payment that amounts to approximately 8% of the sale price of Outlook.

Additionally, the court found that expert testimony "urging jurors to rely on speculation", without any more was "insufficient":

The law does not require an expert to convey all his knowledge to the jury about each license agreement in evidence, but a lump-sum damages award cannot stand solely on evidence which amounts to little more than a recitation of royalty numbers, one of which is arguably in the ballpark of the jury’s award, particularly when it is doubtful that the technology of those license agreements is in any way similar to the technology being litigated here . . . In the present case, the jury had almost no testimony with which to recalculate in a meaningful way the value of any of the running royalty agreements to arrive at the lump-sum damages award.

Also, regarding the apportionment of damages (Georgia-Pacific factors 10 & 13), the court determined that the pop-up calendar feature was a "tiny feature" that did not warrant royalties based on the entire Outlook product:

The evidence can support only a finding that the infringing feature contained in Microsoft Outlook is but a tiny feature of one part of a much larger software program. Microsoft’s expert explained that Outlook’s e-mail component is "the part of Outlook that’s most commonly used by our customers." . . . In short, Outlook is an enormously complex software program comprising hundreds, if not thousands or even more, features. We find it inconceivable to conclude, based on the present record, that the use of one small feature, the date-picker, constitutes a substantial portion of the value of Outlook. . . . . For these reasons, Factors 10 and 13 of Georgia-Pacific provide little support for the jury’s lump-sum damages award of $357,693,056.18.

Finally, in the entire market value (EMV) analysis, the court addressed criticisms in Congress and by high technology companies about the court's use of the EMV rule, which “allows for the recovery of damages based on the value of an entire apparatus containing several features, when the feature patented constitutes the basis for customer demand." The court agreed with Microsoft that the jury improperly applied the EMV rule in this case, by using the entire revenues of Microsoft Outlook as the royalty base.

Also, the court defended the use of EMV despite criticism from various academic and industry circles:

Some commentators suggest that the entire market value rule should have little role in reasonable royalty law. . . . But such general propositions ignore the realities of patent licensing and the flexibility needed in transferring intellectual property rights. The evidence of record in the present dispute illustrates the importance the entire market value may have in reasonable royalty cases. The license agreements admitted into evidence (without objection from Microsoft, we note) highlight how sophisticated parties routinely enter into license agreements that base the value of the patented inventions as a percentage of the commercial products’ sales price. There is nothing inherently wrong with using the market value of the entire product, especially when there is no established market value for the infringing component or feature, so long as the multiplier accounts for the proportion of the base represented by the infringing component or feature.

Nevertheless, in light of the lack of substantial evidence supporting the original damages verdict, the Fed. Cir. remanded the case for further proceedings.

Download a copy of the opinion here (link)

Willfulness Can Still Be Pled Even If Preliminary Injunction Is Not Sought

When the Federal Circuit issued its Seagate decision on willful infringement, the court stated the following on post-filing willfulness:

It is certainly true that patent infringement is an ongoing offense that can continue after litigation has commenced. However, when a complaint is filed, a patentee must have a good faith basis for alleging willful infringement. Fed. R. Civ. P. 8, 11(b). So a willfulness claim asserted in the original complaint must necessarily be grounded exclusively in the accused infringer's pre-filing conduct. By contrast, when an accused infringer's post-filing conduct is reckless, a patentee can move for a preliminary injunction, which generally provides an adequate remedy for combating post-filing willful infringement . . . A patentee who does not attempt to stop an accused infringer's activities in this manner should not be allowed to accrue enhanced damages based solely on the infringer's post-filing conduct. Similarly, if a patentee attempts to secure injunctive relief but fails, it is likely the infringement did not rise to the level of recklessness.

The Seagate opinion went further to state that the position on preliminary injunctions was not a per se rule, and its application would depend on the facts of each case.

Nevertheless, many defendants have latched onto this language in the district courts in an effort to get the willfulness issue "off the table" early using 12(b)(6) motions.

Affinity Labs of Texas LLC v. Alpine Electronics, No. 9:08-CV-171 (E.D. Tex., Sept. 2, 2009, order) (R. Clark).

Affinity Labs commenced their case on August 29, 2008. In its initial complaint, Affinity Labs neither made a claim of willful infringement nor requested a preliminary injunction. At a subsequent Case Management Conference, Affinity Labs confirmed that it had not, at that time, made a willfulness claim, and stated that Defendants were unaware of the asserted patent until the case was filed. A few months later, Affinity Labs amended its complaint to raise a willfulness claim for the first time. Defendants moved to dismiss Affinity Labs’s claim of willful infringement on the grounds that Affinity Labs cannot base its claim entirely on Defendants’ post-filing conduct without first moving for a preliminary injunction.

The court rejected this argument:

It would make little sense to implement a per se rule where a patentee who relies solely on post-filing conduct for his willfulness claim is foreclosed from receiving enhanced damages if he does not also seek preliminary injunctive relief. Injunctive relief is not always appropriate under the facts of a case. See eBay, Inc. v. MercExchange . . .There is little difference between the situation where the court denies a preliminary injunction and that where counsel believes a motion for a preliminary injunction would be inappropriate and opts instead not to file one after considering his or her ethical obligations under Fed. R. Civ. P. 11.3 The Seagate court explicitly declined to apply a per se rule in the first situation, and the court sees no reason why a different result is mandated in the latter situation.

Defendants do not suggest that the facts alleged by Affinity Labs in its second amended complaint do not state a claim for willfulness; they merely contend that Affinity Labs cannot raise a willfulness claim based solely on post-filing conduct without first seeking a preliminary injunction. For the reasons discussed above, the court rejects this argument. Accepting the facts pled in Affinity Labs’s complaint as true, the complaint states a claim to relief that is plausible on its face. Defendants’ motion to dismiss for failure to state a claim is denied.

Read/download the opinion here (link)

The opinion also has a handy run-down of recent decisions on this same issue, where a majority of district courts also came out against the per se rule:

- ACCO Brands, Inc. v. PC Guardian Anti-Theft Prods., Inc., 592 F. Supp. 2d 1208, 1227 (N.D. Cal. 2008) - court concluded that Seagate does not hold “that only conduct after the patentee files for a preliminary injunction may be considered as a basis of a willfulness claim” and denied Defendants’ motion for summary judgment on willfulness.

- St. Clair Intellectual Property Consultants, Inc. v. Palm, Inc., 2009 WL 164751 at *1 (D. Del. Jun. 10, 2009) - granted Plaintiff’s request to file an amended complaint adding a willfulness claim and noting that “there is no per se requirement for a plaintiff to file for preliminary injunctive relief before raising a wilful infringement claim.”

- Krippelz v. Ford Motor Co., 2009 WL 799463 at *4 (N.D. Ill. Mar. 25, 2009) - rejecting Defendant’s argument that failing to move for a preliminary injunction waived any right to damages for willfulness, stating that “the proposition that failure to seek a preliminary injunction constitutes a forfeit of a claim for willful infringement is neither an absolute nor a general rule applicable to all patent cases.”

- Novartis Pharmas. Corp. v. Teva Pharmas. USA, Inc., 2009 WL 483865 (D.N.J. Feb. 25, 2009) - Plaintiff was denied a preliminary injunction, the court stated that it “agrees with [Plaintiff] that Seagate did not create a per se rule of dismissal, and finds that it may be possible for [Plaintiff] to show after discovery that [Defendant] acted in reckless disregard of the ‘objectively high likelihood’ that it was infringing on a valid patent.”

PatentFreedom To Offer Subscription-Based Reexam Service to Attack NPE Patents

Joff Wild from IAM Magazine attended the CIP Forum 2009 in Göteborg Sweden and provided an interesting report on a presentation given by Dan McCurdy, who is the chairman of PatentFreedom and CEO of Allied Security Trust. In his presentation, McCurdy announced the launch of a new initiative called "Integrity" which will essentially serve as an inter-partes reexam gadfly service against problematic patents owned by NPE's (aka "trolls").

PatentFreedom offers subscription-based services, priced between $15- $25K, "designed to help operating companies and their advisors more effectively assess, respond to, and ultimately reduce the specific threats posed by NPEs." Membership is open "to any operating company, law firm , or other entity that derives the majority of its revenues from the sale of products or services other than services involving the sale, enforcement, or licensing of intellectual property" (for a list of service offerings, click here).

The new "Integrity" service will be available to PatentFreedom subscribers, where each subscriber chooses which sectors they would like PatentFreedom to focus on when seeking to identify patents to challenge. Importantly (and perhaps oddly), subscribers cannot single out specific patents on their own - the PatentFreedom team will ultimately make this decision, based on subscriber portfolio assessments identifying particularly threatening and potetially vulnerable patents.

Wild provides further details:

Companies can identify as many sectors as they wish, but will have to pay a minimum of $100,000 for each one they do select. McCurdy estimates that the cost of an inter partes re-examination is between $100,000 and $200,000. He told me that the idea was not only to deprive NPEs/trolls of the weapons they use to challenge operating companies, but also to sow uncertainty in the minds of their financial backers. Will investors be so willing to fund an NPE/troll if there is a chance that the patent(s) it seeks to use to generate an income will be held invalid in a USPTO process that costs a fraction of the amount needed to fight a full-scale litigation?

According to McCurdy, PatentFreedom data shows that close to 4,000 operating companies doing business in the US have now been sued by an NPE/troll. The cost of NPEs/trolls to those who they targeted in 2008 was betwen $7 billion and $10 billion. Overall, they now account for 17% of all American patent litigation, although in the technology industries that figure climbs to more than 50%, with some individual companies experiencing a hit rate of 90%. It is time, McCurdy says, to be much more aggressive in fighting the threat that NPEs/trolls pose. For example, he wondered, whether operating companies should give work with law firms that routinely represent NPEs/trolls (he showed a slide of those which do so and some big names were on the list) or employ funds that back NPEs/trolls to run things such as pension and healthcare plans. When fighting a war, he stated, you go after the fight chain. And, he said, operating companies are engaged in a war with NPEs/trolls.

Read Wild's full post here (link)

"Senior Management Changes" at the USPTO; Doll Retires

Today the PTO announced that, after 35 years at the USPTO, Commissioner for Patents John Doll has intends to retire from the agency on October 2, 2009. As a result, David Kappos has nominated longtime USPTO executive Robert (“Bob”) Stoll to the position of Commissioner for Patents, and has named Margaret (“Peggy”) Focarino Deputy Commissioner for Patents.

It is expected that U.S. Commerce Secretary Gary Locke will appoint Stoll after Doll’s retirement becomes official. The Commissioner appointment is for a term of five years.

It is not certain how Doll's retirement will affect the ongoing continuation rules litigation (Tafas v. Doll), but it certainly won't help the PTO's case at this point.

See Stoll's biography here (link)

See Focarino's biography here (link)

Read the PTO announcement in its entirety here (link)

Gutierrez On Patent Harmonization

Horacio Gutierrez, Corporate Vice President and Deputy General Counsel of Microsoft, posted the following on Microsoft's official blog on Tuesday:

Big challenges certainly confront the global patent system: Escalating patent application backlogs; lengthening pendency periods; increasing costs of patent prosecution; dubious patent quality due to the global explosion of prior art and the time allowed to examine applications; and examination inefficiency due to duplication of work by multiple offices.

But these challenges also present unprecedented opportunity. One of the biggest is the opportunity to advance patent harmonization.

Global patent harmonization is not just wishful thinking about an ideal patent system. Rather, it is a necessity if national patent authorities are to overcome the substantial difficulties they face.

Over 3.5 million patent applications are pending around the world, including over 750,000 in the U.S. Pendency periods are extending to three, four or in some case five years before final patents are issued. The cost of this workload to patent applicants and patent offices is too high, and the delays in securing patents are too long for entrepreneurs and large enterprises alike.

In today’s world of universal connectivity, global business and collaborative innovation, it is time for a world patent that is derived from a single patent application, examined and prosecuted by a single examining authority and litigated before a single judicial body.

A harmonized, global patent system would resolve many of the criticisms leveled at national patent systems over unmanageable backlogs and interminable pendency periods.

To increase efficiency and enhance patent quality, patent offices also need to leverage collaboration and work sharing opportunities. As I blogged previously, national patent offices should be commended for their early efforts at work sharing through projects such as the Patent Prosecution Highway and the "IP5"partnership.

The logical next step is to accelerate the work underway to align patent approval procedures and application formats, including a common digital application, and to collaboratively set standards for patentable subject matter, adequacy of disclosure and enablement requirements, and the completeness of the examination record. Bold action is needed. Stringent criteria must be established and clearly understood so patent search and examination results can be accepted by patent authorities around the world.

By facing the challenges, realizing a vision, overcoming political barriers, and removing procedural obstacles we can build a global patent system that will promote innovation, enrich public knowledge, encourage competition and drive economic growth and employment. The time is now – the solutions are in reach.

See the post here (link).

What is interesting here is that the call for harmonization appears to go beyond the standard administrative reforms ("it is time for a world patent that is derived from a single patent application, examined and prosecuted by a single examining authority and litigated before a single judicial body"). Such a position, particularly within the U.S., is quite unusual.

Of course, speculation abounds over the meaning of the statement, but it is worthwhile to note that the statement was probably released in anticipation of WIPO's upcoming symposion on September 17th titled "Symposium to Address Operational Deficiencies in Global IP Systems" (link). More details will follow.

Now It Begins? Litigation Rumors Surface Over Intellectual Ventures

Intellectual Ventures (IV) has insisted for a long while that its accumulation of patents has nothing to do with patent litigation. In fact, the company has prided itself on not filing any lawsuits, despite the claim that its patent portfolio, comprising 27,000 patents, has brought in over $1B in licensing revenue. Recently, IV was rumored to have struck a $120M patent deal with Intuit Inc., and also struck deals with companies like Cisco and Verizon for between $200M and $400M apiece.

Interestingly, no one knows the circumstances surrounding IV's licensing deals - to date, most every license is shrouded in mystery (Intuit's SEC filing stated that the company "entered into an agreement to license certain technology" for past and future licensing rights. The filing did not disclose the technology, the IP or the licensor.) Worse still, IV operates using a multitude of shell companies, making it difficult to track ownership of the patents.

Recently, IV was rumored to be engaging in "catch and release" licensing with some of its patents - after getting a particular patent or portfolio, IV gives prospective licensees a timetable to pay a set amount. After the time period expires, the patent is then sold off to anyone (read: patent plaintiff firm) that feels they can monetize the patent(s), with a "back end" payment being negotiated in favor of IV. In other words, IV has allegedly started to "outsource" their patent litigation.

Zusha Elinson from the Recorder has an excellent piece on IV's alleged foray into patent litigation, where the article covers the saga behind Picture Frame Innovations LLC who recently filed suit (see complaint here) against Kodak and CDW, seeking millions of dollars in damages. Elinson tracks the history of the patent, the inventors, owners, and even looks at the attorneys handling some of the behind-the-scenes matters to show IV's involvement, and concludes that the litigation represents "a new phase" in IV's business model.

- Read "Intellectual Ventures Takes Indirect Route to Court" (link)

NOTE1: An interesting factoid about the litigation is that the lead attorney for the plaintiff is none other than Ray Niro.

NOTE2: The complaint states that Picture Frame Innovations LLC is located at "125 South Wacker Drive, Suite 300 Chicago, IL 60606" - this location appears to be nothing more than a virtual office space.

NOTE3: In case anyone is looking for more information on IV and its collection of shell companies (over 362 of them in all), you can order a report from Avancept LLC that will give you all the grueling details over the span of 650+ pages. To order a report (or read the report summary), click here.