Source: http://271patent.blogspot.com/2009/03/
Timestamp: 2019-04-18 18:41:12+00:00

Document:
Bilski Beatdown: Holders of Business Method Patents May Be Holding "Worthless Stock"
Even if the court were to hold that “manipulation” suffices to effect a "transformation,” the question would remain whether either claim transforms an “article”—i.e., any physical object or substance, or an electronic signal representative of any physical object or substance . . . A credit card number is not a physical object or substance, and plaintiff does not argue to the contrary.
There is no dispute that credit cards are physical objects and that their particular physical characteristics have significance in various contexts. Yet a credit card number no more represents a physical credit card than a card represents a number. Both the number and the card represent a common underlying abstraction—a credit card account, which is a series of rights and obligations existing between an account holder or account holders and a card issuer.
[Regarding the recitation of an IP address,] the claimed method does not transform or even manipulate the IP address itself . . . The IP address itself is not an object of transformation; indeed, it would make no sense to change the IP address, since its purpose is to serve as an identifier. Furthermore, an IP address is not a “visual depiction” of a computer in the sense required by the Bilski court’s reading of Abele. See Bilski, 545 F.3d at 963. The claims do not, as a matter of law, meet the transformation prong.
Former vice-president Al Gore did not actually take credit for inventing the internet, and neither does plaintiff; however, plaintiff does contend that the entire internet is the machine implementation of its method.
Even if the “over the Internet” limitation could otherwise be considered a machine implementation, the involvement of the internet will not qualify as such where it merely constitutes “insignificant extra-solution activity.” See Bilski, 545 F.3d at 962. A different rule would eviscerate section 101, because any “competent draftsman could attach some form of [extra]-solution activity to almost any mathematical formula,” or, for that matter, mental process.
Finally, the use of the internet does not impose meaningful limits on the scope of the claims. See Bilski, 545 F.3d at 961 (holding machine implementation or transformation must impose meaningful limits on claim scope) . . . Otherwise non-statutory subject matter cannot be made patentable simply by limiting it to a particular technological field . . . The instant claims broadly preempt the fundamental mental process of fraud detection using associations between credit card numbers. A limitation to “only” the vast area of online credit card transactions is not meaningful.
Having reviewed the above tangle of references to “Beauregard” claims and the facts of this case, the court reaches two conclusions. First, there is at present no legal doctrine creating a special “Beauregard claim” that would exempt claim 2 of the ‘154 patent from the analysis of Bilski. The USPTO has referred to “Beauregard claims” when assessing computer programs embedded in tangible media, but there is no legal support for the view that Beauregard extends the holding of Lowry. Like Auntie Mame’s Uncle Beauregard, the footing of the so-called Beauregard doctrine is anything but sure.
Second, even if Beauregard and the USPTO decisions referring to it could be considered to set out a legal doctrine, and even if such doctrine survives Bilski, it would not provide a basis for plaintiff to avoid summary judgment. If a “Beauregard claim” is anything, it is an exception to the traditional printed matter rule for computer programs embodied in a tangible medium.
In analyzing Bilski, one is led to ponder whether the end has arrived for business method patents, whose numbers swelled following the decision in State Street. Without expressly overruling State Street, the Bilski majority struck down its underpinnings. This caused one dissenter, Judge Newman, to write that State Street “is left hanging,” while another dissenter, Judge Meyer, registered “an emphatic ‘yes’” to rejecting State Street, and a third, Judge Rader, queried whether the court was willing to decide that the entire field of business patents is “undeserving of incentives for invention.” 545 F.3d at 995, 998, 1014. Although the majority declined say so explicitly, Bilski’s holding suggests a perilous future for most business method patents.
The observations of several Justices suggest that this issue may be expected to receive serious consideration by the Supreme Court . . . The closing bell may be ringing for business method patents, and their patentees may find they have become bagholders.
(“Bagholder” denotes a shareholder left holding shares of worthless stocks).
Read/download a copy of the opinioin here (link).
Last Friday, Ocean Tomo conducted one of their high-profile intellectual property auctions at the Ritz-Carlton in San Francisco. Normally, bidding activity is relatively brisk, but this year expectations were set lower in light of the current economic conditions (as much as a 50% drop was anticipated). For a pre-auction report, see Joe Mullin's blog post here (link).
It turned out conditions were even worse than expected, resulting in a "bleak event": Of the 80-odd high-tech patents offered, only six sold and just eight others attracted bids. Auctioneer Charlie Ross commented after the event that "I haven't talked to myself so much in years."
(1) "Cellular telephone with programmable authorized telephone number"
(2) "Universal memory card interface apparatus"
(3) "System, method and medium for managing information"
(4) "Portable communication unit with discrete allocable blocks of airtime"
(5) "Personal medical device communication system and method"
(6) "System and method for managing prepaid wireless service"
a low number of bids.
The auction started out on an upbeat note, with Lot 1 selling for $200,000. Bidding then flat-lined, followed by occasional bursts of bidding heartbeats. The live auction results are not the end of the sales story. There were examples of bidding not reaching the reserve price, and Ocean Tomo attempts to broker deals between unsuccessful buyers and sellers together afterwards.
Lot 59A (US 7,406,305) is a lot of Prepaid Wireless patents. Five of the patents were previously litigated in four suits. Also, 3 of the patents were reexamined, suggesting as strong validity vetting.
previously asserted against S3 and 3DFX, was valued in the catalog at $2.75 Million. Zero bids.
Lots 67 (US 7,134,092), 9 (US 6,922,815) and 68 (US 6,938,218) with “Method and apparatus for three dimensional internet and computer file interface,” whose embodiment was demonstrated at the exposition. The embodiment was a special web browser that displayed and projected multiple pages in cube form, where each internal facet displayed a web page. Since the original filing of the patents I feel that technology has caught up with the potential of the inventions, for example with graphics speed and display size. One can navigate through sites, automatically attaching additional cubes in the process . . . As the dimensions of [exemplary embodiments] are the same as an iPhone, this would be a possible method of browser navigation, even with the small display. I’m surprised these had zero bids.
Lot 40 (US 7,324,000), comprising two patents where Jonathan Zittrain is lead inventor, titled “State adaptation devices and methods for wireless communications”. Some may recognize Jonathan as noted IP law professor at Harvard. The lot received zero bids. When I first saw the patent in the catalog I recognized its applicability to social networking and the exciting field of teledildonics. (Google teledildonics and patents).
Although others have attempted to remedy this conflict, no fully integrated medical systems have been developed. For example, the Air Medical Software (Innovative Engineering of Lebanon, N.H.) provides computer software for dispatching emergency crews to accident scenes and managing flight information. However, it does not provide comprehensive integration of the flight information with a clinical diagnosis, billing system and administrative system.
Shortly after the application was filed, the inventors and prosecution counsel received a brochure on the AeroMed system at a conference. The brochure indicated that the AeroMed system did indeed provide the features discussed in the application.
[a]pplicants are aware of AeroMed Software, computer software for Air Medical Dispatch, Flight Program Management, Medical Charting, Continuing Education Tracking, Transfer Center, Physician’s Referral Lines, and Custom Applications. AeroMed Software is a product of Innovative Engineering of Lebanon, New Hampshire.
the brochure to disclose that did not threaten patentability. He excluded, however, the entire teaching that would have been a serious obstacle to patentability. There can be no question that a 'reasonable examiner' would have considered the information in the brochure material."
[T]he inventive feature of the ‘073 patent was billing integration. The specification made that clear. Indeed, in the one Office Action issued before the application was allowed, the examiner stated: “[t]he prior art teaches systems and methods of computerized integrated data management, but does not teach or suggest a computerized method that includes collecting and integrating patient information with flight information to produce an encounter record, as set forth in the claims.” Golden Hour can hardly argue now that its representation of AeroMed in the ‘073 patent application was not an “argument for patentability.” It is clearly how the examiner distinguished AeroMed from the invention disclosed in the ‘073 patent. Golden Hour can point to no law suggesting that only those arguments used to overcome a rejection from the PTO are “arguments of patentability.” Indeed, this argument is fundamentally wrong.
patentability of the invention. The language was lifted directly from the front of the brochure. It was incumbent upon Golden Hour “to provide the PTO with sufficient information for a reasonable examiner to consider the [brochure] in context, not with a selective and misleading disclosure.” . . . Here, Golden Hour and its counsel selected the one part of the AeroMed brochure to disclose what was consistent with how it had described AeroMed to the PTO. Furnishing the entire brochure would have revealed the inconsistencies between Golden Hour’s description in the application and the truth about the AeroMed system. Such selectivity is strong evidence of intent to mislead the patent office about the relevant prior art system as described by its competitor.
Accordingly, Judge Ward ruled that Golden Hour was guilty of inequitable conduct, and rendered the patent unenforceable.
NOTE 1: The finding of inequitable conduct came after the court found infringement.
NOTE 2: The brochure was undated, and prosecution counsel correctly pointed out that undated disclosures are not typically considered by the PTO. Judge Davis rejected this argument, stating that it "disregaraded the continuing duty of candor."
. . . mistakes and omissions will inevitably occur, and that the courts will be asked to determine if there was inequitable conduct.
Larson filed a continuation application just prior to the grant of its patent. Larson sued Aluminart on the patent and Aluminart filed for a reexamination request. Aluminart additionally accused Luminart of inequitable conduct at the district court. The PTO granted the reexamination request, and the district court stayed the litigation. The reexamination proceeding was conducted by the PTO at the same time the continuation application was being prosecuted. During the reexamination proceeding, the continuation application underwent a series of four Office Actions.
For the reexaminations, Larson submitted an IDS containing 200 patents, including district court pleadings, along with the allegations of inequitable conduct. Larson also disclosed the co-pending application, the first two Office Actions, and additional references. However, Larson did not disclose the 3rd and the 4th Office Action, and missed 3 references applied in the Actions. Apparently missing this information, the PTO went on to issue a Reexamination certificate.
After the court resumed litigation, Aluminart again accused Larson of engaging in inequitable conduct during the reexamintion proceeding. Finding that the 2 Office Actions and 3 prior art references were material, and because Larson "did not provide any plausible excuse for witholding these materials from the PTO," the district court found Larson engaged in inequitable conduct.
On appeal, the CAFC considered each of the prior art references, and found that the features relied upon for materiality were already disclosed by other references that were considered by the reexamination panel. As such, the references were deemed cumulative, and the CAFC reversed the district court in this regard.
[T]hat the examiner provided only summary rejections without meaningful analysis. According to Larson, in the Third and Fourth Office Actions, the examiner articulated rejections almost identical to the previous office actions; mostly discussed the Johnson patent, which had been thoroughly explained in previous office actions; and focused on claim limitations that were not at issue. In other words, Larson contends, because the Third and Fourth Office Actions did not contain examiner comments different from previous office actions and because Larson disclosed all of the material references discussed in those actions, the office actions themselves were not material.
[T]hat a contrary decision of another examiner reviewing a substantially similar claim” was material . . . because a “rejection of a substantially similar claim refutes, or is inconsistent with the position that those claims are patentable, [the] adverse decision by another examiner . . . meets the materiality standard.
We acknowledge that the ’039 Continuation examiner later withdrew his rejection based upon the Johnson patent and came to the same ultimate conclusion as the Reexamination Panel—that the Johnson patent did not disclose the “extending into screen tracks” limitation. The ’039 Continuation examiner’s later view, however, does not change the fact that the Third Office Action contained valuable reasoning and rejections at the time when it was made. Importantly, during the time from when the Third Office Action issued to the time when the Fourth Office Action withdrew the pertinent rejection—more than a year—there was an adverse decision by another examiner that refuted, or was inconsistent with, the position that claim limitations of the ’998 patent were patentable over the Johnson patent. Accordingly, the Third Office Action was material.
Remanding the case back to the district court, the CAFC provided four points of guidance for determining the issue of deceptive intent.
(1) "it will not be necessary for the district court to accept additional evidence. Rather, the court should analyze all of the evidence of record, consistent with this opinion, and determine if Larson withheld the Third and Fourth Office actions with an intent to deceive the PTO."
(2) "materiality does not presume intent, and nondisclosure, by itself, cannot satisfy the deceptive intent element . . . While deceptive intent can be inferred from circumstantial evidence, the circumstantial evidence must still be clear and convincing . . . Further, the inference must not only be based on sufficient evidence and be reasonable in light of that evidence, but it must also be the single most reasonable inference able to be drawn from the evidence to meet the clear and convincing standard."
(3) "the district court should take into account any evidence of good faith, which militates against a finding of deceptive intent . . . However, while the court must consider any such evidence provided, the patentee is not required to offer evidence of good faith unless the accused infringer first meets its burden to prove—by clear and convincing evidence—the threshold level of deceptive intent."
(4) "If the district court satisfies itself—in light of all the evidence and consistent with our materiality findings—that Aluminart has established a threshold level of intent by clear and convincing evidence, it will then be required to balance the levels of materiality and intent to determine if a finding of inequitable conduct is warranted."
I write separately, however, to express my view that this precedent has significantly diverged from the Supreme Court’s treatment of inequitable conduct and perpetuates what was once referred to as a “plague” that our en banc court sought to cure . . . Symptoms of this plague are apparent from the facts of this case. The patent-in-suit has undergone examination twice in the PTO, and the patentee has been accused of inequitable conduct on each occasion for allegedly withholding material information . . . Following remand today, the litigation will continue to focus on inequitable conduct, to the exclusion of the patentee’s infringement contentions. The ease with which inequitable conduct can be pled, but not dismissed, is a problem of our own making.
During litigation, Defendant asserted that Plaintiff made affirmative misrepresentations to the PTO in the application leading up to the patent-in-suit. During prosecution, the PTO rejected some claims on indefiniteness and others on prior art. With regard to the indefinite claims, the Examiner specified features, that, in the Examiner's opinion, distinguished the claims over the cited art of record. The Examiner further indicated that these claims would be allowed once the 112(2) issues were addressed.
A personal interview was conducted where certain features were incorporated into the independent claims, including "the discussion found in paragraph  of the application as published." Amendments were made, and the application was allowed.
materially and substantially deviated from the language of paragraph 0018 of the published application when submitting new application claims 41 and 45, failed to apprise the examiner of such deviations, and indeed affirmatively misrepresented to the examiner that claims 41 and 45 had antecedent support . . . knowing such representation to be false.
“[M]ateriality is not limited to prior art” but embraces any information that a reasonable examiner would be substantially likely to consider important in deciding to allow the patent . . . Plaintiff challenges the materiality of the misstatement because the PTO “had all the information it needed to determine if the statement was accurate.” At the hearing, Plaintiff asserted that if the examiner had the information to determine whether the information provided by an applicant was true or a misstatement, then the information is not material. This Court has not found any cases setting out such a bright-line test and analogous cases do not support Plaintiff’s proposed rule.
It is clear that a misrepresentation that is contradictory to information that is not presented to the examiner is an intentional material misrepresentation. . . . It is a much closer question when the patentee makes a statement contradictory to information that is actually before the PTO.
[T]his Court cannot adopt or apply a bright-line rule that, if the PTO had the information to ascertain the veracity of the alleged misstatement, the misstatement is not material. Instead, the issue of materiality must be decided on a case-by-case basis. Because of the procedural posture of this motion, this Court, for instance, does not know whether the examiner actually looked at and considered the specification after the amended application. On the other hand, the Court acknowledges that considering and reviewing the specification is fundamental to the patent approval process . . . While the Defendant faces a heavy burden to establish at trial that the alleged misrepresentation was material – at this stage, the Court cannot make that determination. Accordingly, based on this record, this Court cannot find that the proposed affirmative defense of inequitable conduct is futile as a matter of law. Instead, the Court will grant the motion and allow the parties to address the adequacy of the defense at a later time.
CAFC Throws a Bone to the PTO in Tafas Case: Now What?
By now, most everyone has heard that the CAFC issued its opinion in Tafas v. Doll and upheld the PTO's authority to promulgate many (but not all) of the rules. After much hand-waving over what PTO rules are to be considered "procedural" versus "substantive", the CAFC essentially treated the rules as a substantive due process issue over a non-fundamental right.
While we do not purport to set forth a definitive rule for distinguishing between substance and procedure in this case, we conclude that the Final Rules challenged in this case are procedural. In essence, they govern the timing of and materials that must be submitted with patent applications. The Final Rules may “alter the manner in which the parties present . . . their viewpoints” to the USPTO, but they do not, on their face, “foreclose effective opportunity” to present patent applications for examination.
[F]inal Rule 78 is inconsistent with § 120 . . . Section 120 unambiguously states that an application that meets four requirements “shall have the same effect, as to such invention, as though filed on the date of the prior application.” . . .
The use of “shall” indicates that these are the exclusive requirements, and that all applications that meet these requirements must receive the benefit provided by § 120. . . .Thus, Rule 78 is invalid because it attempts to add an additional requirement—that the application not contain amendments, arguments, or evidence that could have been submitted earlier - that is foreclosed by the statute. Because the statute is clear and unambiguous with respect to this issue, the USPTO’s [argument] is unavailing.
simply because it requires the applicant to exert more effort to comply, so long as the effort required is not so great that it effectively forecloses the possibility of compliance.
Here, section 132 states that "if after receiving [a rejection], the applicant persists in his claim for a patent, with or without amendment, the application shall be reexamined" [section 132(a)]. Also, "“[t]he director shall prescribe regulations to provide for the continued examination of applications for patent at the request of the applicant” [section 132(b)]. While the CAFC noted that section 132 did not define the difference between “continued examination” and “reexamination,” teh court nevertheless found that nothing in the statute precluded the PTO from limiting RCE's in the proposed manner.
Rules 75 & 265: The "5/25 ESD Rules" - applicant submitting either more than five independent claims or twenty-five total claims must provide an examination support document (“ESD”) that includes a preexamination prior art search, a list of the most relevant references and limitations disclosed by each reference, an explanation of how each independent claim is patentable over the submitted references, and an analysis of how each limitation of the claims is disclosed and enabled by the specification.
[W]e need not decide whether the USPTO may impose a limit on the number of claims an applicant can pursue because we do not find that the ESD requirement creates any such limit. Rather, it simply requires that an ESD be submitted if more than five independent or twenty-five total claims are included in certain sets of copending applications. Because we cannot, as discussed above, conclude that Final Rules 75 and 265, on their face, effectively foreclose applicants from successfully submitting ESDs, we similarly cannot conclude that these rules place an absolute limit on claim numbers in violation of § 112, ¶ 2.
We recognize that the drafting of an ESD will entail browsing many references, that mistakes and omissions will inevitably occur, and that the courts will be asked to determine if there was inequitable conduct. However, doubt about the judiciary’s ability to apply its own doctrine in a way that yields fair results and discourages frivolous allegations should not preclude the USPTO from promulgating rules that are within its statutory authority.
Expect each of these topics to have a large bulls-eye on them for the remand.
The court's internal operating procedures entail circulating a draft opinion, before it issues to the public, to the full court. At that time, a judge could initiate a poll of the judges to take the case en banc. (IOP #10(5).) There's no sign that such a poll happened here.
In any event, it seems clear that (a) the other judges of the court are not learning about this decision today (along with the rest of us), and (b) a majority of them already could have stopped it from happening if they had wanted to.
Another wrinkle is that the PTO director has not been named as of yet. It is possible that the new director will drop the case entirely.
The United States Patent and Trademark Office is pleased that the United States Court of Appeals for the Federal Circuit confirmed that the Final Rules are within the agency's rulemaking authority and that the rules regarding requests for continued examination, claims, and examination support documents are consistent with the law. We are further considering other aspects of the opinion, including the Federal Circuit's conclusion that the rule regarding continuations conflicts with the Patent Act.
The Office gave no word on the fate of the Appeal Brief Rules, which were delayed last December.
Nominations must be postmarked or electronically transmitted on or before May 15, 2009.
The Judicial Business of the U.S. Courts released its annual report this week on the business of the Federal Judiciary for the fiscal year ending September 30, 2008. Overall, the report provides statistical data on the work of the Federal Judiciary, compares data for the current year to that for previous fiscal years, and, wherever possible, explains why increases or decreases occurred in judicial caseload.
In the world of IP, the number of cases sank by 11% in 2008. However, most of this drop is attributable to the reduction of new copyright cases (-26.5%). Trademark and patent cases, stayed relatively flat (-1.1% and +0.4%, respectively).
Considering that 9,573 IP lawsuits were filed in 2008, patent litigation made up only 30% of all IP litigation. Further, as 223,093 civil cases were filed in 2008, patent litigation made up only 1.3% of all litigation in the U.S.
For the 2,875 patent cases that were terminated in 2008, only 3.8% of the cases ever reached trial. 1,517 cases (52%) were terminated before pretrial, while 402 (14%) were terminated during or after pretrial. 847 patent cases were terminated with no court action.
To read more, and to download the (412 page) report, click here (link).
THe EPO issued a press release yesterday, announcing that filings for 2008 dropped by 3.6%. More importantly, the EPO went on to point out that the grant rate for European patents dropped for the first time to less than 50%. More specifically, the grant rate for 2008 was 49.5%, as compared to 51% for 2007.
The purpose of patents is to facilitate economic benefits for society by creating legal certainty in the market. We therefore need to continue to ensure quality in the patenting procedure. Some efforts in this respect are now beginning to bear fruit: The practice we introduced in 2004 of informing applicants early in the process of their prospects of obtaining a patent visibly encourages companies in many cases to abandon their applications. Subsequently, the strict application of patentability criteria by our patent examiners has led to more refusals to grant a patent. These are important steps to ensure the relevance of the patents entering the innovation process.
The EPO's announcement means that the allowance rate at each of the trilateral offices will be below 50% -- with the EPO at 49.5%, the JPO at 48.9%, and the USPTO at 42%. Taken collectively, the average rate of allowance stands at 47.5%.
While various interested parties continue to claim that overburdened patent offices are allowing patents "of dubious quality" as a regular course of business, the statistics keep showing that this has not been the case for at least for the last year.
This “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%. While this may seem high, if you only allow 20 cases a year it is no problem for quality to find some kind of error in your cases, especially when they aren’t experts in your art. 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.
Being a fee-funded government entity, it should be no surprise that the PTO would be affected by the recent economic meltdown. But by how much? In a recent interview, acting USPTO Director John Doll stated that the PTO's current projections show that patent filings should drop by a mere 2% in 2009. Other analysis are predicting a 10% drop in filings.
"I talked to a large corporation today and they're going through their patent portfolio to see what's core," said Doll, adding that the company could decide to abandon much of its portfolio. The budget woes mean that the patent office has stopped recruiting examiners, which it had been doing in an effort to clear a tremendous backlog of patent applications.
"We've stopped hiring at this time," said Doll. "If we closed our doors today, it would take us almost two years to clear out our backlog."
"It would be a great time to hire," he added.
Another problem is the steep dropoff in the allowance rate. With the PTO waging wars of attrition against certain applicants, chances are that such applicants will simply walk away from the prosecution instead of fighting repeatedly fruitless (and pointless) battles with the Office.
When international applications are filed, they are forwarded by the Receiving Office (RO) to the International Search Authority (ISA) selected by applicant.
On occasion, specific ISA's have limited their competencies for specific applications. For instance, the EPO will not act as an ISA for applications with one or more claims directed to a business method. Likewise, the Australian Patent Office has declared that it is not competent for applications with one or more claims drawn to subject matter set forth in "Annex A" (link) of the arrangement between IP Australia and 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 . . . 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 USPTO conducted a roundtable to determine whether or not there is support in the patent community and/or the public sector for the adoption of some type of deferral of examination . . . The USPTO also invited written comments by any member of the public on the issues raised at the roundtable, or on any issue pertaining to deferral of examination . . . The USPTO Webcast the roundtable and a video recording of the roundtable is available on the USPTO’s Internet Web site. The USPTO is extending the comment period to provide interested members of the public with an additional opportunity to view the Webcast before submitting comments to the USPTO.
The Senate Committee on the Judiciary has scheduled a hearing on "Patent Reform in the 111th Congress: Legislation and Recent Court Decisions" for Tuesday, March 10, 2009 at 10:00 a.m. in Room 226 of the Senate Dirksen Office Building.
Additional written statements were provided by The Computing Technology Industry Association, and photo sharing company FotoTime. Their statements may be downloaded here and here.
Special thanks to Hal Wegner for providing advanced copies of the written statements.
Defendant's Knowledge of Reexamination Certificate May Constitute "Objective Recklessness"
Plaintiff sued defendant in 2005 alleging patent infringement, but the plaintiff did not plead willful infringement. Defendant filed a reexamination soon after, which the PTO granted. The district court stayed the litigation. While the PTO rejected claims during reexamination, the patentee/plaintiff successfully argued around the rejections, and the reexamination certificate issued in June 2008, holding all claims patentable.
Plaintiffs allege they had no reason to believe Defendant even knew of the ‘437 Patent at the time the initial Complaint was filed and thus, they lacked a good faith basis upon which to claim willful infringement. The Court agrees. The Court finds before the Reexamination Certificate issued, allegations that Defendant’s actions were deliberate or reckless would not have provided sufficient factual or legal grounds because the validity of the ‘437 Patent remained questionable. However, once the USPTO had made its final decision, Defendant’s continued use of the ‘437 Patent could reasonably be considered “objectively reckless.” Therefore, it is only since the USPTO’s certification that Plaintiffs could in good faith consider bringing a claim of willful infringement. Additionally, the Court finds although the Reexamination Certificate was issued almost eight months before Plaintiffs sought leave to amend, there has been no undue delay because this case was only reopened on December 18, 2008, approximately one month before the instant Motion was filed. As such, the Court will not deny Plaintiffs’ proposed addition of a claim for willful infringement on the grounds of undue delay.
A number of years ago, Jay P. Kesan and Gwendolyn Ball teamed together to write "How Are Patent Cases Resolved? An Empirical Examination of the Adjudication and Settlement of Patent Disputes" (link). Many practitioners have relied on the findings in the document, and the paper continues to enjoy a high rate of downloading in the SSRN E-Library.
Now, Kesan and Ball are back, this time with a study titled "Transaction Costs and Trolls: Strategic Behavior by Individual Inventors, Small Firms and Entrepreneurs in Patent Litigation." Using original court documents to identify the parties, outcomes and disputed patents in cases filed in 2000 and 2002, they explore how the resolution of patent cases relates to the nature of the parties (large, medium, small). They also examined whether individual inventors and entrepreneurs are able to defend their patent rights, and whether trolls are a significant problem.
• Small parties are quite active in the courts, constituting nearly half of all plaintiffs. However, most small parties are suing other small parties. Only about 20% of small plaintiffs are suing defendants with annual sales greater than $500M.
• Small firm plaintiffs are the most likely, among all plaintiff categories, to litigate to a trial against large firm defendants.
• However, large firm plaintiffs are just as likely to litigate to a trial when suing large firm defendants. This finding was surprising, given that conventional wisdom expects large parties (with large patent portfolios) to cross-license their way out of disputes.
• For small firm plaintiffs, various indicators of "patent quality" (number of claims, backward citations, etc.) increase with the size of the defendant. The same trend is not evident for large or medium sized plaintiffs. Thus, there is some evidence that when suing large firm defendants, small firms are only enforcing their most "valuable" patents.
[W]e find little evidence that "trolls" are posing a serious problem. The number of patent licensing firms - the most obvious candidate for the role of troll - active in cases led in the study years was quite modest. Most of these licensing firms were small and they, for the most part, were equally likely to sue small, medium and large firms. However, there is some evidence that when a licensing firm sues a large firm they were less likely to pursue a judgment or a trial than were other small firms. Thus, our results suggest that patent litigation is not dominated by "trolls," but that the best candidates for the "troll" moniker do seem to behave differently when suing the largest firms than do other firms of similar size. Care needs to be used in interpreting this result, however, since the very fact that they were not present in large numbers may make it statistically difficult to analyze their behavior.
If recent reports are any indication, Leahy should be a very popular person in the coming months.
Sen. Patrick Leahy, chairman of the Senate Judiciary Committee, is expected to reintroduce a patent reform bill as early as today, according to people familiar with the matter. So it's no surprise that a who's who of tech general counsel -- Cisco Systems' Mark Chandler, Intel's Bruce Sewell, Google's Kent Walker -- and a phalanx of patent litigators paid $1,000 to down wine and hors d'oeuvres with the senator. A small group, committed to raising $10,000 for Leahy, got to stay for dinner.
It seems somewhat strange, if not ironic, that the group decrying the excesses of litigation would surround themselves with "a phalanx of patent litigators" to meet with Sen. Leahy. (The article didn't mention if any patent prosecution counsel were invited to the event).
Big electronics companies are pushing hard for such legislation. Leahy held a $10,000 per plate dinner [*!!*] in Silicon Valley on February 17. It was hosted by the general counsels of Apple, Cisco, Hewlett-Packard, Intel, Google, Oracle, Symantec and Yahoo among others.
If you feel like "following the money", a good site to visit is OpenSecrets.org - you can dig through various groups to see who is giving what and to whom (tip: use search keyword "patent" as a start).
Dennis Crouch at Patently-O published an internal January 7 memo from John Love (Deputy Commissioner of Patent Examination Policy) explaining the examination of process claims in view of In re Bilski. The memo is directed to the TC directors of patent examination.
In short, Love explained that the PTO is "presently studying the full ramifications of the court's clarification and other recent developments in the law." The PTO is in the process of redrafting the guidelines, and has recommended to the examining corps that the follow the current guidelines set forth in MPEP 2106, with the following modification.
As explained in a memorandum dated May 15, 2008, entitled "Clarification of 'Processes' under 35 USC § 101", a method claim must meet a specialized, limited meaning to qualify as a patent-eligible process claim. As clarified in Bilski, the test for a method claim is whether the claimed method is (1) tied to a particular machine or apparatus, or (2) transforms a particular article to a different state or thing. This is called the "machine-or-transformation test". It should be noted that the machine-or-transformation test from Bilski is slightly different from the test explained in the May 15 Clarification memo, which was based on the Office's interpretation of the law prior to Bilski.
There are two corollaries to the machine-or-transformation test. First, a mere field-of-use limitation is generally insufficient to render an otherwise ineligible method claim patent- eligible. This means the machine or transformation must impose meaningful limits on the method claim's scope to pass the test. Second, insignificant extra-solution activity will not transform an unpatentable principle into a patentable process. This means reciting a specific machine or a particular transformation of a specific article in an insignificant step, such a data gathering or outputting, is not sufficient to pass the test.
Ormco sued Align, and its "Invisalign" process, over patents relating to orthodontic appliances designed and manufactured using "digital shape data."
Specifically, Align's accused process involved the following: impressions of teeth are scanned to produce a 3D image, and are saved as an "ADF" file. The ADF file is then stored on servers in the US and in Costa Rica. Using Align's "Tootshaper" software, operators in Cost Rica create representations of the patient's teeth to fit the aligners. After further processing by the toothshaper software, the data is saved as a new ADF file and transmitted back to the US.
Theories of joint infringement are cognizable under § 271(a) where multiple actors are involved, and the patentee can show that one party “control[s] or direct[s] each step of the patented process,” even if some steps are “performed” by others. BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373, 1380 (Fed. Cir. 2007), rehear’g en banc denied (2008). However, the “joint” aspect does not eliminate the need to show all steps or stages of the claimed process are performed in the United States. The theory of joint infringement concerns who performed the steps of a claim, not where the steps were performed.
Infringement can be established via showing either “all or a substantial portion of the components of a patented invention” were supplied, or “any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use” was supplied.
declines to read Microsoft’s dicta as overruling Union Carbide’s clear holding.
Also, the court added in the footnote that "Cardiac Pacemakers makes clear that Union Carbide remains the law until an en banc Federal Circuit or the Supreme Court says otherwise."
There is also a very detailed and interesting analysis by the court regarding software "components", and whether or not they are "combined" or "substantial parts" of patented components for the purposes of § 271(f).
Will Economy Spur the Rise of "Asset Light" Companies?
Scott M. Fulton, III, writing for betanews.com, did an interesting piece on chipmaker Spansion, and its recent decision to file for Chapter 11 Bankruptcy. Spansion's filing comes hot on the heels of chipmaker Qimonda announcing bankruptcy as well. Many analysts predict that, with the current glut of chips and gloomy economic outlook, a good number of memory companies will be forced to consolidate or disappear.
On average, companies in the semiconductor spaces tend to be very IP-centric. Spansion was such a company, and claimed to hold key patents relating to "MirrorBit" technology (enabling two bits to be stored on a single cell, instead of one) and other chip technologies, inherited from its AMD predecessor. Recognizing that IP licensing could be more profitable than running the actual business, Spansion is contemplating joining the ranks of a newly-minted category of "asset light" companies.
The company that was at one time the world's principal provider of NOR flash memory -- the more non-volatile variety -- had its own plans to go "asset light," to use a now familiar phrase, and to concentrate on licensing its intellectual property to companies with the muscle to do the heavy lifting. It sounds like a plan AMD just executed last month. As it turns out, Spansion had also been planning to license others to produce its designs.
Whether that remains the plan after a few months' time is now completely unknown. This morning, the company's Sunnyvale-based American arm announced it was filing for Chapter 11 bankruptcy protection, a month after its Japanese division applied for similar protection there.
mounted an aggressive defense of its IP, which included suing global flash leader Samsung for patent infringement. Spansion is asking the US International Trade Commission to bar the import of Samsung memory that uses multiple-bit-per-cell technology, in a demonstration that it could do the same for others down the road (Toshiba immediately springs to mind).
But it takes years to achieve victory in the courtroom, and in the meantime, the world's glut of NAND flash memory is putting competitive pressures even on NOR suppliers like Spansion . . . With a leading supplier of memory now officially restructuring, it may only be a matter of time before other component suppliers in similar situations follow suit.
As expected, new patent reform legislation was introduced today as identical bills in the House and Senate. Senator Orrin Hatch (R-Utah) joins Leahy as a co-sponsor of the Senate bill, while House Judiciary Committee Chairman John Conyers (D-Mich.) and ranking minority member Lamar Smith (R-Texas) are co-sponsoring the House version.
For the most part, the legislation is largely the same as 2008. According to Leahy, "[w]e kept the language the same because we want to start where we left off and give us something to work on."
• No provisions on inequitable conduct.
• "Hard" First-To-File Rule - providing no grace period, the first person to file gets the patent. Secret prior art (i.e., 102(e)) cannot be sworn behind.
• Willfulness - Treble Damages will be limited to instances where the patent owner presents clear and convincing evidence that the defendant(s) acted with "objective recklessness" when infringing (intentionally copied, continued conduct that was not "colorably different" from previous infringement).
• Reexamination - expands reexamination requests so that "any person at any time may file a request for reexamination by the Office of any claim on a patent on the basis of any prior art or documentary evidence."
• Venue - ‘‘(1) where the defendant has its principal place of business or in the location or place in which the defendant is incorporated or formed . . . (2) where the defendant has committed substantial acts of infringement and has a regular and established physical facility that the defendant controls and that constitutes a substantial portion of the operations of the defendant; (3) where the primary plaintiff resides, if the primary plaintiff in the action is—‘‘(A) an institution of higher education . . . or (B) a nonprofit organization . . . or (4) where the plaintiff resides, if the sole plaintiff in the action is an individual inventor . . ."
While the chances of passage is unknown, there is a large chance that further and substantial revisions will be made. Co-sponsor Orrin Hatch commented at the news conference that "[w]e all agree that more work needs to be done."
CNET - "Controversial provisions remain in patent reform bill"
Reuters - "Congress takes up patent redo, damages fight looms"
CNNMoney.com - "Congress To Try Again On Patent Reform"
Back in 2006, the EPO obtained a special software tool called "IPscore", which was originally developed by the Danish Patent and Trademark Office, for estimating the economic value of patents and development projects.
The EPO recently announced that IPscore is now available to the public and can be downloaded free of charge.
• identify opportunities and risks.
In addition to the software, the EPO has posted a short introductory video called "Patent portfolio management with IPscore." Also, other training opportunities include an online "virtual classroom" session and a two-day training course at the EPO, which provides a thorough introduction to patent valuation and how to use IPscore. The course includes hands-on exercises to help people understand various features.
Read the EPO press release here.
Getting a slight jump on spring cleaning, the 271 Blog underwent a makeover over the weekend. Of course, as luck would have it, I got hit with the flu (for the 2nd time) immediately afterwards. Anyways, hope you like the new look, and I hope to be up and about shortly. To paraphrase Comic Book Guy from the Simpsons: "worst . . . flu season . . . ever."

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