Source: http://271patent.blogspot.com/2010/09/
Timestamp: 2019-04-18 18:39:04+00:00

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To date, litigated patents were viewed as "strong" patents - the types that defendants were supposed to avoid taking to trial. Moreover, litigated patents were seen as more valuable, since they managed to survive an all-out attack on validity by a presumably well-financed defendant. Earlier studies (John R. Allison et al., Valuable Patents, 92 Geo. L.J. 435 (2004) looked at litigated patents, and found that they differed from non-litigated patents in that they (1) include more claims, (2) cite more prior art, (3) are cited more often by later patents, and (4) come from larger "families" of patents/continuations. Each of these factors are now used in conventional methodologies to determine the private value of patents.
John Allison, Mark Lemley and Joshua Walker recently took on the task of identifying every patent that was litigated eight or more times between 2000 and February 2009, including cases still pending, and compared the outcomes of the cases against patents that were litigated only once. In the course of their analysis, they found 106 such patents, which have been litigated in a total of 2,987 different patent assertions in 478 different cases, often against multiple defendants.
[T]o our great surprise, we find that the willingness of these patentees to litigate their cases to judgment is a mistake. Far from being stronger than other litigated patents, the most-litigated patents that go to judgment are far more likely to be held invalid or not infringed. The differences are dramatic. Once-litigated patents win in court almost 50% of the time, while the most-litigated – and putatively most valuable – patents win in court only 10.7% of the time.
The results are equally striking for patents owned by non-practicing entities (NPEs), and for software patents. NPEs and software patentees overwhelmingly lose their cases, even with patents that they litigate again and again. Software patentees win only 12.9% of their cases, while NPEs win only 9.2%.
[S]tatistical tests bear this out. We compare the proportion of win rates, testing the null hypothesis that there is no difference between the most-litigated and once-litigated patent outcomes. We test the proportions in several ways, both including and excluding settlements in the denominator of decided cases, and both including and excluding default judgments as plaintiff wins. No matter which test we use, the differences are highly statistically significant – the most-litigated patentees were more likely to lose.
Considering only the patents themselves, the proportions of initial ownership by large and small entities are almost equal in the most- and once-litigated data sets: 53.5% of most-litigated patents and 47.8% of once-litigated patents were issued to large entities. The picture is quite different, however, when one looks at the proportion of actual assertions in litigation, where large entities account for a surprisingly small percentage of the most-¬litigated patents. Because small entities are disproportionately represented in the actual litigation of most-¬litigated patents . . . patents that were initially issued to large entities represent only 22.4% of the assertions in the most-¬litigated group, compared to 47.8% of the once-¬litigated group.
[W]hen the cases do not settle, large patent plaintiffs are significantly more likely than small ones to win, without regard to how the data are sliced. When we combine the two data sets, large entity plaintiffs win 53.1% of the cases decided on the merits (55.9% if default judgments are included), while small entity plaintiffs win only 12.3% of their cases (23.1% if default judgments are included).
- Just 16.7% of the assertions of the most-litigated patents were made by product-producing companies.
- Software patents constituted 20.8% of the once-litigated patents but 74.1% of the most-litigated patents.
- The number of defendants per case is a negative predictor of settlement - the more defendants there are per case, the less likely the case is to settle. Also, the more defendants there are per case the more likely those defendants are to win.
We designed this study to explore the effects of repeat play on litigation behavior, contributing to a literature on the economics of civil procedure as well as the substance of patent law. But what we found was dramatic and unexpected: The patents and patentees that occupy the most time and attention in court and in public policy debates – the very patents that economists consider the most valuable – are astonishingly weak. Non-¬practicing entities and software patentees almost never win their cases. That may be a good thing, if you believe that most software patents are bad or that NPEs are bad for society. But it certainly means that the patent system is wasting more of its time than expected dealing with weak patents. And it also suggests that both our measures of patent value and our theories of litigation behavior need some serious reconsideration.
Herengracht sued Wrigley for false patent marking under 35 USC 292(a) for the marking of Hubba Bubba Bubble Tape with a patent that expired on May 5, 2008.
In the complaint, Herengracht alleged that Wrigley owned the patent and employed the inventors, and thus knew "since at least 1988 that the  Patent would expire on May 5, 2008." Furthermore, Herengracht imputed knowledge of the expiration of the patent on Wrigley based on Wrigley's "accounting and budgeting," alleging that Wrigley paid maintenance fees on the patent until 2008.
Herengracht further alleged that Wrigley is "a sizeable and sophisticated company, with approximately 16,000 employees and yearly revenues of over $5 billion" and experience with patent matters. Herengracht suggested that Wrigley's in-house legal department, in addition to "large firms as outside counsel" had some responsibility for Wrigley's knowledge of the expiration of the patent. Herengracht also named four Wrigley in-house lawyers whose Internet webpages list practice areas of intellectual property, alleging that these individuals are responsible for ensuring that Wrigley complies with patent laws.
Wrigley moved to dismiss Herengracht's complaint under 12(b)(6) for failure to plead an intent to deceive the public by marking their product with an expired patent.
Taking all factual allegations as true, as I must on a 12(b)(6) motion to dismiss, Herengracht's allegations center upon Wrigley's knowledge of the patent expiration as assignee of the '175 Patent, by employing inventors of the '175 Patent in May 1988 when the patent application was filed, through paying maintenance fees on the '175 Patent until 2008, vis-a-vis its status as a "sophisticated company," and by employing in-house counsel with patent backgrounds. These circumstances are inadequate allegations of Wrigley's intent to deceive the public under Rule 8, and fall considerably short of the heightened pleading requirements of pleading fraud under Rule 9(b).
Where a qui tam relator alleged that the defendant was "a sophisticated company and has many decades of experience applying for, obtaining, and/or litigating patents," there was inadequate pleading of "intent to deceive." Simonian, supra, 2010 WL 2523211 at *'3 (N.D. III. 2010).
I note that Herengracht's allegations are a near-verbatim recitation of [the language used in the Simonian case] . . . By failing to allege more than simply Wrigley's sophistication and experience and knowledge regarding patents, Herengracht has failed to plead an actual intent to deceive.
Herengracht's attempt to base Wrigley's intent to deceive on allegations of its sophistication as a company, as well as in-house counsel and outside retained counsel's experience with patents, is also misplaced. I note that these allegations - proffered in support of Wrigley's intent to deceive - are also particularly similar to the allegations at issue in a recent case, Brinkmeier v. BIC, supra, 2010 WL 3360568. In Brinkmeier v. BIC, also a qui tam case, the relator alleged that: (1) "as [the defendant] well knows, after a patent issues, a maintenance fee must be paid or else the patent will expire;" and (2) "[a] sophisticated company such as BIC likely would not inadvertently include expired patents in its patent markings[.]" . . . However, the court in Brinkmeier v. BIC determined that "allegations that [defendant] is sophisticated and employs experienced counsel do not suggest intent to deceive," granting the motion to dismiss.
Likewise, in this case, Herengracht bases its allegations regarding Wrigley's intent to deceive on the same arguments. For example, Herengracht alleges that Wrigley, "a sizeable and sophisticated company, with approximately 16,000 employees and yearly revenues of over $5 billion," has "decades of experience with applying for, obtaining, licensing, and litigating patents, and knows that patents expire." . . . Herengracht further alleges that Wrigley paid a total of $5,970 in maintenance fees following the issuance of the '175 patent. . . . Accordingly, Herengracht's allegations of sophistication and experience are insufficient to demonstrate the requisite "intent to deceive" standard under 35 U.S.C. § 292.
Jerry Cao (Assistant Professor, of Finance Singapore Management University) and Po-Hsuan Hsu (Assistant Professor of Finance, University of Connecticut) recently looked at patent data for VC-backed firms in the U.S. from 1976 through 2005 to empirically examine the signaling effect of start-up firms’ patents on entrepreneurial performance and financing patterns of venture capitalists (VCs).
Not only does patenting play an important signaling role between VCs and entrepreneurs, but our results show that start-up companies’ patenting prior to any VC investment is credible by leading to higher IPO success rates. Accordingly, entrepreneurs tend to wait for patent filing before asking for VC money and tend to file more patents when the degree of information asymmetry is higher. Consequently, patenting start-up firms not only attract larger and more experienced VCs in first VC financing round, but also receive significantly larger amounts in first rounds or all rounds of investment, and experience longer investment incubation periods. All these findings are consistent with the signaling role of patents in equilibrium. Patent filing also helps to enhance entrepreneurs’ control in start-ups: new ventures with prior patents are significantly less likely to be acquired in trade sale than those without patents.
"No matter how big a guy was, Nicky would take him on. You beat Nicky with fists, he comes back with a bat, you beat him with a knife, he comes back with a gun, and if you beat him with a gun, you better kill him, ’cause he’ll be coming back and back, until one of you is dead."
- Sam 'Ace' Rothstein (Robert DeNiro): "Casino"
After being stalled for months, a bipartisan group of 25 senators today urged Senate Majority Leader Harry Reid to bring the Manager's Amendment to S.515 of the Patent Reform Act to the Senate floor "for consideration as soon as possible."
A new report by the World Intellectual Property Organization (WIPO) analyzing IP trends in 2008 and 2009 suggests that innovative activity and demand for IP rights dipped during the global economic crisis, but began to recover this year.
As the world economy started to slow sharply in 2008, an estimated 1.91 million patent, 3.3 million trademark, and 660,000 industrial design applications were filed across the world. Compared to 2007, these figures represent a slowdown in the growth of patent and industrial design applications and an actual decline in the number of trademark applications . . . Beyond 2009, there are grounds for optimism as patent applications filed under the Patent Cooperation Treaty (PCT) system and international trademark registrations filed under the Madrid system have returned to growth.
Data on R&D expenditure compiled for the report show that, on average, companies started to reduce their R&D budgets from early 2009 onward. While 2007-08 registered a slowdown in R&D expenditure, 2008-09 showed an actual decrease (-1.7%) in R&D expenditures.
There was considerable growth in demand for energy-related patents – fuel cells, solar, wind and geothermal energy. Patent applications filed under the PCT System for those technologies increased from 584 applications in 2000 to 3,424 applications in 2009.
There was a slowdown in the growth of patent grants in 2008. The total number of grants across the world is estimated at 780,000 in 2008, representing a 0.6% increase from 2007. The slowdown is largely explained by a substantial drop in grants at the patent offices of the Republic of Korea (-32.5%). Without the substantial growth of grants in China, there would have been a contraction of total worldwide patent grants in 2008.
The EPO and USPTO today announced that they intend to extend the trial period for the Patent Prosecution Highway (PPH) Program until January 28, 2012, effective October 2010. This is the second extension of this pilot program between the two examining authorities.
Preventing Fee Diversion: "[S]topping fee diversion is hardly a panacea. In the last several years, the UPTO has been fully funded – that is, Congress didn’t divert fees. Nonetheless, the backlog grew. The addition of 10-­20% of operating revenue wasn’t enough even to enable the PTO to hold steady."
Increasing PTO Fee-­Setting Authority: "[I]t is likely not a good idea simply to spend more money to weed out bad patents. Most of that money will be wasted on applications that are of no consequence to anyone. And because of the structure of the examination system, it might not even succeed in weeding out bad patent applications. Even if it did, however, the current fee structure makes patent quality self-limiting . . . the more bad patents [the USPTO] rejects, the fewer patents will pay maintenance fees, and the less money it will have to conduct a detailed examination."
Retaining Patent Examiners: "There may well be benefits to reducing examiner attrition. But the evidence suggests that weeding out bad patents is not among them. Empirical research by Lemley and Sampat shows that the longer examiners spend at the PTO, the less searching they do, the less likely they are to issue initial rejections or demand claim amendments, and the more likely they are to ultimately grant a patent. (Lemley & Sampat, 2010). It is the most junior examiners who are most likely to reject applications. The reason is not precisely clear, but may have to do with increased workloads on senior examiners, or with acculturation into a corps whose ethos is to grant rather than deny patents."
Outsourcing Patent Searches: "[R]ecent empirical evidence suggests that it might not work. [A recent study] found that [examiners] rely almost exclusively on art they find for themselves, not art submitted by applicants. And that doesn’t appear to reflect either applicants drafting around the art they found or the weakness of that art; U.S. examiners largely ignored even art that was submitted because it was found important by a foreign patent examiner during examination of a counterpart application. (Cotropia et al., 2010). If examiners are psychologically primed to rely principally on things they find for themselves, it won’t help to have others provide them with the best art. And it might even hurt, causing examiners not to focus on the best prior art."
Shortly after the Federal Circuit held business methods patentable in 1998, the PTO was inundated with business method patent applications. Most of those applications went to class 705. Indeed, by 2001 class 705 had the largest application volume. In response to this flood, the PTO initiated a specific “quality control” measure in this class in March 2000: the “second pair of eyes” review (SPER), under which applications are subjected to mandatory assessment by more than one examiner before being allowed. (Allison & Hunter, 2006). Requiring two examiners to agree seems to have had a dramatic effect: a 2009 study found that class 705 has the lowest grant rate among high volume classes. (Lemley & Sampat, 2008). One possible explanation for the low grant rate in this class is that the second pair of eyes is working, and that the grant rate reflects better rigor during examinations, rather than application volume. The fact that SPER leads to more rejections in Class 705 doesn’t mean it is an unalloyed success . . . Interestingly, the PTO recently shut down the SPER program in business methods. Too much success, it seems, carries its own risks.
[PTO] human resource policies could be brought to bear, training examiners to search better, or giving them more time, or finding other ways to debias them. And it seems obvious – though likely politically infeasible – that the rules should not treat allowances differently than rejections. (Katznelson, 2010). These are good ideas, and they are worth exploring further. But implementation may be politically difficult. And some of the possible explanations point in different directions: should we give examiners more time to search, or less, for example?
The Patent Office should focus its examination resources on important patents and pay little attention to the rest. But it is difficult for the government to know ahead of time which patents are likely to be important. There are two groups, however, that have better information about the likely technological and commercial value of inventions: patent applicants and competitors. To harness information in the hands of patent applicants, we could give applicants the option of earning a presumption of validity by paying for a thorough examination of their inventions. Put differently, applicants should be allowed to “gold plate” their patents by paying for the kind of searching review that would merit a presumption of validity. (Lemley et al., 2005) An applicant who chooses not to pay could still get a patent. That patent, however, would be subject to serious—maybe even de novo—review in the event of litigation. Most likely, applicants would pay for serious review with respect to their most important patents but conserve resources on their more speculative entries.6 That would allow the Patent Office to focus its resources, thus benefiting from the signal given by the applicant’s own self-interested choice.
The Office announced today the launch of the beta version of a USPTO Data Visualization Center on its Web site that introduces the"patents dashboard." This tool is intended to give the public access to traditional measures of pendency as well as several new pendency tracking measures.
The dashboard introduces six new measures of pendency designed to give a better overall picture of the contributions of different parts of the examination process to application pendency. For example, the traditional measure of total pendency measure ends with the filing of an RCE. Now a new measure, called “Traditional Total Pendency Including RCEs,” looks at pendency of applications from filing of the original application to ultimate disposal of that same application, including any additional time attributable to RCE filings. Similar measures are provided relative to divisional applications and other types of continuation practice. The site also provide information about pendency for applications in appeal practice.
We hope you find the car dashboard metaphor helpful and attractive. While we recognize that data visualization experts may prefer other formats, the dashboard metaphor conveys information succinctly, and gives us all something to start with. However we appreciate that all metaphors have their limits -- for instance the speedometer format is certainly not intended to convey that a higher backlog is better.
The PTO intends to further refine the dashboard and is seeking input about ways we can improve it. A dedicated mailbox has been set up for comments and the Office intends to monitor all feedback carefully.
Read remarks from Director Kappos in his recent blog entry.
This case is directed to an interference between Goeddel and Sugano on inventions relating to modified DNA that codes the 166 amino acid sequence of mature hFIF (Human Fibroblast Interferon). At the USPTO, Sugano was given priority based on a Japanese application filed in 1980. The application provided some information regarding sequencing, but did not specifically disclose the claimed sequence until a CIP was filed in 1990. Goeddel's application was filed in 1989.
The BPAI found that, despite the fact that a complete description of the claimed sequencing was not present in Sugano's 1980 application, one skilled in this field "should have been able to envision" the DNA molecule. Referring to the high level of skill in this field, the BPAI held that although not explicitly described, a person of skill in the field would conclude that Sugano was in possession of the invention of the interference counts.
The Board’s decision that the Japanese Application constitutes constructive reduction to practice of the subject matter of these interferences is not in accordance with law, for the Japanese Application does not meet the criteria of §112, first paragraph, as to this subject matter. The award of priority to Sugano is reversed. The cases are remanded for appropriate further proceedings.
The USPTO recently published a 15-page notice updating the 2007 KSR Guidelines. The update reviews all of the most relevant Federal Circuit caselaw (over 20 cases) dealing with obviousness since KSR, and distills the rulings down to a reader-friendly format that concludes each case with a handy "teaching point."
Finally, the update includes Federal Circuit cases discussing consideration of evidence in cases of obviousness.
The USPTO is also seeking comments from the public, and is "especially interested in receiving suggestions of recent decisional law in the field of obviousness that would have particular value as teaching tools." Comments concerning the 2010 KSR Guidelines Update may be sent by email to KSR_Guidance@uspto.gov.
It is important for Office personnel to recognize that when they do choose to formulate an obviousness rejection using one of the rationales suggested by the Supreme Court in KSR and discussed in the 2007 KSR Guidelines, they are to adhere to the instructions provided in the MPEP regarding the necessary factual findings.
[I]t remains Office policy that appropriate factual findings are required in order to apply the enumerated rationales properly. If a rejection has been made that omits one of the required factual findings, and in response to the rejection a practitioner or inventor points out the omission, Office personnel must either withdraw the rejection, or repeat the rejection including all required factual findings.
Office personnel as well as practitioners should also recognize the significant extent to which the obviousness inquiry has remained constant in the aftermath of KSR.
[W]hen considering obviousness, Office personnel are cautioned against treating any line of reasoning as a per se rule . . . for example, automating a manual activity, making portable, making separable, reversal or duplication of parts, or purifying an old product may form the basis of a rejection. However, such rationales should not be treated as per se rules, but rather must be explained and shown to apply to the facts at hand. A similar caveat applies to any obviousness analysis. Simply stating the principle (e.g., ‘‘art recognized equivalent,’’ ‘‘structural similarity’’) without providing an explanation of its applicability to the facts of the case at hand is generally not sufficient to establish a prima facie case of obviousness.
Office personnel should note that in this case the modification of the prior art that had been presented as an argument for obviousness was an extra process step that added an additional component to a known, successfully marketed formulation. The proposed modification thus amounted to extra work and greater expense for no apparent reason. This is not the same as combining known prior art elements A and B when each would have been expected to contribute its own known properties to the final product.
[M]erely pointing to the presence of all claim elements in the prior art is not a complete statement of a rejection for obviousness. In accordance with MPEP § 2143 A(3), a proper rejection based on the rationale that the claimed invention is a combination of prior art elements also includes a finding that results flowing from the combination would have been predictable to a person of ordinary skill in the art. MPEP § 2143 A(3). If results would not have been predictable, Office personnel should not enter an obviousness rejection using the combination of prior art elements rationale, and should withdraw such a rejection if it has been made.
Some commentators on the KSR decision have expressed a concern that because inventive activities are always carried out in the context of what has come before and not in a vacuum, few inventions will survive scrutiny under an obvious to try standard. The cases decided since KSR have proved this fear to have been unfounded. Courts appear to be applying the KSR requirement for ‘‘a finite number of identified predictable solutions’’ in a manner that places particular emphasis on predictability and the reasonable expectations of those of ordinary skill in the art.
The LES is expecting over one thousand of the world’s leading intellectual property (IP), licensing and business development professionals a the upcoming Licensing Executives Society (USA & Canada), Inc., Annual Meeting at the Chicago Sheraton Hotel & Towers September 26-29. Themed ‘Deals, Deals and more Deals’ the meeting will focus on the critical role IP plays in today’s most successful business strategies and will explore ways to leverage IP to maximize deal-making and profitability.
The SuperFreakonomics of IP Licensing – Do Patents Slow Innovation? - Steven Levitt, co-author of the New York Times best-seller Freakonomics and its recent follow-up SuperFreakonomics, will present a keynote address on the unintended impact of the patent system on innovation. He will also discuss his groundbreaking research on the effects of incentives on economics and market behavior as they relate to innovation. A book signing will follow Mr. Levitt’s presentation.
Is the U.S. Patent System Under Siege: Congress, the PTO, the FTC and the Supreme Court -The Honorable Judge Paul Michel, retired Chief Judge of the United States Court of Appeals for the Federal Circuit will look at the many challenges facing the U.S. patent system including the reform legislation currently pending in Congress, the USPTO’s efforts to reduce backlogs and improve the quality of issued patents, and increased scrutiny by the Supreme Court and FTC.
IP as a National Responsibility: A Global Outlook for Strategies, Policies and Laws -- Economist and Former Vice Presidential Candidate Pat Choate, will join John Whealan, Associate Dean of Intellectual Property Law at George Washington University Law School and Suzanne Michel, Deputy Director of FTC’s Office of Policy Planning to discuss how the United States, Europe, Asia and developing countries might leverage IP to secure future wealth and what this could mean for commercial collaboration across national boundaries.
IP100 Recap: IP Hot Topics 2010 -- Over the course of 2010, LES has hosted innovative IP100 forums comprised of high-level IP leaders who have analyzed several hot IP topics. This panel will revisit the topics, review previous findings and discuss what we’ve learned from the world-class IP100 panels about best practices in licensing. Key ‘take-aways’ will be included in a white paper available after the meeting for attendees.
CEEM Royalty Rate and Deal Terms Survey.
The new data will provide valuable benchmarks for all aspects of deal-making across the life sciences, chemicals, energy and related industries.
IP Deals of Distinction Award -- LES will present its annual Deals of Distinction™ Awards to the best IP deals of the year in five industry sectors.
Frank Barnes Mentoring Award -- The LES Foundation will present the Frank Barnes Mentor Award to recognize an LES member who has made significant contributions to the field of licensing through their professional mentorship.
For more information, visit the LES website.

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