Category Archives: Patents – Legislation

In re Bilski – Could be Transformative

News that the Supreme Court will review In re Bilski is quick to set off currents of speculation.  In its un-reviewed form, Bilski was relief from the State Street hangover and was a work-around to the stunted state of reforming the Patent Act.  Now, one wonders how the Supremes can keep intact their string of smackdowns on CAFC rulings, when Bilski seems to have been a reaction to prior whippings.

A Path that is Wide, but the Gate is Narrow.

How many roads must a patentee go down, before he can see the sky?  The patentee wishes to invest in plowshares, but those infringers divert some of the budget to swords.  Then, at the reckoning, what is gained.

Passages from two recent decisions that deny post-judgment recoupment remind us that when the fire burns out, there may be nothing to carry away.

In Star Navigation Systems Group, Ltd. v. Aeromechanical Services Ltd., 2009 WL 1313208 (N.D.Cal. 2009), the accused infringer’s motion was denied after the plaintiff-patentee voluntarily dismissed the case.  A “press release issued after Star voluntarily dismissed [explaining] that Star dismissed the action after concluding any award of damages it might obtain would be outweighed by the costs it would incur in prosecuting the matter” did not prove that Star had prosecuted the suit in bad faith.

Also denied was a post-judgment motion for attorneys fees, after a jury ruling, a JMOL, and a CAFC reversal, in Sundance, Inc. v. De Monte Fabricating, Ltd., 2009 WL 1324901 (E.D.Mich. 2009).  The Hon. Avern Cohn, who has seen a lot in 30 years on the federal bench, noted all of the hoops that the patentee had hurdled, before the CAFC ruled de novo and declared invalidity ab initio.  “The ′109 patent was not only duly granted; it was thrice examined. That the Court and three (3) patent examiners got it wrong in the view of the Federal Circuit does not make this an exceptional case.”

A variety of reasons suggest why the Patent Act needs to be reformed, but the gauntlet that the CAFC requires be run before a final decision can be reached, is a good one.

The Litigation Reform Aspects of H.R. 1908

Others can comment on the prosecution side of the patent reform debate.  Developments in patent litigation, which the recently-passed House bill 1908 may provoke, are more in my field of interest.  Specific attention was given to the amended provisions on venue, interlocutory appeals, and inequitable conduct.

The bill would extensively amend 28 U.S.C. 1400(b), so that venue for patent cases could be only those locales with “substantial” connections to the parties, events, or operations.   One can try to predict how courts might apply the “substantial” standards in the amended provision.  Venue would be proper if the defendant has its “principal place of business or is incorporated” there; or, if there, the defendant “committed a substantial portion” of the infringing acts “and has” a business located in that venue that “constitutes a substantial portion of defendant’s operations.”  A patent plaintiff is supposed to sue in a venue where it does “substantial” R&D or manufacturing “related to the patent” in suit.  Courts have applied a substantial presence standard to personal jurisidiction questions, but not to patent venue issues.  About the only place in the present statute that uses similar language is 35 U.S.C. 271(f) as to supplying a “substantial portion of the components” of a patented combination.  It thus is unknown what makes activity “substantial” enough to secure venue. 

A prohibition in the venue provision of the bill would ensure that no party shall “manufacture venue.”  Another implies that, even if there was a last-minute run to file cases before the statute became effective,  cases filed after 7SEP07 “shall be transferred” to a venue meeting the statute’s new precepts of “substantial” nexus.  In my mind’s eye are ‘available to sublet’ signs in Marshall, TX.

A provision would amend 28 U.S.C. 1292 to allow interlocutory claim construction rulings to be appealed, if the district court allows that in its “discretion.”  A district court may grant leave for an interlocutory appeal, but that does not ‘manufacture’ appellate jurisdiction, and the CAFC is not required to review the ruling.  Anyway, Markman is so nineties,  now everyone plays the new KSR game.

Inequitable conduct gets some needed specificity in the as-passed version of H.R. 1908.  The threshold standard of materiality is art that supports a “prima facie finding of unpatentability,” which is “not cumulative” to art “of record.”  {Quare: can art be both cumulative and indicative of unpatenability?}.  The bill promotes employment of former examiners, who now can work as experts on whether “a reasonable examiner would have made” that “finding of unpatentability.”  Q: Were you formerly a patent examiner? A: Yes.  Q: Were you reasonable? A: Yes.  To Bench: I move to have him accepted as a prima facie expert.

The second test of “materiality” is withheld information that “refutes or is inconsistent” with arguments for patentability.  One unclear aspect is that the withheld information be “otherwise material.”  If that means material enough to support a finding of unpatentability, then less material art being withheld may be “inconsistent” with an argument, but not to the point of being inequitable conduct.

Some study will be needed to divine the two burdens of proof.  The “defense” must be “established by clear and convincing evidence,” but the materiality standard, i.e., the prima facie proof of unpatentability, needs only “a preponderance of the evidence.”  Also, prima facie was a term chosen advisedly, since when evaluating it, “rebuttal evidence shall not be considered.” 

The reforms on the intent element are that “specific facts beyond materiality …must be proven” to establish intent, such as, “circumstances that indicate conscious or deliberate behavior” to mislead or deceive.  In recent CAFC caselaw only a few cases had evidence, apart from materiality, that would prove “conscious or deliberate” misconduct.  Moreover, it’s expensive to discover this evidence.   No express burden is set out for proving “intent” to “mislead or deceive the examiner,” but again, “Circumstantial evidence may be used” to prove intent.

The bill does not expressly allocate the issues are those for a jury or for a judge to decide, but apparently, the jury could decide all the issues, and leave to the court to “balance the equities to determine which” remedy to impose.  Moving the ‘balancing’ away from the evaluation of materiality and intent, and over to the selection of remedy is an excellent reform.  The present “sliding scale” applied to materiality and intent is hopelessly vague, maleable, and effectively unreviewable.

In addition to the former examiner full-employment provision, the bill includes another aspect to grow domestic service industries.  It enables the USPTO to require by regulation that applicants “submit a search report.”  That prior art search “must be performed by …individuals who are United States citizens or by a commercial entity that …employs United States citizens to perform such searches.”

The bill is a good start to reforming and standardizing these litigated issues.

Reforms That Codify, Promote Progress, and are Useful.

A lot of ink went for naught in analysis of the Leahy-Hatch 2007 patent reform bill.  Now though, a House version has moved to the floor for vote.  Patent litigators should favor Sections 10 and 11 in the “Amendment in the Nature of a Substitute to H.R. 1908” put forth by Hon. Messrs. Berman, Smith, Conyers and Coble.

Section 10 permits, but does not grant a right to, an interlocutory appeal of claim construction rulings.  The Leahy bill stayed the case upon the filing of these appeals.  The Berman bill grants the district judge “discretion whether to approve” the appeal request, and “if so, to stay proceedings” during the interlocutory appeal.  This revision, IMO, accords control properly to the district judges, rather than forcing an appeal and a stay after every Markman ruling.  Too often, patent reform proposals try to divest the district judges of control, and push everything back to the patent office or up to the CAFC.

Section 11 in the Berman bill adds back in a provision on inequitable conduct that I have been pushing for since 2004. (note to link below).  It codifies the essential aspects of the defense, rather than leave it all to any one court’s efforts to divine all that represents CAFC panels’ decisions on materiality, intent, balancing, and exceptions thereto.  The Leahy bill had no provision on inequitable conduct. 

The Berman bill codifies that the defense (1) must be pleaded with particularity, and (2) proven by clear and convincing evidence.  It defines the two elements of proof, a “material” omission or submission, and intent to deceive.  Materiality is that which a “reasonable patent examiner would consider important in deciding whether to allow” the application.  That excludes technical omissions like an inventor’s address or mistakes about small entity status.  Information that is “cumulative to information already in the record” is outside the definition of material information. 

One excellent aspect of the intent definition is that the proof must be evidence “beyond materiality of the information” omitted or submitted.  This prevents the defense from collapsing into the one issue of materiality.  Further, the proofs must evince “conscious or deliberate behavior” and that keeps a negligence case from being twisted into an intentional wrong.  These definitions, by the lack of mention, hopefully take away the “balancing” test created by the CAFC, along with the “discretion” to invalidate aspect.  The Berman bill recognizes that patents related to one “found enforceable …may also be held to be unenforceable.”  Again, this puts the proper authority with a district court, which “may” extend the determination of unenforceability to related applications.  Other proposals were wide of the mark, either limiting unenforceability to only one or more claims, or requiring that all patents in the family be deemed unenforceable.

It had been hoped that a patent reform bill would “define the contours” of the defense, and provide a “blueprint for district judges” so that inequitable conduct was handled uniformly by our courts.   That hope for codification, as expressed in my comments at an FTC Town Hall (link below, at pgs. 102 – 105), never got much traction until this amended H.R. 1908.  Finally.

http://www.aipla.org/Content/ContentGroups/Meetings_and_Events1/Roadshows
/20058/TownMeeting_Chicago_Transcript.pdf

If I Were A Patent Reformer, I’d…

For several years running, Congress and industry groups have floated proposals for reforming the 1952 Patent Act.  Each round of proposals is followed with a round of commentaries and critiques.  The “ills” of the system, a blight of “bad patents,” the Federal Circuit panels run “amok,” worrisome “trolls,” deadweight on the American “engine” of innovation, and a host of colorful metaphors populate the hue and cry about patents and patent reform.  Ideas for reform are gleaned from foreign practice, from litigation and licensing statistics, from academia and bureaucracia, and from inventors large and small.  The problems and the proposals conflate and dissociate, or become arcs that lead and trail the circular arguments around them.

Crafting reforms that are comprehensive – not interstitial or amendatory; that are purposeful – not self-serving to one, but not all groups; and, that can re-define the landscape may require taking apart what is liked and adding back more of what is disliked.  It may require making old problems into new solutions.  So, here goes.

Outsourcing.  I hate how work once done by the patent office now is done by outside contractors.  Look at a patent docket on PAIR, and so many entries indicate time passing as papers are passed from the USPTO to contractors and back.  Some propose to eliminate outsourcing, and appropriate more money for the patent office.  Instead of that retreat to the past, or to toss more dough on the problem, my first proposal is increase outsourcing and reduce the number of examiners who are government employees.  Replace that with grant money, awarded to groups at universities and institutes, who will assess patentability, once the USPTO determines a filed application is “complete.” Who could provide a greater level of specific knowledge within a pertinent art, and speak to the level of skill, the novelty and obviousness inquiries – an examiner, three years out of college and acting alone, or dedicated groups of grad students and Ph.D’s at Stanford, Princeton, or a major state university?  Nolo contendre.  Government grant money funds all sorts of significant research and development, why not grant money for patentability studies.  Those groups will be incentivized to operate with a high level of acumen, and to keep their program under grant.  Government-employed examiners just work for that check and to add that line to their resume.

Patent Term Adjustments.  Delays in patent examination always have been a gripe.  A year or more for a first office action, then if you amend six to nine months for a second action, and if you don’t amend then possibly a year or more to appeal a final rejection.  The last reform, by statute, adds on time for certain delays in the examination process.  If anything, granting such extensions arguably put an imprimatur on delays, and did nothing to speed things along.  Again, more money for examiners was the age-old suggestion.  My second proposal is shorter patent terms, at the inventor’s option, at less cost and for faster examination.  The invention may have a short shelf life, and so, getting a patent faster but for a shorter term of exclusivity may be attractive to some applicants.  Shorter terms put more inventions into the public domain faster too.  If my invention improves a method or product, today, then doubtlessly, a further improvement will be developed within a few years.  Final action and issuance after one year, with exclusivity for four years, would protect and keep pace with five-year technologies.

Maintenance Fees.  Once there was a rationale for maintenance fees, but now those are just patent taxes.  On another tact, can anyone have a real affection for “paper patents.”  Proposal #3 is to make patent protection more like trademark protection – you lose your patent rights unless your invention continues being used in interstate commerce.  After five years, the patentee must file an affidavit of substantial use in IC, or the patent is extinguished.  Maintenance fees would become due with an affidavit similar to Section 8.  You would pay once, after half the term of the patent, and that fee keeps the patent in force for the remainder of the full term.  That fee would not be small, and the actual use requirement would be substantial.

Inequitable conduct.  This defense can be a blight on honestly-obtained patents, but is a needed deterrent against `gaming’ the examination process.  Proposal #4 is to legislate standards for district courts to deal with the defense.  A statute of limitations on the defense would give repose to patentees, and a limitations period would dovetail nicely with a post-grant opposition procedure.  Next, impose a heightened pleading requirement on allegations of inequitable conduct, and enable district courts to strike the defense unless the uncited art is proven material early on, and to require that intent cannot be pleaded “upon information and belief.” 

Patentable subject matter.  Perhaps a good starting point for reforming the Patent Act would be to delineate what is patentable subject matter, and for those areas, e.g., business methods or tax avoidance schemes, the statute would set out what specifically might be, and what may not be patented.

That’s enough of being King for A Day.  I have to get back to prosecuting and litigating patents with the practices that date back to 1952, or earlier.

BAH –> patents!

It’s perhaps is an indictment of our schools when commentators seize upon random bits of numerical measure, and from that, fashion points and corollary conclusions.  A recent Booz Allen + Hamilton report concludes that more R&D spending does not “necessarily create more valuable innovations” and that the “important innovations don’t involve new patents.”  From the scatter of statistical seeds from which those observations sprang, BA+H erects a rule (set out in bold type) that “Patents generally don’t drive profits (em. del.).” 
Casting aside the devilish details and courtesanal caveats of BA+H, the bold type conclusion of the BA+H report has been seized upon by many of the patent-haters in our blawgoshere to prop up their anti-patent agenda.  A good example is my favorite patent-hater, Mike over at techdirt.com (which really is a fine tech news site).  The last patent that Mike liked probably issued in the late forties (indeed, Mike recently denigrated how few patented inventions came out of Edison’s lab).
So, I read the BA+H Patents report.  My technical training makes it hard to accept any hypothesis based on “no statistical relationship between” factoid A and numeroid B.  Wrapping my mind around separate points, HAVING a statistical relation, is more intellectually engrossing.  When BA+H posits that “we found no statistical relationship between financial performance and either patents counts or patent quality,” my sense is that nothing was proven or even connoted by that missing statistical link.  Would a panel accept for scholarly publication a study based on the lack of relation between two data sets?
At a minimum, the analysis behind the BA+H Patents proposition needs replacement data with statistical relation, data normalized within industry groups, or its premise tossed since it lacks relevant, statistically probative data.Still, once I’d wrapped my mind about the spring inside the BA+H Patents timepiece, to recast the data was an intellectual necessity.  Here’s some wheat germs gleaned from exhibit 10b in the BA+H Patents report.  Taking the premise that more [R&D $] makes more [patents] but not “necessarily” more [moola, jack, gelt, ka-ching, G’s], then focusing on the contrary data, one asks: does spending less on R&D, mean less patents, profits, etc.  Consider only the @20 listed “High-Leverage Innovators” which spent less than @2% of their sales on R&D.  Of these, Conoco spent 0.1% of its sales on R&D, but has over 900 patents (not including those of Phillips).  ExxonMobil’s R&D was 0.2% of sales, and the combined companies hold over 12,500 patents.  Are these petrochemists innovators; do they make tons of money?  Ecolab, which makes cleaning and sanitizing chemicals, applied 1.5% of its sales to R&D, and holds almost 650 patents.  Again, innovator; financially successful?  Indeed, do any of the 92 companies on exhibit 10b hold no patents, need no patents, profit not from their patents?  Read what BA+H says about SanDisk’s profits.
Overall, the surficial points glossed off the BA+H Patents data were that some industries, e.g., medical, spend a larger portion of their sales revenues on R&D, and that companies in the Far East spend a larger percentage than do those in the U.S.  These two points suggest (a) that certain industries that enjoy higher margins, protected by patents, consider greater R&D expenditures necessary and worthwhile, and (b) that the U.S. could fall behind other global economies that rely on IP and R&D budgets to acheive their high profitability.
Those stats are relevant and related.  The notion in the BA+H report that patents play an insignificant role relies on the lack of a “statistical relationship.”
Overall, the surficial points glossed off the BA+H Patents data were that some industries, e.g., medical, spend a larger portion of their sales revenues on R&D, and that companies in the Far East spend a larger percentage than do those in the U.S.  These two points suggest (a) that certain industries that enjoy higher margins, protected by patents, consider greater R&D expenditures necessary and worthwhile, and (b) that the U.S. could fall behind other global economies that rely on IP and R&D budgets to acheive their high profitability.Those stats are relevant and related.  The notion in the BA+H report that patents play an insignificant role relies on the lack of a “statistical relationship.”Overall, the surficial points glossed off the BA+H Patents data were that some industries, e.g., medical, spend a larger portion of their sales revenues on R&D, and that companies in the Far East spend a larger percentage than do those in the U.S.  These two points suggest (a) that certain industries that enjoy higher margins, protected by patents, consider greater R&D expenditures necessary and worthwhile, and (b) that the U.S. could fall behind other global economies that rely on IP and R&D budgets to acheive their high profitability.Those stats are relevant and related.  The notion in the BA+H report that patents play an insignificant role relies on the lack of a “statistical relationship.”

Overall, the surficial points glossed off the BA+H Patents data were that some industries, e.g., medical, spend a larger portion of their sales revenues on R&D, and that companies in the Far East spend a larger percentage than do those in the U.S.  These two points suggest (a) that certain industries that enjoy higher margins, protected by patents, consider greater R&D expenditures necessary and worthwhile, and (b) that the U.S. could fall behind other global economies that rely on IP and R&D budgets to acheive their high profitability.Those stats are relevant and related.  The notion in the BA+H report that patents play an insignificant role relies on the lack of a “statistical relationship.”

A Proper Starting Point for Reforming The Inequitable Conduct Defense.

The Leahy-Hatch bill, The Patent Reform Act of 2006, appropriately keeps the issue of patent enforceability in the courts. A string of failed legislative proposals had suggested adminstrative tribunals. The current bill achieves the threshold point of grounding the inequitable conduct defense in the patent statute. That essentially empowers district courts, and serves to minimize uncertainties about the contours of the defense that arise when courts grapple with the caselaw on inequitable conduct.

Before the issue can be pleaded, a court must have determined that the patent is “not invalid in whole and ..infringed.” The statutory test incorporates the well-known elements of “material” or “false” information, and “intent to deceive or mislead” the PTO. Also set out are indicia of “good faith” that can defeat a charge of inequitable conduct. Consistent with precedent, “clear and convincing” proof is needed before a patent can be deemed unenforceable.

The varied approaches in prior bills range from elimination of the defense, to eliminating it from the courts and creating ‘star chamber’ panels at the Patent Office. These ideas were fostered by the NAS and FTC reports, which I have advocated against when working with professional organizations, commenting to Congressional panels, and at the 2005 “town hall” meetings. The best approach would conform the defense to the better caselaw principles and the best case managment practices, and doing that, would cut away the aspects that have been shown to be abused, or to cause delays, and excessive costs.

It would help if the bill’s sponsors had a better proofreader. It now provides that unenforceability can be found “only if the patent owner {sic} presents clear and convincing evidence” of inequitable conduct. No “patent owner” ever would prove that against its own patent.

The bill puts the issue where it needs to be, in the statute, and in the federal district courts.