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Abbott Laboratories v. Sandoz, Inc., (Fed. Cir. 2009) (en banc in part) 07-1400

While considering an appeal of a claim construction ruling from the Eastern District of Virginia, the court suddenly found itself faced with a dilemma regarding the construction of certain product-by-process claims: the plaintiff argued that the district court erred in construing the process steps of the claims by using rule in Atlantic Thermoplastics, 970 F.2d at 846-47, which stated that "process terms in product-by-process claims serve as limitations in determining infringement." According to the plaintiff, the proper construction lied with Scripps Clinic & Research Foundation v. Genentech, Inc., 927 F.2d 1565, 1583 (Fed. Cir. 1991), which stated that "the correct reading of product-by-process claims is that they are not limited to product prepared by the process set forth in the claims."

Acting sua sponte, (or as Professor Crouch puts it: "en banc sua sponte sub secretum") the CAFC took the issue for en banc resolution, despite the fact that the court received no briefing and held no argument on the issue.

In Atlantic Thermoplastics, the CAFC considered the scope of a product-by-process claim that recited "[t]he molded innersole produced by the method of claim 1." The patentee urged that competing, indistinguishable innersoles made by a different method nonetheless infringed. The CAFC rejected the patentee’s position, and construed the product-by-process claims as limited by the process.

Looking at the line of 7 Supreme Court cases dealing with the issue (spanning over the years 1874-1938), the CAFC concluded that the Atlantic Rule "finds extensive support in Supreme Court opinions that have addressed the proper reading of product-by-process claims . . .
The Supreme Court has long emphasized the limiting requirement of process steps in product-by-process claims. " Moreover,

[T]he Supreme Court has reiterated the broad principle that "[e]ach element contained in a patent claim is deemed material to defining the scope of the patented invention." Warner-Jenkinson, 520 U.S. at 19. Although Warner-Jenkinson specifically addressed the doctrine of equivalents, this rule applies to claim construction overall. As applied to product-by-process claims, Warner-Jenkinson thus reinforces the basic rule that the process terms limit product-by-process claims. To the extent that Scripps Clinic is inconsistent with this rule, this court hereby expressly overrules Scripps Clinic.

Furthermore, the majority opinion (Chief Judge Michel and Judges Rader, Bryson, Gajarsa, Linn, Dyk, Prost, and Moore) stated that

The dissenting opinions lament the loss of a "right" that has never existed in practice or precedent – the right to assert a product-by-process claim against a defendant who does not practice the express limitations of the claim. This court’s en banc decision in no way abridges an inventor’s right to stake claims in product-by- process terms. Instead this decision merely restates the rule that the defining limitations of a claim – in this case process terms – are also the terms that show infringement.

Thus this court does not question at all whether product-by-process claims are legitimate as a matter of form. The legitimacy of this claim form was indeed a relevant issue in the nineteenth century . . . However, this court need not address that settled issue. The issue here is only whether such a claim is infringed by products made by processes other than the one claimed. This court holds that it is not.

Product-by-process claims, especially for those rare situations when products were difficult or impossible to describe, historically presented a concern that the Patent Office might deny all product protection to such claims. See In re Butler, 17 C.C.P.A. 810, 813 (CCPA 1930) ("Process claims are valuable, and appellant thinks he is entitled to them; but it is submitted that he should not be limited to control of the process when the article which that process produces is new and useful."). In the modern context, however, if an inventor invents a product whose structure is either not fully known or too complex to analyze (the subject of this case – a product defined by sophisticated PXRD technology – suggests that these concerns may no longer in reality exist), this court clarifies that the inventor is absolutely free to use process steps to define this product. The patent will issue subject to the ordinary requirements of patentability. The inventor will not be denied protection. Because the inventor chose to claim the product in terms of its process, however, that definition also governs the enforcement of the bounds of the patent right. This court cannot simply ignore as verbiage the only definition supplied by the inventor.

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Newman's Dissent (Joined by Mayer and Lourie)

Heretofore a new product whose structure was not fully known or not readily described could be patented as a product by including in the product description sufficient reference to how it can be made, to distinguish the new product from prior art products. Patentability was determined as a product, independent of any process reference in the claim, and validity and infringement were based on the product itself. This expedient for patenting products whose structure was not fully known at the time of filing the patent application has been called the "rule of necessity." It was pragmatic, fair, and just, for it attuned patent law and practice to the realities of invention.

Today the court rejects this expedient and discards this practice, ruling that all claims containing a process term under the rule of necessity now must be construed, for purposes of infringement, as limited to use of any process term that was used to assist in defining the product. That is, such a product is not patented as a product, however it is produced, but is limited to the process by which it was obtained. This is a new restraint on patents for new products, particularly today’s complex chemical and biological products whose structure may be difficult to analyze with precision. It is a change of law with unknown consequences for patent-based innovation.

The court acts sua sponte, without explanation of what policy is intended to be served by this change, without consideration of the technologies that may be adversely affected by elimination of this expedient, without notice to those whose property rights may be diminished. In so doing, the court departs from statute, precedent, and practice. This change is as unnecessary as it is flawed, gratuitously affecting inventions past, present, and future. I respectfully dissent.

NOTES:

- The en banc ruling clearly mitigates a potential certiorari showdown at the SCOTUS, which would have had a good chance of review if the Scripps ruling prevailed.

- While there appears to be some legitimate concern over procedural violations on the sua sponte ruling, Hal Wegner has notes that the CAFC's actions follow previous, similar actions in Kingsdown Medical Consultants, Ltd. v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988)(Markey, C.J.)(en banc in part); Midwest Industries, Inc. v. Karavan Trailers, Inc., 175 F.3d 1356 (Fed.Cir.1999)(Bryson, J.)(en banc in part); and DSU Medical Corp. v. JMS Co., Ltd., 471 F.3d 1293 (Fed. Cir. 2006)(Rader, J.)(en banc in part).

- This ruling appears to follow a judicial trend of firming up the notice provision for patentees and their claim terms, and adding a further level of complexity to patent claim drafting: while insufficient claim detail may lead to invalidity, additional claim details may foreclose avenues of infringement.

- For whatever it's worth, 2 of the 3 dissenting judges hold PhD's in the chemical arts (Newman: PhD Yale, 1952, Lourie: Univ. of Penn., 1965).

Last December, Chief Circuit Judge Michel gave the keynote address at the FTC hearings on "The Evolving IP Marketplace", where Judge Michel addressed the state of patent law and patent reform. Frankly, it's one of the most sober and rational patent reform speeches in recent years, and I thought it would be worthwhile to help distribute a transcript of the speech. While the FTC has a transcript available here (link), I cleaned up the FTC version and made it available at the link provided below.

Some key "highlights" from the speech:

Addressing the oft-cited contention that too many "junk" patents are issued:

But I suggest that as we move forward . . . that it's worth pausing to consider for just a minute what do we really mean when we're talking about more patent quality. Certainly lay people and maybe some lawyers could be forgiven if they take that as a suggestion that a very large number of patents are just flat-out invalid. That is, the entire patent is a piece of junk, worth nothing, illicitly granted.

I've been on the court for twenty years and eight months, and I cannot ever remember seeing a single patent, I'm sure they're out there, but I can't remember seeing one where every single claim was invalid. I've seen innumerable patents where some of the broader claims either were indefinitely broader or were damn close, but in all of those cases, the narrower claims seemed to me equally clearly to be plainly valid. So what we really have is a problem of some over-broad claims getting through the system, slipping through the sieve that in the ideal world would catch them.

On the "litigation explosion" and "wasteful litigation":

I keep hearing that we have a ‘litigation explosion’ in patent infringement cases. I keep hearing that we have lots of ‘wasteful litigation.’ I keep hearing we have excesses and abuses of certain types of defendants or maybe plaintiffs in some of these cases. I also read that for quite a number of decades now, the percentage of extant patents sued on has remained almost exactly the same, at about percent, so if you have a lot more patents out there, you would expect more lawsuits, and that's exactly what you get.

 

Now, of course you can say, yeah, but they're all bad patents. Well, maybe or maybe they're partly bad and partly good, so a little hard to be sure. I'm a skeptic about whether we have an excess amount of wasteful litigation or a crisis or a patent litigation explosion.

 

Now, as you may have heard me already throw out the number, about 3,000 patent suits filed a year, but the more interesting numbers that start to reduce that is that about 90 percent settle voluntarily. Now, of course now you may say, but yeah, only under coercion and under threats, under a gun at your head. All those kind of arguments. Well, maybe. Maybe. But 90 percent never go to trial, so when we're talking about trial expense, trial delay, not minor matters, we're not talking about 90 percent of the lawsuits. We're talking about 10 percent of the lawsuits. What happens to the 300 that don't fall out on voluntary settlements between the parties?

 

Well, over two-thirds of them get resolved on summary judgment. Now, summary judgment isn't cheap. I'm not trying to make that argument, but it's a lot less expensive than a full trial, lots less, and much faster almost always, not in every case, but normally.

 

So now we're down to about a hundred trials per year, ball park figure. (All these figures are just ball park figures). If we step back and we say, all right, we're a nation, highly developed, high technological, fully industrialized advanced nation of 300 million people. We have something like a million and a half patents in force, and we have what, 30,000 companies in the marketplace? I don't even know the exact number, but accept the notion that it may be somewhere like 30,000 players. Are a hundred trials excessive in a country of that size and that vitality with that many patents extant? And what happens when there are trials? Most of them get affirmed on appeal. Of course, that also means some get reversed, but the numbers again are kind of instructive.

On the PTO, and it's ability to deal with patent reform:

So, of course, the magic bullet is a new kind of reexamination in the Patent Office. That's what everybody says will solve the problem. Why? It will be faster and cheaper than court trials. Well, maybe. In the real world, we've got a Patent Office that struggles to keep up with its current work. What basis would we have for confidence, particularly if it doesn't have a tripled budget, that it can run in-house what amounts to a court system with cross examination and discovery rules and a Judge presiding and making fact findings or Administrative Patent Judges even trained for this? How hard would it be to get them up to speed to function just the way District Court Judges do or ITC administrative judges in patent cases? I think these are hard questions, and I don't think the answers are too obvious, but they certainly give me a lot of pause.

* * *

Now, certainly the existing reexamination process has been less than a stellar success, and it certainly doesn't look faster than the courts, as slow as the courts are, compared to how they should be. I can't testify about how much cheaper it is, but the stories I've heard don't sound too encouraging, and then there's a big question of: Is it adequately accurate? Is it more accurate than what would happen in a well-run district courtroom? I'm not sure.

* * *

I'm told that the average examiner has been in the corps less than three years. Less than three years! That's a horrible fact in this country, even for our ongoing system of ex parte examination. If you try to lay on top of that a new beefed up litigation-like re-exam process, are there people there who can do it? Can the examiners do it? Can the supervisors do it? Even the board is also drowning in cases. They've greatly expanded in recent years. I think it's somewhere up to in the neighborhood now of 80 Administrative Patent Judges. What do they need, 160, 390? No one even knows what they would need to run these trials.

On "excess" damages:

Now, of course when you talk about the courts, their awards, people talk about excess damages. Everyone can cite some example of what they consider a horrendously excess damage award. A fair number of what I've read in print turn out to be nonexistent cases. I kept reading about the windshield wiper case where the cost of the car was used as the metric of damages, but I haven't been able to find such a case.

 

And Professors Jaffee and Lerner, who are very highly qualified economists, wrote in their book, which many of you read, that the courts often give double damages and actually cited a case that I was involved in as an example of double damages, and they said that I gave both lost profit damage and reasonable royalty damages to the winning patentee. Well, yeah, the Court did. Of course it did, because it was for different products and different time ranges, two different forms of damages, but they weren't -- but that's not double payment. That's paying once, so there's a lot of misunderstanding out there.

 

There are a lot of apocryphal cases that turn out to not really exist, and there are certainly some very large damage numbers; no question about that. On the other hand, most of those large damage amounts involve very large markets, very large profits, so we shouldn't be surprised, I wouldn't think. In any event, a few examples, if they're not very representative, hardly prove that excesses are common, but that's the charge, that half the time the damages are wildly out of proportion to anything that would be sustainable in common sense. It's easy to use words like ‘appropriate.’ The FTC talks about whether damages are ‘appropriate.’ Well, it's a little bit in the eye of the beholder. What you might think was appropriate I might think was way too little or way too much, but it's a pretty inexact yardstick.

On "trolling" and NPEs:

Then the argument keeps shifting. Well, it's not so much the number of infringement suits filed every year, it's who's filing. Well, why should we assume that a non-manufacturing patent owner shouldn't be allowed to enforce its patent? What is wrong with a university owning patents based on research of its faculty scientists or research institutes or small inventors or small innovative companies that either can or don't want to try to manufacture products themselves but license their inventions so others can make them?

 

Well, are these patentees really illegitimate somehow? I mean, after all, at least up until now a patent has given its owner the right to exclude, not the obligation to make. Then some say, well, it's not so much the non-practicing entities, it's certain companies that don't invent at all, but merely acquire and enforce patents, and of course calling them ‘trolls’ just confuses the analysis because obviously a troll is a bad thing.

It's a pejorative label. (Some people who used to complain about trolls allegedly have become trolls). But I don't think that it's helpful -- it's a slogan. It's a label. It's an excuse to not think carefully about the problem, as far as I'm concerned. It's like talking about ‘questionable patents.’ It's an excuse to not think carefully about the problem as far as I'm concerned. It's like talking about questionable patents. It's not helpful if we're going to try to diagnose the real illness and prescribe a useful medicine.

Besides, patents, like any other form of property, the essential element of property is it is alienable. You can sell it. You can sell it to anybody you want to for whatever price you want to sell it. Why should that be prohibited? Why should I be prohibited from buying patents if that's what I want to do, whether I invented them or not, whether I am going to practice them or not, whether I'm a research institution or a university or not? There might be some reasons. Maybe some of them are good, but it's not self-evident, at least not to me.

 

Then there's certainly the debate about motives. Well, they just want to acquire patents so they can squeeze royalties out of infringers. Well, yeah. Hey, this is commerce. This is about money. This is not an altruistic system. The whole constitutional idea was that the incentive of monetary gains would motivate innovation at a greater rate and to better ends than if the lure of money wasn't there, so I'm a little dismayed when I see it even creep into footnotes of Supreme Court opinions, that certain patentees were just trying to squeeze money out of the accused infringer. Well, all kinds of patentees are trying to squeeze money out of the accused infringer. That's what the lawsuit is all about, so come on. Let's be a little more adult about it than to worry about the greedy motive of the patentee. Of course the patentee is greedy.

There's much more in the speech, and it's a very informative and entertaining read - download a (cleaned-up) copy of the transcript here (link)

© 2009, Michael E. Kondoudis

An application data sheet (ADS) is a document that provides the bibliographic data for an application to the USPTO.  The USPTO prefers, but does not require, the use of an ADS.  An ADS can be advantageous, however, because it tends to reduce errors in the conversion/recordation of application data into the  USPTO’s official electronic  data record.  While electronic filing via the USPTO’s EFS-Web has certainly reduced some errors, the USPTO relies on the uploaded documents (e.g., declaration, specification), rather than a user’s input, to create its official electronic record.  For example, in a national stage application filed under 35 USC § 371, the USPTO might look to the publication of the international application for the title and to other documents for the listing of inventors and the correspondence address.   The use of an ADS, because it provides this information in a single document and in a specified format, improves the accuracy of this conversion and the resulting electronic record.

Examples of What Can Happen Without an ADS
The USPTO’s procedures for converting the application data of paper applications and for recording electronic data into its official data record are surprisingly accurate, in view of the number of application data records it must create.  Nonetheless, as with any system, errors do occur.  And, even when they are remedied early in the prosecution process, they still take time and can cause processing delays.  Worse yet, sometimes errors in the USPTO data records are not corrected.  Consider the following U.S. patents, which could have benefited from an ADS:

1. U.S. Patent Nos. 6,112,451, 6,631,400, and 6,637,044, each for a “Statement Regarding Federally Sponsored Research or Development”;
2. U.S. Patent No. 7,263,562 for a “Method and System for Describing Uploaded Files Statement Regarding Federally Sponsored Research or Development”; and
3. U.S. Patent No. 6,389,215 for “Low Birefringent Polyimides for Optical Waveguides Statement Regarding Federally Sponsored Research or Development”.

And then there are:

1. U.S. Patent No. 6,930,045 for “Cross Reference to Related Application”;
2. U.S. Patent No. 6,829,526 for a “Train Detection System and a Train Detection Method Cross Reference to Related Application”; and
3. U.S. Patent No.  6,786,734 for an “Electrical Adapter With a Foldable Housing Cross-Reference to Related Application”.

Clearly, there are instances when an ADS would have helped the USPTO more accurately convert bibliographic information into an official data record.

The Requirements for an ADS
37 CFR § 1.76 governs application data sheets and sets forth specific requirements for each ADS.  The following are some of the more noteworthy.

1.  An ADS may be used in provisional and nonprovisional applications.  37 CFR § 1.37(a).

2.  The USPTO offers a fillable pdf form (Form PTO/SB/14) on its website here.  CAUTION - The USPTO ADS fillable form must be submitted as a text-based PDF file. A scanned version of the ADS fillable form will be rejected via EFS-Web because EFS-Web will not be able to auto-load scanned in data into backend systems.   (Answer to USPTO.GOV EFS-Web Help FAQ # 252).

3.  An ADS must be in a specific format.  An ADS must be titled “Application Data Sheet” and must contain all of the following section headings, with any appropriate data for each section heading:

1. Applicant information (i.e., the name, residence, mailing address, and citizenship of each applicant);
2. Correspondence information (i.e., the correspondence address, which may be indicated by reference to a customer number);
3. Application information (i.e., the title of the invention, a suggested classification, by class and subclass, the Technology Center to which the subject matter of the invention is assigned, the total number of drawing sheets, any docket number assigned to the application, the type of application);
4. Representative information (i.e., the registration number of each practitioner having a power of attorney in the application);
5. Domestic priority information (i.e., the application number, the filing date, the status, and relationship of each application for which a benefit is claimed under 35 U.S.C. 119(e), 120, 121, or 365(c));
6. Foreign priority information (i.e., the application number, country, and filing date of each foreign application for which priority is claimed) (NOTE - providing this information in the application data sheet constitutes the claim for priority as required by 35 U.S.C. 119(b) and § 1.55(a); and
7. Assignee information.

37 CFR §§ 1.76 (a) and (b).

4.  Providing domestic priority information in an ADS constitutes the specific reference required by 35 USC § 119(e) or 120, and 37 CFR §§ 1.78(a)(2) or 1.78(a)(5), such that this information need not otherwise be made part of the specification.  37 CFR 1.76 (b)(5).

5.  The USPTO will interpret any blank section in an ADS to mean that there is no corresponding data for that label anywhere in the application.  37 CFR § 1.76(a).

6.  In the event of an inconsistency between the ADS and other submitted documents, the timing of the submission of the conflicting information controls.

• When the conflicting information is submitted at different times - the latest submitted information governs regardless of how it is supplied, except that an oath or declaration governs inconsistencies in the naming of inventors or their citizenship.
•  When the conflicting information is submitted at the same time - the ADS will govern when the inconsistent information is supplied at the same time, except that an oath or declaration governs inconsistencies in the naming of inventors or their citizenship.

37 CFR 1.76 (d)

Wednesday, May 13, 2009

Everything You Ever Wanted to Know About the Current State of Patents and Patent Law

Imagine a "who's who" list of patent scholars, practitioners, in-house counsel, government officials, IP brokers and policy makers - who were all placed in a single room with a microphone for 6 full days to speak individually about their experiences and opinions on various aspects of patent law. A transcript of the speeches/discussions would surely be a valuable asset to anyone looking to learn from the practices and observations of others.

The Federal Trade Commission (FTC), who recently completed a whirlwind tour of public hearings in California and Washington DC has now begun publishing transcripts of these meetings and has made many of them available, along with the presentation material provided with each session. While some of the transcripts are missing from the FTC site, the 271 Blog has done some sleuthing and has located copies elsewhere, with the exception of the May 4-5 hearings.


FTC HEARING ON THE EVOLVING IP MARKETPLACE


DECEMBER 5th (2008) HEARING
Panel 1: Developing Business Models
Panel 2: Recent and Proposed Changes in Remedies Law
Panel 3: Legal Doctrines That Affect the Value and Licensing of Patents

TRANSCRIPT (link)

Panelist Presentations:
• Thomas Cotter, Remedies for Patent Infringement: Theory and Practice
• Peter N. Detkin, To Promote the Progress…of Useful Arts: Investing in Invention
• Q. Todd Dickinson, Federal Trade Commission Workshop: Recent and Proposed Changes in Remedies Law
• Brian Kahin, The Patent Ecosystem in IT: Business Practice and Arbitrage [Written Version]
• Daniel P. McCurdy, Unique Operating Companies Involved in Patent Litigation with NPEs; Patent Litigation Involving NPEs and Operating Companies
• Roderick R. McKelvie, Seagate Plus One: How the District Courts are Implementing Seagate; Seagate Plus One (Article)
• Joseph Scott Miller, Testimony of Professor Joseph Scott Miller, Lewis & Clark Law School - Legal Doctrines That Affect the Value and Licensing of Patents (Panel 3)
• Raymond Millien, The IP Marketplace Players
• John A. Squires, Patent Remedies: Can Quanta Finish What eBay Started? [Written Version]
• Jay Thomas, Patent Damages: Principles and Current Problems
• Duane R. Valz, Yahoo! Inc- FTC Hearing on The Evolving IP Marketplace
• Mallun Yen, Cisco Systems, Inc. FTC Hearing on the Evolving IP Marketplace [Written Version]

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FEBRUARY 11th - 12th HEARING, WASHINGTON DC
February 11 - The Evolution of Remedies (Damages)
Panel 1: Patent Damages
Panel 2: Industry Roundtable discussion


TRANSCRIPT (link)


February 12 - The Evolution of Remedies (Damages)
Panel 1: Changes in Injunction Law
Panel 2: Industry Roundtable discussion

TRANSCRIPT (link)

Panelist Presentations:
• Paul Janicke, Patent Damages
• Aron Levko, 2009 Patent Damages Study - Preliminary Results
• Bryan P. Lord, Hearing on Patent Damages
• Steve Malin, Empirical Analysis Of Permanent Injunction Decisions Following eBay
• Marian Underweiser, Towards an Efficient Market for Innovation
• Donald R. Ware, Introductory Remarks and Presentation

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MARCH 18th - 19th HEARING, WASHINGTON DC

March 18 - Industry Roundtables
Panel 1: Universities and Entrepreneurs
Panel 2: The IT and Electronic Industries
Panel 3: Manufacturing and Diversified Companies
Panel 4: Life Sciences Industries


TRANSCRIPTS: Session 1 (link), Session 2 (link), Session 3 (link), Session 4 (link)


March 19 - The Operation of IP Markets
Panel 1: Economic Perspectives on IP and Technology Markets
Panel 2: Fulfilling the Patent System's Public Notice Function


TRANSCRIPTS: Session 1 (link), Session 2 (link), Session 3 (link)


Panelist Presentations:
• Ashish Arora, Markets for Technology and the Division of Innovative Labor: A View from the Ivory Tower
• James Bessen, Patent Notice and Markets for Technology
• Robert Hunt, The Federal Trade Commission’s Hearing on “The Evolving IP Marketplace”
• Ron D. Katznelson, “The Evolving IP Marketplace” Hearings on The Operation of IP Markets
• F. Scott Kieff, The Importance of Marinating on Patents
• Scott Stern, The Impact of the Patent System on the Market for Technology

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APRIL 17th HEARING, WASHINGTON DC

Panel 1: Roundtable Discussion
Panel 2: Recent Scholarship in Patent Markets

TRANSCRIPTS: Session 1 (link), Session 2 (link), Session 3 (link)

Panelist Presentations
• Iain M. Cockburn, Licensing: a view from the trenches (Selected findings from the LES Foundation Surveys)
• Stuart Graham, Patents and Technology Markets: How is the market operating, and can it be improved?
• James E. Malackowski, FTC Hearings on Developing Business Models and a National IP Economic Infrastructure
• Mark A. Lemley, Ignoring Patents; How To Make a Patent Market
• R. Polk Wagner, Patent Portfolios [Written]; Understanding Patent Quality Mechanisms

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MAY 4th-5th HEARING, BERKELEY, CA
May 4 - IP Marketplaces
Panel 1: The IP Marketplace in the Life Sciences Industries
Panel 2: The IP Marketplace in the IT Industry
Panel 3: Markets for IP and Technology: Academic Perspectives

May 5 - Notice and Remedies
Panel 1: The Notice Function of Patents
Panel 2: Patent Remedies

(Transcripts & Presentations not currently available)

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Anyone looking to get more insight on current patent issues and read first-hand accounts from industry and academic leaders are strongly advised to read through the materials. It's a lot of information - a few hundred pages in transcript material alone - but is well worth the read.

The FTC page for these hearings may be viewed here (link), which contains much of the aforementioned material, with the exception of some of the transcripts listed above.

There has been a renewed interest in deferred examination for the USPTO, primarily because (a) it appears to enjoy some success overseas, and (b) the current backlog of pending cases at the PTO are at unsustainable levels. As many institutional patent filers recognize, a fair percentage of yearly filings are almost exclusively defensive, i.e., the filings are submitted to create "freedom-to-operate" (FTO) areas and to potentially block future filers in the technological space, and also create uncertainty for competitors analyzing filed applications.

While U.S. companies have long used defensive filings, statistics on this area are hard to find, since the U.S. system makes it almost impossible to gleam the motivation behind any filing.

However, in the EPO, and more specifically Germany, deferred examination creates two "lags" between filing and grant (or refusal): (1) the examination lag - i.e., between filing and examination, and (2) grant/refusal lag - i.e., between examination and grant or refusal. In Germany, examination does not start until it is requested by the applicant. Thus, the applicant controls the examination lag. Accordingly, applicants can achieve a very long, and cost-efficient, period of pendency, since prosecution costs are practically nil, and there is no “risk” of too early termination. As a result, competitors cannot ignore the application (since the examination request can still be made), and the applicant gains a certain leverage in the patent office on the specific technology.

(As EPO president Alison Brimelow put it: "If you spend several years waiting for a decision, you and others can play 'rich man’s poker', taking a bet on what your rights are going to be and discussing your commercial relationships in the shadow of that pending set of applications.")

Under this backdrop, EU scholars Joachim Henkel and Florian Jell looked at the German model to determine how, and how often, German patent filers avail themselves of defensive patent filings, and their motivations for doing so. Analyzing all direct first filings at the German patent office between 1986 and 2000, the authors found the following:

• While 64.7% of all applications in the GPTO were eventually accompanied by an examination request, 35.3% of all applications had no examination started. However, of the 35.3%, 51% of them had subsequent, priority-based, applications filed in other patent authorities.

• In 47.8% of all GPTO direct first filings, the request for examination was filed before the application was published, meaning the applications corresponded to an "accelerated process" pattern. The remaining 16.9% lingered as "optional" filings, presumably to create insecurity among competitors.

• 2% of all applications could turn out to have defensive publishing as their sole purpose, that is, the publication of inventions with the purpose of creating prior art.

• More than 20% of all applications are left pending for the maximum of seven years before examination is requested or the application is deemed to be withdrawn.

• In cases where the filings are withdrawn very early (when first annual fees would have been due), 85.9% of applications actively withdrawn had subsequent filings, thus indicating that the original filing was merely done to secure priority.

Other findings from the study:

[A] surprisingly large share of applications is kept pending without request for examination, in 20% of all filings even for the maximum period of seven years. For applications with low value or low probability of grant, this creates insecurity for competitors and is thus preferable to an early withdrawal or an early, and likely negative, decision by the examiner. Second, a longer pendency period gives the applicant more time to assess the value of requesting examination. We find that for 17% of all GPTO direct filings, a request for examination is made with delay, that is, after publication of the application.

Evidence from interviews suggests that firms strongly benefit from maintaining pendency of patent applications that cover rather abstract technologies whose market is considered strategically important as a whole, but which are not yet embodied in concrete products. It seems that in such cases a pending patent application offers enough protection while at the same time involving lower cost (e.g. no examination fee, no prosecution cost). As soon as “full” protection is required (e.g. when a product will be launched soon), the applicant can easily induce examination of the patent. Our data shows that this strategy is mostly used by firms (in contrast to individuals): 90.4% of all patents that were pending for seven years before examination started were filed for by corporations or institutions.

Our interviews further suggest that individual applicants who keep their filings pending do so in order to save examination cost while searching for licensees. A majority of 54.8% (which is far above average) of all early lapsed patent applications is filed by individuals suggesting low commercial value of the underlying inventions. The remaining 41.6% (more than 2 % of all filings) are early lapsed corporate or institutional filings. They are strong candidates for being DPs [defensive publications], or in any case for having a large value component related to creating FTO. While we can currently not exclude that the applicants did file initially with the intention of obtaining a patent grant, and within two years realized that a request for examination would be of little value (because of a low probability of grant, or a low value of the resulting patent, if granted), interpreting these filings as DPs is very plausible. First, this interpretation is suggested by qualitative evidence. Second, a survey among EPO applicants found that preserving FTO, after preventing imitation, is the second most important motive for patenting.

Read/download "Alternative Motives to File for Patents: Profiting from Pendency and Publication" (link)

At the May 2008 session of the Working Group, the International Bureau (IB) presented a paper titled "Enhancing the Value of International Search and Preliminary Examination Under the PCT" (PCT/WG/1/3), where the paper addressed shortcomings of the PCT to exploit work product of various offices. According to the group, worksharing would greatly assist in reducing the overall workload of patent offices worldwide through the use of the international reports either as the basis for grant or at least as the basis for an accelerated examination process.


In other words, the general idea is place greater weight on reports issued from the international/national stage so that a positive report would automatically indicate a potential patent grant in all member states, referred to as a "PCT II Patentability Report." After the report issues, national offices would have a specific period of time to issue a notification of refusal.

According to the report, the system

[W]ould result in an extremely high quality final work product that should be able to be heavily relied on, if not accepted, by national offices due to the fact that it is the result of a comprehensive search of multiple offices that incorporates prior art submissions by the applicant and third parties. It will have the additional confidence factor of being prepared in conjunction with the processing of the national application [in the issuing search office], thus resulting in either a patent grant or a final rejection in that office.

Some highlights of the system include:


(1) the combining of international and national processing "that will enable more efficient processing in the Authority/national office performing the search and examination,"

(2) search/examination collaboration among Authorities,

(3) allowing for the submission of prior art by the applicant, and

(4) allowing for third party prior art submissions.

-- Read/download a copy of the report here (link)


-- Read other documents relating to the "Patent Cooperation Treaty Working Group : First Session" (May 26, 2008 to May 30, 2008) here (link).

Recently, Intel Corp.'s chief patent counsel David Simon and entrepreneur Steve Perlman faced off in a debate on patent reform yesterday, where their views showed a wide gap between the opinions of big corporations and startups over pending patent legislation, and especially apportionment of damages and first-to-file.

It's an interesting presentation - Simon makes a number of points regarding the practical effect of patent litigation on the business models and budgets of high tech companies. Perlman, who was more animated than Simon, began to pick apart, in detail, some of the contentions of the CPF, and others in the pro-reform movement. At one point, it even sounds like he calls one of the authors that contributed to matters cited in the Congressional Report a "f***ing liar" (this is not crystal clear, but you can judge for yourself at about the 7:35 point of the video)

View the 20-minute video here (link)

Also see part 2 of the video (16 min.), where Ronald Yin from DLA Piper addressed a more middle-of-the-road position, stating that "The system needs to be fixed, but I don't think it's in as dire straits." (link)

See, EETimes, "Intel, startup face off in patent debate" (link)

EDN, "Patents: fixable, or the next weapons of financial destruction?", discussing the debate and noting that the burgeoning "patent derivative market" could "further increase the risk of innovation for real technology companies" (link)

See also, Tech Daily Dose, "Lofgren 'Very Nervous' About IP Pact" (link). From the article:

Silicon Valley executives told [Lofgren] in recent meetings that a compromise bill, which last month passed the Senate Judiciary Committee, could be worse than no bill at all due to what they believe is watered down damages language. "Last year we had a strong bill," Lofgren said of the version that passed the House. The Senate measure stalled last spring after Judiciary Chairman Patrick Leahy and then-ranking member Arlen Specter could not see eye to eye on damages text. "Now we have a bill that opponents of patent reform are rallying around," she said of Leahy's legislation as amended.

Ex Parte Catlin, Appeal 2007-3072 (BPAI, February 3, 2009) Precedential Opinion

The claimed invention was directed to a method for implementing an on-line incentive system at a merchant's web site. The application contained a means-plus-function recitation in the claims:

1. A method for implementing an on-line incentive system, said method comprising the steps of:

providing, at a merchant's web site, means for a consumer to participate in an earning activity to earn value from a merchant; and . . .

On Appeal, the BPAI noted the examiner's obviousness rejection (and surprisingly didn't raise any 101 issues sua sponte). However, the Art Unit SPE filed a request for rehearing seeking reconsideration of the Board's decision by arguing that the "means for" language was indefinite under section 112, second paragraph, since the Specification allegedly did not disclose adequate structure, material, or acts that perform the function recited in the claims.

Reviewing the Specification, the Board noted that "The Appellants' Specification does not provide . . . an algorithm by which the consumer is able to participate in an earning activity and earn value." Also, the Board noted that a description of prior art incentive programs "merely provides examples of the results of the operation of an unspecified algorithm."

Citing Aristocrat Techs. Austl. Pty Ltd. v Inter. Game Tech., 521 F.3d 1328 (Fed. Cir. 2008), it was stated that

For a patentee to claim a means for performing a particular function and then to disclose only a general purpose computer as the structure designed to perform that function amounts to pure functional claiming. Because general purpose computers can be programmed to perform very different tasks in very different ways, simply disclosing a computer as the structure designated to perform a particular function does not limit the scope of the claim to "the corresponding structure, material, or acts" that perform the function, as required by section 112 paragraph 6.

* * *

[A] general purpose computer programmed to carry out a particular algorithm creates a "new machine" because a general purpose computer "in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software.". . . The instructions of the software program in effect "create a special purpose machine for carrying out the particular algorithm." . . . Thus, in a means plus function claim "in which the disclosed structure is a computer, or microprocessor, programmed to carry out an algorithm, the disclosed structure is not the general purpose computer, but rather the special purpose computer programmed to perform the disclosed algorithm."

Turning to the application's disclosure, the Board found that

Appellants' Specification describes generally that the consumer can access an earning activity through the merchant's web site. The merchant's web site itself cannot be the means or structure corresponding to the function of the claims, because the claims recite providing "at a merchant's web site" means for a consumer to participate in an earning activity and earn value. It is clear from the claims that the merchant's web site is merely the location, through which the software that enables the consumer to participate in the earning activity and earn value, is provided. The Specification does not provide, however, an algorithm by which the consumer is able to participate in an earning activity and earn value.

The Board applied the 112 rejection and vacated the obviousness rejection, noting that "[a] rejection of a claim, which is so indefinite that 'considerable speculation as to meaning of the terms employed and assumptions as to the scope of such claims' is needed, is likely imprudent."

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

© 2009, Michael E. Kondoudis

The USPTO recently published a Notice to applicants filing applications under the PCT in the United States Receiving Office (RO/US) to exercise care in selecting a competent International Searching Authority (ISA) for claimed subject matter.  The USPTO reminds applicants that:  (1)  the EPO will not act as an ISA/IPEA for applications with one or more business method claims; and (2)  the AU-IPO will not act as an ISA/IPEA for applications with one or more claims drawn to certain fields of technology specified in Annex A of the Arrangement between IP Australia and the United States Patent and Trademark Office, which was published in the USPTO’s Official Gazette at 1337 OG 263.

From the USPTO’s website …

Limited Competency of Certain International Searching
Authorities With Respect to Applications Filed in the USPTO

The USPTO has noticed a significant number of international applications filed in the United States receiving Office (RO/US) under the Patent Cooperation Treaty (PCT) where the applicant has chosen an International Searching Authority (ISA) which is not competent for the subject matter of the claimed invention.  This can result in significant delays in the issuance of the International Search Report and Written Opinion of the International Searching Authority.  When such an application is filed it is forwarded by the RO/US to the ISA selected by applicant.  After processing the application, the ISA will return the application to the RO/US with an indication that it is drawn to subject matter for which the ISA is not competent to act. The RO/US will then notify applicant of such and invite applicant to select a competent ISA.  Once the RO/US receives a new indication from applicant as to a new ISA, the RO/US will forward the application to the newly selected ISA where it will undergo further processing and will eventually receive a search in accordance with Chapter I of the PCT.

Applicants are hereby reminded that certain ISAs have limited their competency for applications filed with the RO/US.  Specifically, the European Patent Office (EPO) will not act as an ISA/IPEA for applications with one or more claims to a business method (citation omitted).  Further, the Australian Patent Office (IP Australia) has declared that it is not competent for applications with one or more claims drawn to subject matter set forth in Annex A of the Arrangement between IP Australia and the United States Patent and Trademark Office (see 1337 OG 263).  To avoid significant processing delays, applicants filing international applications naming either the EPO or IP Australia as the ISA should take care to ensure that the application does not contain any claims for which the selected ISA is not competent.

The relevant portion of Annex A is reproduced below.

Annex A of the Arrangement between IP Australia and the USPTO

Subject matter for which the Australian Patent Office is NOT a competent International Search Authority or International Preliminary Examination Authority for international applications filed with the RO/US by International Patent Classification (8th edition):

A01-AGRICULTURE; FORESTRY; ANIMAL HUSBANDRY; HUNTING; TRAPPING; FISHING, all classes except:  A01H, A01N, A01P(i.e. new plants or processes of obtaining them thereof, Preservation of human, animals bodies or plants, biocidal, pest repellent, pest attractant or plant growth regulatory activity of chemical compounds or preparations)
A21-BAKING; EQUIPMENT FOR MAKING OR PROCESSING DOUGHS; DOUGHS FOR BAKING all classes except:  A21D, (i.e. Treatment of flour or dough for baking)
A22-BUTCHERING; MEAT TREATMENT; PROCESSING POULTRY OR FISH
A23N-MACHINES OR APPARATUS FOR TREATING HARVESTED FRUIT, VEGETABLES OR FLOWER BULBS IN BULK
A23P-SHAPING OR WORKING OF FOODSTUFFS
A24-TOBACCO; CIGARS; CIGARETTES
A41-47 PERSONAL AND DOMESTIC ARTICLES (eg. headgear (A42), footwear(A43),
haberdashery (A44))
A61-MEDICAL OR VETERINARY SCIENCE, all classes except:  A61K, A61L, A61P and A61Q (i.e. preparations for medical, dental or toilet purposes, methods, apparatus for sterilising materials or objects, chemical aspects of bandages, dressings, absorbent pads, or surgical articles, therapeutic activity of chemical compounds, use of cosmetics or similar toilet preparations)
A62-LIFE-SAVING all classes except:  A62D (i.e. chemical means for extinguishing fires, processes for making harmful chemical substances harmless, or less harmful, by effecting a chemical change, composition of materials for coverings or clothing for protecting against harmful chemical agents; composition of materials for transparent parts of gas-masks, respirators, breathing bags or helmets; composition of chemical materials for use in breathing apparatus)
A63-SPORTS; GAMES; AMUSEMENTS

B06-GENERATING OR TRANSMITTING MECHANICAL VIBRATIONS IN GENERAL
B21, B23-B27 all except: B23K (i.e. soldering or unsoldering; welding; cladding or plating by soldering or welding; cutting by applying heat locally, e.g. flame cutting; working by laser beam)
B31-MAKING PAPER ARTICLE WORKING PAPER
B60-B68 all except: B60L, B60M and B60Q (i.e. electric equipment or propulsion of electrically-propelled vehicles; magnetic suspension or levitation for vehicles; electrodynamic brake systems for vehicles, in general, power supply lines, or devices along rails, for electrically-propelled vehicles, arrangement of signalling or lighting devices, the mounting or supporting thereof or circuits therefor, for vehicles in general)

D01-D07 Textiles all except:  D06L, D06M, D06N,  D06P, D06Q (i.e. bleaching, treatment of fabrics, dyeing or printing textiles, decorating textiles)

E01-E06 FIXED CONSTRUCTION
E21-EARTH OR ROCK DRILLING; MINING

F01-F04 MACHINES
F15-F17 ENGINEERING ELEMENTS, ACTUATORS, STORAGE OR DISTRIBUTION OF GASES OR LIQUIDS
F41-F42 WEAPONS, AMMUNITION

G04-HOR0LOGY
GO6-COMPUTING; Calculating; Counting
G10-MUSICAL INSTRUMENTS
G11-INFORMATION STORAGE

The UPSTO’s announcement can be read here.

The Law Office of Michael E. Kondoudis, PC
Washington DC Patent Attorney
www.mekiplaw.com

© 2009, Michael E. Kondoudis

Gene Quinn of IPWATCHDOG.COM has a troubling an interesting post about the USPTO from the inside.  For anyone curious as to why the allowance rate has dropped below 50% (it is presently at 42%), and why the quality of examination has declined so much in recent years, I recommend taking a few minutes to read Mr. Quinn’s post entitled “Perspective of an Anonymous Patent Examiner“.  A few nuggets from the anonymous Examiner:

 [The USPTO’s] “reject, reject, reject now” policy is encouraged by management’s policy of issuing a written warning on an examiner’s permanent file for allowance error percentage above 10%.

Additionally, there is a lack of motivation to get cases allowed, because there is no incentive for the examiner to do the extra work required to arrive at claim language which can be allowed.

Over the years, I too have heard many of the same views from multiple Examiners.  It is little wonder why morale at the USPTO is so low.  I leave you with Mr. Quinn’s final question from his post, which I second:

With so many Czars and hundreds of billions of dollars being thrown around Washington, DC, can’t we get just a little attention at the agency that is tasked with promoting the progress of science and useful arts?  I don’t think that is too much to ask for, is it?

The Law Office of Michael E. Kondoudis, PC
Washington DC Patent Attorney
www.mekiplaw.com