Director Kappos has created a new blog that is available via the PTO website. The blog (titled the "Director's Forum") looks to be an excellent avenue for the Director to stay in-touch with patent practitioners and patent applicants – both to receive input from the IP community and to serve as a pulpit for PTO proposals. The blog allows comments, although they are moderated.

The first post focuses on how the PTO is attempting to "work for independent inventors." In one portion, Kappos focuses on legislative patent reform and a move to a first-to-file system:

With regard to the patent-priority system, the bill's proposal to move to a first inventor to file system really represents only a minimal change to the process we use now. The new system would not create a situation where someone could steal an idea and win a race to the patent office. That person would not be an inventor and would not be eligible for a patent in the first place. Keep in mind that there are stiff penalties in place to protect against that. So the real issue involves the case of simultaneous non-collaborative invention that is currently resolved through the interference system.

The truth is that only .01 percent of all patent applications could be affected by a change to first inventor to file. The interference system is already biased in favor of the first inventor to file and 70 percent of the extremely small number of cases that get into the interference process are decided in favor of the first inventor to file. For more on these and other issues, I would encourage you to read the text of the speech I gave at the Conference on our Web site.

Of course, it is not true that "only 0.01 percent of all patent applications" could be impacted by a change to first-to-file. The problem is that this figure does not take into account the frequency that patent applicants rely on their invention date to avoid prior art by swearing behind a reference. My own studies find that about 1% of applicants attempt to swear-behind prior art. Applicants swear behind more often in applications that might be termed "valuable." While still small, the 1% frequency is 100 times greater than the PTO's 0.01% figure (which appears to be based on interference tallies).

The data also ignores the frequency that invention date is relied upon during litigation. My preliminary studies show that invention date is more frequently at issue in infringement litigation than at the PTO.

Notes:

• I'll have a working paper available on these issues later this month.
• Read the Director's Forum Blog.

Bilski v. Kappos (Supreme Court 2009) (oral arguments)

The transcript from the hour-long oral arguments are available online here. The following is the five-minute version of the questions and statements that I found most interesting. They are a bit out-of-order.

JUSTICE SCALIA: Well, if the government says that the -- that the term on which it hangs its hat is the term useful arts and that that meant, originally, and still means manufacturing arts, arts dealing with workmen, with -- you know, inventors, like Lorenzo Jones, not -- not somebody who writes a book on how to win friends and influence people. What is wrong with [the] analysis, that ..."useful arts" ... always was thought to deal with machines and inventions?

JUSTICE BREYER: You know, I have a great, wonderful, really original method of teaching antitrust law, and it kept 80 percent of the students awake. ... And I could probably have reduced it to a set of steps and other teachers could have followed it. That you are going to say is patentable, too?

JUSTICE SCALIA: . . . Let's take training horses. Don't you think that -- that some people, horse whisperers or others, had some, you know, some insights into the best way to train horses? And that should have been patentable on your theory.

JUSTICE SOTOMAYOR: So how do we limit it to something that is reasonable? Meaning, if we don't limit it to inventions or to technology, as some amici have, or to some tie or tether, borrowing the Solicitor General's phraseology, to the sciences, to the useful arts, then why not patent the method of speed dating?

JUSTICE SOTOMAYOR: But a patent limits the free flow of information. It requires licensing fees and other steps, legal steps. So you can't argue that your definition is improving the free flow of information.

MR. JAKES: . . . I think that we should go back to the first principles that were enunciated in Diehr and other cases, that abstract ideas per se are not patentable. That's my position, and what I would advocate in this case and any case...

MR. STEWART: Well, I think the Court could say -- could do essentially what was done in Benson and Flook, namely acknowledge that there had never been a case up to this point in which a process had been held patent eligible that didn't involve a machine or a transformation. It could leave open the possibility that some new and as yet unforeseen technology could necessitate the creation of an exception.

MR. JAKES: [L]ooking at what are useful arts, it does exclude some things. It does exclude the fine arts. Speaking, literature, poems, I think we all agree that those are not included, and there are other things as well. For example, a corporation, a human being, these are things that are not covered by the statutory categories. . . . Now, the patent on the data, that's another category that's not included in the subject matter of those four categories. The data itself is not patentable, but if it is a series of steps, it should be eligible as long as it meets the other statutory requirements as a process.

CHIEF JUSTICE ROBERTS: Well, but your Claim 1 it seems to me is classic commodity hedging that has been going on for centuries.

MR. JAKES: Your Honor, if that were true, then we should run afoul of the obviousness provision under section 103.

JUSTICE BREYER: There are actually four things in the patent law which everyone accepts. There are two that are plus and two that are minus. And the two that are plus is by giving people a monopoly, you get them to produce more. As you said, you get them to disclose. The two minuses are they charge a higher price, so people use the product less; and moreover, the act of getting permissions and having to get permission can really slow things down and destroy advance. So there is a balance. In the nineteenth century, they made it one way with respect to machines. Now you're telling us: Make it today in respect to information. And if you ask me as a person how to make that balance in respect to information, if I am honest, I have to tell you: I don't know. And I don't know whether across the board or in this area or that area patent protection will do no harm or more harm than good.

MR. STEWART: And you know, Justice Scalia, you mentioned how to win friends and influence people. I think at a certain level of generality you could describe both Dale Carnegie and Alexander Graham Bell as people who devised methods of communicating more effectively. The reason that Bell's method was patentable was that it operated in the realm of the physical. Bell had devised a process implemented through machines by which sound was transformed into electronic current. The current was then transmitted over a distance and transformed back into sound. Innovations as to new techniques of public speaking, new techniques of negotiations, techniques that go to the substance of what is said may be innovative. They may be valuable. They are not patent eligible because they don't deal in the realm of the physical --

JUSTICE SOTOMAYOR: How about if we say something as simple as patent law doesn't cover business matters

MR. STEWART: I think that would be incorrect, and it would create problems of its own. . . . So to say that business methods were ruled out would itself be a fairly sweeping holding.

JUSTICE SCALIA: Also you could say business methods apart from machines are not patentable. How about that?

MR. STEWART: If the Court said that in the limited area of business methods, if there is no machine or transformation there is no patent eligibility --

CHIEF JUSTICE ROBERTS: Mr. Stewart, I thought I understood your argument up until the very last footnote in your brief. And you say this is not --simply the method isn't patentable because it doesn't involve a machine. But then you say but it might be if you use a computer to identify the parties that you are setting a price between and if you used a microprocessor to calculate the price. That's like saying if you use a typewriter to type out the -- the process then it is patentable. . . . that takes away everything that you spent 53 pages establishing. . . . [I]f you look at your footnote, that involves the most tangential and insignificant use of a machine. And yet you say that might be enough to take something from patentability to not patentable.

MR. STEWART: And all we've said is that it might be enough; that is, hard questions will arise down the road as to where do you draw the line, to what extent must the machine or the transformation be central --

CHIEF JUSTICE ROBERTS: So you think it's a hard question. If you develop a process that says look to the historical averages of oil consumption over a certain period and divide it by 2, that process would not be patentable. But if you say use a calculator, then it -- then it is?

MR. STEWART: I think if it's simply using a calculator for its preexisting functionality to crunch numbers, very likely that would not be enough. But what we see in some analogous areas is that the computer will be programmed with new software, it will be given functionality it didn't have before in order to allow it to perform a series of calculations, and that gets closer to the line. . . . I guess the point I'm trying to make is simply that we don't want the Court, for instance, in the area of software innovations or medical diagnostic techniques to be trying to use this case as the vehicle for identifying the circumstances in which innovations of that sort would and would not be patent eligible, because the case really doesn't present any -- any question regarding those technologies.

JUSTICE KENNEDY: How would you come out in the State Street case today, if all of the arguments were made under your test?

MR. STEWART: Well, under our test, we would come out the same way because the computer would be a machine. The only question would be whether the programming of the computer with new software caused it to be a patentable different machine from the one that existed previously.

JUSTICE STEVENS: It's not on a computer, which the only difference from the old computer is it's using a new program. You can't say that's a new machine.

MR. STEWART: [The] PTO agrees ... that programming a computer by means of software to produce -- to perform new functions can create a novel --

JUSTICE BREYER: But then all we do is every example that I just gave, that I thought were examples that certainly would not be patented, you simply patent them. All you do is just have a set of instructions for saying how to set a computer to do it. Anyone can do that. Now, it's a machine.

MR. STEWART: ... we recognize that there are difficult problems out there in terms of patentability of software innovations and medical diagnostics.

JUSTICE KENNEDY: You thought we -- you thought we would mess it up.

MR. STEWART: We didn't think the Court would mess it up. We thought that this case would provide an unsuitable vehicle for resolving the hard questions because the case doesn't involve computer software or medical diagnostic techniques, and therefore, we thought the Court would arrive at the position that I think, at least some members are feeling that you have arrived at, that you will decide this case, and most of the hard questions remain unresolved.

As she has done with past cases, Jill Browning provides the following same-day analysis of the Supreme Court oral arguments in Bilski v. Kappos.

By Jill Browning

The Federal Circuit, sitting en banc, affirmed the Patent Office's decision that the applicant's claims directed to a method of hedging risk in the field of commodities trading did not meet the patent eligibility standard of  35 U.S.C. § 101.  The Federal Circuit found that a "process" must be tied to a particular machine or apparatus, or must transform a particular article into a different state or thing (the "machine-or-transformation" test), to be eligible for patenting under 35 U.S.C. § 101.

The Supreme Court heard oral argument on the appeal from the Federal Circuit today, wherein the central issue is whether the Federal Circuit erred by holding that a "process" must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing ("machine-or-transformation" test), to be eligible for patenting under 35 U.S.C. § 101. 

Justices Sotomayor, Kennedy and Breyer were particularly active, with only slightly lesser participation by Justices Scalia and Ginsburg and Chief Justice Roberts. The Justices appeared to be struggling to come up with the "right" answer and appeared to be mindful of the potential consequences their ruling may have.

Justice Scalia initially indicated that the "useful arts" should mean the manufacturing arts, but not someone who writes a book on "how to win friends and influence people."  Justice Sotomayor followed up with a question regarding the difficulty in where to draw the line if there is no tie to science/technology, reciting the parade of horrors of potentially patentable methods for estate plans or tax avoidance.  Justice Breyer followed up with a question asking whether the framers of the Constitution intended for every  "new" method that helps the business owner to conduct business should be patentable, intimidating that the petitioner's proposed test could be too encompassing and asking for an alternative to limit it to something more reasonable, such as "useful arts."  Justice Sotomayor asked whether a method to cure someone that involves only human activity would fall within the Patent Act.  In response, Petitioner responded that yes, many of these things, if there were new and useful and met the other requirements of the Patent Act, should be patentable, giving the specific example of surgical methods.

Justice Breyer asked for a proposed "back up" principle if the Court "hypothetically" decided to reject the test that "any steps" may potentially be patentable.  Chief Justice Roberts and Justice Kennedy both followed up with comments indicating that certain "ideas" that are abstract should not be patentable, indicating that it would be difficult for him to think that the actuarial tables used in the insurance industry should have been limited to 1 person.  

Justice Ginsburg appeared to be in favor of something similar to the European system, which, she understood to require that the invention be tied to "science or technology".  The petitioner pointed out that the United States is different and that it would be difficult to define "technology based" in the United States.  Petitioner indicated that Europe defines "technology based" to exclude business methods.   Justice Scalia asked why, in a horse-based economy (in the 1800's) there were no patents directed to methods of training horses, as this would certainly have been useful at the time.

Justice Sotomayor indicated that "how" to approach a problem can't be enough to make it patentable, rather, it has to involve some transformation.  She also asked how to discern Congressional intent.  Further to the "intent" issue, Justice Stevens asked whether the original drafter of the Patent Act had any comments on this issue.

Justice Breyer indicated that there were four things to consider when making this ruling, two positive and two negative.  The two positives were the monopoly power the patent provides and the disclosure to the public.  The two negatives were the higher prices that result when a monopoly is in play and having to get a license or permission to practice a patented invention takes time and slows progress.  He indicated that in the past, we respected machines, now, this was asking to respect information, and he was grappling with whether providing patent protection would do more harm than good.

Justice Sotomayor commented that maybe it be sufficient to patent useful knowledge if it were tied to some transformation and the patenting of the Morse Code was discussed.

This concluded the Petitioner's opening argument.

The Respondent began by indicating that the Federal Circuit's test was not "inflexible," but only required some link between the method and the transformation.  At least Justice Sotomayor expressed concern regarding applying a  rigid exclusive test, in that potential patentable subject matter would be excluded from the patenting process.  Justice Ginsberg was curious regarding whether the Federal Circuit sua sponte came up with the test or whether the Government proposed the test during briefing.

The Respondent indicated a couple of different times during the argument that there would be many difficult questions to answer in the future, but that the test could accommodate the difficult questions and allow for exceptions to the machine or transformation test.

The State Street case was discussed and Justices Stevens, Scalia and Breyer wanted to know whether this case would come out the same way if the Federal Circuit's test were utilized.  The Justices appeared to expect a "no" answer, but Respondent indicated that State Street would have ended with the same result because the claims were directed to a machine (a computer).

This led to a discussion regarding the Respondent's apparent position, set forth in its last footnote on its brief, which Chief Justice Roberts was troubled about, that if the method is simply tied to a calculator or a computer, then it would be patentable, and this seemed to place form over substance.  Both Justices Kennedy and Stevens were curious with respect to what was "transformed" by the State Street computer program, indicating that it appeared to be merely a new process on an old machine.  The Respondent did not have a ready answer, deflecting the question by indicating that hardware could be present which would transform the machine.

In rebuttal, the Petitioner stressed its position against a rigid test, which could be avoided by simply looking at whether the "invention" is attempting to patent an abstract idea.

Novo Nordisk v. Caraco Pharma (Fed. Cir. 2009)

Unlike most interlocutory orders, the grant or denial of preliminary injunctive relief may be immediately appealed. A district court only awards preliminary injunctive relief after determining that the moving party is likely to win on the merits and is suffering irreparable harm that can be solved by the injunction. Thus, it is no surprise that district courts are reluctant to stay injunctive relief pending appeal. Such a stay may even serve as a signal to the Federal Circuit (1) that the lower court lacks confidence in their decision and (2) that the case does not require any expedited schedule.

In Novo Nordisk v. Caraco, the E.D. Michigan court issued an injunction that would force the patentee to amend its Orange Book listings for its diabetes treatment drug Prandin. The change would make it easier for the generic manufacturer Caraco to obtain FDA approval.

Without substantive opinion, the Federal Circuit has granted a stay of this relief pending full appellate review of the injunction.

Preliminary relief and resulting stays of relief are interesting to study because of the court's willingness to engage in speculation and admit uncertainty. Preliminary relief is granted when the movant shows that it will likely win the case on the merits and that it will suffer irreparable harm if preliminary relief is not granted. Although the appellate court gives deference to a lower court's decision on preliminary relief, it takes a somewhat fresh-look at staying the preliminary relief pending outcome of an appeal. A stay is typically granted based on some evidence that the appellant will likely win the appeal as well as the harm/benefit associated with a temporary stay. To minimize the harm of a stay, the moving party often requests an expedited briefing schedule.

The leading case describing the approach is Standard Havens Prods., Inc. v. Gencor Indus., Inc., 897 F.2d 511 (Fed. Cir. 1990). In that case, the court discussed its four-factor equitable analysis modified to focus on stays pending appeal.

In deciding whether to grant this motion, we must apply the four factors that always guide our discretion to issue a stay pending appeal: (1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.

(Opinion by Judge Michel)

• Pirates: The EU Parliament now has two members from the Swedish Pirate Party. The Pirates platform is based on weakening copyright laws and eliminating patents. The first line of the party website reads: "The Pirate Party wants to fundamentally reform copyright law, get rid of the patent system, and ensure that citizens' rights to privacy are respected." [LINK]
• Billion Dollar Trade Secret Trial: The top semiconductor manufacturer in Taiwan (TSMC) sued the top mainland China semiconductor manufacturer (SMIC) for stealing its trade secrets (in state court in California). The jury sided with the plaintiff, although the damage calculation is still underway. [LINK]
• JOAO Control & Monitoring v. Playboy & Penthouse: The JOAO patent holding company has sued a dozen online pornography providers alleging patent infringement. The asserted patent claims an apparatus for transmitting audio and video information from a vehicle to a website. The inventor Ray Joao is also a patent attorney and is represented by Andrew Spangler.
• Who Owns Patents being Reexamined: The folks at Westerman Hattori have been writing about reexaminations. In a recent post, they list the top-ten patentees whose patents are undergoing reexaminations (based on reexaminations granted since January 2009). The top five include Rambus, LGE, Weatherford/Lamb, Mondis Tech, and ADC Tech. [LINK]

Editorial by Ciarán O'Riordan, Exective Director of End Software Patents

Scope

On Monday, November 9th, the Supreme Court will hear the case of Bilski's business method patent. Being the first review of patentable subject matter since 1981, this decision could make the rules for decades to come. The court will review the 2008 ruling of the CAFC which created the "particular machine or transformation" test. This test, depending on who's reading it, could significantly narrow the scope for patenting software ideas.

The Supreme Court isn't obliged to rule on the patentability of software ideas. Bilski's patent is a business method patent, not a software patent. So why might the court make a broad ruling which would cover software? For people who are already aware of the legal arguments, I'd like to offer a review of the socio-economic arguments for abandoning software patents.

Practitioner profile

To see how different software is from most patentable fields, you just have to look at the practitioners. There is a small number of large companies with well known products, and there is a mass of small companies. The low cost of entry to software development means the number of small companies is particularly large, but we'll leave that aside to look at a bigger difference. In most patentable fields, this pyramid of big and small companies describes how products are made. If this were true for software, then the decision of patentability would be an economic decision, and some costs might have to be reduced, but there'd be no fundamental incompatibilty. But in software, this is only half the story.

In software, unlike in other patentable fields, there are two additional categories of developers. The first is the software developers that sit in the IT departments of every medium sized company. They're the folk that keep the emails flowing, who make internal software, extend software bought by the company, and who run the website. The second group is individuals, informal groups and communities who program for their own benefit or for social reasons such as providing alternatives to software seen as overly restrictive.

The existence of these two categories changes everything because it's obviously unreasonable to require them to work within the patent system, and it's unjustly restrictive. Not only are patent incentives obviously not necessary to motivate IT departments to fix problems, the timeline and budgets are orders of magnitude out of sync with the speed and costs of writing software. When a company manager reports a website problem, they don't expect the IT department to reply about first seeking legal advice for a patent search, and they don't expect to later have a bill from a patent holder because of the way in which the IT department happened to fix the problem.

For user communities programming to suit their own needs, the costs and timeline are also unreasonable, but there is also the bigger problem that the patent holder gains veto power over the distribution of the software. If the software is written for the purpose of having a freely redistributable program, then this third-party veto spoils the developer's efforts. There will be no direct profits from which to offer royalty payments, so the result is a lose-lose situation where the developer's goal is blocked, and there's isn't even anything in it for the patent holder (although the patent will still be enforced to sink the piece of software so that computer users are pushed toward a program which will pay royalties to the patent holder).

Standards

This issue is further exasperated by a problem which applies to all types of software developer: in no other domain are modern standards as crucial as they are in software. If you want to cure rubber, there are many ways to do it. When patents block a product developer from using one method, there's the possibility of useful innovation when that developer looks for an alternative method. In software, being blocked from using an email, image, or document format equates to being prohibited from writing a functional email reader, image viewer or word processor. Can you imagine the utility of an innovative word processor that can't read any existing documents? Nobody would use this, which means any innovations therein would have been wasted effort.

For video, this problem is a reality. The MPEG-LA group claims to represent more than twenty patent holders which each have one or more essential patents for implementing the commonly used mpeg video format. There's no licence available for freely redistributable software, and even royalty payers have to agree to MPEG-LA's terms. The committee developing the next standard for webpages, HTML5, spent months searching and debating which video format they could recommend in the standard, and the final answer was that, due to software patents, there is today no format they can recommend.(ref-1)

When "user communities" grow up

Now, it's important to look at the output of the mentioned user communities. If like, say, hobbiest watchmakers, they just catered for themselves and a few friends without attracting the attention of patent holders, then this wouldn't be a big problem. The system would still be unjust, but if the injustice never manifested itself, then it would be theoretical issue.

Indeed, freely redistributable software and the work that was begun by idealists and hobbyists has now lead to the world's most used webserver, the world's second most used web browser, and the GNU/Linux operating system. Indeed, the "users" are nowadays often employees, and their collaborative development models have emerged as the primary competitors in many software domains. Blocking collaboration turns out not only to be a restriction on useful individual activities, but it also stiffles competition and the mass production of useful software.

In software, rather than supporting innovators, patents protect the old against the new.

Although large firms now contribute to these projects, many of the developers are still individuals and people who don't directly profit. The terms of distribution for this software are the same now as they always have been. It's a proven formula, and a key clause is that you can't distribute if patent royalties will be required.

Example: GNU/Linux

The kernel of the GNU/Linux operating system was examined by patent attorney Dan Ravicher, who announced on August 2, 2004, that he had found no court-validated patents to be infringed but 283 *issued patents* existed which could potentially be used to support patent claims.(ref-2) Thereafter, Microsoft in the 2007 began claiming that the kernel violates 235 of its patents - although the patents have never been specified.(ref-3) Neither could be precise, but they these give us ballpark figures.

The kernel one component, and because the human-written source code is online, we can see it contains approximately 4,000,000 lines of source code. Given that a distribution of the GNU/Linux operating system, complete with applications, can contain software with more than 225 million lines of source code, when we extrapolate from the kernel numbers, we arrive at the possibility of 13,160 or 15,848 patent infringements per complete distribution.(ref-4) All of this in something that can be distributed once or a thousand times, usually at no cost, sometimes large corporations, sometimes by individuals.

This is a degree of uncertainty that can't be fixed by changes in evaluation standards.

As for innovation, lists and lists of research suggests that patents reduce software innovation.

There was a time when if you wrote something, you owned it, you could sell it, you could give it away. It could be put in the accounts and it could be used as the base for collaboration. Now, ownership of a piece of software is hopeful speculation. There is no reliable way to have a settled expectation regarding the boundaries or the extent to which you own a piece of software. This uncertainty, and this unfair regulation is what the Supreme Court has the chance to rid us of by giving the USPTO a reliable tool for excluding software ideas from patentable subject matter.

-- Ciarán O'Riordan is Exective Director of End Software Patents

Cold War Museum v. Cold War Air Museum (Fed. Cir. 2009)

In 2004, the appellant registered the service mark THE COLD WAR MUSEUM under Section 2(f) after providing evidence that the mark had acquired distinctiveness through "substantially exclusive and continuous use in commerce for at least the previous five years."

Three years later, the Air Museum filed a cancellation proceeding. In that proceeding, the TTAB cancelled the mark based on its finding that the mark was merely descriptive of the service being provided.

On appeal, the Federal Circuit reversed TTAB and instead held that the party seeking to cancel the mark had not overcome the presumption "the registered mark has acquired distinctiveness."

A mark registered on the Principal Register is presumed to be valid. . . . [T]he presumption of validity that attaches to a Section 2(f) registration includes a presumption that the registered mark has acquired distinctiveness. To rebut this presumption, a party seeking to cancel a Section 2(f) registration must produce sufficient evidence for the Board to conclude, in view of the entire record in the cancellation proceeding, that the party has rebutted the mark's presumption of acquired distinctiveness by a preponderance of the evidence.

TTAB had refused to consider the mark-holder's originally submitted evidence of distinctiveness. On appeal, the Federal Circuit also held that evidentiary ruling to be in error.

[T]he Board acknowledged that the applicant had submitted evidence of acquired distinctiveness during prosecution. However, the Board decided that it could not consider this evidence because the Cold War Museum did not resubmit the evidence in the cancellation. This was error. The unambiguous language of 37 C.F.R. § 2.122(b) provides that the entire file of the registration at issue is automatically part of the record, without any action necessary by the parties. Therefore, the evidence of the mark's acquired distinctiveness submitted during prosecution was automatically part of the record before the Board, and the Board was required to consider this evidence in determining whether Air Museum had met its burden of proving a lack of acquired distinctiveness by a preponderance of the evidence.

rules indicate that the "evidence of record" in an opposition includes the entire registration file history .

Imation v. Koninklijke Philips Electronics (Fed. Cir. 2009)

At its heart, this case is simply one of contract interpretation.

Philips and Imation (via 3M) had originally cross-licensed a set of patents relating to CD and DVD technology. The agreement expired in 2000, although the licenses themselves were irrevocable and continued. After 2000 several subsidiaries were formed (GDM and Memorex), and Philips argued that those companies activities were not licensed because the companies were formed after expiration of the agreement.

On appeal, the Federal Circuit held that the later-formed subsidiaries were included within the original grant of rights just like future inventions are included within properly drafted assignment agreements. In the license states that Philips “agrees to grant and does hereby grant to [Imation] and its Subsidiaries a personal, non-exclusive, indivisible, nontransferable, irrevocable, worldwide, royalty-free license.” According to the court, that grant is a " singular, present grant to a class composed of Imation and its Subsidiaries of rights to existing and future patents that fall within the definition of 'Licensed Patents.'" Philips (losing) argument was that the grant language formed "multiple licenses over time." Under that theory, no license would be granted to subsidiaries formed after 2000.

Reversed and Remanded

Notes:

• Read the Decision: 09-1208.pdf
• Oddly in July 2009, the parties announced that the litigation had been settled. Link.

Association for Medical Pathology & ACLU v. USPTO & Myriad, 09-cv-4515 (S.D.N.Y. 2009)

Earlier this year, a group of organizations and individuals filed suit against the USPTO, Myriad, and individual directors of the University of Utah Research Foundation (ex parte Young action) demanding that the breast cancer gene patents (BRCA1 & BRCA2) be found invalid or unenforceable and that the PTO's policies and practices with respect to genetic patents be declared unconstitutional. The federal lawsuit argues (1) that the genes are not patentable because they are "products of nature" and (2) that the patentee's use of patent rights to limit scientific research on the genes violates constitutional First Amendment protections. The defendants moved to dismiss based on various standing and jurisdictional issues. In an 85 page opinion, Southern District of New York Judge Robert Sweet has denied all of the defendants' motions to dismiss.

Judge Sweet recognized this case as important:

This action is unique in the identity of the parties, the scope and significance of the issues presented, and the consequence of the remedy sought. . . . The challenges to the patents-in-suit raise questions of difficult legal dimensions concerning constitutional protections over the information that serves as our genetic identities and the need to adopt policies that promote scientific innovation in biomedical research.

Jurisdiction & Standing to Sue the USPTO: The court found that the overarching statutory scheme of the Patent Act did not preempt the court's jurisdiction over the PTO in this case since the Patent Act does not "provide a remedy for persons who complain about the constitutionality of patents issued by the USPTO and/or the policies and practices of the USPTO. . . . The novel circumstances presented by this action against the USPTO, the absence of any remedy provided in the Patent Act, and the important constitutional rights the Plaintiffs seek to vindicate establish subject matter jurisdiction over Plaintiffs' claim against the USPTO."

The court also found that the plaintiffs have standing to sue the USPTO for their Constitutional grievances; declaratory judgment jurisdiction over Myriad and the Directors, and personal jurisdiction over the Directors as representatives of the State of Utah.

In the final few pages, Judge Sweet outlined plaintiffs' case against the USPTO:

In this case, the Plaintiffs have pled sufficient factual allegations to satisfy the standard set forth in Iqbal. The Complaint alleges the existence of a specific, written policy for the patenting of genes and the parameters of the policy. . . . The Complaint further alleges that the information encoded in the BRCA1/2 genetic sequences, rather than being the result of an inventive process, exists in nature. . . . Based on these factual allegations, the Plaintiffs assert that the patents-in-suit grant Myriad ownership rights over products of nature, laws of nature, natural phenomena, abstract ideas, and basic human knowledge and thought in violation of the First Amendment's protections over freedom of thought. In addition, the Plaintiffs assert that Myriad's ownership of correlations between certain BRCAl/2 mutations and an increased risk of breast and/or ovarian cancer has inhibited further research on BRCA1/2 as well as genes that interact with BRCA1/2. As a result, the patents-in-suit are alleged to violate Article I, section 8, clause 8 of the Constitution which directs Congress to "promote the Progress of Science and useful Arts . . . ."

The facts alleged in the Complaint are plausible, specific, and form a sufficient basis for Plaintiff's legal arguments. Consequently, the pleading requirements as set forth in Iqbal are satisfied.

The next decision in the case is expected in January based on the Plaintiffs' motions for summary judgment.

MTD decision.pdf

The following guest post is by Matthew Smith

The grant rate of motions to stay is highly judge-dependent and (somewhat less obviously) district-dependent. The table below shows the approximate grant rate of contested motions to stay in major patent litigation districts since about the beginning of 2008. These data included around 150 motions, after excluding follow-on or duplicate motions on the same facts (e.g., in parallel cases against different defendants), stipulated motions, patent-owner-initiated motions, and motions initiated by declaratory judgment plaintiffs. The districts below are listed in order of decreasing frequency of the occurrence of such motions.

The Eastern District of Virginia, Western District of Wisconsin, and Northern and Middle Districts of Florida had relatively few orders, and were excluded.

A review of the orders confirms a relatively clean division into favorable and unfavorable judges for stays. This division is often flawlessly mirrored in the reasoning of written orders. Courts usually analyze three factors when considering stays: prejudice, timing and simplification. Where stays are disfavored, courts focus on the prejudice that delay may cause to the patent owner, find excessive delay in filing the request a few months after service of the complaint, and identify a plethora of issues that will be left unresolved by reexamination. Courts where stays are favored search in vain for particularized prejudice to the plaintiff (e.g. deteriorating evidence), find that requests submitted on the eve of trial are timely, and focus on the possibility that the claims could be canceled by the PTO when analyzing simplification.

There also appears to be a recent trend favoring stays pending inter partes reexamination, as opposed to ex parte reexamination. The estoppel associated with inter partes reexamination is sometimes viewed as a simplifying factor for issues in litigation. See, e.g., Anascape Ltd. v. Microsoft Corp., Case No. 9:06-CV-158 (E.D. Tex. Feb. 23, 2007); see also Ceiva Logic Inc. v. Frame Media Inc., Case No. SACV 08-00636-JVS (C.D.Cal. June 9, 2009); Wall Corp. v. Bonddesk Group LLC, Case No. 07-844 GMS (D.Del. Feb. 24, 2009).

The data for this study were helpfully provided by the Docket Navigator.

• The new website Found Persuasive looks to be an excellent addition to the online patent discussion. The authors promise a practical discussion of "patent prosecution strategies and templates for the patent practitioner. Patent attorneys Michael Leonard, Jared Olson, and Sheetal Patel are the authors.
• The ReexamCenter is full of practical information about Reexamination Issues. The new site is run by Robert Sterne's team at Sterne Kessler.
• Professor Ho at Loyola (Chicago) sent in information about an upcoming event: IP Day in Chicago on November 3.
• The PTO Central Reexamination Unit (CRU) has a new website design and updated statistics.
• USPTO Ombudsman: The PTO has invited public comment on its Ombudsman Pilot Program. The program is intended to create a direct-line of communication for applicants who believe that their applications are being improperly examined. e9-25798.pdf.

In a prior post, I discussed the USPTO's planned docket-change for applications associated with a request for continued examination (RCE). See Nudging Against RCE Filings. According to the RCE Docket proposal, when an applicant files an RCE, the pending application will be taken off the examiner's in-prosecution docket and placed in the "special-new" queue that is primarily filled with continuation applications. This new approach will result in RCE's being handled much more slowly.

The graph below is a rough-cut attempt to compare the "special-new" queue with the RCE queue. The data comes from a set of eight thousand randomly selected patent applications filed 2001-2006 whose file histories have been made public on PAIR. The graph shows three groupings or application scenarios and the average delay from applicant filing to the receipt of a first office action for each. In my sample of continuation applications, the average PTO delay in mailing a first office action was a bit over six hundred days. On the other hand, after receiving an RCE, the average PTO delay in issuing an office action was less than three months.

The proposed change docket-change would essentially take the RCE group and combine it with the continuation group – likely adding over 18-months delay to RCE processing. As Scott Kamholz suggested, this will likely lead to a patent term adjustment (PTA) "bonanza." This may become a favored approach for applicants looking to extend their patent term. Submarine anyone?

Because of the large sample size, the differences in delay between the groupings are all significant (P<.01). However, there are a number of potential confounding factors – perhaps most notably is a selection bias associated areas of technology. I did not correct for those potential problems in this rough-cut.

UPDATE: The following comment comes from a PTO Insider:

The difference here is the initial docketing to examiners. An RCE will cause the application to be automatically redocketed to an examiner's Special New tab immediately once the LIE processes the RCE. Continuations, on the other hand, are not automatically docketed to examiners in this fashion, hence the pendency on the same order as normal non-continuation filings. Most of this time (after pre-exam) is spent on a SPE docket or no docket at all, awaiting eventual docketing to an examiner, just like normal non-continuation apps. While it's likely that RCEs on the Special New docket will increase the time to next action for those cases, it won't be anything even remotely comparable to 600+ days.

In re Giacomini (Fed. Cir. 2009) (discussion of the briefs)

Giacomini is appealing the BPAI's 102(e) rejection -- arguing that the patent asserted as prior art does not actually qualify as prior art. Giacomini's application claims priority back to November 2000. The asserted prior art patent issued in 2006, but was filed in December 2000. The prior art patent also claims priority to a provisional application filed in September 2000. The PTO claims that the 102(e) date of the patent is the filing date of the provisional -- thus making it prior art over Giacomini.

When a patent is asserted under 102(e)(2), the patent's filing date is considered the priority date. In the language of the statute, the PTO must consider whether the putative prior art patent was "granted on an application for patent ... filed in the United States before the invention by the applicant for patent." The provision makes clear that a patent claiming priority to an international application will be given the international application filing date if that application "designated the United states and was published . .. in the English Language." Under US case law, when being considered as prior art, divisional and continuation patents are also given the filing dates of their parents as their 102(e) date. See In re Klesper (CCPA 1968)("provided the disclosure was contained in substance in the earliest application"). However, patents claiming priority to a foreign filing under Section 119 are not given the foreign priority date.

The novel question here on appeal is how to interpreted the statute's silence regarding provisional applications.

• Appeal Brief: cafc_appeal_brief_2009-1400_500-002us-2.pdf
• cafc_appeal_brief_2009-1400_500-002us-2.pdfPTO Opposition: Giacomini - Director's Brief (Red Brief).pdf
• BPAI Decision: BPAI Decision in Giacomini
• Related Discussion: Patently-O Discussion of Ex Parte Yamaguchi (BPAI 2008)

The Federal Circuit has proposed a set of about two-dozen amendments to its Rules of Practice. Under 28 U.S.C. § 2071(b), the court is required to provide "public notice and an opportunity for comment." Any comments on the rules are due to the Federal Circuit clerk by November 5, 2009. Below, I discuss some of the proposed changes.

Rules 8(d) and 18(d) Stays Pending Appeal: Often a losing party will almost simultaneously ask both the district court and the appellate court to stay injunctive relief pending appeal. The proposed rule would require the movant to identify "when it filed the motion in the district court [or agency] and why it is not practicable to await a ruling by the district court on that motion." The purpose of this rule is to help the appellate court avoid unnecessarily stepping on the toes of the district court judges.

Rule 21 Mandamus: Because the court often acts quickly in Mandamus actions, any reply brief "should be expedited if appropriate" or else the "court may act on the petition before the receipt of any reply." The Federal Circuit has been receiving a marked increase in the number of mandamus requests in the wake of its TS Tech decision where the court ordered a case moved out of the Eastern District of Texas.

Rule 29 Amicus Brief: Rule 29 is amended to clarify that a third party filing an amicus brief does not need to file a motion for leave to file if "all parties consented to the filing."

Caution for those using USPS: If your document "must be received by the court on a particular date, then the file might consider using an alternative method of delivering the document to the court, such as a commercial carrier or hand-delivery. The court cannot waive the deadlines for filing a notice of appeal or petition for review, even if the document was deposited in the mail in a timely fashion."

• RuleChange16Oct2009.pdf
• CAFC Rules Page

Mark Lemley and Bhaven Sampat have released a new working paper that uses PAIR data to draw some conclusions about the current patent system:

Conclusion: The evidence illuminates the patent prosecution process as a continuing negotiation between examiner and applicant. That negotiation does not end with an initial or even a final rejection. Interviews and amendments after final play an extremely significant role in generating patents, and in limiting the scope of those claims as well. Nor is that the end of the process. Continuation applications are flourishing. They have broken into two roughly equal groups, with different uses. Many applicants are using RCEs to keep fighting for claims that the examiner wasn't willing to give them. The second group is filing continuation applications rather than RCEs. They have opted for a slower process, either because they want delay so that they can modify their application to track developments in the marketplace or because they want multiple patents to build an effective fence around a single invention.

In the paper, the authors implicitly retreat from earlier work criticizing the patent examination process –suggesting that their results here "may be a hopeful sign for patent examination: even though the PTO ultimately grants patents on a large majority of the applications it receives, it may still be serving an important gatekeeper function by requiring applicants to narrow their claims. (This assumes that most of those amendments narrow the claims; that seems likely, but we cannot test it empirically)."

Read the paper on SSRN.

Stuart Soffer has provided information on an interesting spike in patent litigation filings in the Washington DC Federal District Court (DDC). As the chart below shows, more patent cases against the USPTO have already been filed in DDC in 2009 than in any other year in recent history.

What's Going On: On my review, of 39 of the DDC patent cases filed thus far in 2009 (including those not-against the PTO), all of the cases fell into one of these two categories:

Most of the DDC cases are suits against the PTO. The 2009 spike appears to be largely driven by patent holders asking for a review of PTO calculations of patent term adjustment. See Daido v. Doll, 09-628; Biogen IDEC v. Doll, 09-754; Novartis v. Doll, 09-804. The outcome of these cases will likely be dictated by the Federal Circuit's decision in Wyeth v. Kappos. That case focuses how to calculate an adjustment when the patentee is eligible under both Section 154(b)(1)(A) and Section 154(b)(1)(B). Oral arguments were held in early October, 2009.

The remaining cases involved declaratory judgment actions filed against non-US patent holders under 35 U.S.C. § 293. That section of the Patent Act provides that DDC has in rem jurisdiction over the patent and is a proper venue unless the foreign entity has identified a designated agent in another US jurisdiction. In the case of HTC v. Luzzatto, 08-998, the Taiwanese company HTC sued to invalidate Luzzatto's patent covering a "telephone identification calling apparatus." That case is interesting because the district court refused to dismiss the case against Luzzatto even though he had assigned his rights to the patent to another entity. The court reasoned that Section 293 explicitly creates jurisdiction over the "patentee", and Section 100(d) defines a patentee to include "not only the original patentee to whom the patent was issued but also the successors in title to the patentee."

• New Counts: The Patent Office Examiner Union (POPA) has voted to approve the PTO's proposed changes to the examiner count system. [POPA][Washington Post]
• Novo Nordisk v. Caraco: The Federal Circuit has temporarily stayed an Eastern District of Michigan court ordered injunction that would force the patentee to amend its Orange Book listing for its diabetes treatment drug Prandin. The court is now considering whether to leave the stay in place for the remainder of the appeal. [CAFC Order][FDA Law Blog]
• Baker Hughes v. Nalco: Nalco moved for a stay of a preliminary injunction pending appeal. Going even further, the Federal Circuit vacated the preliminary injunction. In its non-precedential order, the appellate court held that preliminary injunction could not be sustained because the lower court had failed to explain its irreparable harm finding. The improvement patent relates to a method for purifying crude oil. [CAFC Order]
  
• Tafas Steps Back: Following the PTO's withdrawal of its rule package, Tafas has filed a motion with the Federal Circuit to dismiss the pending appeal in Tafas v. Kappos but not vacate the District Court's injunction. It appears likely that Tafas will seek fees and costs as the prevailing plaintiff. Donald Zuhn at Patent Docs includes more details.

• Duke Law Professor Arti Rai has started work at the USPTO as the "Administrator for External Affairs." Although not a registered patent attorney, Rai had a focus on biochemistry at Harvard and attended one year of Harvard Medical School before heading to law school (again at Harvard). [cv] In addition to her extensive knowledge of the patent system, Rai is an expert on administrative law. In her writings, she typically argues that the PTO should be given more independence and power.
• Professor Rai's new position will likely focus on PTO relations with other US governmental entities as well as with foreign governmental entities.
• Professor Rai offered remarks at the Collegiate Inventors Competition in Chicago on Monday evening. Here are a few quotes:
• "As I know from my research, and from my own sister’s experience with her biotech startup, inventors need this protection in order to attract research and development capital. The challenge we face at the USPTO is ensuring that inventors can always look to us for strong and speedy protection."
• "Since taking office a little over two months ago, Director Kappos has moved aggressively to reform the office, expedite the way in which we examine patents, update our IT infrastructure, and reach out to stakeholders and members of Congress to provide a sustainable funding mechanism for the USPTO. We are committed to using all of the tools at our disposal to reduce the amount of time it takes for inventors to get the patents they need to bring products to the marketplace. You will be hearing more in the months to come, so stay tuned and keep believing in your ability to change the world with your inventions."
• IP Hall of Fame Nominations: Nominations have opened for IAM Magazine's Annual Award to "honour those who have made an outstanding contribution to the development of IP law and practice." http://www.iphalloffame.com/
• Call for Papers: Next Generation of Antitrust Scholarship Conference

[Updating of this post in-progress]

Princo Corp. v. International Trade Commission (ITC) (Fed. Cir. 2009)

The long-running Princo cases involve questions of when bundled licensing of patent rights may be seen as patent misuse (and thus rendering the patents unenforceable). The underlying pools of patents cover compact discs that are recordable (CD-R) and re-writeable (CD-RW).

In its most recent panel decision, the Federal Circuit (Judges BRYSON, GAJARSA, and DYK) rejected several theories of patent misuse, but remanded to consider whether the patentees has improperly sequestered alternative technologies. Judge Bryson did not agree with the novel misuse theory and dissented-in-part. Princo, US Philips, and the ITC each requested rehearing en banc.

The Federal Circuit has now granted the requests from US Philips and the ITC to hear the case en banc. (The court rejected Princo's request for rehearing its questions en banc).

US Philips presented two questions:

1. Whether a supposed agreement, between developers of new technology and a new product standard, to license one of the resulting patents only for use under that standard, thus foreclosing the possibility that it might be used to create a competing standard, could be held anticompetitive without (i) defining a relevant market in which the standards compete and (ii) proving that the agreement injured or was likely to injure competition in that market.
2. Whether such an agreement, even if deemed anticompetitive, would be a proper basis for invoking the doctrine of patent misuse to refuse enforcement of different patents used to practice the joint standard.

The ITC did not explicitly list its en banc question, but basically argues that the remand is improper because (1) neither party raised the misuse theory that the court relied upon in its decision and (2) the ITC needs the Federal Circuit to define the "relevant market" before it can properly determine the market harm.

Briefs: US Philips en banc brief will be due at the end of November, and briefs from the ITC and Princo will be due thirty days from the date of service of US Philips. "Briefs of amici curiae will be entertained, and any such amicus briefs may be filed without leave of court but must otherwise comply with Federal Rule of Appellate Procedure 29 and Federal Circuit Rule 29."

US Philips is represented by Douglas Melamed at WilmerHale; Princo is represented by Eric Wesenberg at Orrick; the ITC's lead attorney is Clara Kuehn. Portions of the Melamed and Calebresi 1972 article on property rights is found in almost every property law casebook.

NYIPLA Amicus Brief.pdf: Supporting a strong written description requirement: "By the time of the O'Reilly v. Morse decision in 1853, 56 U.S. (15 How.) 62, it was understood that attempting to dominate an entire field by generic functional claiming was prohibited when the applicant had invented and disclosed only limited techniques or apparatus to carry out such function. Though phrased differently, this doctrine has continuing vitality and is today most closely embodied in the requirement that the specification enable the full scope of the claimed invention."

Professors Janis & Holbrook.pdf: Section 112 does not support a separate written description requirement - not even one limited to the context of new matter.

Morris.DOC: The text of Section 112 does not create a separate written description requirement. Professor Morris suggests giving teeth to Section 112p2 in requiring the applicant to "particularly point[] out and distinctly claim[] what he regarded as his invention."

Novozymes.pdf: WD should be limited to new matter issues.

Holman in Support of Neither Party.PDF: The genus and species possession requirements unjustifiably discriminate against biotech inventions by creating a technology-focused super-enablement requirement. [Read Prof. Holman's Biotech IP Blog where he is following the case.]

University of California (and other major patent-holding universities): The requirements prejudice university researchers who "often make the most important basic science discoveries. . . . As a result [of the written description requirement], university researchers are denied the recognition and reward of inventorship due solely to lack of a available resources rather than lack of inventive contribution."

Most patent infringement lawsuits are resolved with an agreement for the accused infringer to pay money to the patent right-holder. Generic drug-maker challenges to pharmaceutical patents occasionally follow a different path – with the patent holder paying money to the accused infringer to stay off the market for an extended period of time. This summer, the Obama administration (through the DOJ) indicated that these "pay for delay" settlements are "presumptively unlawful." (WSJ Article). The FTC has opposed these reverse-payment settlements for many years – arguing that they tend to allow a company holding vulnerable patents to maintain monopoly-level drug prices.

Now, the Senate has joined the fray. The Senate Judiciary Committee has approved a ban on reverse-payment settlements. (Prior Art Blog citing Reuters).

S.369 was co-sponsored by Senators Kohl, Grassley, Feingold, Durbin, and Brown. The Bill would amend the Clayton Antitrust Act to make it "unlawful under this Act for any person, in connection with the sale of a drug product, to directly or indirectly be a party to any agreement resolving or settling a patent infringement claim in which-- (1) an ANDA filer receives anything of value; and (2) the ANDA filer agrees not to research, develop, manufacture, market, or sell the ANDA product for any period of time." Such an agreement would then result in antitrust liability as well as the ANDA losing its 180-day exclusivity right. (Download S369)

The Heene family may have wanted to consult with Joseph Meadows of Los Angeles. His Patent No. 6,325,329 covers a helium balloon of sufficient volume and buoyancy to allow a human pilot to float above the ground and to glide over the ground.

The USPTO has announced that Sharon Barner of Foley & Lardner has agreed to become Deputy Director of the USPTO. Barner is the head of Foley's large IP department and has been a supporter of Obama since his youthful days in the Illinois legislature. As was the case with Kappos, Barner will be taking an extreme pay cut, opening herself to public criticism; and moving to DC. She should be applauded for her willingness to become a public servant. Under the law, the USPTO Director has the power to nominate his Deputy, but the actual appointment is done by the Secretary of Commerce (Locke).

The patent office has substantial problems that need to be addressed and that would be addressed regardless of who is in charge at the PTO. The benefit of Kappos & Barner is that have decades of patent law experience and are both committed to building a better patent system for the long-term. They understand how patents are actually used and the motivation behind patentee actions. Hopefully, this means that the eventual changes to the system will be more successful; have fewer unintended consequences; and be less likely to unduly antagonize those already invested in the system.

Barner was on my (rather long) short-list of potential Federal Circuit nominees to replace Judge Schall who is moving to Senior Status next week. Many members of the patent litigation bar are calling for a district court judge to be nominated. Judge Kathleen O'Malley (N.D. Ohio) likely tops the list along with Judge Patti Saris (D.Mass.).

Stanford v. Roche (Fed. Cir. 2009) 08-1509r.pdf

Using federal NIH funding, Stanford scientists developed and patented a method of using PCR to measure HIV virus concentration in blood plasma. The development was done in partnership with the PCR leader Cetus. The Cetus PCR business was later purchased by Roche, and Stanford subsequently offered to license the patent rights to Roche (for a substantial royalty). After negotiations stalled, Stanford sued Roche for patent infringement. Roche claims that it has ownership rights or - at least - shop rights to the patents based on its acquisition of Cetus's PCR assets. The district court (Judge Patel, N.D. Cal.) rejected Roche's claim of rights, but did find the patents invalid as obvious (on summary judgment).

Roche's Ownership: Roche raised ownership rights both as a counterclaim and as a defense. The district court held those claims barred by California's statute of limitations. On appeal, however, the Federal Circuit held that the general statute of limitations does not operate to block defenses in litigation. Rather, "[u]nder California law, a defense may be raised at any time, even if the matter alleged would be barred by a statute of limitations if asserted as the basis for affirmative relief." (Quoting Styne v. Stevens, 26 Cal. 4th 42, 51 (2001)). Likewise, the statute of limitations to claiming rights does not apply when ownership is raised as a challenge to a plaintiff's standing to sue. "It is well settled that questions of standing can be raised at any time and are not foreclosed by, or subject to, statutes of limitation."

The law of patent ownership is somewhat complex because it involves a mixture of state law (or the law of the local jurisdiction) and federal law. State contract law serves as the baseline, but federal law (esp. Federal Circuit law) creeps into many situations. Here, for instance, the Federal Circuit has held that the "question of whether contractual language effects a present assignment of patent rights, or an agreement to assign rights in the future, is resolved by Federal Circuit law."

One of the listed inventors first signed an agreement with Stanford - promising to assign any future inventions that emerged from his employment. Later, the inventor signed an agreement with Cetus agreeing "to hereby assign" his interests. Under Federal Circuit law, these two contracts are treated differently. And, although the Cetus agreement came later, the company could claim equitable title immediately at the moment of invention while Stanford needed to actually obtain an assignment. The company also automatically held legal title in the patent application at the moment it was filed. (The inventor did not sign an assignment to Stanford until after filing).

"[B]ecause Cetus’s legal title vested first, Holodniy no longer retained his rights, negating his subsequent assignment to Stanford during patent prosecution."

Recordation of Rights: Patent ownership regularly transfers without the new owner recording the assignment with the USPTO. Recordation is not required, but it does offer some benefits. Notably, where two entities both claim ownership (as there are in this case), a second assignee can hold title if it records first.

A [prior] assignment . . . shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage. 35 U.S.C. 261

One caveat in the statute is that the subsequent assignee must be a bona fide purchaser - i.e., take "without notice" and pay "valuable consideration." Here, the Federal Circuit found that Stanford was at least on inquiry notice of the relationship between the inventor and Cetus and the potential for a rights-transfer.

Standing:

Stanford cannot establish ownership of Holodniy’s interest and lacks standing to assert its claims of infringement against Roche. Thus, the district court lacked jurisdiction over Stanford’s infringement claim and should not have addressed the validity of the patents. The district court’s grant of summary judgment of invalidity is therefore vacated, and the case is remanded with instructions to dismiss Stanford’s claim for lack of standing.

Bilski v. Kappos (Supreme Court 2009) 08-964bsUnitedStates.pdf

In its responsive brief, the Obama Administration asks the Supreme Court to confirm that a patentable process must be tethered to technology - either "directed to the operation of a particular machine or apparatus" or "involve the transformation of matter into a different state or thing."

Interpreted in light of the historical scope and development of the patent laws, as well as the statutory context, the term “process” encompasses all technological and industrial processes, broadly conceived. But it does not extend patent-eligibility beyond those bounds, to methods of organizing human activity that are untethered to technology—e.g., methods by which people conduct economic, social, or legal tasks, such as entering into contracts, playing poker, or choosing a jury. Such methods fall outside of the broad expanse of technological and industrial fields that “the statute was enacted to protect.” Parker v. Flook, 437 U.S. 584, 593 (1978). Because petitioners’ hedging method relates solely to human conduct, untethered to any technology—any machine or transformation of matter—it falls outside the coverage of Section 101.

. . .

This Court has long recognized that the distinguishing feature of a technological process is that it concerns a particular machine or apparatus or effects a transformation of matter to a different state or thing.

Although Bilski's claim does not relate directly to software, the machine-or-transformation could be seen to limit the patentability of software processes acting on a general purpose computer (as opposed to a "particular machine"). The Government brief suggests that the Federal Circuit test leaves software substantially patentable when tied to a general purpose computer - citing favorably to In re Alappat, 33 F.3d 1526, 1545 (Fed. Cir. 1994) (en banc) (“[A] general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software.”).

In any event, the machine-or-transformation test contemplates that many forms of “software” inventions are patent-eligible. . . . [However,] software code that is claimed by itself, uncoupled from any storage medium or computer, may be nothing more than “an idea without physical embodiment,” and therefore would not be patent-eligible.

Here, the brief did not address the reality that a software process can be "technological and industrial" without be limited in its association to a particular computer.

As a fall-back, the Government appears to suggest an additional exception to the patentable subject matter test for "methods of organizing human activity."

Methods of organizing human activity are not patent-eligible “process[es]” within the meaning of Section 101.

The brief spends a considerable amount of time focusing on the statutory interpretation on the word "process" and its predecessor "useful arts" - paying special attention to provide an originalist style analysis. Here, the government attempts to show that finance (i.e., business methods) were not originally considered useful arts. Additionally, the government argued that even though tremendous advances took place in finance and insurance industries during the 18th and 19th centuries, those innovations were not traditionally patented.

In sum, because the initial patent statutes were intended to foster the “useful arts,” they were directed to technological and industrial inventions, as opposed to fields of purely human activity—including financial and economic activity unconnected to technology—which fell within the sciences or liberal arts.

Amicus briefs in support of the government position are due this Friday.

• IP Czar: George Mason visiting professor Victoria Espinel has been selected as the IP Enforcement Coordinator for the Administration - known as the IP Czar. The role will likely be more focused on international trademark and copyright issues rather than patent law issues. Her nomination must be confirmed by the senate. [LINK]
• DC in DC: Next Thursday (1:30 p.m., October 1), I'll be the opening speaker in GWU's IP Speaker Series. My presentation considers the proposed first-to-file legislation and includes a new set of data the (low) frequency that applicant's attempt to rely on their invention date during prosecution. The talk is open to GWU students, alumni as well as "friends." Other speakers include Edward Walterscheid (Oct. 27); Zahr Stauffer (Oct. 29); Joseph Miller (Nov. 5); and Chris Cotropia (Nov. 19). [LINK]

Most patents currently being reexamined at the PTO are also being litigated in parallel proceedings in district court. This rise in importance of parallel reexaminations leads directly to both Constitutional controversies and practical problems. Although the Federal Circuit has nimbly attempted to avoid the problem, the truth is that both the PTO (an Article II executive agency) and the Article III Courts focus on the same question of validity of patent claims. These races to conclusion raise questions of both separation of powers and res judicata.

A practical issue is raised by Microsoft in the i4i case relates to the relevance of non-dispositive reexamination events to the question of willful infringement. In Microsoft's case, the ex parte reexamination request was initially granted, and that grant was followed by a non-final office action rejection. On appeal, Microsoft argued that the PTO's rejections of i4i's claims on obviousness grounds should result in a per se finding that its its infringement defenses were not objectively reckless. Rather, according to Microsoft, the PTO's grant of reexamination and non-final rejection at least serve to prove that its defenses were credible. i4i argues on the other side that the non-dispositive reexamination events are irrelevant because of the different standard for review, different claim construction approach, and lack of finality.

At the Santa Clara Law School conference that I attended yesterday, one panelist made a seeming reasonable suggestion - that courts should begin to reexamination results once an applicant agrees to amend or cancel claims being asserted during litigation. At that point, it is a foregone conclusion that the resulting reexamination certificate will not confirm the patentability of those pre-amended claims.

The Board of Patent Appeals and Interferences has seen a tremendous upswing in its workload over the past couple of years. The swing was largely triggered by the prospect of rules limiting the filings of requests for continued examination (RCEs). However, it appears that applicants and patent attorneys - who are now familiar with the process - are continuing to see appeals as a viable alternative even though the RCE limits appears dead-in-the-water. Of course, the appeals have also been driven by the increasing percentage of applications being finally rejected by examiners.

In a recent presentation, BPAI Chief Judge Fleming provided a useful survey of the "state of the Board." Highlights below.

• In FY2009, the BPAI is expected to have decided over 7,000 cases. That represents more than a 40% increase over FY2008.
• In addition, it is expected that over 15,000 cases will have been docketed to the BPAI in FY2009. That number is well over double those docketed in FY2008. This leaves an 'inventory' of about 12,500 cases.

In its current form, the BPAI cannot keep up with demand. By the end of FY2010, Judge Fleming expects the backlog to extend over 21,000 cases. The office currently has a three-prong approach to fixing the situation: (1) hiring more BPAI judges; (2) hiring more patent attorneys who essentially serve as law clerks, drafting opinions that are eventually approved by the Board; and (3) improving BPAI efficiency.

Notes:

View the presentation: bpai_092109.pps

Edwards Lifesciences v. Cook, Inc. (Fed. Cir. 2009)

The four Edwards patents all relate to internal blood-vessel grafts for treating aneurisms. The grafts are designed to be inserted endovascularly without the need for open surgery. After construing the claims, N.D. Cal. District Court Judge Jeffrey White granted summary judgment of non-infringement to the two defendants, Cook and Gore. On appeal, the Federal Circuit affirmed.

Lumpy Claim Construction: Patent claim construction serves as a prime example of how litigators can take a simple issue and make it quite complicated. For their part, judges are keen to limit the issues. A common approach in claim construction is to group similar claim terms together and give them identical meaning. In this case, the patent used the terms "graft," "graft body," graft structure", "bifurcated base structure," and "bifurcated base graft structure." Examining these terms, the appellate panel agreed that these terms could properly be analyzed together because the applicant had used them "interchangeably in the specification," at least with respect to the disputed differences.

This risk of synonymous meaning is not necessarily bad. Using various terms to describe the same idea helps to flesh out the detail and scope of the idea. However, in most cases, applicants would probably be better off emphasizing distinctions between similar terms. The distinctions may well be useful for ensuring varied claim coverage.

The point from this case is that the distinctions between similar terms must be explicitly emphasized if the applicant wants to have confidence that it can later rely on the differences.

Broadening Claims:During prosecution, Edwards seemingly broadened some of its claims by amending the "intraluminar graft" elements to simply "graft" elements. Despite that change, the court found that the specification's written description still required that all grafts be intraluminal.

In re Lister (Fed. Cir. 2009)

Lister is attempting to patent his method of playing golf that allows a player to tee-up each shot (except for hazards and greens). He filed his patent application in 1996. Two years prior, however, Lister had registered a copyright on his manuscript describing the game (acting pro se).

Based on the copyright submission, the examiner rejected the application as anticipated under Section 102(a) and barred under Section 102(b). The Board, however, eliminated the Section 102(a) rejection because "[Dr.] Lister could not have disclosed his own invention before he invented it." However, the board did agree that manuscript's availability at the copyright office did constitute prior publication under the statutory bar of Section 102(b). The touchstone for publication under Section 102(b) is public accessibility.

[The Board] concluded that an interested researcher would have been able to find the manuscript by searching the Copyright Office's catalog by title for the word "golf" in combination with the word "handicap." Additionally, the Board found that an individual seeking to view the manuscript would have been able to do so by visiting the Copyright Office. Finally, the Board rejected Dr. Lister's arguments that the inconvenience of visiting the Copyright Office and the Copyright Office's rules prohibiting individuals from making copies of the manuscript precluded a finding of public accessibility. With respect to the unavailability of copies, the Board found that the inventive concept was straightforward enough that it could be understood and retained by a person of ordinary skill in the art upon reading the manuscript without any need to obtain a copy.

Although there was no evidence that anyone actually looked at the manuscript, the Board held that public accessibility does not require that the document have been actually accessed.

On appeal, the Federal Circuit reversed – finding that (1) the availability of a manuscript in the copyright office does not necessarily meet the accessibility requirement of Section 102(b); and (2) in this case, the PTO did not prove that the document was publicly accessible.

This case is akin to other "library" cases where prior art is found covered in dust in a secluded section of a library. In those cases, the material is considered public if "it could be located by persons interested and ordinarily skilled in the subject matter or art exercising reasonable diligence."

Here, the court found that the Library of Congress records did not create accessibility because those records were (at that time) not searchable by subject or keyword. Rather the LOC records could on be searched by title (beginning with the first word of the title of the article) or author last name.

The automated catalog was not sorted by subject matter and could only be searched by either the author's last name or the first word of the title of the work.

On the other hand, LOC records (although not the full manuscript text) are also available through Westlaw and Dialog. In its decision, the appellate panel indicated that the search features available through those paid services were sufficient to make the records "publicly accessible." However, the record did not indicate when Lister's records became available through Westlaw or Dialog and thus those sources cannot be relied on as prior art.

Absent evidence of the date that the disclosure was publicly posted, if the publication itself does not include a publication date (or retrieval date), it cannot be relied upon as prior art under 35 U.S.C. 102(a) or (b). Quoting M.P.E.P. § 2128.

. . . .

Essentially, the evidence shows that at some point in time Westlaw and Dialog incorporated the Copyright Office's automated catalog information about the Lister manuscript into their own databases. There is no indication as to when that occurred or whether it was prior to the critical date. We see little difference between the evidence in this case and a situation in which an examiner comes across an undated reference that discloses an invention for which an applicant is seeking the patent. We surely would not view the mere existence of the reference in the latter scenario as prima facie evidence that it was available prior to the applicant's critical date.

. . . absent any evidence pertaining to the general practices of the Copyright Office, Westlaw, and Dialog, or the typical time that elapses between copyright registration, inclusion in the Copyright Office's automated catalog, and subsequent incorporation into one of the commercial databases, any presumption along those lines would be pure speculation.

On remand, the PTO can legitimately reject the application again if it can prove that the LOC records were available through Westlaw or Dialog more than one year prior to the 1996 patent application date.