Archive for April, 2009

House Judiciary Committee Takes Up Patent Reform

April 30, 2009

The House of Representatives Judiciary Committee will hold its first hearing on the House version of the Patent Reform bill, H.R. 1260, this morning at 10:00.  Witnesses scheduled to testify at the hearing include:

  • David Simon, chief patent counsel for Intel, Inc.
  • Phillip Johnson, chief intellectual property counsel for Johnson & Johnson
  • John Thomas, professor at Georgetown Law School
  • Jack Lasersohn, general partner at Vertical Group
  • Dean Kamen, inventor and founder of DEKA Research and Development, Inc.
  • Mark Chandler, senior vice president at Cisco
  • Bernard Cassidy, senior vice president and general counsel at Tessera, Inc.

You will recall that Phillip Johnson also testified at the Senate Judiciary Committee hearing on Patent Reform.

Patent Docs notes that the witness list is rather imbalanced.  Mr. Johnson is the only representative from a life sciences company, the Coalition for Patent Fairness, a strong proponent of patent reform, has two witnesses in Messrs. Simon and Chandler.

Will the House push for stronger damages limitations similar to those passed in the 110th Congress or will the House follow the Senate Judiciary Committee’s lead and seek to pass a compromise bill?  Stay tuned . . .

Tafas v. Doll Request for Extension of Time

April 24, 2009

IPWatchdog is reporting that Tafas and Glaxo have filed a joint motion to extend the time to file a petition for panel rehearing or a petition for rehearing en banc.  According to the motion, the government is considering whether to request rehearing of the panel’s decision that the continuation rules are invalid because they conflict with § 120 and government lawyer’s need more time to consider the issues.  Tafas and Glaxo also acknowledge that they too may file a request for rehearing of the issues that they lost.

Any such petitions are currently due May 4 and the motion requests an extension until June 3.  Such motions are granted on a fairly routine basis, especially when the reasoning is that the government needs the additional time.

Gene Quinn of IPWatchdog seems to believe that an en banc petition will be granted by the Federal Circuit; he believes the case will not return to the district court.  I tend to disagree.  I believe the original panel decision to be bad law in that it grants the PTO a large amount of rule-making authority that it did not have previously:  virtually any rule can be argued to be procedural, rather than substantive.  While I would like to see en banc review to undo the panel opinion, I just don’t see it happening at this time.

As I noted earlier:

The case is certainly of sufficient importance to warrant further review by the entire court.  Given the posture of the case, however, with so many unresolved issues that need to be decided by the district court, the case may not be ripe for such review at this time.  The court may also not wish to expend additional judicial resources on the case given that we do not know whether a new PTO Director would support these rules.  I believe en banc review to be doubtful at this time.  Unfortunately, that means that Judge Prost’s opinion will continue to haunt us into the future on other issues.

My position seems to be the minority position.  I hope that I’m wrong; the Federal Circuit has certainly surprised me before.  Perhaps if a new PTO director is around when the court is considering any petitions, it may help to determine what the court will do with it.

What Should You Do If You Have a New Idea or Invention?

April 21, 2009

The following is adapted from my firm’s website.  It was written by another patent attorney at the firm, James T. Beran, and myself.

Who Has Rights in the Invention?

If you have a new idea or invention, you may need to determine who else may have rights in the invention, such as a co-inventor or employer.  For example, as an employee, if you develop a new idea or invention, you may need to discuss it with your employer to determine how best to proceed.  In general, employees retain ownership of their inventions that they invent unless there is an agreement with the employer to assign the invention to the employer, or if the employee was hired to invent.  Even if the employee retains ownership of the invention, the employer may have certain “shop rights” in the invention that may permit the employer to practice the invention.

If you determine that you, or you and a co-inventor, have rights in an invention, you may want to determine whether to apply for a patent.  Anyone who is a co-inventor of an invention claimed in a patent application has an undivided right to the invention.  Each co-inventor has the right to license, assign, sell, or transfer his or her rights in the invention, without permission of the other co-inventors.

Should You Apply for a Patent?

One approach that can be used to determine how to proceed, that is, to determine whether to apply for a patent, is as follows:

If you have a new idea or if you have ownership rights in a new idea, the first thing you may wish to do is to try to determine whether it would be best protected by a patent or by another type of intellectual property protection.  If you believe the idea would be best protected by a patent, you should document and record any evidence of inventive activities, as these could become important when prosecuting the patent application.

Next, you may want to determine whether your idea is sufficiently developed to pursue patent protection at this time.  While it is not necessary to have made a model or prototype to obtain a patent, a patent application must include sufficient description and drawings of the invention to permit someone skilled in the art to which the invention pertains to make and use the invention.  If you have not yet determined these details, the invention may not yet be ready for patent protection.

The next step that you may wish to take is to determine whether filing a patent application is warranted and develop a business plan.  Is there a market for the invention?  Will you be able to sell or license the invention, or manufacture the product?  Will it be easy to detect infringement?  Does the investment justify the cost?

Before proceeding further, you may want to do any Internet search to determine the closest products that might affect the novelty or obviousness of the invention and also to determine who might be competitors.  This can be done initially using a search engine and also on a website that includes patents, such as http://www.uspto.gov/.  This search may help determine whether applying for a patent is warranted.  Many patents have been issued for products that never made it to the marketplace.  You may have never seen anything like your new invention, but there may be a patent that describes it.  This initial search does not substitute for a search performed by a professional search company, but it is a good start.

You should then bring any search results and a brief description, as well as any drawings or models to a meeting with a patent attorney.  You should also provide any information that may be a statutory bar and any evidence of inventive activities.  The attorney can help advise you further on whether to file a patent application and prepare one for you should you decide to do so.

Clearance Searches & Opinions

Once you’ve developed a new product or invention, another consideration is whether anybody else has a patent that covers the product or invention that they can enforce against you.  Before undertaking significant investment in filing a patent application or in bringing the product to market, it may be prudent to perform a patent clearance search, sometimes called a “freedom to operate” search.  Otherwise, it may be that you receive a cease and desist letter or are sued for infringement after these investments have already been made and you could be on the hook for infringement damages and/or be prevented from using your invention.  At the very least, you may have to defend an expensive patent infringement lawsuit.

A patent attorney can assist you by having a search performed for a third party’s patents that may pose a risk of infringement for your product or invention.  If there are patents that are close or that may pose a problem, the attorney can work with you to design around the patent or you may abandon the idea and try something else before making significant investment.

What should you do if you have received a letter from a third party that threatens you with a patent infringement suit or asks you to license a patent?  Again, the advice of a patent attorney is invaluable here.  Simply ignoring the letter could potentially lead to your having to pay triple damages to the patentee in an infringement suit and being faced with an injunction.  The patent attorney can help you to decide an appropriate response and potentially give you a non-infringement opinion or an opinion that the patent is invalid.  The opinion could be used as a defense to a charge of willful infringement that may require a payment of triple damages.

District Court Applies Bilski Even More Broadly

April 14, 2009

In an opinion last month, Judge Marilyn Patel of the Northern District of California entered summary judgment of invalidity against two claims of U.S. Patent No. 6,029,154, Cybersource Corp. v. Retail Decisions, Inc., (No. C 04-03268).  The court, applying the Federal Circuit’s opinion in Bilski, held claims 2 and 3 invalid for failure to claim patentable subject matter.

Claim 3 was directed to a method claim for verifying the validity of a credit card transaction over the Internet:

3. A method for verifying the validity of a credit card transaction over the Internet comprising the steps of:
a) obtaining information about other transactions that have utilized an Internet address that is identified with the credit card transaction;
b) constructing a map of credit card numbers based upon the other transactions and;
c) utilizing the map of credit card numbers to determine if the credit card transaction is valid.

Claim 2 was a Beauregard-type claim directed to a computer readable medium containing program instructions for detecting fraud in a credit card transaction:

2. A computer readable medium containing program instructions for detecting fraud in a credit card transaction between a consumer and a merchant over the Internet, wherein execution of the program instructions by one or more processors of a computer system causes the one or more processors to carry out the steps of:
a) obtaining credit card information relating to transactions from the consumer; and
b) verifying the credit card information based upon values of plurality of parameters, in combination with information that identifies the consumer, and that may provide an indication whether the credit card transaction is fraudulent,
wherein each value among the plurality of parameters is weighted in the verifying step according to an importance, as determined by the merchant, of that value to the credit card transaction, so as to provide the merchant with a quantifiable indication of whether the credit card transaction is fraudulent,
wherein execution of the program instructions by one or more processors of a computer system causes the one or more processors to carry out the further steps of;
obtaining information about other transactions that have utilized an Internet address that is identified with the credit card transaction; constructing a map of credit card numbers based upon the other transactions; and utilizing the map of credit card numbers to determine if the credit card transaction is valid.

Method Claim

Regarding the method claim, the plaintiff argued that the methods met Bilski‘s transformation requirement by manipulating both credit card numbers and IP addresses.  The court, however, disagreed, holding that “the claimed methods simply obtain and compare intangible data pertinent to business risks.”  The court reasoned that “transformation” requires a fundamental change, while “manipulation” does not.  Although credit cards and credit card numbers may be manipulated, they are not transformed.  The court further held that credit card numbers are not physical objects; Bilski requires a transformation of an “‘article’–i.e., any physical object or substance, or an electronic signal representative of any physical object or substance.”  The court also rejected the IP address argument, holding that the IP addresses are not transformed or manipulated in the claim.

The plaintiff also argued that the method meets the machine prong of Bilski‘s test because it is performed over the Internet, a series of general and special purpose computers, routers, hubs, switches, and other specialized hardware.  The court held that the Internet is not “a particular machine” as required by Bilski.  Because the Internet is not essential to the claimed method, the court characterized its inclusion as “insignificant extra-solution activity.”  Thus, method claim 3 was held invalid as failing to meet either prong of the test set forth in Bilski.

Beauregard Claim

The plaintiff in the case argued that Bilski‘s machine-or-transformation test should not apply to claim 2 because it is not a method claim, but rather a Beauregard claim.  Beauregard claims are directed to computer-readable media that contain computer programs for performing patented methods.  As such, they are not considered methods, but rather tangible items such as computer disks, tapes, hard drives, or the like.

The court reviewed the Federal Circuit’s opinion In re Beauregard that created such claims and other cases that cite to it.  The court noted that there is actually no decision on the merits in Beauregard.  Instead, the PTO simply dropped the appeal and agreed with the patent applicant that such claims were patentable.  Thus, Beauregard is not binding precedent.

Like Auntie Mame’s Uncle Beauregard, the footing of the so-called Beauregard doctrine is anything but sure.

Because claim 2 refers to a process implemented through “unspecified program instructions,” Beauregard would not even save the claim in this case.  The court cited the Board of Patent Appeals decision Ex Parte Cornea-Hasegan from earlier this year to support this part of its opinion.

Conclusion

The court concluded its opinion with several interesting quotations:

In analyzing Bilski, one is led to ponder whether the end has arrived for business method patents . . .

Although the majority declined to say so explicitly, Bilski‘s holding suggests a perilous future for most business method patents.

The closing bell may be ringing for business method patents, and their patentees may find they have become bagholders (shareholders left holding worthless stocks).

A reading of the Cybersource court’s opinion does indeed lead one to believe that business method patents are in peril.  The court does provide a bit of hope for such methods, but their value will be much less than previously supposed.  The court noted that the computer programs and methods were “unspecified” and “intangible”.  One option that may still be available to patent applicants would be to include a great deal more detail regarding various implementations of business methods and programs implementing such methods.  This detail could be added to the claims to help meet the machine-or-transformation test.  Of course, more detailed claims leave clever infringers more ways to avoid them.

Update on Patent Filing Numbers

April 13, 2009

Patently-O has a great post on the current numbers from the PTO.

Original patent application filings are down about 10% for the current fiscal year, while continuation filings are down about 20%.  Continuation filings were particularly high in early FY2008 in anticipation of the new PTO rules that would limit continuation filings in the future.

The post is also interesting in that it tracks the PTO statistics on continuation and RCE filings.  The PTO tracks Requests for Continued Examination (RCEs) as new application filings.  Thus far in FY2009, 27.6% of patent application filings have been RCEs.  This is up from 24.1% last year and 10-11% in FY2000-2002 (these numbers also include other forms of re-filing an application such as CPAs).  Perhaps these numbers account for the rumored increase in the RCE filing fee.

The reasons for these numbers are not exactly clear, but one can certainly speculate.  The economic downturn, the recent court decisions limiting patent rights, and the prospect of patent reform constitute a few reasons for the reduction in filings.  The increase in RCE filings probably result from the decreased allowance rate, among other reasons.

Senate Judiciary Committee Passes Patent Reform Bill

April 2, 2009

The Senate Judiciary Committee passed the Patent Reform bill today by a vote of 15-4.  Sen. Orrin Hatch (R-UT), one of the bill’s co-sponsors, voted against the bill.  He was upset with the lack of provisions limiting inequitable conduct.

Sen. Jon Kyl (R-AZ) introduced an amendment that would raise the standard for art that will trigger a post-grant opposition.  His amendment was defeated.  He noted that he had other amendments he would like to introduce, but it seemed futile at this juncture.  Chairman Sen. Patrick Leahy (D-VT) was clearly in a hurry to get the bill passed by the committee.

Patent Reform opponents, such as the pharmaceutical and biotechnology sector, seem to be in favor of the revised bill.  On the pro-patent reform side, the Coalition for Patent Fairness issued a statement calling the bill a step forward.  It is clear that they are hoping for a stronger bill from the House, particularly on the issue of damages.

The bill now moves to the full Senate where there is certain to be additional debate and potentially more changes.

IP Watchdog has details on today’s hearing.

Update: Text of Patent Reform Bill

April 1, 2009

Patent Commentator Hal Wegner has provided the text of the proposed amendment that will be introduced to the Senate Judiciary Committee tomorrow.

Senate Judiciary Committee Close to Agreement on Patent Reform

April 1, 2009

Sens. Patrick Leahy (D-VT), Arlen Specter (R-PA), and Dianne Feinstein (D-CA) announced yesterday that they “are closer than ever to final agreement” on patent reform initiatives.  The language of the proposed agreement is still being drafted, but they plan another hearing for Thursday.  They specifically announced the following:

1.  On the contentious damages issue, they have stricken the provisions from the bill related to apportionment of damages.  Instead, they seek to give the trial judge a gate-keeping role to determine the evidence that may be presented on the issue of damages.  In other respects, the reasonable royalty calculation would follow existing case law.

2.  The “best mode” requirement of patents will be maintained, but omitting the best mode will no longer be a basis for invalidating a patent (then what’s the point of the requirement?).

3.  Interlocutory appeals of claim construction opinions will require “additional findings by the district court.”

4.  The willfulness standard of In re Seagate will be codified.

5.  Venue selection for infringement cases will be reformed to follow the Federal Circuit’s “convenience of the parties” standard enunciated in In re TS Tech USA Corp.

6.  The standard for the PTO to conduct a post-grant review of an issued patent was changed from the current reexamination standard of “a substantial question” of patentability to “an interesting question” of patentability.  Presumably, this is a lower standard.  My experience is that the PTO already grants the vast majority of reexamination requests.  The new standard will mean that nearly all requests for post-grant review will be granted.

7.  Reexamination or post-grant review will not be allowed for issues other than prior art.  An earlier proposal had suggested that such reviews could be granted for prior sale or public use.

8.  The Bayh-Dole Act would be amended to increase the amount of royalties that universities and other non-profits can keep from patents, even after they’ve received government funding for the invention.

9.  The ability of patent examiners to telework would be expanded.

Sen. Specter suggested that he wanted to hear from any and all interested parties at the Thursday hearing to resolve any objections.

Sen. Kyl’s Views

Sen. Jon Kyl (R-AZ), who had earlier introduced his own patent reform bill, expressed a dissenting view on the situation.  He expressed support for the proposed changes to the damages calculations, but he opposed the anticipated changes in post-grant review, interlocutory appeals, and willfulness, and complained generally that the reform contained “almost nothing to enhance the rights of patent owners and improve the system.”

He argued that the PTO should have been a party to the patent reform negotiations.  By leaving them out, it is unknown whether the PTO may be able to successfully implement some of the changes, such as the post-grant review.  This could actually make the patent system worse.

Sen. Kyl further argued that the reform does nothing to address the problems with the patent system that exist within the PTO.  Without doing anything to help them address the backlog and patent quality issues, there will not be significant changes to the system.  Congress is unlikely to address patent reform again in the near future once this round of reform is successfully completed.

Reaction

I tend to agree with Sen. Kyl that if these provisions are actually adopted, the changes to the patent system will not be as significant as previously thought.  In my mind, this isn’t necessarily a bad thing.  It will be interesting to see if any of the interested parties have significant problems with these provisions at the next committee hearing on the bill.

IP Watchdog has a good summary of the issues as well.  He notes that the onerous post-grant provisions being thrust on the PTO may accelerate the passage of additional rules packages that create additional significant burdens on applicants.  Otherwise, the PTO may simply be overwhelmed by the number of post-grant requests and find that it has an even greater backlog than it currently has.

Perhaps the committee decided there was no way to reach agreement on how to reform the PTO and they wanted to pass something, given the recent failures at passing PTO reform.


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