Source: https://patentplanetblog.blogspot.com/2013/06/
Timestamp: 2019-04-25 08:47:15+00:00

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Raymond Niro's Why Bash Individual Inventor-Owned or Controlled Companies?
Raymond Niro's Why Bash Individual Inventor-Owned or Controlled Companies - Patent Troll on IP Watchdog is a fascinating account of the context for the first use of the term "patent troll."
Part of the story was familiar: Mr. Niro's client sues Intel for patent infringement then later adds a defamation claim in response to Intel calling it a patent extortionist in a newspaper which led Intel's Peter Detkin and his team to rename his client a patent troll.
Part of the story was less familiar: Intel fails in its attempt to use a corporate shell in a bankruptcy avoidance proceeding not to recover an asset (i.e., the patent) sold for less than fair market value for the creditors' sake, but to knock it out of the patent infringement suit filed against Intel.
Mr. Niro's makes a provocative claim that West Coast tech companies are funding the spate of academic papers bashing individual inventor owned or controlled companies as patent trolls. It seems possible, but I would like to see the evidence supporting this claim. In my mind academic papers should reflect what is best for the public not what is best for a well-funded special interest group, but as a lawyer I am not going to cast stones at companies funding others to advocate for certain legal viewpoints. At the same time, if an author receives funding, it seems fair to ask for disclosure of any funding source (no, naming a shell entity funding won't suffice) so readers can assess the nature of the article.
Here's a bit of good news for US patent applicants. Local Congressman Mike Honda (D-San Jose), Congresswoman Zoe Lofgren (D-San Jose) and Congresswoman Anna G. Eshoo (D-Palo Alto) have introduced the Patents And Trademarks Encourage New Technology (PATENT) Jobs Act that will end sequestration for the United States Patent and Trademark Office (USPTO) in Fiscal Year 2013 and exempt the USPTO from sequestration in Fiscal Years 2014-2021.
The PATENT Jobs Act would enable USPTO to access fees sequestered in Fiscal Year 2013, which would be otherwise untouchable. Budget sequestration is important to patent applicants because these federal budget cuts are expected to remove $150 million from the USPTO's fiscal budget in 2013. The bill is a response to a California delegation letter to the Commerce, Justice, and Science Appropriations Subcommittee asking for a fix to the problem of sequestration.
Apparently, sequestration has slowed the rate of patent grants in the last two months. At least Professor Crouch says, "With the sequester, the USPTO has slowed its operation somewhat over the past two months. As a result, fewer patents issued per week in May/June 2013 than in prior months. That Professor Crouch also predicted the Office is still on track to issue a record number of patents in 2013 -- an approximate 5% increase over 2012 shouldn't be taken as the gospel or obscure that sequestration has slowed the grant rate. Of course this matters because in May 2013, the USPTO patent dashboard stated that it had 596,159 patent applications in backlog that have not been examined. The bill sponsors state startups and innovators experience "a costly two-year wait for a patent to be issued."
Sequestration has delayed opening of the USPTO satellite offices. Congressman Mike Honda states without passage of the PATENT Jobs Act "the budget reduction effectively stops the agency from opening new, highly anticipated regional patent offices across the country, including the satellite office in Silicon Valley."
Congressman Mike Honda also said, "USPTO is funded entirely by fees paid to the agency, making it fundamentally different than other government spending. Congress intended for these fees to be used solely to carry out USPTO’s operations, not the government at large. Our bill will prevent the application of sequestration to USPTO fee revenue so that the Silicon Valley office can open as scheduled and USPTO can continue the progress that has been made on reducing the patent application backlog, which is vital for ensuring America’s economic competitiveness."
Congresswoman Zoe Lofgren noted, "It is very short-sighted to hold back the new products and cutting edge technologies that can grow our economy. Our bill is very simple and reaffirms a long held belief that inventors who pay fees should receive speedy services and patents for their inventions. The services and speed these new offices offer can make the difference for products to go from the drawing board to the marketplace faster, benefiting all of us with the growth and job creation that come with it."
Congresswoman Anna Eshoo said, "The U.S. Patent Office has been crucial to economic growth and innovation in America. Sequestering this self-funded agency is illogical and sets it up to fail. These cuts will exacerbate the patent backlog and stifle efforts to connect Silicon Valley innovators with a satellite patent office. Our legislation will enable USPTO to implement reforms and programs years in the making so that the agency can continue to foster the wealth of knowledge and innovation across America."
Congress should pass the PATENT Jobs Act to allow the USPTO to move forward without delay on establishing the permanent facility of the satellite office in Silicon Valley. During discussions leading up to passage of the America Invents Act (AIA) Congress emphasized how important it would be for the USPTO to keep its user fees to support its operations. I enjoy watching our local Congress act on this problem so let's see where it goes.
Today, the U.S. Supreme Court issued a call for the views of the Solicitor General (CVSG) on whether or not to grant the petition for certiorari to consider the issue of joint infringement in Limelight Networks, Inc. v. Akamai Technologies, Inc.
It's too early to say if the Supreme Court will hear this case, but if so, it will impact the value of US patents relating to distributed computing (e.g., cloud computing).
On June 20, The NY Times published an article F.T.C. Head Seeks End to Misuse of Patents confirming the FTC is planning to investigate patent assertion entities or pejoratively "patent trolls."
FTC chairwoman Edith Ramirez's stated: A Federal Trade Commission investigation into the practices of "patent trolls" is necessary because there is little real evidence about the costs and benefits of a rising tide of patent litigation. This insight strikes at the assumption that the rising tide of PAE lawsuits is damaging the economy.
Ms. Ramirez noted "Despite the rapid growth in the number of lawsuits filed by those patent-focused companies, regulators have little more than anecdotal evidence of how patent trolls affect business innovation and whether the patent-enforcement companies help to produce benefits that small companies could not enjoy on their own. We have a role to play in advancing a greater understanding of the impact of P.A.E. activity and using our enforcement authority where appropriate to curb anticompetitive and deceptive conduct."
Although this is framed as an investigation, PAE's should be prepared to articulate how they actually level the playing field for small entities and in the end benefit America. If they cannot, well life can be tough. On the other hand, if they do a good job stating the value, it could be FTC investigation will inform the American public that not all PAE are alike nor deserving of the same treatment.
On June 19, The NY Times published an article F.T.C. Is Said to Plan Inquiry of Frivolous Patent Lawsuits that said FTC chairwoman Edith Ramirez is planning to request a sweeping general investigation including issuance of subpoenas to the patent assertion entities or pejoratively "patent trolls." Hopefully this investigation will result in an accurate detailed view of PAEs. I know we all hate to pay nuisance settlements, but not all patents lawsuits are frivolous and it is time to examine PAEs based on practices rather than lazily labeling them all as patent trolls.
On July 17, Teresa Stanek Rea Acting Under Secretary of Commerce for IP and Director of USPTO posted an article about the USPTO's response to the Obama Administration's plans for improving the patent system: USPTO and the Obama Adminstration Taking Action to Improve Incentives for Future Innovation via High Tech Patents.
In Association of Molecular Pathology v. Myriad Genetics the Supreme Court continues to narrow patent protection afforded the biotech industry. The Court held naturally occurring DNA is a product of nature thus ineligible for patent protection. In contrast, synthetic cDNA appears to be eligible, because it is not naturally occurring. This decision aims at DNA product claims rather than methods of isolating DNA.
For detailed commentary: Groklaw Naturally Occurring Human Genes Not Patentable - Myriad Loses - Our Genes Belong to Us, IP Watchdog Supremes Isolated DNA and Some cDNA Ineligible and Tom Goldstein of SCOTUSblog Details on Association for Molecular Pathology v. Myriad Genetics, Inc.
On June 4, 2013, the White House proposed steps to improve the US patent system, including seven legislative recommendations and five executive actions designed to protect innovators from frivolous litigation and ensure highest-quality patents in our US patent system.
For details see Fact Sheet: White House Task Force on High-Tech Patent Issues. The White House also announced the National Economic Council and the Council of Economic Advisers report Patent Assertion and U.S. Innovation, which outlines the challenges we face and the need for legislative action.
1. Require patentees and applicants to disclose the “Real Party-in-Interest,” by requiring that any party sending demand letters, filing an infringement suit or seeking PTO review of a patent to file updated ownership information, and enabling the PTO or district courts to impose sanctions for non-compliance.
2. Permit more discretion in awarding fees to prevailing parties in patent cases, providing district courts with more discretion to award attorney’s fees under 35 USC 285 as a sanction for abusive court filings (similar to the legal standard that applies in copyright infringement cases).
3. Expand the PTO’s transitional program for covered business method patents to include a broader category of computer-enabled patents and permit a wider range of challengers to petition for review of issued patents before the Patent Trial and Appeals Board (PTAB).
4. Protect off-the-shelf use by consumers and businesses by providing them with better legal protection against liability for a product being used off-the-shelf and solely for its intended use. Also, stay judicial proceedings against such consumers when an infringement suit has also been brought against a vendor, retailer, or manufacturer.
5. Change the ITC standard for obtaining an injunction to better align it with the traditional four-factor test in eBay Inc. v. MercExchange, to enhance consistency in the standards applied at the ITC and district courts.
6. Use demand letter transparency to help curb abusive suits, incentivizing public filing of demand letters in a way that makes them accessible and searchable to the public.
5. Strengthen Enforcement Process of Exclusion Orders. Once the U.S. International Trade Commission (ITC) finds a violation of Section 337 and issues an exclusion order barring the importation of infringing goods, Customs and Border Protection (CBP) and the ITC are responsible for determining whether imported articles fall within the scope of the exclusion order. Implementing these orders present unique challenges given these shared responsibilities and the complexity of making this determination, particularly in cases in which a technologically sophisticated product such as a smartphone has been successfully redesigned to not fall within the scope of the exclusion order. To address this concern, the U.S. Intellectual Property Enforcement Coordinator will launch an interagency review of existing procedures that CBP and the ITC use to evaluate the scope of exclusion orders and work to ensure the process and standards utilized during exclusion order enforcement activities are transparent, effective, and efficient."
Today, in Make Patent Trolls Pay in Court, Federal Circuit Chief judge Randall Rader and law professors Colleen Chien and David Hricik note patent trolls have strategic advantages over companies since patent trolls (1) don't make anything so cannot be countersued; (2) have no concern with business reputation as litigation is their business; (3) can defer attorney fees unless they win due to contingency fee representation; and (4) total litigation costs can be low even when they lose. However, Professor Crouch notes in Fight Litigation Misconduct, But Not Through Hyperbole the typical costs of a patent troll that loses is not a court filing fee. Yet, these advantages often lead defendants to settle even when a patent is of doubtful validity.
While Congress is considering a set of new bills, such as End Anonymous Patents Act, Patent Quality Improvement Act of 2013, and SHIELD Act, to address patent trolls, the Chief judge Rader notes that courts already have certain laws to curtail the advantages of patent trolls. For example, judges can dismiss an unworthy patent case at the outset under Federal Rule of Civil Procedure Rule 11. Yet this rarely happens. For cases that go further, 35 USC 285 gives judges the authority to shift a defendant's attorney fees to the abusive patent troll for payment if the plaintiff knew the action is being brought in bad faith and the case is objectively baseless. Given attorney fees dwarf all other costs of litigation this would give patent trolls a reason to pause on the case with no merit.
Yet, judges rarely shift the defendant's attorney fees to the patent owner. Part of the problem is the Federal Circuit's "subjective bad faith and objectively baseless" standard. It is difficult. Another is the customary slack district court judges give trolls before they are willing to find a case "exceptional" as defined the Federal Circuit's interpretation of 35 USC 285 and shift the attorney fees. In fact in 2011, federal judges awarded fee shifts only 0.7% of the time (20 times out of 3,000 cases). Think about it, only 1 case in 100 is without merit? The media makes it sound like this is not the case.
Thus, the article suggests the solution is right in front of us. Just enforce the existing laws such as 35 USC 285 to curb abusive patent litigation rather than await passage of bills, which seem like hasty band-aids with obvious flaws.
Today, the ITC ruled Apple cannot import or sell AT&T compatible iPhones 3, 3GS, and 4, and AT&T 3G-compatible iPads and iPads 2 due to infringement of Samsung Electronics' U.S. Patent No. 7,706,348,which relates to encoding/decoding a transport format combination indicator in CDMA communications. Not sure if Apple sells these older products, but Apple plans to appeal to the Federal Circuit. Thanks to Alan Cooper for this news.
As you may recall the USPTO selected Silicon Valley for a satellite patent office in June 2012. Still without a permanent facility, federal budget cuts may be causing the delay in getting there. The federal government says it needs to hold 5% of PTO user fees, worth $148 million, to a general fund. This seems wrong when you consider many applicants are citizens of foreign countries. Applicants should be able to use the US patent system without their money being used to prop up the federal tax and spend policies.
Flatworld Interactive v. Apple - Was Apple Betrayed by Former Attorney at Morgan, Lewis & Bockius?
Mr. Joe Mullin wrote an investigative article based on court documents unsealed in the Flatworld Interactive v. Apple patent infringement case that is surprising if true. Email logs appear to show one of Apple's outside law firms Morgan, Lewis & Bockius had an attorney who help formulate a patent attack against Apple just days after the iPhone was revealed to the world. The attorney claims that MLB's General Counsel knew and he had no access to Apple confidential information. Apparently, the attorney's wife took the lead in seeking to monetize the patent, but the attorney may have assisted and together they own or owned 35% of the patent owner.
For details see Mr. Mullin's article Apple, betrayed by its own law firm - Lawyer-turned- "troll" started planning patent suit six days after iPhone launch. It will be interesting to see how this develops. Apple seeks to disqualify Flatworld's attorneys.

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