USPTO Issues Dual Memos on 112 Rejections

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

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

To wit:

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

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

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

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

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

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

EPO Publishes Helpful Presentations From September Program

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

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

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

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

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

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

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

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

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

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

Forbes: Top Patent Revenue-Generating Universities

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

(1) New York University

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

(2) Wake Forest University

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

(3) Stevens Institute of Technology

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

(4) Ohio University

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

(5) Brigham Young University

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

(6) University of Rochester

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

(7) University of Minnesota

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

(8) University of Florida

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

(9) Stanford University

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

(10) Northwestern University

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

(11) Mount Sinai School of Medicine

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

(12) University of Massachusetts

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

(13) University of Utah

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

(14) University of California

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

(15) University of South Alabama

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

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

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

Why Academia Takes Profits Over Wonder

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

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

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

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

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

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

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

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

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

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

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

Beating NPE Patent Holders At Their Own Game

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

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

* * *

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

* * *

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

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

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

The article also included this little tidbit:

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

Read the article here (link).

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

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

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

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

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

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

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

Download a copy of the presentation here (link)

CAFC: Prior Art Recycling Permitted For Reexamination

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

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

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

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

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

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

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

* * *

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

With regard to art before the PTO:

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

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

* * *

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

AFFIRMED

Light Reading For Labor Day: 2007 Annual US Court Report

When you're not preoccupied wiping BBQ sauce from your hands (and children's faces) this weekend, the Statistics Division for the Administrative Office of U.S. Courts released its annual report (all 416 pages) on "Judicial Business of the United States Courts."

Some interesting findings:

• After rising 14 percent in 2006, filings in the Federal Circuit fell 13 percent in 2007 (down 227 appeals) to 1,545, almost the same as total filings in 2003. The decreases appear to be related primarily to reductions in non-patent appeals (e.g., Merit System Protection Board, CAVC, etc.).

• As of September 30, 2007, 34 cases appealed from the USPTO were pending at the CAFC, as compared to 51 cases pending the year before.

• The Eastern District of Texas received more than 250 cases related to patents and reported higher filings of contract cases and prisoner petitions.

• In the district courts, 2,896 patent cases were launched in 2007, which is a slight bump (2.3%) from the 2,830 cases filed in 2006. To date, the biggest year for patent cases was 2004, where 3,075 cases were filed.

• Pendency of patent cases appears to be up: 353 patent cases were pending 3 years or more in 2006, as compared to 408 cases in 2007.

What was somewhat surprising was that, in general, little has changed in terms of the raw number of cases filed, terminated, and pending.


Read/download the entire report here (link)

See AmLaw Daily "Federal Court Statistics for 2007 Suggest Civil Courts Functioning As Expected" (link)

Patent Reform Touches DNC in Denver

From the "Tech Daily Dose" for Congressional Daily:

Rep. Zoe Lofgren, D-Calif., told a crowd in Denver on Tuesday that it is crucial for Congress to pass legislation to update the U.S. patent system next year -- even if the measure is a scaled back version of the broad, controversial language that was in play during the 110th Congress. The House passed its patent bill but a companion stalled in the Senate.

Lofgren, who represents the Bay Area and is a key member of the House Judiciary Committee, said a new effort should begin with "things we know we can agree on." A proposal that would curb judicial "venue-shopping" for favorable courts is critical as is language to address patent abuses, she said. "How do you legally set a framework that prevents abuses and allows for a vigorous system that protects intellectual property?" Lofgren asked aloud. "It's not easy to come up with solutions."

Read the short article here (link)

USPTO Seeks Volunteers for "Continuing Education for Practitioners" Program

From a recent USPTO news release:

The USPTO is developing a Continuing Education for Practitioners (“CEP”) system for on-line delivery of educational materials to patent practitioners, and is seeking help in piloting the on-line system. The CEP system is built on the recognition that a smoothly operating patent system requires well-qualified USPTO personnel working hand-in-hand with up-to-date patent practitioners. The goal is to increase efficiency, reduce pendency, and improve quality in the patent process. Additional information concerning the CEP system and the pilot test is provided below.

The CEP System

The CEP program would present brief educational materials concerning recent USPTO rule changes, revised patent examination guidelines, or the like. The practitioner would respond to one or more verification questions or prompts after reviewing the educational materials. The verification questions will be drawn directly from the training material and the practitioner will have ready access to the educational material while responding to the verification questions. In other words, the verification questions are designed to verify the practitioner has reviewed the materials; they are not a test of knowledge or skills.

The total time spent reviewing the educational materials and responding to verification questions should be approximately one hour. Practitioners would be required to complete one CEP program per year. As envisioned, the system would automatically notify practitioners of the training requirements, send appropriate reminder notices, and track completion. No fee will be charged to access the training materials; a fee would accrue only for failing to timely complete the training.

You may volunteer or submit questions on the pilot program by sending an e-mail to OEDonline@uspto.gov. The e-mail should include the name, registration number, telephone number, and e-mail address for the volunteer. Telephone inquiries concerning the pilot test may be directed to Bill Griffin (571-272-4097) in the Office of Enrollment and Discipline.

View the news release here.

Pending Study Suggests Plaintiffs Should Settle, Rather Than Litigate

While it isn't patent-specific, a somewhat controversial study will be published in the Journal of Empirical Legal Studies that looked at 2,054 cases that went to trial from 2002 to 2005 to see if parties are better off settling rather than going to trial.

Of course, one of the problems with such a study is that you can only make one-way determinations when evaluating litigation decisions. In other words, the only useful data would be refused settlement offers (that aren't sealed) compared to related jury verdicts. Nevertheless, some potentially interesting findings were made:

Generally, defendants were "wrong to go to trial" less often than plaintiffs - for defendants, the choice to litigate was wrong in 24 percent of cases, while plaintiffs were wrong in 61 percent of cases. In just 15 percent of cases, both sides were right to go to trial.

However, while defendants were wrong less often, the price for being wrong was substantially greater - getting it wrong cost plaintiffs about $43,000. For defendants, the cost was $1.1 million.

[M]ost of the plaintiffs who decided to pass up a settlement offer and went to trial ended up getting less money than if they had taken that offer. “The lesson for plaintiffs is, in the vast majority of cases, they are perceiving the defendant’s offer to be half a loaf when in fact it is an entire loaf or more,” said Randall L. Kiser, a co-author of the study and principal analyst at DecisionSet, a consulting firm that advises clients on litigation decisions.

As part of the study, which is the biggest of its kind to date, the authors surveyed trial outcomes over 40 years until 2004. They found that over time, poor decisions to go to trial have actually become more frequent.

The study has attracted the attention of the New York Time, that wrote in a recent article:

[T]he study tried to account for that possibility and found that factors like the years of experience, rank of a lawyer’s law school and the size of a law firm were less helpful in predicting the decision to go to trial. More significant was the type of case.

For example, poor decisions by plaintiffs to go to trial “are associated with cases in which contingency fee arrangements are common,” according to the report. “On the defense side, high error rates are noted in cases where insurance coverage is generally unavailable.”

The findings are consistent with research on human behavior and responses to risk,
said Martin A. Asher, an economist at the University of Pennsylvania and a co-author. For example, psychologists have found that people are more averse to taking a risk when they are expecting to gain something, and more willing to take a risk when they have something to lose.

“If you approach a class of students and say, I’ll either write you a check for $200, or we can flip a coin and I will pay you nothing or $500,” most students will take the $200 rather than risk getting nothing, Mr. Asher said.

But reverse the situation, so that students have to write the check, and they will choose to flip the coin, risking a bigger loss because they hope to pay nothing at all, he continued. “They’ll take the gamble.”

Read NYT: "Study Finds Settling Is Better Than Going to Trial" (link) (graphic)

See ABA Journal: "Most Plaintiffs Who Reject Settlement Offers Do Worse at Trial" (link)

CAFC: "Original" Applications Include Continuations For the Purposes Of Inter Partes Reexam

Cooper Technologies Co. v. Director U.S. Patent and Trademark Office, (08-1130), August 19, 2008

Pursuant to section 4608 of the American Inventors Protection Act of 1999 (AIPA), the inter partes reexamination procedure is available for "any patent that issues from an original application filed in the United States on or after" November 29, 1999

Cooper challenged the propriety of an inter-partes reexamination request on a continuation patent, filed after November 29, 1999, whose parent applications were filed before that date. According to Cooper, the continuation did not qualify as an "original application" for the purposes of the AIPA. The PTO argued that "oringal applications" included continuations and other related applications

The CAFC looked to legislative and PTO rulemaking histories to determine whether PTO pronunciations on the meaning of "original application" were "procedural" or "substantive." The CAFC clearly found that the PTO's remarks were procedural, thus deserving of increased, Chevron-type deference on review.

In this case, the Patent Office’s interpretation of "original application" does not effect any change in existing law or policy; rather, it is a prospective clarification of ambiguous statutory language regarding a matter of procedure. It is therefore "interpretive"- rather than "substantive" . . . Because the Patent Office is specifically charged with administering statutory provisions relating to "the conduct of proceedings in the Office," 35 U.S.C. § 2(a)(2)(A), we give Chevron deference to its interpretations of those provisions.

Under the two-step Chevron analysis, the reviewing court (1) must "always first determine ‘whether Congress has directly spoken to the precise question at issue.’" When a phrase is not a defined term in a statute, and when the statutory context does not provide any "concrete indication of Congress’s intended meaning," the reviewing court (2) examines "whether, in its own interpretation of its responsibilities under the Act, the agency charged with the everyday administration of the provision applies ‘a permissible construction.’"

On the term "original application," the CAFC found that the term as used in the statute did not have an "established meaning in patent law." Citing numerous ambiguities in the PTO's documentation and the legislative history, the court could not find anything in the legislative history that makes Congress’s intended meaning of "original application" clear.

Turning to the PTO's interpretations of "original application," the CAFC found the PTO's interpretations permissible:

Reissue

The Patent Office [points out] that its interpretation of section 4608 does not foreclose inter partes reexamination of reissue patents, but simply limits those proceedings to reissues of original applications filed after November 29, 1999. Such reissues are deemed by operation of law to replace the surrendered originals and, thus, are entitled to treatment as original patents. See 35 U.S.C. § 252. We agree that this interpretation is reasonable.

Continuations

Cooper argued that allowing inter-partes reexaminations on continuations would violate 35 USC § 120 which states "An application . . . shall have the same effect, as to such invention, as though filed on the date of the prior application . . . or on an application similarly entitled to the benefit of the filing date of the first application." The CAFC disagreed with Cooper:

Cooper’s argument misconstrues section 120. The title of section 120 is "Benefit of earlier filing date in the United States." . . . The "effect" described in section 120 is the benefit of the earlier filing date - i.e., the benefit for purposes of priority and section 112; the statute itself makes this clear in the clause "or on an application similarity entitled to the benefit of the filing date of the first application." . . . Nothing in section 120 guarantees that a continuation filed after the effective date of the AIPA will be exempt from inter partes reexamination, just because its parent application
is . . . Construing section 120 . . . we held "[i]n essence, ‘having the same effect’ means having the benefit of the filing date of the earlier filed application" - i.e., the benefit of priority.

[W]e conclude that the Patent Office’s interpretation of section 4608 is permissible and therefore entitled to deference. Under the Patent Office’s construction, "original application" includes continuation applications.

AFFIRMED

Gary Odom, a.k.a. Patent Hawk, Sues Microsoft for Patent Infringement

Gary announced yesterday on his patent blog site Patent Prospector, that he has filed a complaint in the Eastern District of Texas, accusing Microsoft of infringing U.S. Patent 7,363,592, titled "Tool Group Manipulations."

Download a copy of the complaint here.

CAFC Finds Infringement Under Doctrine of Equivalents, but Limits Injunctive Relief

Voda v. Cordis Corp., 07-1297, August 18, 2008

After a jury trial, the district court found that Cordis infringed Voda's patent related to cardiac guide catheters. On appeal, Cordin argued, among other things, that the district court erred in finding infringement under the doctrine of equivalents (DOE). Voda appealed the district court's denial of a permanent injunction.

For the DOE, the CAFC reiterated that two tests for equivalence are used:

This court applies two articulations of the test for equivalence. See Warner-Jenkinson, 520 U.S. at 40 (explaining that different phrasings of the test for equivalence may be "more suitable to different cases, depending on their particular facts"). Under the insubstantial differences test, "[a]n element in the accused device is equivalent to a claim limitation if the only differences between the two are insubstantial." Honeywell Int’l Inc. v. Hamilton Sundstrand Corp., 370 F.3d 1131, 1139 (Fed. Cir 2004). Alternatively, under the function-way-result test, an element in the accused device is equivalent to a claim limitation if it "performs substantially the same function in substantially the same way to obtain substantially the same result." Schoell v. Regal Marine Indus., Inc., 247 F.3d 1202, 1209-10 (Fed. Cir. 2001).

Cordis took issue with a claim term that recited "a first substantially straight leg" and "a second substantially straight leg." According to Cordis, their curved catheter did not meet this limitation in certain claims. The CAFC disagreed:

[W]e conclude that Voda introduced substantial evidence establishing that the redesigned curve portion of the XB catheter meets the straight and substantially straight limitations under the doctrine of equivalents. One of Voda’s experts testified that the difference in shape between the redesigned curve portion and a straight portion was so insubstantial that cardiologists would have difficulty distinguishing the two during use. There was also testimony that the redesigned curve portion performed the same function as a straight portion, in the same way, to achieve the same result.

On the denial of a permanent injunction, Vordis, who is an individual inventor, argued that irreparable harm would come to his exclusive licensee. However, Vordis did not argue that he himself would suffer the same injury. The CAFC found this fatal to his argument:

We disagree with Voda that the denial of a permanent injunction in this case conflicts with eBay. The Supreme Court held only that patent owners that license their patents rather than practice them "may be able to satisfy the traditional four-factor test" for a permanent injunction. Id. (emphasis added). Nothing in eBay eliminates the requirement that the party seeking a permanent injunction must show that "it has suffered an irreparable injury." Id. (emphasis added). Moreover, we conclude that the district court did not clearly err in finding that Voda failed to show that Cordis’s infringement caused him irreparable injury. In addition, we find that the district court did not clearly err or abuse its discretion in finding that monetary damages were adequate to compensate Voda. Accordingly, we affirm the district court’s denial of Voda’s request for a permanent injunction.

Are We Heading for a "Subprime Patent Crisis"?

Alberto Barrionuevo, president of the anti-software-patent Foundation for a Free Information Infrastructure (FFII), seems to think so:

In many countries, many regulations (financial controls) were removed and so the market was finally flooded by what any common person would denominate "fake money". The same fake money as the one created with a fake notes machine, out just that much more complex and nicely sold.

But equally, and curiously roughly matching in dates, it has happened in the patent system during the last ten to fifteen years mainly. The regulations have been raised time ago. To get a patent has become almost for free. No innovation effort is almost needed. No innovative step almost. No disclosing of technical knowledge is needed. No invention "as such" is needed, using the patent jargon words. Artificial complexity of the system has reached levels where only the experts bureaucrats working on it understand it. The innovation of the bureaucracy reigns. Real inventors, formerly experienced and brightly engineers, have been replaced by patent technocrats and patent trolls. Those same patent technocrats who indeed decide, with little or no political implication, the patent policy of some of the biggest economical sectors of the
world.

The result of this is a patent inflation. The most important patent offices of the world (mainly the namely "Trilateral") have granted surely some millions of subprime patents… that at the end mean fake assets and fake money. Many of these patents are fake because imprecise, too wide and/or non inventive, but many others are fake because are just out of the limits of the patentability. Their subject matter never should have constituted an "invention", but they were granted. "Obvious" is a word who lost it sense time ago.

[S]o, Great Patent Sirs, just continue enjoying today the patent pollution party.

But remember that the hangover will come soon or later and the crisis will reach all the technology market but specially the patent establishment.

In Spanish we have an old saying for this: "A todo cerdo le llega su San
Martín".

Read Barrionuevo's post on Digital Majority here.

BMC/Muniauction Decisions Sink Global Patent Holdings Joint Infringement Claim

Global Patent Holdings, LLC v. Panthers BRHC LLC, No. 9:08-cv-80013-KAM, August 12, 2008

Global Patent Holdings (GPH) sued Panthers for infringing U.S. Patent Number 5,253,341, known as the “Remote Query Communication System” patent (also known as the "JPEG patent"). In its complaint, GPH alleged that infringement takes place through the joint action of both Defendant and the website user, because Defendant’s website “controls and directs the performance of each of the method steps of claim 17 which are not performed” by Defendant itself.

The Panthers moved to dismiss the complaint as insufficient to state a claim for direct
infringement under FRCP 12(b)(6). Judge Marra granted the motion.

[I]t appears that the level of “direction or control” the Federal Circuit intended was not mere guidance or instruction in how to conduct some of the steps of the method patent. Instead, the court indicates that the third party must perform the steps of the patented process by virtue of a contractual obligation or other relationship that gives rise to vicarious liability in order for a court to find “direction or control.” Without this kind of relationship, the Court does not believe that a finding of “joint infringement” is warranted under BMC Resources.

The parties agree that the ‘341 patent requires two individuals or entities to complete all of the method’s steps (at least in terms of Defendant’s alleged infringement) – a remote computer user, and the website server. Further, at oral argument, Plaintiff conceded that the patented method does not begin until a computer user visits Defendant’s website. If no person ever visited Defendant’s website, then Plaintiff’s patent would never be infringed. The initial step of the ‘341 patent calls for action on the part of the remote computer user. Plaintiff claims that this action is “controlled” by Defendant because Defendant puts Javascript programs on the remote user’s computer to allow the process to begin. Nevertheless, the Court does not believe this “control” is sufficient “direction or control” over the remote computer user. Plaintiff has, in no way, alleged that remote users are contractually bound to visit the website, it has not alleged that the remote users are Defendant’s agents who visit the website within the scope of their agency relationship nor has it alleged any facts which would render Defendant otherwise vicariously liable for the acts of the remote user. Using Plaintiff’s analogy, Defendant may give home users the keys to the truck, but home users have no obligation to use those keys to start the truck and drive away.

In this case, the patented process cannot start until the remote user visits Defendant’s website. Plaintiff has not alleged that these individuals visit Defendant’s website under Defendant’s “direction or control.” Therefore, the Court cannot conclude that Defendant and the remote users are “joint infringers” under BMC Resources. Since Plaintiff has not alleged sufficiently that Defendant is a joint infringer, and Plaintiff has not alleged that Defendant carries out all the steps of the patented method, Plaintiff’s claim for direct patent infringement must be dismissed as inadequate.

Read/download the opinion here (link)


Hal Wegner has also just circulated a new paper addressing this issue titled "E-Commerce Claims: The Single Actor Direct Infringer." In the paper, Wegner states:

In view of Muniauction, recently granted patents with claims that do not have a single actor direct infringer should be resubmitted for reissue to fix the problem before expiration of the two year broadening deadline for a reissue and, of course, pending claims should be carefully considered for amendment.

Download Wegner's paper, along with a copy of IPO's amicus brief for Muniauction here (link)

PTO Limits Scope of Patent Agent Representation

Today's Federal Register issued final rulemaking, effective September 15, 2008, that proscribes a patent agent from giving an opinion on infringement or validity, except for situations where an opinion of validity is "reasonably necessary and incident to the preparation and prosecution of patent applications or other proceedings before the Office involving a patent application or patent." The PTO states:

Whether a validity opinion involves practice before the Office depends on the circumstances in which the opinion is sought and furnished. For example, an opinion of the validity of another party’s patent when the client is contemplating litigation and not seeking reexamination of the other party’s patent could not be reasonably necessary and incident to the preparation and prosecution of patent applications or other proceedings before the Office involving a patent application or patent. In such situations, the opinion may constitute unauthorized practice of law. See Mahoning Cty. Bar Assn. v. Harpman, 608 N.E.2d 872 (Ohio Bd.Unauth.Prac. 1993). Similarly, a validity opinion for the sale or purchase of the patent is neither the preparation nor the prosecution of a patent application. Likewise, the opinion is not a proceeding before the Office involving a patent application or patent. Registration to
practice before the Office in patent cases does not authorize a person to provide a validity opinion that is not reasonably necessary and incident to representing parties before the Office. In contrast, a validity opinion issued in contemplation of filing a request for reexamination would be in contemplation of a proceeding before the Office involving a patent.

In no circumstance would practice before the Office include the rendering of opinions on infringement. Under the law, the Office has no authority to resolve infringement cases. Thus, registration to practice before the Office in patent cases does not include authority to render infringement opinions. See Mahoning Cty. Bar Assn. v. Harpman, supra.

The rules go further by disallowing a patent agent to prepare most patent assignments, with one narrow exception. Specifically, the new rule sanctions

Drafting an assignment or causing an assignment to be executed for the patent owner in contemplation of filing or prosecution of a patent application for the patent owner, where the practitioner represents the patent owner after a patent issues in a proceeding before the Office, and when drafting the assignment the practitioner does no more than replicate the terms of a previously existing oral or written obligation of assignment from one person or party to another person or party.

Read/download the new rules here (link)

Also see Revision of Patent Fees for Fiscal Year 2009: Final Rule .

BPAI Precedential Opinion: Examiners Must Provide "Reasoned, Fact-Based" Evidence For Prior Art Rejections

Ex Parte Whalen II, Appeal 2007-4423, July 23, 2008

Whalen's application claimed a composition for embolizing an aneurism, which the Examiner rejected for anticipation, and obviousness.

The primary issue in the rejections centered around a claim element reciting embolic compositions having a viscosity of at least 150cSt (centiStokes) at 40 degrees C. While the prior art disclosed embolyc compositions, they did not disclose the exact viscosity specified in the claim.

The examiner's rejection stated that the prior art "inherently" contained the same viscosity because they "comprise similar components used in overlapping ranges of concentrations as those claimed." Alternately, the Examiner concluded that the claimed compositions would have been obvious because "it would have been prima facie obvious to optimize the viscosity range of [the known] compositions by routine experimentation."

The BAPI reversed the examiner on both inherency and obviousness.

The Examiner has not provided an adequate basis – based on evidence or scientific reasoning – to support the finding that the “compositions disclosed by Evans inherently possess the same viscosity . . . as the instantly claimed invention” . . . The Examiner reasons that “Evans’ compositions comprise similar component[s] used in overlapping ranges of concentrations,” but even if some of the compositions encompassed by Evans’ broad disclosure might have a viscosity of 150 cSt at 40° C, that possibility is not adequate to support a finding of inherent anticipation.

“Inherency . . . may not be established by probabilities or possibilities. The mere fact that a certain thing may result from a given set of circumstances is not sufficient.” In re Oelrich, 666 F.2d 578, 581 (CCPA 1981). See also Ex parte Skinner, 2 USPQ2d 1788, 1789 (BPAI 1986) (“[T]he examiner must provide some evidence or scientific reasoning to establish the reasonableness of the examiner’s belief that the functional limitation is an inherent characteristic of the prior art” before the burden is shifted to the applicant to disprove the inherency.).

On obviousness, the Board stated:

While “the discovery of an optimum value of a variable in a known process is normally obvious,” In re Antonie, 559 F.2d 618, 620 (CCPA 1977), this is not always the case. One exception to the rule is where the parameter optimized was not recognized in the prior art as one that would affect the results. Id.

Here, the Examiner has not pointed to any teaching in the cited references, or provided any explanation based on scientific reasoning, that would support the conclusion that those skilled in the art would have considered it obvious to “optimize” the prior art compositions by increasing their viscosity to the level recited in the claims. No reason to have done so is apparent to us based on the record. On the contrary, the references all suggest that low viscosity was a desired property in embolic compositions.

* * *

The U.S. Supreme Court recently held that rigid and mandatory application of the “teaching-suggestion-motivation,” or TSM, test is incompatible with its precedents. KSR Int’l Co. v. Teleflex Inc., 127 S.Ct. 1727, 1741 (2007). The Court did not, however, discard the TSM test completely; it noted that its precedents show that an invention “composed of several elements is not proved obvious merely by demonstrating that each of its elements was, independently, known in the prior art.” Id.

The Court held that the TSM test must be applied flexibly, and take into account a number of factors “in order to determine whether there was an apparent reason to combine the known elements in the fashion claimed.” Id. at 1740-41. Despite this flexibility, however, the Court stated that “it can be important to identify a reason that would have prompted a person of ordinary skill in the relevant field to combine the [prior art] elements in the way the claimed new invention does.” Id. “To facilitate review, this analysis should be made explicit.” Id.

[W]hen the prior art teaches away from the claimed solution as presented here . . . obviousness cannot be proven merely by showing that a known composition could have been modified by routine experimentation or solely on the expectation of success; it must be shown that those of ordinary skill in the art would have had some apparent reason to modify the known composition in a way that would result in the claimed composition.

REVERSED

Patent Reform Crawling Back In 2008? Lemley Proposal For Damages May Provide Answers

Friday's CongressDaily reported that Senate Minority Whip Kyl and his staff are in the process of drafting patent reform legislation, and they are expected to unveil their proposal in September. According to sources, the draft "is said to be much different from the version introduced by Senate Judiciary Chairman Patrick Leahy and Sen. Orrin Hatch."

While the details have not been revealed, the legislation is expected to address damages, post-grant review, inequitable conduct and "patent quality initiatives."

On damages, "litigants would be encouraged to use precise economic analyses to determine damages rather than less exact calculations." Post-grant reviews would be available for 12-18 months after issue, where reviews would be limited to issues of novelty and obviousness. On inequitable conduct, the legislation would "would require patent applicants to be more forthcoming to the PTO or face penalties." However, unlike previous legislation, the new proposal would address allegations of misconduct through administrative proceedings rather than in the courts.

Also, submission of search reports and analysis relevant to patentability will be required for every application. Commerce Secretary Gutierrez previously wrote to lawmakers that this provision would be "the strongest step toward improved patent quality."

For more information, see

- "Kyl Maps Out A Separate Course On Patent Legislation" (link)

- "Groups Plot Strategy For Patent Overhaul In Next Congress" (link)

Issues surrounding damages continues to divide the patent community however. Critics of the current regime argue that "reasonable royalty" damages are overcompensating (non-practicing) patentees. Accordingly, damage apportionment has been put forward as a means to curb the perceived overcompensation.

However, should Congress tweak reasonable royalty compensation, or should they look somewhere else? A recent paper by professor Mark Lemley suggests that easing restrictions on "lost profits" damages may provide a better means for market competitors to recoup damages, while reducing tendencies of courts to provide "kickers" on reasonable royalties. From the abstract:

[T]he lines between lost profits and reasonable royalties are blurring. In significant part this is because courts have insisted on strict standards of proof for entitlement to lost profits. Specifically, patentees must prove demand for the patented product, the absence of noninfringing substitutes, the ability to meet additional demand in the absence of infringement, and the proportion of those sales that represent profits. This in turn means that many patent owners who have in fact probably lost sales to infringement cannot prove lost profits damages, and turn to the reasonable royalty measure. The result is that courts have distorted the reasonable royalty measure in various ways, adding "kickers" to increase damages, artificially raising the reasonable royalty rate, or importing inapposite concepts like the "entire market value rule" in an effort to compensate patent owners whose real remedy probably should have been in the lost profits category.

In Part I, I explain the strict requirements for proving lost profits, and give examples of patentees who have failed to meet these requirements. In Part II, I explain how relegating these patentees to reasonable royalties has led to problematic changes in reasonable royalty law. Finally, I suggest in Part III that courts should draw a sharp division between the injury suffered by patentees who compete with infringers and those who do not. Patentees who compete should be entitled to the best estimate of lost profits, even if not all elements of proof are available. Doing so will avoid overcompensating patent owners in reasonable royalty cases.

Read more of Lemley's paper, titled "Distinguishing Lost Profits from Reasonable Royalties" here (link)

BPAI Appointments: Fixed

Statement by the Press Secretary

WASHINGTON--(BUSINESS WIRE)--

On Tuesday, August 12, 2008, the President signed into law:

S. 3295, which provides for the appointment of administrative patent judges and administrative trademark judges in the U.S. Patent and Trademark Office.

(LINK)