Friday, December 28, 2007

Leahy, Hatch Address Patent Reform Act for 2008

On December 18, Senators Patrick Leahy and Orrin Hatch briefly addressed the Senate version (S. 1145) of the Patent Reform Act during a floor speech. While the speeches were not very detailed, they suggested two things - (1) the Senate wants to move as quickly as possible on the Patent Refrom Act, and (2) the pending legislation will have numerous changes before it is put up for a vote.

From the speeches:

LEAHY: In July, after several extensive and substantive markup sessions, the Senate Judiciary Committee reported S. 1145 favorably and on a clear and strong bipartisan vote. In the course of our committee deliberations, a great many changes were made to improve and perfect the bill. These improvements included changes on the key issues of enhancing patent quality, clarifying rules on infringement and compensation of inventors, and improving the ability of the Patent and Trademark Office to do its job well.

HATCH: [T]he current law has not seen a major revision since 1952. Much has changed since then. The courts have struggled valiantly to interpret the law in ways that make sense in light of change. but that piecemeal process has left many areas unclear and some areas of the law out of balance. So action by the Congress is needed, and needed urgently.

LEAHY: I agree with my distinguished colleague that now is the time to enact patent reform, and we are in good company in that belief. Our leadership has committed to taking up S. 1145 as early in the new year as possible, and we commend that commitment. I fully recognize that when the bill was reported by the Judiciary Committee, a number of members expressed a strong view that the bill should be further perfected before it comes to a vote on the floor of the Senate. I made a commitment to the members of the Judiciary Committee at the markup that I would work closely with each of them, and other Members of the Senate, to make further improvements in the bill. I reaffirm that commitment.

View the complete transcript here (link)

Wednesday, December 26, 2007

Public Interest Groups File Amicus in *Support* Of Continuation Rules in ED Va.

Eleven Public Interest groups recently filed a collective amicus brief in the E.D. Va., supporting the PTO's position on the continuation rule changes. The brief borrowed heavily from Lemley & Moore's 2004 paper titled "Ending Abuse of Patent Continuations" and the FTC's 2003 report to conclude that limiting continuations will help the public interest:

To be sure, while there is indeed a strong public interest in supporting innovation, that does not mean that incentives for patents should always be raised without considering the corresponding cost to society. Congress has intentionally implemented a patent system that balances the incentives provided to patentees with the benefit to the public of the disclosure and ultimate dedication of the resulting inventions to society. Thus, the public interest lies in an efficiently functioning patent system, not one that is subject to abuse and manipulation. Since the Final Rules will help the USPTO achieve this goal, they are in the public interest.
Interestingly, the brief suggests that patent applicants and practitioners are not entirely within the purview of the "public interest":
[A]rguments regarding the public interest made by patent holders and patent attorneys should be carefully scrutinized, because they are, in fact, the special interests that benefit from the patent system and what benefits them personally may not actually benefit the public interest.
Read/download the brief here (link)

Read PubPat press release here (link)

Members of the "Public Interest Amici" include:

  • The Public Patent Foundation ("PUBPAT"),
  • Computer & Communications Industry Association ("CCIA"),
  • The AARP,
  • Consumer Federation of America (“CFA”),
  • Essential Action,Foundation for Taxpayer and Consumer Rights (“FTCR”),
  • Initiative for Medicines, Access &Knowledge (“IMAK”),
  • Knowledge Ecology International (“KEI”),
  • Prescription Access Litigation(“PAL”),
  • Public Knowledge (“PK”),
  • Research on Innovation (“ROI”), and
  • Software Freedom LawCenter (“SFLC”)

Thursday, December 20, 2007

Happy Holidays From the 271 Blog!

U.S. Patent 7,258,592 - "Santa Claus visit kit"

1. A kit for creating an illusion that suggests a Santa Claus visit in a premises, said kit comprising:

a) items revealed to a child audience comprising

i) a displayer Christmas diorama that, when assembled, at least partly bounds a region in which small items can be placed, said diorama having a plurality of panels, a first image being imprinted on one of said panels;

ii) amusement items for use by at least a member of said child audience in carrying out steps that said child audience is invited to believe will assist Santa Claus in making said visit; and

b) items at least temporarily concealed from the child audience, said concealed items comprising means for making boot print resembling marks to mark an illusionary trail of Santa Claus in said premises and a card having a second image, the second image being similar to the first image but also containing a representation of Santa Claus.


The 271 will be taking a short break over the holidays to experiment with single malt scotch from Japan (yes, Japan - the country is now the second largest producer of single malt in the world), drinking a toast to Franklin Pierce (the first president to decorate an official White House Christmas tree), and finally getting around to making "figgy pudding" (link) after all those years wondering what the heck Bing Crosby was singing about . . .


Wednesday, December 19, 2007

Litigation Statistics Suggest China's IPR Progressing for Plaintiffs

Will Lewis, student at the University of San Diego School of Law, engaged in some recent number-crunching to get a sense on the state of IP enforcement in China. Basically, Lewis took IP cases from the Beijing Courts, Guangzhou Intermediate People's Court, Jiangsu Courts, and Zhejiang Courts, segregated cases having domestic-only parties from cases having at least one foreign entity, and tabulated the outcomes of the cases. A summary of his findings appear below:

Bejing Cases

Lewis' analysis looked at cases from Beijing No. 1 Intermediate People's Court, Beijing No. 2 People's Court, and Beijing High People's Court between November 2005 and January 2007. In total, 24 of the published patent cases were litigated to a final judgment in the lower courts, where the patent holder prevailed 67% of the time. However, on administrative review (i.e. appeal), the reviewing court found the patent at issue invalid 52% of the time, valid 27%, partially valid 6%, and remanded 15% of the cases.

In the 15 patent cases that damages are reported, the average damage award was RMB 158,457 plus injunctions. The largest damage award was RMB500,000 for infringement of a patent. The company who won this award claimed RMB37,500,000 in damages.

Guangzhou Cases

Here, foreign patent holders prevailed in 100% of the 3 published cases (domestic disputed were adjudicated in favor of the patentee in 71% of 14 published cases).

Of the 3 patent case involving at least one foreign party, the average damage award was RMB56,666 plus an injunction.

Jiangsu Cases

Again, foreign patent holders prevailed in 100% of the 3 published cases. However, the Jiangsu courts had a heavier domestic docket, but also found in favor of the patentee in 71% of 84 published cases.

Injunctions were issued in all three of the decisions for foreign patent holders, but the damages award was reversed on appeal for one of the cases. The average damages award for other two cases was RMB275,000.

Zhejiang Cases

Here, the courts only heard 2 cases involving a foreign patent holder and found in favor of the patentee 505 of the time. With regard to domestic cases, Zhejiang appeared to have a heavy patent dockets, publishing 107 cases, where the patentee prevailed in 86% of the cases.

To view all the findings, click here (link)

Overall, Lewis concluded that (1) the winning rates are similar whether the plaintiff is domestic or foreign; (2) trade secret is the most difficult IPR to protect; (3) a higher percentage of cases involving foreign parties went to trial than cases involving only domestic parties; and (4) IP rights appear to have a surprisingly good chance of being protected, with the plaintiff prevailing over 75% of the time over all IP disciplines (patent, trademark, copyright).

  • See also, Mei Ying Gechlik, "Protecting Intellectual Property Rights in Chinese Courts: An Analysis of Recent Patent Judgments," Carnegie Paper No. 78, January 2007 (link)

Tuesday, December 18, 2007

ED Va.: Continuations Count as "Original Applications" For the Purposes of the AIPA

Cooper Technologies Co. v. John W. Dudas (1:07cv853) (November 30, 2007)

Cooper sued for infringement on two patents, where one patent (filed in 2003) was the last of a series of continuations dating back to 1994. The defendant filed an inter-partes reexamination request with the PTO, seeking to invalidate the continuation patent.

Cooper argued that, under the American Inventor's Protection Act (AIPA), inter-partes reexamination was not appropriate for the continuation patent, because the "original application" (i.e., the first application from which the continuation stemmed from) was filed prior to the enactment of the AIPA (November 29, 1999). Neither the AIPA nor the legislative history defined the phrase "issues from an original application."

However, the PTO defined the term in an OG publication, and in the MPEP, stating that an "original application" included, among other things, first-filed application and continuation applications. In MPEP 201.04(a), the term is defined as "an application which is not a reissue application."

Cooper sought review of the PTO's definition under the APA, arguing that the PTO's interpretation of the AIPA was arbitrary, capricious, and contrary to law and that its implementation of the AIPA constituted improper rulemaking. Accordingly, Cooper argued that the granting of the inter-partes reexamination was erroneous.

The district court disagreed with Cooper for two reasons. First, the court noted that the original application was abandoned, thus no patent could have "issued from" that application. Also, previous holdings from the CAFC (Bristol-Myers Squibb Co. v. Pharmachemie B.V. 361 F.3d 1343 (Fed. Cir. 2004)) made clear that a continuation application begins "a new proceeding in which all the original claims . . . [are] once again presented for examination."

Second, the court noted that the 5th edition of the MPEP (1983) defined an "original application" as "an application which is not a reissue application. An original application may be a first filing or a continuing application." According to the court:

Given this consistent usage, the Court must presume that the Patent Office's definition in the MPEP has entered the modern parlance of patent law. See Patlex Corp. v. Mossinghoff, 758 F.2d 594, 606 (Fed. Cir. 1985) (noting that the detailed rules and regulations in the MPEP "describe procedures on which the public can rely"). It must also presume that Congress was aware of this definition and that it adopted it in the AIPA. See 2A Sutherland Statutory Construction § 47.29 ("In the absence of legislative intent to the contrary, or other overriding evidence of a different meaning, technical terms or terms of art used in a statute are presumed to have their technical meaning.")

Accordingly, the Court finds that the Patent Office's interpretation of "original application" in the AIPA is fully consistent with the term's established meaning in patent law.

Read/download the opinion here (link)

USPTO: Telework Is the Answer

Deborah S. Cohn, acting PTO chief administrative officer, writes in the Federal Times:

We have seen that a successful telework program can result in greater employee productivity and performance, reduced traffic congestion and air pollution, and reduced real estate costs. Telework also provides options for individuals with disabilities, assists employers with recruitment and retention efforts and allows for continuity of operations in case of an emergency or disaster. Teleworking can greatly improve the quality of life for employees by reducing their commuting time and costs, giving them more control over their schedules and assisting them in achieving a balance between work and their personal lives.

The numbers help tell the story. As of Oct. 19, 3,609 PTO employees were participating in some form of telework. This represents 40.7 percent of our total work force and 45.7 percent of total eligible employees, making PTO’s telework program among the largest and most progressive within the federal government. What’s more, on an annual basis, PTO employees who telework collectively save more than 613,000 gallons of gas, save more than $1.8 million in fuel costs and reduce emissions by more than 9,600 tons, according to Telework Exchange estimates.

Friday, December 14, 2007

Study Shows USPTO Backlog Is Tied More to Non-Final Actions, and Not Continuations

George Mason University Assistant Professor of Systems Engineering & Operations Yifan Liu and J.D. Candidate Ayal Sharon reviewed the backlog problem at the PTO, and applied a "queueing theory" analysis to filings to determine where the problems may lie.

Queueing theory enables mathematical analysis of several related processes, including arriving at the back of a queue, waiting in the queue (essentially a storage process), and being served by the server(s) at the front of the queue. Applying a "priority queue" analysis, the process works to:

  • add an element to the queue with an associated priority;
  • remove the element from the queue that has the highest priority, and return it; and
  • (optionally) peek at the element with highest priority without removing it.
Turning their analysis to PTO pendency, the authors made the following assumptions:

(1) A priority queue processes higher priority items first, giving them a shorter queuing delay – but at only at the expense of longer queuing delays for lower-priority arrivals. Since the USPTO gives higher priority to RCEs and continuing applications than to regular new applications, large numbers of RCEs and continuing applications should result in disproportionate waiting times for regular new applications.

(2) At the very least, a limit on the number of continuing applications would be desirable because continuing applications can produce multiple generations of unlimited numbers of high priority offspring. RCEs and multiple non-final office actions both contribute to the risk of starvation, but pose less potential risk than continuing applications because they do not produce parallel offspring (branching feedback).

Did the study validate the PTO's assertion that pendency would be reduced? Erm . . . not quite:

. . . the [current] USPTO model is saturated and is overwhelmed. Some sort of policy change is needed to lower the total traffic intensity.

. . . based on the current statistics, the results from limiting continuing applications seem similar to the results from limiting RCE applications. Prohibiting second and later generations of continuation application, as the only policy change, will not have much impact. It may help somewhat to prohibit all continuations, but the system will remain saturated, and as with eliminating RCEs, it is unfair to the applicants.

This is not to say that the USPTO does not need safeguards to prevent an excessive use of continuation applications from becoming a workload problem in the future. A policy limiting continuation applications would be similar to the “admission control policies” used to limit the number of arriving items in computer operating system priority queues. What this analysis shows, however, is that based on current statistics, such a policy will not currently have much of an effect.

. . . we find that the excessive number of non-final rejections per application is the main cause of the system’s saturation. The sensitivity analysis performed in appendix IV supports this conclusion. This number of excessive non-final rejections in each round of prosecution dwarfs the number of second and later RCEs and continuation applications. Reducing the number of non-final rejections per application is the most effective way to improve the throughput of the USPTO. This will help reduce the primary burden on the system — the large number of regular amended cases that remain alive in the system due to repeated non-final rejections.

. . . if we keep the current policies on RCE, continuations, and nonfinal rejections, we would need to increase the number of examiners by a factor of 1.2230 in order to decrease the total intensity from 1.2230 to 1. This would mean hiring 4215 x 0.2230 = 940 new examiners.139 (The USPTO goal for fiscal years 2005 and 2006 was to do exactly that.)

Hiring additional examiners is a problematic solution. Our hiring calculations are based on a on a "steady state" assumption that the growth rate of applications will remain proportional to the growth rate of the examining corps. However, for many years the incoming rate of applications has been rising, and is expected to continue to rise in the future. This means that the number of patent examiners would need to grow at least at a rate proportional to growth rate of new applications, ad infinitum. An exponential growth in hiring is not a sustainable solution. The USPTO has recognized that hiring is not a viable long-term solution to the problem.

We were surprised by the results of the simulation. We expected the results to show starvation of the priority queue, caused by the RCEs and continuations. Instead, we got the unexpected result that the large number of non-final rejections per round of prosecution is the major cause of the backlog of applications.

Given the limitations of time and scarcity of data, our model was very simple in terms of mathematical complexity. A more detailed analysis was beyond the scope of this modest student note. The authors hope that this note will encourage further research along these lines, both inside and outside the USPTO.

View/download the study here (link)

Hat tip: I/P Updates

Thursday, December 13, 2007

AUTM Releases Report on University Tech Transfer

The Association of University Technology Managers (AUTM) has released its latest survey on technology licensing and related activity for U.S. academic and nonprofit institutions and technology investment firms.

According to the report, university tech transfer is booming. Universities received $45 billion plus in R&D expenditures at U.S. academic centers and technology transfer had record staffing levels, with total employees exceeding 1,800. After sampling technology transfer activities of members, the report provided the following statistics, claiming that AUTM members:

• Managed 18,874 new invention disclosures

• Filed 15,908 total U.S. patent applications

• Saw 3,255 U.S. patents issued

• Signed 4,963 new licenses

• Managed 12,672 licenses and options that are yielding active income. Each single license represents a one-on-one relationship between a company and a university, hospital or research institution that earns income on products.

• Had 697 new products introduced to the market in 2006 from active licensees;

• Introduced more than 4,350 new products into the market in the nine years from FY1998 to FY2006. That is 1.32 new products based on academic inventions introduced every single day over the last nine years.

• Launched 553 new startup companies in 2006. That is 2.2 new companies for every working day of the year.

• 5,724 new spinouts since 1980 — more than one company every two days during 9,498 days of innovation.

Despite filing more applications than in preceding years, universities secured fewer patents because of delays at the US Patent and Trademark Office. US patent applications from university tech transfer offices grew nearly 8 per cent to 15,908, but patents issued slipped slightly to 3255. Overall, the number of patents issued was down roughly 17 per cent after peaking in 2003.

Download the AUTM report here (link)

See also, "Patent delays mar bumper year for US tech transfer" (link)

Wednesday, December 12, 2007

OMB Approves IDS Rule Changes for PTO

The OMB completed its review of the IDS Rules and published its approval on (link). From the website:

Title: Changes to Information Disclosure Statement Requirements and Other Related Matters

Abstract: The U.S. Patent and Trademark Office (Office) amends its regulations on information disclosure statement (IDS) requirements and other related matters to improve the quality and efficiency of the examination process. These changes would enable the examiner to focus in on the relevant portions of submitted prior art at the very beginning of the examination process, give higher quality first actions, and minimize wasted steps.

This action would make the following changes relating to submissions of IDS's by applicants:

  • impose a requirement for the personal review of, and to provide information about, certain citations;
  • eliminate the fees for, but permit only timely, IDS submissions; and
  • only permit the filing of an IDS after the mailing of a notice of allowance if a claim is admitted to be unpatentable and a narrowing amendment is also submitted.
The Office would also
  • permit third parties to submit prior art up until the mailing of a notice of allowance after application publication;
  • to no longer permit an IDS to meet the submission requirement for a request for continued examination (RCE);
  • to permit, after payment of the issue fee, certain amendments and petitions so applicants will not have to file a continuation application or an RCE for such items; and
  • to revise the protest rule to better set forth options that applicants have for dealing with unsolicited information received from third parties.

Despite multiple challenges (see here and here), the OMB largely ignored the evidence showing a "substantial" economic impact. Also, just as in the continuation rule changes, the rules have not been shown to the public. The rules are expected to go into effect late January.

See earlier OG Notice (July '06) on the IDS Rules (link)

- Executive Summary (link)

- Detailed Summary (link)

See PTO PPT Presentation ('06) on IDS Rule Changes (link)

- The 4 time period for submitting IDS (link)

- Application prosecution timeline (link)

Tuesday, December 11, 2007

Applicants Question PTO's Focus on "Compact Prosecution" In Upcoming Reform Measures

One of the most important aspects of patent prosecution and application pendency is the the concept of "compact prosecution", which is described in MPEP § 2106(II):

It is essential that patent applicants obtain a prompt yet complete examination of their applications. Under the principles of compact prosecution, each claim should be reviewed for compliance with every statutory requirement for patentability in the initial review of the application, even if one or more claims are found to be deficient with respect to some statutory requirement. Thus, USPTO personnel should state all reasons and bases for rejecting claims in the first Office action. Deficiencies should be explained clearly, particularly when they serve as a basis for a rejection. Whenever practicable, USPTO personnel should indicate how rejections may be overcome and how problems may be resolved. A failure to follow this approach can lead to unnecessary delays in the prosecution of the application.
In the recently-proposed changes to BPAI practice, the PTO received a fair number of comments (link) that were negative towards the proposed rules. One of the biggest sticking points for applicants was the perceived lack of quid-pro-quo on the burdens imposed on applicants versus examiners.

While appeals provide for a variety of different outcomes, the most often outcome (including pre-appeal brief activity) is the reopening of prosecution. In effect, the reopening of prosecution grants a "mulligan" to the examiner on a bad rejection, and leaves the door open for further rejections. This, according to one comment, is a big problem:

The Proposed Rules fail to address several factors which unduly prolong patent prosecution. These factors include repeated reopening of prosecution by the examiner after an appeal brief is filed, as well as after a decision by the Board in which all of the original rejections presented by the examiner were reversed. Such repetitive reopening of prosecution has the effect of preventing judicial review of agency action. Such repetitive reopening of prosecution is also contrary to fundamental legal principle that an administrative agency cannot avoid review of its actions by continuously keeping open activity which prevents judicial review.
As evidence, the commentator pointed to application no. 09/077,337 as a classic example of abuse. The history of the application is as follows:

02/17/00 - 1st non-final rejection.
04/24/01 - Restriction.
06/19/01 - 2nd non-final rejection.
09/18/01 - 1st Appeal Brief.
01/31/02 - 3rd non-final rejection.
03/11/02 - 2nd Appeal Brief.
10/01/02 - 1st Suspension.
06/17/03 - 4th non-final rejection.
07/15/03 - 5 th non-final rejection.
09/19/03 - 3rd Appeal Brief.
11/29/05 - BPAI decision - Examiner reversed.
02/08/06 - 2nd Suspension.
04/25/07 - Request for information under 37 CFR § 1.105.
At wit's end, the Applicant commented in the latest response with the following:

As evidenced by the extraordinary amount of prosecution carried out by the Office, it appears that the Office had long ago internally decided that this application was never to mature into a patent. Thus, as the Office's illegal withholding of application allowance is expected to continue, the Office will predictably not be satisfied no matter how Applicants respond to the current Request for information.
View the response in its entirety here (link)

See 09/077,337 image file wrapper here (link)

While this application appears to be a more extreme case, other Applicants have shared this frustration over "reopening abuse."

See Joe Butscher, "Pre-Appeal Brief Panels Should Allow More Applications Rather Than Reopening Prosecution" IP Today, July 2007 (link)

Monday, December 10, 2007

Peterlin Lawsuit Dismissed in the DC District Court

Aharonian v. Gutierrez (07-1224) December 6, 2007

Earlier this year, Aharonian and other plaintiffs complained that the appointment of Margaret
Peterlin to the position of Deputy Under Secretary of Commerce for Intellectual Property and Deputy Director of the United States Patent and Trademark Office was unlawful because she is not a “citizen of the United States who has a professional background and experience in patent or trademark law.” 35 U.S.C. § 3(b). The DOC responded that, for a variety of reasons, the complaint was non-justiciable.

In an opinion issued last week, Judge Robertson dismissed the complaint.

Two of plaintiffs’ three claims appear to be brought directly under 35 U.S.C. § 3(b), the statute which structures the United States Patent and Trademark Office (USPTO) and creates the office of the Deputy Director which is held by Ms. Peterlin. Defendant argues that there is no private cause of action under this statute, and plaintiffs have functionally conceded this argument by failing to respond . . . Nor would a response have made much difference: neither the text nor the legislative history of the statute evinces anything approaching the congressional intent required to establish a private cause of action – that is, intent to create both a private right and a private remedy.

One of plaintiffs’ three claims invokes Administrative Procedure Act (APA), which unlike 35 U.S.C. § 3(b), does provide a cause of action for persons aggrieved by final agency decisions that are arbitrary, capricious, or contrary to law. A claim alleging violation of the standard in 35 U.S.C. § 3(b) is unreviewable under the APA, however, because 35 U.S.C. § 3(b) lacks standards that a court could meaningfully use in evaluating this type of high-level personnel decision. Because the only statutory standard is vague and highly subjective, the decision whom to appoint Deputy Director must be considered “committed to agency discretion by law.”

[I]f Congress had intended the extraordinary situation in which judicial review would reach to the very qualifications of agency officers for their policymaking positions, its statute would not be drawn “in such broad terms that . . . there is no law to apply.”

View/download the opinion here (link)

Friday, December 07, 2007

USPTO's Patent Advisory Committee Releases Annual Report

The Patent Public Advisory Committee (PAC) was created to advise Congress on the policies, goals, performance, budget and user fees of the USPTO with respect to patents. The Committee is charged with preparing an annual report that is submitted to the Secretary of Commerce, the President, and the Committees on the Judiciary of the Senate and the House of Representatives.

The 2007 Report is focused on "practical challenges facing both the USPTO and the patent system of which it is a part." Specifically, broad categories of issues addressed were (1) patent quality, (2) pendency and (3) flexibility.


PAC states:

The Committee believes that "Quality" is dependent upon five essential components. These are: (a) providing a meaningful definition of quality; (b) accessing the best prior art; (c) accessing the best information available to the applicant; (d) assessing the appropriate level of examination resources necessary for highly complex applications; and (e) attracting and retaining the most qualified workforce.

Here, PAC places a large share of blame on the applicants:
Candidly, a further cause of ever-increasing pendency is clearly applicants’ behavior itself. From the filing of the nth continuation application, to the presentation of an excessive number of claims, to the late filing of information disclosure statements (IDS), to the failure to file any illuminating information, or the inclusion of large numbers of less relevant references in such statements, applicants severely and directly impact an examiner’s ability to perform focused, timely and quality examinations. Such behavior must be brought under control in a manner that is fair to applicants.
To battle existing pendency problems, the PAC report provides some recommendations including exploration of a "market-based examination model," and granting "full faith and credit" to foreign search reports, stating that the "USPTO set a goal of achieving full utilization of foreign prior art searches, and expanded IPC search capability within six months of the date of this report."


The Committee strongly recommended the adoption of legislation permanently ending diversion of user fees for non-USPTO expenditures. Additionally, the Committee strongly recommended that Congress pass legislation giving the USPTO authority to set and adjust patent fees.

Hot on the heels of the PTO's announcement that allowance rates have dropped, the Committee projected out the loss in revenue from issue/maintenance fees, and found that, by FY 2013, the PTO would be short around $1.1 billion.

Of course, there is much more in this report, and it definitely qualifies as a "must-read" for anyone interested in U.S. patent policy heading into 2008.

View/download the report here (link)

Are Opinions of Counsel Truly "Irrelevant" Under Seagate?

That's the question being asked in the case of Dell v. Lucent Technologies (E.D. Tex, 4:03-cv-347), where Lucent has filed a Motion In Limine to preclude Dell from mentioning to the jury that Lucent did not rely on an opinion of counsel in defense of Dell's willful infringement allegations.

According to Lucent, the absence of an opinion of counsel is "irrelevant" under Seagate. Additionally, Lucent suggested that Dell should be precluded from mentioning that Lucent failed to obtain an opinion of counsel because the jury might be confused into thinking that Lucent had an obligation to obtain such an opinion:

Because Lucent’s decision not to rely on an opinion of counsel in defense of Dell’s willful infringement allegations is irrelevant to any issue before the jury, any reference to that decision is inadmissible. Fed. R. Evid. 402. Moreover, because any suggestion by Dell that Lucent did not obtain an opinion of counsel will only serve to confuse and mislead the jury into believing that Lucent had an obligation to obtain an opinion, any such suggestion should also be precluded under Federal Rule of Evidence 403. Accordingly, Lucent respectfully requests that the Court preclude Dell from mentioning or suggesting that Lucent did not obtain an opinion of counsel.

In response, Dell argues that the lack of an opinion is relevant, and should be submitted to the jury:
Whether Lucent knew or should have known of the objectively high risk of infringement is a subjective inquiry to which an opinion of counsel is relevant. If Lucent had obtained an exculpatory opinion of counsel, it would surely argue that its having done so demonstrates that it did not know of a high risk of infringement. The reverse is also true; from Lucent’s failure to seek legal advice the jury can infer that Lucent recklessly disregarded a high risk of infringement. The jury is therefore entitled to hear that Lucent did not obtain an opinion of counsel, and to consider this fact along with the other relevant facts and circumstances.

View Dell's Motion In Limine here (link)

View Lucent's Response here (link)

Thursday, December 06, 2007

BIO Submits USPTO's Annual Report to Congress

After releasing the 2007 annual report, the PTO remarked in the report that the Office achieved "record breaking year-end numbers that reveal historic improvement in the quality of patent and trademark reviews and subsequently the quality of issued patents and registered trademarks" (see earlier 271 Blog post here).

While the PTO's claims were subject to much debate, the Biotechnology Industry Organization (BIO), perhaps playing a bit of "I'll-see-your-ten-and-raise-you-twenty", decided to submit the annual report to Congress for consideration in the ongoing debate over the Patent Reform Act of 2007. According to a statement issued by BIO to Congress:

As the Senate continues to debate legislation aimed at improving the U.S. patent system, it is clear that the current system continues to promote American ingenuity and innovation - as evidenced by the high number of new patent applications and issuances in 2007. And, despite the record number of new applications, the PTO is reporting marked improvement in the quality of patents issued, demonstrating a more rigorous process of patent examination.

We urge the Senate to consider these trends as it debates patent reform legislation. While there are ways to even further improve patent quality, such as through meaningful inequitable conduct reform and more objectivity and transparency in the patent examination process, these trends reported by the PTO undermine the calls for draconian "reforms" to the patent system. To the contrary, it is clear that the fundamentals of our current system are sound, and improving over time. These fundamentals should not be undermined in the guise of 'reform'. Proposals that encourage infringement and weaken the certainty and predictability of patents must be rejected. Such proposals would discourage investment in innovative industries such as biotech, in which it often takes more than a decade and hundreds of millions of dollars to bring a product to market.

The Senate should reject such proposals and tread carefully and deliberately when considering patent reform. We pledge our support to continue to work with the full Congress to ensure the U.S. patent system continues to provide the framework required to maintain America's global leadership in innovation.
Read "BIO Urges Senate To Consider PTO Reform on Improved Patent Quality" (link)

See also FDA News (subscription) : "BIO: PTO Report Shows Need for More Limited Patent Reform" (link)

Wednesday, December 05, 2007

W.D. Wisconsin: "Significant Support" for Non-Infringement Vitiates Willfulness

Franklin Electric Co., Inc. v. Dover Corp. (05-C-598-S), November 15, 2007

Franklin sued Dover for infringing its patents related to underground tanks. The district court found in favor of Dover on summary judgment, ruling that Dover's products did not infringe. On appeal (link), the CAFC reversed the district court's claim construction and remanded for further proceedings.

In the remanded case, Franklin reasserted willful infringement, claiming that (1) Dover made previous attempts at licensing the technology from Franklin's predecessor prior to the lawsuit, (2) no advice of counsel was obtained, and (3) Dover ignored Franklin's letters accusing it of infringment. In light of Seagate, the district court found that, as a matter of law, no willfulness could be inferred:

Defendant points primarily to this Court’s first summary judgment decision as conclusively establishing that there was not an objectively high likelihood of infringement. Plaintiff points to defendant’s failure to seek advice of counsel prior to selling the accused devices, defendant’s efforts to obtain a license from plaintiff’s predecessor, customer demand for a waterproof system and letters from the patentee accusing defendant of infringement. Plaintiff argues that this evidence establishes willfulness.

All of the evidence advanced by plaintiff goes to the second component of the Seagate test – what defendant knew or should have known with respect to the likelihood of infringement. That plaintiff accused defendant of infringement or defendant sought a license has no bearing on whether there was an objectively high likelihood that its product infringed. It goes to the defendant’s knowledge and state of mind, which Seagate holds irrelevant to the objective inquiry. The infringement analysis in the first summary judgment decision goes to the objective inquiry of the likelihood of infringement. Regardless of the contrary decision of the Appeals Court, the analysis establishes defendants’ conduct in selling its product was not reckless in the sense that there was an “objectively high likelihood” that its actions were infringement. Given the significant support in the language of the patent, the specification and prosecution history for defendant’s noninfringement position, plaintiff cannot meet its burden to prove objective recklessness by clear and convincing evidence.

View/download the opinion here (link)

LES Launches Certified Licensing Professional (CLP) Program

The Licensing Executive Society has created a Certified Licensing Professional (CLP) certification, which is is a professional designation intended to distinguish those who have demonstrated "experience, proficiency, knowledge and understanding of licensing and commercialization of intellectual property through involvement in patenting, marketing, negotiation, legal, and intellectual asset management."

The goal of the CLP program is to elevate the licensing profession by establishing a standard of knowledge that will differentiate professionals that have taken the steps necessary to become certified.

To become a CLP, a candidate must: (1) Satisfy the CLP Standards which includes passing a written examination, (2) Submit the CLP application, and (3) Pay an application fee.

To qualify, candidates must possess a bachelor's degree or higher from an accredited university, and have at least 3 years of professional level experience involving the development, use,
transfer, marketing, and/or management of intellectual property within the prior 8 years.

For more information, see the LES website (link)

See LES Power-Point presentation on the CLP program (link)

Tuesday, December 04, 2007

IRS Looking at New Taxable Category Based on Patents


Federal Register / Vol. 72, No. 186 / Wednesday, September 26, 2007 / Proposed Rules:

[T]he IRS and Treasury Department continue to be concerned about the patenting
of tax advice or tax strategies and believe that adding a new category of reportable transaction to the section 6011 regulations for patented transactions will assist the IRS and Treasury Department in obtaining disclosures of tax avoidance transactions and in providing effective tax administration. Under the new category of reportable transactions, the ‘‘patented transaction’’ is a transaction for which a taxpayer pays (directly or indirectly) a fee in any amount to a patent holder or the patent holder’s agent for the legal right to use a tax planning method that the taxpayer knows or has reason to know is the subject of the patent. A patented transaction also is a transaction for which a taxpayer (the patent holder or the patent holder’s agent) has the right to payment for another person’s use of a tax planning method that is the subject of the patent.

View the notice here (link)

Monday, December 03, 2007

Patent Litigation Should be Flat for 2007; But are the Number of Defendants Rising?

After peaking in 2004, with 3,075 patent cases, patent litigation took a dip in 2005 (2,720 cases), only to tick up slightly in 2006 (2,830 cases). It's looking like 2007 will be a flat year for patent litigation, with the likelihood that the number of cases will dip from 2006.

So far, according to data obtained from Justia, 2007 has seen 2,577 patent-related cases filed in the district courts around the United States. Broken down by month, the filings appear as follows:

  • January - 201 complaints filed

  • February - 181 complaints filed

  • March - 262 complaints filed

  • April - 219 complaints filed

  • May - 265 complaints filed

  • June - 280 complaints filed

  • July - 225 complaints filed

  • August - 222 complaints filed

  • September - 214 complaints filed

  • October - 288 complaints filed

  • November - 220 complaints filed

One of the patent litigation trends that doesn't receive much coverage is the number of defendants that are named per case. While I haven't seen any hard data on this, it appears that the number of defendants per case may be rising.

Anecdotally, two recent cases illustrate this phenomenon. The first, filed in the ED Tex. on Nov. 27, is Harthcock v. MIPS Technologies Inc et al. (2:2007-cv-00515), where 91 defendants were named. It appears that the patentee sued the allegedly infringing manufacturer, along with every single one of the manufacturer's customers, and every single one of the manufacturer's customers' retailers. According to the Patent Troll Tracker, counting each defendant separately across all cases, the filings on Nov. 27 resulted in 113 new patent infringement suits in the ED Tex. This single day resulted in more companies being sued than have been sued in all of 2007 so far in Detroit, Dallas, ED VA, Minnesota, Boston, or Philadelphia.

The second is Technology Patents LLC v. Deutsche Telekom AG et al. (8:2007-cv-03012), filed on Nov. 8 in the District Court for the District of Maryland, in which 131 defendants were named in a lawsuit directed to SMS technology (see more from the Maryland IP Law Blog here). Considering the defendants individually, these two cases alone represent almost 10% of all patent litigation filed for the entire U.S. (I realize there are statistical anomalies in this approach, but you get the point).

While this is not a new phenomenon, it appears that defendant "clustering" should increase in the coming year, especially in light of the CAFC's Sandisk ruling that expanded the scope of DJ actions. In the case of non-practicing entities, the earlier practice of cherry-picking defendants one-by-one has now become increasingly risky. Also, as Jim Skippen, chief executive of Wi-LAN commented recently, there are "significant economies of scale" in suing multiple defendants.

See 271 Blog "Patent Litigation Statistics" (link)

See 271 Blog post on PWC Patent Litigation Survey (link)

See also 271 Blog post: Kesan & Ball, "How Are Patent Cases Resolved? An Empirical Examination of the Adjudication and Settlement of Patent Disputes" (link)

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