Category Archives: Patents – Legislation

Interlocutory Is Interlocutory – Patent Reform Can’t Reform That.

At the recent Senate Judiciary hearing, the Coalition for Patent Fairness offered remarks supporting the “Patent Reform Act of 2007” through the testimony of the General Counsel of Palm.  Specifically, they “support interlocutory appeal to the [CAFC] from Markman rulings.”

Palm’s General Counsel (who is not listed on the USPTO Roster of attorneys) related a case history, which may or may not reflect a need for interlocutory appeals of Markman rulings.  A disputed claim term was construed, “favorably to Palm,” and the company was granted summary judgment.  That “claim construction was reversed” by the Federal Circuit, and remanded.  The “second Markman hearing” as to the claim term was decided “again to Palm’s advantage” and was “sustained on the second appeal” to the CAFC.   How is that any different, in timing, costs or outcome, than the contemplated interlocutory appeal of a Markman ruling?

Palm’s example, and the proposed interlocutory appeal, involve two appeals.  The cost the time from filing a complaint to final judgment, and the tasks necessary to reach that point, seem to be the same in the Palm example and if there were interlocutory, Markman appeals.  The difference is that, there would be two appeals in every patent case.  The Palm example involved two appeals only because the first Markman ruling was dispositive, presumably of non-infringement.  In other words, dispositive Markman rulings get appealed now, and promptly; the proposed reform would add non-dispositive Markman claim construction rulings to the appeal docket.

The threshold question is whether an interlocutory ruling is worth much.  An interlocutory order “is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties.”  FRCvP 54(b).  At a ‘first’ Markman hearing, the judge MAY construe the then-disputed claim terms, or only some of terms may then be construed.  The construction MAY be tentative, and expressly, the Judge’s order may state it is subject to revision later.  So, is that appealable?  What if there are subsequent Markman rulings, are each one appealable?  Will it be necessary to wait until after all the infringement contentions, and all of the validity challenges are flesh-out before the Court is ready to interpret the claims – knowing that an interlocutory appeal will follow?  Let that be decided by the reformers, and their lobbyists, and the reform coalitions or consorts.

With that ‘first’ Markman ruling made and appealed, the matter will be remanded.  If error was found, the a ‘second’ Markman will be needed (perhaps a 2nd interlocutory appeal, too?).  Central to evaluating the worth of these interlocutory appeals is the jurisprudence on interlocutory orders.  Only notions of stare decisis or the law of the case suggest that an interlocutory ruling will remain unchanged.  All that has to happen is more prior art to be presented, or perhaps supplemental expert reports, or a change in the law governing claim construction, and any interlocutory order might be changed based on ‘changed circumstances.”

Interlocutory appeals of Markman rulings may sound like a fix, but claim constructions that are dispositive get appealed now.  If claim construction is not dispositive, then does it make sense to stop the litigation of the dispositive issues, while the CAFC reviews the non-dispositive claim construction issues?  Even if they reject what the district court has done, on remand, a second, non-dispositive claim construction ruling will be the result.  How many mini-trials does it take to make one whole?

Post-Grant Opposition, Post-KSR.

My lunchtime reading was recent testimony to the Senate Committee on “The Future of American Innovation” (was that proposed as the name for a ride at Tomorrowland; no, that was “House of the Future”).  Having not spent my formative years inside the D.C. Beltway, it is an unknown whether legislative committees (like litigants) only call witnesses expected to provide helpful testimony; or is the approach more random.

Random choice resulted in a print-out of testimony from the Chief IP Counsel at Goldman, Sachs, appearing also for SIFMA, AB(ankers)A, and FSR.  Concern was expressed over “a system out of balance” and “in need of substantial reform.”  The organizations refused to be cast on either side of the reform debate, and noted was their willingness to finance innovators large and small.  No less testimony though was devoted to their status as patentholders, as well as potential defendants (scions vs. trolls, oh my!).  The guiding metaphor was “balance,” as in a see-saw needing to be “rebalanced.”  The fear was the see-saw now is “overweight” with notions based in the Industrial Revolution, and underweight on “value drivers of the knowledge economy” (those may include drivers in play at golf courses near Palo Alto).

The primary point was the represented financiers support for the post-grant opposition procedures in S. 1145.  No longer will patentees have to wait for an infringement to defend or to lose their patent, it could be immediate.  The testimony referred to untapped, and yet-unexamined “troves of prior art,” and how to “improve patent quality” with a “balanced mechanism for firms to inject prior art” into post-grant oppositions.  That injection would enjoy the added feature, not available in Court, that “the challenger need only prove invalidity under the more equitable [to whom?] preponderance of evidence standard [and] without the [pesky] presumption of validity.”

So, let us take up an example, using USP 6,975,996 assigned to Goldman Sachs for “Electronic Subpoena Service.” The `996 tries to solve the “lack of coordination amongst [gov’t] agencies conducting investigations” of financial institutions.  The claimed “computer-implemented” method receives the subpoena, associates it with a recipient, picks a method of delivery over communication networks, transmits it, and tracks responses to the subpoena.  Novel, useful, non-obvious – let the phosita decide.  The `996 lists 125+ prior art patent documents, and over 30+ lines of “other” art – ALL of which was examined under the pre-KSR standard for non-obviousness.  Indeed, a final rejection, based on anticipation and obviousness, issued against the application.  But, there it is today.

Consider this, the `996 issues post-KSR, and post-grant oppositions are permitted – how much might it cost Goldman Sachs to defend the invention, again and against those previously-considered 125+ patents, plus against an ‘injection’ from the “troves of prior art” in the files of the opposers, and when only a preponderance and no presumption are in play?  It likely will cost the patentee a lot, or about the amount of money that Goldman Sachs makes every 14 or 15 minutes.

Is our patent system constrained within “an ‘Industrial Revolution-era’ view of the world”?  Preaching pejoratives against the I. Revolution, and arguing for radical changes to protect the E. Revolution is a dicey proposition.  But, as the politicos best understand the quote from one denizen of Dogpatch: ‘if’n you ain’t fer it, yur agin it.’  Patent reform, priceless.

Lending the Seal and Robe to The Pursuit of Fair Patent Reform.

A post on patently-o remarked about Chief Judge Michel’s efforts in providing comment and analysis to legislators considering reforms to the Patent Act.  It linked to a June letter from “Chambers” of the “Chief Judge” which criticizes a proposed revision on damages apportionment, and it closes with an offer to explain his “May letter to the Chairman”.  Since the letter is fairly pointed, it provoked inquiry into the appropriateness or limits on a sitting Judge communicating views, as a Judge, on pending legislation.  As with so many ethical issues, there are canons, comments and considerations, but then, few answers.

The general rule, applied to our federal judiciary, is permissive:

“A judge may … consult with, an executive or legislative body or official on matters concerning the law, the legal system, and the administration of justice to the extent that it would generally be perceived that a judge’s judicial experience provides special expertise in the area.”  Canon 4 (same text adopted in Delaware).

Even under that permissive version, this Canon of the “Code provides very limited circumstances under which a judge may consult with or participate in the other branches of government.”  Georgia Ethics Op. No. 233.

The version of Canon 4, in Ohio, New York and Arizona, negates the near-identical permissive statement, generally, subject to a pro se exception.

(C)(1) A judge shall not … consult with an executive or legislative body or official except on matters concerning the law, the legal system, or the administration of justice or except when acting pro se in a matter involving the judge or the judge’s interests.

The California version takes that further, and adds to the pro se exception:

(1) A judge shall not … officially consult with an executive or legislative body or public official except on matters concerning the law,* the legal system, or the administration of justice or in matters involving the judge’s private economic or personal interests.

The New Jersey version allows the Judge to “consult” but, only when the subject of the legislation is part of his judicial duties.

C. A judge may … otherwise consult with an executive or legislative body or official, but only on matters concerning the administration of justice with which the judge is charged with responsibility by the Rules of Court.

Some states place the issue under the broader topic of “extra-judicial” activities, and others slot it under the even-broader matter of “avoiding the appearance of impropriety.”

“A judge who spends a significant amount of time speaking out on legislative issues during the legislative session could be perceived as allowing those activities to interfere with the judge’s judicial duties, and could be seen as attempting to exploit the judge’s position.”  “A judge could not, for instance, … express an opinion on how a statute might be interpreted by the judge.”  Utah Ethics Advisory Committee Informal Opinion 01-1 (January 25, 2001).

Where then does this leave the question – should the Chief Judge lend his title to any particular legislative initiative?  IMO, it is troublesome.  So many commentators have divided the legislative proposals between those favored by one sector of the patenting community, or another.  To support one proposal nearly necessitates a disclaimer against the appearance that the Judge is aligned with one camp, and not the other.  To argue that text in a proposed statute has “shortcomings” and that it would result in “massive” expense, in “vastly more complicated” proceedings, and a “period of great uncertainly,” etc., may, or may not, be objective commentary from the Chief.

N.D. Texas Local Patent Rules – New, But In Conflict With KSR.

Effective May 1, 2007, patent cases in the Northern District of Texas are governed by Local Rules on initial disclosures, added points for case management, and claim construction resolution.  In many respects, these rules compare to those in the N.D. California, and other courts and other judges, such as in the S.D. Ohio.

Currency compelled taking note that the new rule on invalidity challenges requires the challenger’s initial disclosure to include preliminary contentions as to: “If a combination of items of prior art makes a claim obvious, each such combination, and the motivation to combine such items, must be identified.”  With the rigid requirement now relaxed, what simple edit might there be to this local rule?  Replace “motivation” with “common sense”?

Move Directly to Markman Review, do not pass go or collect $$.

The gateway toward patent reform legislation was narrowed in the Patent Reform Act of 2007, as described by Sen. Leahy in his statement summarizing the bills.  It eliminates the provision on inequitable conduct, which I’ve commented on in every forum open to me.  The 2007 version get down to the essential elements of “first-to-file” and “post-grant opposition,” which others have debated extensively.

The most interesting part of the new bill, IMO, was the provision granting jurisdiction to the Federal Circuit for interlocutory appeals of Markman rulings.  Whether the core problem is “patent quality” by the PTO or “activism” by the CAFC, the Markman rulings are where the rocket launches or aborts.  Interlocutory appeals should do as much to curtail the cost of patent litigation as anything proposed.

The provision, in the Senate bill, extends the “exclusive jurisdiction” of the Federal Circuit to appeals “from an interlocutory order or decree determining construction of claims in a civil action for patent infringement.”  Sec. 10(b).  This could expedite the litigants tasks in those districts, such as the N.D. Calif., where the Markman issues have to be part of initial disclosures, and rulings come earlier than in districts with no local patent rules.

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.