Senate Commerce, Science and Transportation Committee Chairman Sen. John D. Rockefeller, IV (D-WV) has indicated that he plans for his committee to vote today on the confirmation of Gov. Gary Locke (D-WA) for Secretary of Commerce. Presumably, the committee will recommend confirmation, with a full Senate vote to follow shortly. Once Gov. Locke is confirmed, Pres. Obama can move on to nominating a new PTO Director.
Archive for March, 2009
Patent Reform Debate Has a Sense of Deja Vu
March 19, 2009
The debate on patent reform seems to be a rerun of the debate in the previous Congress. Will there be a different outcome this time? Only time will tell.
The latest development in the debate is the introduction of a competing Senate bill (S. 610) by Sen. Jon Kyl (R-AZ). BNA (subscription service) is reporting that Sen. Kyl’s bill is identical to the bill he proposed last September in the wake of the failure of the other patent reform bill then pending in the Senate.
S. 610 differs from the earlier introduced bills (S. 515 and H.R. 1260) in several respects. First, S. 610 does not seek to codify the Federal Circuit’s In re Seagate decision regarding inequitable conduct. It does, however, seek to toughen the standard for proving inequitable conduct. Second, S. 610 does not contain the controversial provision of providing for interlocutory appeals on claim construction, a provision the Federal Circuit seems opposed to.
S. 610 retains the “applicant quality submission” language that has been removed from S. 515 and H.R. 1260. Instead of requiring applicants to perform searches and submit the closest prior art with analysis with respect to the claims, S. 610 provides that the PTO may “offer incentives to applicants” to submit such search reports. In light of recent PTO activities, this is an extremely dangerous provision.
S. 610 also shares several provisions in common with S. 515 and H.R. 1260. These include the limitation on venue selection for infringement suits, a change to a first to file system (which will likely never happen under the current wording in the bills), and a new post-grant review procedure. In addition, S. 610 retains the controversial “second window” for such reviews that has been deleted from S. 515 and H.R. 1260. The “second window” provides for post-grant review proceedings to be brought by any entity that has been charged with infringement of the patent. Unlike the post-grant proceeding that immediately follows a patent’s issuance, the “second window” proceeding could be brought any time during the life of the patent.
Like H.R. 1260, it does not seek to repeal the Baldwin Rule that
requires Federal Circuit judges to live within 50 miles of Washington,
D.C.
Sen. Kyl’s bill, not coincidentally, was introduced on the eve of the mark-up session for S. 515. Although it’s good to see that there will be alternative proposals and debate on the issues, simply repeating the steps of the previous Congresses doesn’t seem like the most efficient way to achieve any type of agreement.
Lawmakers Request Additional Time to Debate Patent Reform
March 16, 2009According to BNA (subscription service), seven Senators and five House members have sent letters to members of each chambers’ Judiciary Committee chairman, requesting that they slow down action on the patent reform bills that were recently introduced in each chamber. This follows Sen. Specter’s letter to the Senate committee’s chairman, Sen. Leahy, shortly after the bills introduction, requesting the same thing. The congressmen seek to ensure that all interested parties are heard on the issues.
Judiciary Committee members Sens. Tom Coburn (R-OK), Russell D. Feingold (D-WI), Jon L. Kyl (R-AZ), Ron Wyden (D-OR), Chuck Grassley (R-IA), Christopher S. Bond (R-MO), and Sam Brownback (R-KS) sent the most recent letter to Sen. Leahy, which joined with Sen. Specter’s letter makes eight of the eighteen members of the committee that have asked for a slow down in considering the legislation. The senators repeated Sen. Specter’s point of waiting until the Obama Administration appoints a new PTO Director to determine the administration’s view of the bill. They also cited a lack of consensus on a number of issues, including damages, in the last congress.
The senators’ letter called for the committee not to rush in considering the legislation, but to take a more careful examination of the damages provisions. “We simply request a bit more time and collaboration so that the committee can make sure it gets this important legislation right, and improve its chances for enactment,” the senators’ letter concluded.
Meanwhile, five Republican members of the House Judiciary Committee, Reps. Louie Gohmert (R-TX), Jim Jordan (R-OH), Steve King (R-IA), Trent Franks (R-AZ), and Ted Poe (R-TX), have sent a letter to its chairman, John Conyers, Jr. (D-MI), calling for additional hearings on the House version of the bill. They noted that the bill is similar to the same bill that passed the House last year by a mere 23 votes. Each of the signatories to the letter voted against the bill last year.
Sen. Leahy seems to be ignoring the chorus, however, as he has already scheduled a markup session for the Senate bill on March 19. It appears that he plans to move quickly on the new bill.
Although both sides are calling patent reform a non-partisan issue, it appears to be shaping up to be a partisan fight with Democrats generally favoring the reform bills and Republicans generally opposed. This doesn’t bode well for opponents, since Democrats control both houses of Congress and the White House.
Senate Patent Reform Hearing Focuses on Damages
March 11, 2009The Senate held its first hearing on the new patent reform bill yesterday. As expected, the action took place mostly on the controversial damages apportionment provisions. The Judiciary Committee provided a webcast of the hearing. BNA (subscription service) provides a summary of the hearing.
It seems that on the issues of venue, post-grant review, and inequitable conduct there will probably be room for the sides to reach a compromise. On the damages issue, agreement seems much more difficult. Sen. Patrick Leahy (D-VT) seemed confident that compromise could be reached, but Sen. Arlen Specter (R-PA) referred to prior failures to reach agreement and Sen. Diane Feinstein (D-CA) expressed frustration over past failed attempts. Sen. Specter asked the six witnesses to give the panel standards for determining damages that could be used to reach compromise on the issue.
Witnesses
Steven R. Appleton, chairman and CEO of Micron Technology, Inc., suggested that damage calculations be based on “value actually contributed” by the invention, while Philip S. Johnson, chief intellectual property counsel of Johnson & Johnson, suggested using the entirety of the invention, but looking at the contribution of the invention versus the closest non-infringing alternative. Sen. Specter summarized this as “value added.” When questioned by Sen. Orrin Hatch (R-UT), Johnson said the problem with valuation and an “essential features” inquiry is that the court needs to go beyond what the PTO determined when it issued the patent. The judge and juries must do a “prior art subtraction” which will result in the value of the patent being something smaller than what the PTO issued.
Professor Mark Lemley of Stanford Law School argued that the entire market value provisions for reasonable royalty in the bill that are available “upon a showing to the satisfaction of the court that the claimed invention’s specific contribution over the prior art is the predominant basis for market demand” should be eliminated. He argued that this type of provision would lead to abuses of the system by patent owners.
David J. Kappos, assistant general counsel for intellectual property law and strategy at IBM Corp., argued that the bill should include provisions related to the “essential features” of the invention to determine damages. He cited the Supreme Court’s opinion in Quanta Mechanics v. LG Electronics, a case having nothing to do with damage apportionment, relating instead to patent exhaustion. He and Johnson had strong disagreement on whether the “essential features” inquiry is an appropriate one with respect to damages calculation.
Herbert C. Wamsley, executive director of the Intellectual Property Owners Association which represents constituents on both sides of the issue, could not come up with a good standard when pressed by Sen. Specter. He argued that “there is no magic phrase” and that to get a standard requires an inquiry as to what the invention actually is. He admitted that there does not seem to be a way to reach compromise on the damages issue.
Sen. Feinstein expressed further frustration over trying to reach a compromise. She suggested that perhaps the judge needs to play more of a gatekeeper role when determining which of the Georgia Pacific factors used to calculate a reasonable royalty are presented to the jury for determination. While there was general agreement on this principle, several of the witnesses were cautious.
Johnson wanted to be certain that the court could only instruct the jury on factors for which there was “substantial evidence,” a standard that is generally applied for issues to be determined by juries. Prof. Lemley continued to argue for the apportionment principle in addition to the court’s role as gatekeeper.
Some of the disagreement on the panel on the damages issue seems to line up along party lines. Sen. Feinstein may be on to something along the lines of a potential compromise. It seems that it will be difficult to reach consensus.
Federal Circuit Issues Expansive Reading of Bilski
March 11, 2009Last week, the Federal Circuit decided In re Ferguson. The application at issue included both method claims and “paradigm” claims.
Claim 1, a representative method claim, states:
A method of marketing a product, comprising:
developing a shared marketing force, said shared marketing force including at least marketing channels, which enable marketing a number of related products;
using said shared marketing force to market a plurality of different products that are made by a plurality of different autonomous producing company, so that different autonomous companies, having different ownerships, respectively produce said related products;
obtaining a share of total profits from each of said plurality of different autonomous producing companies in return for said using; and
obtaining an exclusive right to market each of said plurality of products in return for said using.
Claim 24, a representative “paradigm” claim, states:
A paradigm for marketing software, comprising:
a marketing company that markets software from a plurality of different independent and autonomous software companies, and carries out and pays for operations associated with marketing of software for all of said different independent and autonomous software companies, in return for a contingent share of a total income stream from marketing of the software from all of said software companies, while allowing all of said software companies to retain their autonomy.
After Bilski, this would seem to be an easy case. The method claims are clearly not tied to a machine, nor do they transform matter from one state to another.
The court had no more difficulty with the paradigm claims. The applicant argued that the company is a physical thing, analogous to a machine. The court used a “touching” test to determine that, since the company could not be touched, it was not a machine. Therefore, the paradigm claims are merely directed to an abstract idea and are also not patentable.
Concurrence
What makes this case somewhat interesting is Judge Newman’s concurrence. She argues that the court gave an extremely expansive reading of Bilski by essentially holding that anything that does not meet Bilski‘s machine-or-transformation test is an abstract idea. She argues that Ferguson’s methods are instead “definite and concrete and limited, and not at all abstract.”
Perhaps more interesting, Judge Newman’s opinion is a concurrence and not a dissent. She would sustain the examiner’s rejection of the claims as being obvious under § 103 and therefore still not patentable.
This sounds a lot like AIPLA’s amicus brief to the Supreme Court in Bilski, and what others have been saying even earlier. In particular, many of the problems with these types of problems can be handled under the other requirements for patentability and do not invoke statutory subject matter questions. See, e.g., Kristen Osenga, Ants, Elephant Guns, and Statutory Subject Matter, 39 ARIZONA STATE LAW JOURNAL 1087 (Winter 2007). Full disclosure: Prof. Osenga is my wife.
Entire Federal Circuit to Decide if 271(f) Applies to Method Claims
March 11, 2009The Federal Circuit has granted a petition for rehearing en banc in Cardiac Pacemakers, Inc. v. St. Jude Medical, Inc. to decide the question:
Does 35 U.S.C. § 271(f) apply to method claims, as well as product claims?
Section 271(f) states as follows:
(1) Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.
(2) Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.
Thus, the question to be decided in this case is whether the export of subject matter to be used in a patented process could constitute a “component” for infringement purposes within the meaning of § 271(f).
St. Jude argues that the Supreme Court decision in Microsoft Corp. v. AT&T Corp. (2007) requires the Federal Circuit to hold that § 271(f) only applies to apparatus claims and not to process claims. The original panel decision in Cardiac Pacemakers declined to do so, holding that it was bound by earlier Federal Circuit precedent and that Microsoft expressly left open the question of whether § 271(f) applies to method claims.
In 2005, the Federal Circuit held that § 271(f) does apply to method claims in Union Carbide v. Shell Oil Co. In that case, however, at least three judges dissented from the court’s denial to rehear the case en banc. This dissent, plus the intervening Supreme Court decision in Microsoft, would seem to signal that the court is ready to overturn Union Carbide and hold the § 271(f) does not apply to method claims.
Cardiac Pacemakers is a complex case that has involved many patents and has been litigated for many years. The case has been up and down to the Federal Circuit on various issues at least four times. Along the way, various issues and claims have arisen and been dropped.
One lesson to learn from the case is that patents should include a number of different claims of varying scope to encompass various theories of infringement and various infringers. If appropriate, patents should include both apparatus and method claims.
The court has invited amicus briefs in this case. Argument before the entire court will be held on June 1.
Update: Deferred Examination
March 11, 2009The PTO has extended the comment period for deferred examination until May 29. Presumably, this will give sufficient time for a new PTO director to be nominated.
Specter Urges Leahy to Delay Action on Patent Reform Bill
March 6, 2009
As noted earlier this week, the House and Senate have introduced new patent reform bills for the 111th Congress. Sen. Arlen Specter (R-PA), ranking member of the Senate Judiciary Committee, sent a letter to the Chair of the committee, Sen. Patrick Leahy (D-VT), urging him to delay action on the newly introduced patent reform bill.
Sen. Specter asked that action on the bill be delayed until late May to allow the Federal Circuit to hear oral arguments in Lucent Technologies, Inc. v. Gateway, Inc., No. 2008-1485. Although the court has not yet scheduled argument in this case, it would appear that Sen. Specter believes they will take place during the week of May 4. This revelation is a bit odd given that the court guards the secrecy of its argument schedule until it is released to the public.
The Lucent case concerns the controversial damage apportionment provisions of the patent reform bill. A jury in the Southern District of California awarded Lucent $385 million in damages based on Microsoft”s infringing sale of its Microsoft Money, Microsoft Outlook, and Windows Mobile programs. Microsoft argues on appeal that the jury inappropriately applied the entire market value rule to the products in its damage award. An earlier verdict in the case had awarded Lucent $1.5 billion, but this verdict was set aside by the district court judge.
Sen. Specter believes the arguments in the case will be helpful for the debate on patent reform related to damages.
This issue was very contentious as we worked on the bill last year, and I believe that oral argument has the potential to facilitate a compromise or clarify the applicability of damages theories in various contexts.
Sen. Specter notes that another important consideration is that the Obama administration has not yet nominated a new director of the PTO.
This person will have a significant role in implementing any patent reform legislation and we could benefit from hearing the views of the future Director before we send a bill to the floor.
The letter appears to be a good sign that Sen. Specter is not giving up the fight against reducing the value of patents.
Amicus Briefs Filed in Support of Bilski
March 6, 2009As an update on Bilski’s petition for certioriari, Patently-O has collected the amicus briefs that have been filed in support of the petitioner Bilski. The PTO has been granted an extension of time until April 1 to file its brief in opposition. At that time, amicus briefs supporting the PTO will also be due.
Of note is the brief in support of the petition filed by the American Intellectual Property Law Association (AIPLA). AIPLA argues that the Federal Circuit’s machine-or-transformation test is not required by any Supreme Court precedent. Indeed, several cases explicitly hold that the machine-or-transformation test is not required to determine eligible subject matter. AIPLA also argues that the Federal Circuit test is too rigid (a common theme of late when attacking Federal Circuit decisions) and will hamper innovation. Finally, AIPLA argues that overly broad patents should be dealt with by other provisions of the Patent Act, namely § § 102, 103, and 112. Any changes to patentable subject matter should be left to Congress and not dictated by the Federal Circuit.
A decision on the petition should come by the end of the current term of the Court in June. If the Court agrees to hear the case, it will be during the October 2009 term with a decision coming by the end of that term in June 2010.
Patent Reform Bills Introduced
March 4, 2009Sens. Patrick Leahy (D-VT) and Orrin Hatch (R-UT) and Reps. John Conyers (D-MI) and Lamar Smith (R-TX) introduced patent reform bills to Congress. The bills are similar to the one that passed the House last year, but failed to make it to the Senate floor for a vote. BNA (subscription service) provides some details on the bills. Text of the Senate bill and the House bill are here.
What’s in the Bills?
The bills continue to include the controversial provisions regarding apportionment of damages for patent infringement. Apportionment would limit damages to what can be shown in the invention that contributed to the demand over the prior art. This would be a significant hurdle.
Other provisions in the current bills that were retained from the prior bill would significantly change patent practice. The US would change from a first-to-invent regime to a first-to-file regime. This would eliminate interference practice.
As noted by patent commentator, Hal Wegner, this provision of the House bill would only take effect once the “major patenting authorities” of the world adopt the one year grace period that currently exists under US law. This means that the first-to-file provision won’t take effect until Europe and Japan scrap their absolute novelty regimes and switch to the US system where the inventor may publicly disclose or offer to sell his invention up to one year prior to filing a patent application. Guess what? That’s never going to happen.
The bills have a number of other provisions as well. They seek to codify the Federal Circuit’s decision regarding willful infringement, In re Seagate Technologies. The new bills adopt a post-grant procedure that would expand the current inter partes reexamination practice and allow challenges to patents within 12 months of their issuance. Forum shopping would be restricted by the venue provisions. Mandatory interlocutory appeals would be permitted for claim construction. This is to address the high reversal rate at the Federal Circuit on this issue. Finally, the bill would eliminate the “Baldwin Rule” which requires that Federal Circuit judges live within 50 miles of Washington, D.C. The purpose of this change is to attract a larger pool of potential judges.
What’s Not in the Bills?
The bills do not address inequitable conduct, but Sens. Hatch and Leahy recognize that some language addressing this issue will be added to the bills.
Several other controversial proposals that were in the previous bills are not in the new bills. These include the requirement that applicants perform a prior art search and submit a search report and analysis. The PTO had been pushing strongly for this provision. The prior bills also would have eliminated the opt out provision for publication of the application 18 months after filing. Currently, applicants that attest that they will not be filing outside the US can request their applications not be published. The prior bills contained a subject matter exclusion for tax planning methods. This exclusion is not present in the new bills.
Reaction
As expected, the software industry and related tech companies praised the bills, as they did the previous versions. The Coalition for Patent Fairness voiced enthusiasm for the bill. Michael Holston of Hewlett Packard said the bill would allow his company to focus more on innovation instead of responding to frivolous lawsuits. Robert Holleyman of the Business Software Alliance and D. Bruce Sewell of Intel Corp. characterized the current patent system as “outmoded” saying that we can’t afford to wait to pass the legislation.
Patently-O posted a guest post by Michele Lee, Head of Patents and Patent Strategy at Google, strongly supporting reform.
On the other side of the debate, Jim Greenwood, president of the Biotechnology Industry Organization, released a statement saying that his group supports patent reform, but remains concerned about many of the proposed changes. Senior Vice President Ken Johnson of the Pharmaceutical Research and Manufacturers of America similarly noted that the bills do not address the concerns of his group, pointing specifically to the damages provisions that would weaken patents.
The Innovation Alliance and the Manufacturing Alliance on Patent Reform also expressed concern over the damages provisions in the bills. Representatives from Corning, Dolby Labs., and Monsanto likewise decried the proposed changes to the damages provisions. Stan Fendley of Corning was disappointed that this provision is in the new bills after an entire year of debate on the issue. Monsanto also criticized the post-grant opposition proposals saying that patent owners would now be harassed on a piece-meal basis.
Similarly, critics have noted that even after extensive debate in the last Congress, the bills remain largely unchanged from the prior versions.
Will Patent Reform Make it Through Congress This Time?
One answer is that it is too early to tell. Several major changes have occured since the prior bill was debated. One is the new administration. The Obama administration seems to be more amenable to patent reform than the Bush administration was. The Bush administration was generally critical of the bills in Congress last year. The Obama administration hasn’t completely shown its hand yet, but the discussion of patent reform did make it into Obama’s campaign materials on technology, where he called for “gold-plated” patents.
The other major change is that the economy has continued to tank further. Both sides will argue that their position will help, or at least not further hurt, the economy. Pro-reformers argue that frivolous litigation and high damage awards cost their companies jobs and keep them from focusing on litigation. Those opposed to the changes argue that they will reduce the value of patents, which are the new life-blood of our economy. Reducing the value of patents will cause companies to reduce jobs and not focus as much on innovation.
Stay tuned to see who wins the debate.
