Hopefully, this will be on the agenda for a new PTO Director.
Archive for February, 2009
This blog has been following the circuitous trail of President Obama’s attempt to nominate a new Secretary of Commerce, the cabinet post that oversees the PTO: here, here, and here. Well, after the failed nominations of New Mexico Governor Bill Richardson and New Hampshire Senator Judd Gregg, the AP is reporting that President Obama will turn to former Washington Governor Gary Locke.
Gov. Locke served two terms as governor of Washington from 1997-2005, but declined to run for a third term. He embraced the Republican no-new-taxes approach to the 2001 economic crisis, focusing instead on spending cuts. He was considered a rising star in the Democratic party as he gave their response to President Bush’s 2003 State of the Union Address.
Gov. Locke was briefly linked to a fund-raising scandal related to Bill Clinton’s 1996 re-election campaign. After being deposed, the House committee investigating the matter cleared him of any wrongdoing.
Gov. Locke’s record on intellectual property matters is a bit sparse. Since leaving office, he has been a partner in the Seattle office of the law firm Davis Wright Tremaine working on issues related to China. Should his nomination win Senate confirmation, this would clear the way for President Obama to nominate a new Director of the PTO.
On Feb. 11-12, the Federal Trade Commission conducted the latest in a series of hearing on patents and patent reform. At this hearing, there was particular emphasis on patent damage awards and the availability of injunctions after eBay. BNA (subscription service) has reported on the proceedings at the hearing.
Professor Paul Janicke of the University of Houston Law Center presented statistics collected by his organization . Since 2005, 2,700 patent infringement suits have been filed. Only 5% of that number were actually tried to a verdict, with another 8% resolved by summary judgment (often of non-infringement). Over 86% of the cases filed during this time-frame were settled by the parties prior to the district court rendering a verdict.
For cases that made it to trial, juries were more favorable to patentees. Juries granted verdicts for them in 79% of cases, while bench trials only resulted in verdicts for patentees 44% of the time. Overall, entities that practiced the patent were victorious 58% of the time, while non-practicing patent holders only prevailed in 42% of cases. These stats demonstrate why the use of juries in patent cases has been increasing in recent years.
The median damage awards for successful patentees (not including cases where the accused infringer wins) was $5-6 million. There was a slight increase in 2007, but overall the number has remained fairly flat in constant dollars. Based on these numbers, it seems that Congress is overreacting with the damage reduction legislation that has been part of the patent reform proposals in recent years.
There was discussion as to whether damage reform was needed. Several panelists were happy with the flexibility provided by the Georgia Pacific factors used to caculate a reasonable royalty. District judges need to exercise more of a gate-keeper role to guide juries in their calculation of damages. There have been several outlier damage awards that have been significantly higher than the average award, but the courts have usually reduced or eliminated those awards, either at the district court or the Federal Circuit. The current system seems to be working.
Some high awards may result from the plaintiff trying the case on willfulness, rather than on infringement in general. Juries may include a punitive portion in the damage award to compensate for this behavior. Delaware District Judge Sue Robinson recognizes this problem and so bifurcates trials between liability and damage phases.
The hearing also included discussion of injunctions after the Supreme Court’s eBay v. Merc Exchange case. A survey of 49 rulings on injunctions indicated a number of factors that have been used to determine whether an injunction was appropriate. Factors that weighed very heavily included:
• When the relevant patent related to a new or developing market,• When the absence of an injunction was likely to drive down prices in the marketplace,• When the patentee had at some point explicitly refused to grant a license to the infringer,• When there was risk of harm to the patentee’s reputation,• When compliance with the injunction was easy,• When there were inexpensive alternatives to practicing the patent available to the infringer,• When the patentee would otherwise be denied a critical opportunity to develop the product or market relevant to the patent,• When the patent constituted a trivial component of the infringing article,• When the patentee had at some point explicitly offered the infringer a license, and• When the patent was critical to the patentee’s sole or critical product.
• When the injunction would have a significant impact on the adjudged infringer’s business,• When the injunction would interfere with the “core” of the infringer’s business,• When the infringer’s customers tended to be “loyal” or “sticky,” that is, reluctant to switch over in the case of an injunction,• When the patentee had licensed the patent to other parties, and• When the injunction would have a small impact on the infringer’s sales.
BNA (subscription service) is reporting that there was a lot of support for deferred examination at the PTO Roundtable held last week, while the opposition was fairly equivocal.
In my previous post, I laid out many of the arguments for and against deferred examination. Much of the discussion at the PTO Roundtable dealt with the details of such a procedure. Discussion included issues such as how long examination could be deferred, how much less the filing fee would be without the examination request, whether competitors could get intervening rights, whether deferred applications would be published after 18 months, whether competitors could request examination, and how deferral would affect a patent’s term. All of these details would need to be worked out prior to implementation of a deferred examination system.
Among the comments from participants, Alan W. Hammond of Life Technologies Inc., Rockville, Md., estimated his company would drop 20-25 percent of its applications if deferred examination were adopted. There was some discussion whether the uncertainty of competitors’ patents would reduce R&D, while others countered that permitting applications to be dropped would spur R&D in other areas.
Lawyer groups, such as IPO and AIPLA, remain opposed to deferred examination, but the tide seems to be turning. Their opposition was milder than previously and AIPLA in particular suggested it could reconsider the issue.
Other discussion questioned whether deferred examination could result in a reduction in PTO revenue. Others countered that most companies have a fixed IP budget and may actually file more patent applications with the knowledge that a certain percentage of them would not be pursued.
Acting PTO Director John Doll noted that patent filings are down about 1% so far in fiscal year 2009, which is 6% below the PTO’s budget. Participants expected the number to decrease further as the economic situation worsens.
Participants also discussed whether deferred examination should be considered by itself or as part of a larger patent reform project to meet the goal of decreasing patent pendency to 18 months. Some groups opposed to deferred examination may reconsider their opposition if this goal could be met.
Finally, the question arose whether this change could be implemented by PTO rulemaking or would require legislative action. Rulemaking is generally easier, but if this system were considered apart from other more controversial reform proposals, it may get through Congress without a lot of trouble.
Opposition to deferred examination seems to be waning. The main holdup now seems to be the details of what such a system would look like. While no change is ever supported unanimously, if the details noted above can be worked out satisfactorily, deferred examination will be a part of the US patent system in the near future.
Stephen Nipper of The Invent Blog® and Matt Buchanan of Promote the Progress® are reporting that the PTO is considering another administrative rule change that should be highly popular with the patent bar and inventors.
Both are reporting on a rumor, alluded to during the PTO Roundtable Discussion last week, that the PTO plans a significant increase to the fee for a Request for Continued Examination (RCE). The current fee of $810 permits applicants to request that the PTO permit another round of examination of an application that has been finally rejected by the examiner. The Invent Blog® is reporting that the fee may be increased to FOUR TIMES that amount. The goal, of course, is to discourage such filings.
Applicants who face an examiner who is reluctant to allow an application during the initial round of examination have few other options than to file an RCE. One option is to file a petition to challenge the finality of the Office Action, while another option is to file a continuing application. The only other option for the applicant is to appeal the rejection to the Board of Patent Appeals and Interferences (BPAI).
There is no doubt that an increase in the fee to file an RCE would dramatically increase the number of petitions, continuations, and appeals filed. Every time the PTO screws around with examination rules (limiting continuations, proposing appeal brief rule changes), the number of appeals increases dramatically. If they keep this up, half of all patent applications will require an appeal to the BPAI before the patent issues.
Back to the drawing board again for Obama.
Sen. Gregg has withdrawn from the nomination to be the next Secretary of Commerce. Gregg has cited irresolvable policy differences with the Obama administration. Specifically, Sen. Gregg cited the stimulus plan and the 2010 census as areas where he and the administration could not agree.
A new PTO director will not be nominated until after a new Secretary of Commerce is confirmed by the Senate. This means another delay in changes in leadership and potential improvements in the patent system.
Stay tuned . . .
The Manufacturers Alliance on Patent Policy (MAPP), which last month published a study that showed that Patent Reform Legislation on Damages May Hurt Patents and the Economy, wrote a letter to President Obama yesterday urging him to oppose patent reform legislation such as that introduced in the 110th Congress.
MAPP is a group of 130 manufacturing companies that includes Dow Corning, DuPont, Monsanto, PepsiCo, and Texas Instruments. While the companies represent diverse product lines, the group does not include pharmaceutical companies.
In the letter to President Obama, MAPP argues that patent reform legislation that passed the House of Representatives in 2007 would be harmful to competitiveness, investment, and employment in the manufacturing sector by weakening patent protection.
The letter seeks to rebut a number of perceived justifications for patent reform. First, MAPP argues that there has not been an explosion in patent litigation. In 1993, 1.45% of granted patents were litigated, while in 2007 lawsuits were filed on 1.48% of granted patents. There has also not been a substantial increase in damage awards. Adjusted for inflation, the median patent damage award was $3.9 million from 1995-2000 and $3.8 million from 2001-2007.
The letter notes that there has been an increase in the number of patent applications filed in recent years. MAPP argues that this is a good thing as it demonstrates increased innovation. Reform is needed at the PTO to help them deal with the growing number of applications, rather than a weakening of patent protection for issued patents.
Next, MAPP focuses on the top priority in the legislation for patent reformers proposed in the 110th Congress: reduction of damages for patent infringement. Patent reformers have been portraying infringers as innocent victims who get stuck with huge damage awards. In reality, damages are only awarded when a court has found a patent valid and unlawfully used by the infringer. MAPP also challenges the premise that damage awards are excessive, arguing instead that they are exactly as they should be, for the purpose of deterring infringement and reimbursing patent holders for loss of property. Excessive awards are handled by existing law.
The letter notes that the courts have been very busy making changes to patent law that limit the power of patents. The effects of many of these changes are not yet known. Making further changes to limit patents would tilt the balance too far in favor of infringers at this time.
Next, MAPP addresses another another justification for patent reform: poor patent quality. MAPP argues that this is no justification for reforming the post-grant patent system; instead, reform is needed at the PTO. The PTO problems include granting bad patents and a pendency that is too long. Many other entities have made proposals for improving the PTO. MAPP urges Congress to work with these groups to implement their suggestions.
As I noted yesterday, it seems that it will be difficult to reach a consensus on patent reform among the various constiuencies. It may simply come down to which group has the best lobbyists and the loudest voice.
Sen. Patrick Leahy (D-VT), chairman of the Senate Judiciary Committee, plans to reintroduce a patent reform bill in the near future. In a speech yesterday at Georgetown University, Sen. Leahy set forth his legislative agenda for the new Congress. Among other things, he addressed his plans for patent reform.
Sen. Leahy’s previous attempt was passed by the House of Representatives, but never made it to the Senate floor. The senator stated that “[the new bill] will be similar, it will be quite similar in some areas” to the previous bill. He blamed the failure of the Senate to take up the bill on the presidential election. Others, however, might blame it on some of the bill’s controversial provisions, such as its aim to reduce infringement damages. Sen. Arlen Specter (R-PA), ranking member of the Judiciary Committee, found the issue of how to assess damages to be a sticking point to passing the legislation. He never seemed quite able to reach agreement with Leahy on the issue.
The topic of patent reform has often pitted big technology companies, such as the members of the so-called Coalition for Patent Fairness, including Apple, Cisco, Dell, Google, and Microsoft, against large pharmaceutical companies, such as Eli Lilly and Monsanto. Other groups opposing the past attempts at reform include trade unions, the Bush administration, smaller companies and individual inventors, and patent attorneys.
It may be difficult to craft a bill that pleases all of the parties. No compromise has been reached the last few years. Perhaps the change in the administration and the new congressional makeup will make it easier to pass. But, Congress certainly has its hands full with other issues at the moment.
The Federal Circuit has provided a statistical update on its caseload through the end of the 2008 fiscal year. Here’s a brief rundown.
There were 392 appeals in patent infringement cases from district courts, down only slightly from 2007, but at the lowest level since 2001. Of those, 268 (65%) were decided by the court on the merits, with the remainder either settled, mediated, dismissed, or disposed of in another manner. The court issued 152 (57%) precedential decisions, 80 non-precedential decisions (30%), and 36 summary orders (13%). There were also 54 patent appeals from the PTO, of which 22 (41%) were adjudicated on the merits.
For all cases, the Federal Circuit had a 13% reversal rate, with another 13% of cases reversed-in-part. In appeals from district courts, 19% were reversed, and another 24% were reversed-in-part. This means that 43% of the district court cases appealed to the Federal Circuit are sent back to the district court to reconsider at least some part of the case. By contrast, the court didn’t issue a complete reversal of any PTO appeal during the fiscal year.
On a positive note, the court is disposing of appeals at the fastest rate of any year in the last ten. District court appeals are taking an average of 11.0 months from docketing to disposition, while appeals from the PTO (which include trademark appeals) are taking an average of 8.9 months from docketing to disposition.
The World Intellectual Property Organization (WIPO) recently announced a slowdown in the rate of increase of filings under the Patent Cooperation Treaty (PCT), so-called international patent applications. WIPO is the organization that oversees PCT filings. The PCT provides a clearinghouse for filing patent applications internationally prior to filing them in individual countries.
While the number of PCT applications filed in 2008 increased by 2.4% , this is a far smaller increase than the average growth rate of 9.3% over the previous three years. Applications of inventors from the US, which typically file about a third of PCT applications world-wide, actually decreased by about 1% in 2008 compared to 2007. By contrast, filings from inventors in the Republic of Korea (+12.0%), China (+11.9%), and Sweden (+12.5%) showed significant increases.
Of the top 100 companies with the most PCT filings in 2008, 38 were US companies, 28 were from Japan, and 13 from Germany. No US companies were in the top 10; Qualcomm, the US company with the most PCT filings in 2008, was 11th. In fact, four of the top five US applicant companies saw a decrease in the number of filings.
Medical technology, computer technology, and pharmaceuticals were the largest industry sectors for applications in 2008. Management and micro-structures and nanotechnology were the areas that saw the largest increase in applications.
It will be interesting to see if the economic slowdown similarly causes fewer applications to be filed in the US.