Patently-O Law Blog
State of Vermont v. MPHJ Technology (Fed. Cir. 2014)
MPHJ has become the poster-child for bad patent trolling behavior and has been the subject of unfair-trade-practice action in several states. The basic idea is that MPHJ has mailed out more than 15,000 demand letters to small businesses who use scan-to-email technology. The set of five patents have a 1997 priority date. See patent, No. 8,488,173.
Vermont’s attorney general Bill Sorrell has been active in pushing against patent trolls and MPHJ in particular. In May 2013, Vermont sued MPHJ in State Court alleging that the company was engaging in unfair and deceptive trade practices under Vermont law and that the letters “contained threatening, false, and misleading statements.”
Up to now, the case has been in civil-procedure limbo. A major issue to be decided in the state-enforcement actions is the extent that state powers are preempted by the federal patent laws. MPHJ believes that preemption is more likely to be found if the case is decided by a federal court rather than a state court. As such, the patentee removed the case from state court to federal court on grounds of diversity and federal question. However, the federal district court remanded the case back to state court. In its recent decision, the Federal Circuit has tacitly affirmed the remand – finding that it lacks appellate jurisdiction over any appeal. In particular, the Supreme Court has held that there may be no appeal of a Federal District Court’s decision to remand under 28 U.S.C. § 1447(d).
The Vermont State Court will now handle the case and determine the extent that MPHJ’s actions violate the law.
IP Journalist Joe Mullin has written on MPHJ in several posts at ArsTechnica.
I have updated my grant-rate chart from a prior post. For these figures, I obtained a set of 15,900 published patent applications and categorized each application according to its area of technology and also as either patented, abandoned, or still pending. The chart below shows both the grant rate (percentage of applications that have been patented) and also the still in-process rate (percentage of applications that are still in-process).
My sample of applications are a random set of published applications with filing years of 2004 through 2010. About 94% of these cases have been concluded (either patented or abandoned) and my original chart did not include the in-process numbers which, for most areas-of-technology are fairly minimal. However, on reflection, I went back and looked at these figures and found that they are important.
Notably, the eCommerce arts appear to have a low grant rate. However, a substantial percentage of applications in that area are still pending. It is almost certain that some of those still-pending applications will issue as patents and the final grant rate for the area will be higher than originally predicted.
In a letter last week to Secretary Pritzker (DOC), a group of five Democratic Senators have urged for administrative patent reforms to “prevent low-quality, vague patents from entering the market.” The group include Senators Jeff Merkley, Tom Udall, Martin Heinrich, Mark Begich and Mark Warner.
Although the letter does not provide direct policy plans, it does provide a set of guidance that should be well taken by the Patent Office:
(1) Take steps to incentivize examination quality over quantity.
(2) Direct Examiners to ensure that the patent file history is complete and resolves any ambiguities with clarified patent terms prior to issuance.
(3) Assess whether the PTO’s steps to “address functional claiming concerns . . . are sufficient to address concerns that functional claiming provides a loophole from definite, precise claims.”
(4) Expand crowdsourcing and public data analysis as a mechanism to identify problematic patents and categories of patents — then target those areas for more thorough examination.
(5) Ensure public access to information about patents and the file histories.
The suggestions by the Senators are all helpful and are directed to an area of patent law ripe for reform. Lets hope that the USPTO can take these suggestions and create sensible policy.
By Dennis Crouch
The chart below shows the grant rate of US patent applications grouped by technology center sub-groups (technology area). The numbers come from a random set of 10,000 published patent applications that were filed between 2003 and 2010. Later-filed applications cannot be readily used for this exercise because most of them are still pending. The grant rate is calculated simply by counting the percentage of applications that have as patents. The areas of technology are shown with a representative technology-center (or art unit). Overall the grant rate in this population was 60%. I have also added error-bars showing the 95% CI for each group.
By Dennis Crouch
In another seeming bombshell for the Patent Office, the Washington Post has published a 2012 internal USPTO memorandum on telework fraud. Lisa Rein from the post writes:
Some of the 8,300 patent examiners, about half of whom work from home full time, repeatedly lied about the hours they were putting in, and many were receiving bonuses for work they didn’t do. And when supervisors had evidence of fraud and asked to have the employee’s computer records pulled, they were rebuffed by top agency officials, ensuring that few cheaters were disciplined, investigators found.
Oversight of the telework program — and of examiners based at the Alexandria headquarters — was “completely ineffective,” investigators concluded.
Further, the report indicates that “USPTO management demonstrates reluctance to take decisive action when the misconduct is egregious and the evidence is compelling.” At the time, the USPTO was led by Director Kappos.
The original report was then substantially tamed-down (with the most damning elements removed) before it was provided to the DOC Office of the Inspector General. Based on the evidence found in the secret original document, the OIG has indicated that it will now launch a probe of the USPTO’s workforce quality control.
Production versus Hours: The facts here are disturbing. However, one underlying assumption of the report is that we should be looking to the hours-worked by examiners rather than focusing on whether the work is completed (i.e., production). Examiner production is closely monitored and measured on a bi-weekly basis and there is no sense in the industry that examiners can avoid those production quotas without major repercussions.
A request for input was published on July 29, and is available here. The summary states:
The Office of Science and Technology Policy and the National Economic Council request public comments to provide input into an upcoming update of the Strategy for American Innovation, which helps to guide the Administration’s efforts to promote lasting economic growth and competitiveness through policies that support transformative American innovation in products, processes, and services and spur new fundamental discoveries that in the long run lead to growing economic prosperity and rising living standards. These efforts include policies to promote critical components of the American innovation ecosystem, including scientific research and development (R&D), technical workforce, entrepreneurship, technology commercialization, advanced manufacturing, and others. The strategy also provides an important framework to channel these Federal investments in innovation capacity towards innovative activity for specific national priorities. The public input provided through this notice will inform the deliberations of the National Economic Council and the Office of Science and Technology Policy, which are together responsible for publishing an updated Strategy for American Innovation.
I created the chart above by collecting a large set of published patent applications (1.7 million applications) that were all published 2005-2011 (applications filed prior to 8/1/2009) and then looked to see how many inventors were listed on the application and whether the application had issued as a patent. I did not consider family-member applications.
By Dennis Crouch
Although the Patent Act provides for a 20-year patent term, that term can be extended in a few ways. The most common avenue is through Patent Term Adjustment that is automatically awarded to patentees if the USPTO fails to meet its guarantee of timely examination. As the backlog of pending cases grew, so has the average patent term adjustment. More recently, however, the USPTO has moved to reduce the backlog and average pendency – that result is that PTA has also been significantly reduced — for the first time in several years, the average PTA is below 1-year. The time series below shows the average PTA for all utility patents granted since January 2005. The jump in PTA seen in 2009 was due to a legal change in how the term is interpreted. The second chart shows the percentage of patents that are awarded PTA – that figure is also trending down, but is still a troubling 70%.
By Dennis Crouch
ScriptPro v. Innovation Associates (Fed. Cir. 2014)
Kansas district court Judge Carlos Murguia found ScriptPro’s patent claims invalid under 35 U.S.C. §112 for lacking written description. See U.S. Patent No. 6,910,601. That holding has been reversed by a unanimous Federal Circuit panel that included Judges Taranto (Author), Bryson, and Hughes.
Although the technology at issue here is largely mechanical (a pill collating machine), the case is akin to a genus-species debate and also relates closely to the ‘essential element‘ pseudo-doctrine of Gentry Gallery.
Here, all of the examples of the patented collating machine include a set of sensors used to determine whether a particular holding area is full. Further, the specification suggests that – even at its broadest – the invention includes the sensors: “[T]he present invention broadly includes . . . a plurality of sensors.” However, the claims do not include sensor limitations – with the result being that machines both with and without the sensors could be seen as infringing. Seeing that discrepancy between the specification and the claims, the district court ruled that the original written description does not show that the inventor possessed a collating machine that operated without the sensors and thus that the claims covering machines sans sensors fail the written description test. Judge Murguia wrote:
Based on the record before it, the court concludes that no reasonable jury could find that the inventors were in possession of a collating unit that operated without sensors. Innovation is therefore entitled to summary judgment on its claim of invalidity as to all challenged claims.
On appeal, the Federal Circuit has reversed – finding that summary judgment was improper.
It is common, and often permissible, for particular claims to pick out a subset of the full range of described features, omitting others. A specification can adequately communicate to a skilled artisan that the patentee invented not just the combination of all identified features but combinations of only some of those features (subcombinations)—which may achieve stated purposes even without omitted features.
. . . There is no sufficiently clear language in the specification that limits the invention to a collating unit with the (slotchecking) sensors. And considering what the specification does say, and what ScriptPro highlights as a central purpose of the claimed advance in technology [keeping track of open slots – a function that does not require the sensors], it cannot be said as a matter of law that claims 1, 2, 4, and 8 have a scope incommensurate with what is described as the invention. . . . The term “broadly” qualifies the assertion of inclusion [and] suggests that exceptions are allowed to the assertion of what occurs most (perhaps even almost all) of the time.
Readers will note that, while the court begins with a suggestion that written description requires that the patent document affirmatively convey invention of sub-combination, the actual approach looks more to whether the patent document affirmatively denies the subcombinations.
Here, the court thought it important – although not determinative – that the original application as filed included the non-sensor claims. Thus, this is not an example of an ex post attempt to expand scope that is most common in written description cases.
When a specification is ambiguous about which of several features are stand-alone inventions, the original claims can help resolve the ambiguity, though even original claims may be insufficient as descriptions or be insufficiently supported by the rest of the specification.
The notion is that original claims are part of the specification and thus relevant. However, they are also potentially inadequate (as we learned in Ariad and LizardTech).
Not a Summary Judgment Question: One lens for considering this case by recognizing that the failure of written description is a factual question to be decided by a jury. Although it may not ultimately win on the issue, the patentee presented a factual argument supported by expert testimony regarding what a person of skill in the art would have recognized based upon reading the specification. What the court here ruled is that that presentation of evidence by the patentee was sufficient to defeat the defendant’s summary judgment motion of invalidity. We may eventually see a jury verdict in this case — ~10 years after the lawsuit was originally filed.
The following guest post comes from USPTO Commissioner for Patents Peggy Focarino and is a re-publication of what Commissioner Focarino published on the USPTO Director’s Blog.
Today I would like to address our ongoing implementation of the June 19, 2014, unanimous Supreme Court decision in Alice Corporation Pty. Ltd. v. CLS Bank International, et al. (Alice Corp.). In the decision, the court held claims to a computerized scheme for mitigating settlement risk patent-ineligible because they are drawn to an abstract idea. I want to share with you the steps we’re taking to implement the decision.
First, on June 25th, we issued preliminary examination instructions to assist examiners when evaluating subject matter eligibility of claims involving abstract ideas, particularly computer-implemented abstract ideas, in view of Alice Corp.
Second, the USPTO has applications that were indicated as allowable prior to Alice Corp., but that have not yet issued as patents. Given our duty to issue patents in compliance with existing case law, we have taken steps to avoid granting patents on those applications containing patent ineligible claims in view of Alice Corp. To this end, our primary examiners and supervisory patent examiners (SPEs) promptly reviewed the small group of such applications that were most likely to be affected by the Alice Corp. ruling.
We withdrew notice of allowances for some of these applications due to the presence of at least one claim having an abstract idea and no more than a generic computer to perform generic computer functions. After withdrawal, the applications were returned to the originally assigned examiner for further prosecution. Over the past several days, our examiners have proactively notified those applicants whose applications were withdrawn. (Applicants who had already paid the issue fee for applications withdrawn from allowance may request a refund, a credit to a deposit account, or reapplication of the fee if the applications return to allowed status.)
This limited action was closely-tailored and taken specifically in reaction to the Alice Corp. decision. We do not anticipate further review of any applications indicated as allowable under this process, as examiners are currently following the Alice Corp. preliminary instructions during examination (i.e., prior to allowance).
Third, as we continue to study Alice Corp. in the context of existing and developing precedent, public feedback will assist us in formulating further guidance for our examiners. On June 30th, a Federal Register Notice was published to solicit written comments from the public on the preliminary examination instructions. The period for submitting those comments ended July 31, 2014. We appreciate the comments we have received to date. All input will be carefully considered as we work to develop further examination guidance, which we anticipate issuing this coming fall.
We look forward to working with our stakeholders in refining our examination guidance, and will continue to seek feedback as we implement changes as the laws evolve.
By Dennis Crouch
Over the past decade, I have repeatedly written about the serious backlog problem facing the USPTO’s Board of Patent Trials and Appeals (Formerly BPAI, now PTAB). In 2006, there were fewer than 1,000 pending ex parte appeals at any given time. That figure steadily and rapidly ballooned to a seeming high-point of over 25,000 pending ex parte appeals. The PTAB has taken several steps address the backlog. The most important of these is its efforts in hiring a host of new administrative patent judges to decide cases. Although not conclusive, it also appears that the Board has also taken streamlining steps such as discouraging dissents and reducing opinion size. Despite those efforts, the backlog remains over 25,000 with the result that appeals are unduly delayed for years. The chart below comes from the files of 95 recently decided ex parte appeals – the median ex parte appeal now takes more than 3-years to decide.
Bombshell Report: Administration inspectors general have increasingly been embarrassing the Obama administration. The USPTO is no exception to this trend. Todd Zinser, Inspector General of the Department of Commerce has released a new report titled: Waste and Mismanagement at the Patent Trial and Appeal Board. The inspector general report highlights the tremendous rise in the backlog, the PTO’s failure to adjust its workforce to focus on the concern, and, most damning, the “misuse of federal resources totaling more than $5 million.” The Inspector General writes:
Our investigation uncovered waste in the PTAB that persisted for more than four years (2009-13) and resulted in the misuse of federal resources totaling more than $5 million. The bulk of the wasted resources related to PTAB’s paralegals, who had insufficient workloads and considerable idle time during those years. Paralegals told the OIG that they engaged in a variety of personal activities including watching television; surfing the internet; using Facebook and other social media; washing laundry and cleaning dishes; and shopping online while in an official pay status. PTAB managers, including its senior-most personnel, were aware of this problem but took little action to prevent such waste because they believed the problem would disappear once PTAB hired additional judges. We found that, by failing to report the significant waste incurred by the PTAB when Paralegal Specialists were being paid to not work, numerous PTAB employees appear to have violated certain regulations and Department of Commerce policies.
The report states that the abusive-practice began with former Chief Judge Mike Fleming (who left the PTO in 2010), but continued under current Chief Judge James Smith through 2013. Of course, the loose-telework options available to PTO employees also permit this activity to persist.
As an interesting back-story, Professor John Duffy is also a but-for cause of the problem. In particular back in 2008-2009, Chief Judge Fleming had the plan to hire a set of new administrative patent judges and support paralegals to address the growing backlog of cases. The year before, Professor Duffy had written his Patently-O essay outlining how the PTO’s practice of internally hiring Patent Judges was improper and that the U.S. Constitution required them to be appointed by the Secretary of Commerce (or the President). Following that article, the PTO changed its practice to require that the Patent Judges receive their commission from the Secretary of Commerce. The result was that paralegals became much easier to hire than judges and the agency was only able to hire the paralegals before the PTO instituted its hiring freeze. The OIG report states:
When asked why Paralegal Specialists had so much Other Time, Paralegal Specialists and their supervisors stated to the OIG that there was not enough work for the Paralegal Specialists. The evidence showed that, although Chief Judge [Fleming] hired 19 additional Paralegal Specialists in 2009, the PTAB was not able to hire the amount of judges desired before the hiring freeze was instituted that year. . . . Patent Specialists could not create their own work – they relied on others, and judges’ opinions were one main source of work. Paralegal Specialists completed the work that they were given, and then waited for their next assignments.
The practice of approving hours for non-working paralegals (“Other” time) continued after Judge Fleming retired and into the tenure of Chief Judge Smith.
Chief Judge [Smith] originally stated that he recalled having “discussions about other time and paralegal use of it” in 2013. Later in his interview, he stated that he first looked at Other Time when a Senior Manager informed him of some of the individuals’ or teams’ Other Time sometime between mid-2012 and when the OIG sent the PTAB the complaints in early 2013. However, e-mail evidence showed that he learned of the Other Time problem at least as early as September 15, 2011.
The law provides that the USPTO Director, Deputy Director, and Commissioner are all members of the PTAB. 35 U.S.C. § 6. However, the OIG found no evidence that those PTAB “outsiders” had any knowledge of the problem.
The particular issues here have seemingly been dealt with and are unlikely to occur within the PTAB – especially since the paralegals now have judge’s to provide work. However, the incident here is an important reminder of the importance of agency transparency.
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The Commerce OIG has several additional PTO reports, including:
Guest Post by Thomas Leonard of Kilburn & Strode LLP, London
The Advocate General of the Court of Justice of the European Union (CJEU) has issued his opinion in C-364/131, and in doing so has provided hope for the patentability of embryonic stem cells in Europe.
International Stem Cell Corporation (ISCC) is the applicant for two UK patent applications (GB0621068.6 and GB0621069.4) relating to stem cells derived from unfertilised human ova that have been parthenogenetically activated to stimulate cell division (“parthenotes”). The UK Intellectual Property Office (UK IPO) refused the applications on the basis that, given the CJEU’s earlier judgment in Brüstle2, the claimed subject matter related to the use of human embryos for industrial or commercial purposes and was therefore not patentable.
The Court in Brüstle was concerned with the definition of the term “human embryo” within the meaning of Article 6(2)(c) of Directive 98/44/EC (the “Biotech Directive”), which states that inventions shall be considered unpatentable where they relate to uses of human embryos for industrial or commercial purposes. The Court in Brüstle ruled that the term “human embryo” included unfertilised human ova whose division and further development have been stimulated by parthenogenesis (i.e. parthenotes).
Following the UK IPO’s decision to refuse the applications, the matter was appealed to the High Court. At request of the parties, a question was referred to the CJEU seeking clarification on whether parthenotes can correctly be considered “human embryos” considering they die at the blastoma stage, unable to undergo further division and development, and are thus not capable of developing into a human being. The question referred in this case was exactly the same as one asked in Brüstle but for the additional specification that parthenotes “in contrast to fertilised ova, contain only pluripotent cells and are incapable of developing into human beings”.
The Advocate General Opinion in C-364/13
The new Opinion includes a detailed analysis of the relevant law and background, as well as the submissions of the parties (not only those of the applicant and the UK, but also written observations by France, Poland, Portugal, Sweden and the European Commission).
Among the submissions included evidence suggesting it is possible to produce live-born parthenogenetic mice that have been genetically manipulated to surmount the “genetic imprinting” that usually prevents a parthenote from continuing development past the blastoma stage. ISCC had already amended their claims before the UK IPO to exclude the possibility of extensive genetic manipulation beyond parthenogenesis (by including the word “pluripotent” before “human stem cell line” and referring to a lack of “paternal imprinting”).
The Advocate General in principle agrees with ISCC and has come to the conclusion that unfertilised human ova whose division and further development have been stimulated by parthenogenesis are not included in the term ‘human embryos’ as long as they are not capable of developing into a human being and have not been genetically manipulated to acquire such a capacity.
The 4 things you need to know
1. This is good news for applicants in the stem cell field. Any judgments that limit the impact of Brüstle will be a welcome development.
2. The Opinion is not legally binding – yet. For the most part, subsequent CJEU judgments do come to the same result as the preceding Opinion (although perhaps for different reasons), but we need to wait for the final judgment of the CJEU before this will become law.
3. The ray of hope only applies to stem cells derived from parthenotes that are explicitly not able to continue the developmental process to form a human being. When drafting applications in this field, practitioners should include language that supports an amendment to exclude the possibility of further genetic manipulation, bearing in mind of course the EPO’s strict rules with respect to amendments.
4. Remember, in contrast to the US following the judgment in Myriad, it is enshrined in European law that elements isolated from the human body or otherwise produced by means of a technical process, including the sequence or partial sequence of a gene, may constitute a patentable invention, even if the structure of that element is identical to that of a natural element (Article 5(2) of the Biotech Directive).
Kilburn & Strode partner Nick Bassil is part of the team handling the UK patent applications on behalf of ISCC before the UK IPO. ISCC was represented before the UK High Court and CJEU by Piers Acland, QC on instructions from DLA Piper LLP.
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2 Judgment in Brüstle v Greenpeace eV, C-34/10, EU:C:2011:669 (here)
One common complaint of the U.S. patent system is delay. Most patents take over three years to issue. Adding in priority claims moves-out the average timeline (original priority filing date to issuance) to over five years. [Link]. One way that the PTO is addressing that concern is to focus on reducing the backlog of unexamined applications – those that have been filed but that have not yet received a first action on the merits (FAOM). Under Director David Kappos, the goal was to reduce the FAOM timeline to < 10 months – that goal appeared quite amazing at the time, but is now somewhat into focus.
In its Official Gazette, the USPTO occasionally reports average filing-date for recently issued FAOMs. I used those reports to create the above chart considers the timeline for receiving first-actions across the various technology centers within the USPTO. Two salient points appear from the chart. First, the average pendency of unexamined applications has dropped significantly since 2011 and all technology centers are under two-years pendency. Second, the variance between the technology centers has been significantly reduced. This second result has come about based upon efforts at the PTO to move examining resources to areas that are suffering the most from the backlog. Although still the shortest pendency, design patents (TC2900) have come roughly in-line with the rest of the technology areas.
As an interim marker, the time-to-first-action is fairly meaningless. However, the PTO hopes that its reduction will result in an overall reduction in pendency. Time will tell whether that hope is realized. For patentees, the timing can be eliminated by requesting accelerated examination ($4,000 fee).
As suggested by the above discussion, the USPTO patent examination corps is divided into a number of technology centers, and each technology center is sub-divided into one or more art units. The technology focus of each tech center is listed below.
- 1600 – Biotechnology and Organic Chemistry
- 1700 – Chemical and Materials Engineering
- 2100 – Computer Architecture, Software, and Information Security
- 2400 – Computer Networks, Multiplex communication, Video Distribution, and Security
- 2600 – Communications
- 2800 – Semiconductors, Electrical and Optical Systems and Components
- 2900 – Designs
- 3600 – Transportation, Construction, Electronic Commerce, Agriculture, National Security and License & Review
- 3700 – Mechanical Engineering, Manufacturing, Products
The Chart below is an update of one I published earlier this year. The new chart adds in a couple of extra cases that I had previously not included and also takes account of the Supreme Court’s spate of decisions this term, including Alice v. CLS Bank (subject matter eligibility); Nautilus v. Biosig (indefiniteness); Limelight v. Akamai (divided infringement for inducement); Highmark v. Allcare (attorney fee awards in exceptional cases); Octane Fitness v. Icon Health & Fitness (attorney fee awards in exceptional cases); and Medtronic v. Boston Scientific (burden of proving infringement always falls on patentee even in licensee DJ actions). Readers should also note that the decade of 2010′s is not yet ½ completed and the Court has already granted writ of certiorari in one pending action: Teva v. Sandoz (standard of appellate review for factual findings that serve as the underpinnings for claim construction). We can expect that the trend will continue over the next several years with special focus on the new rules and procedures stemming from the America Invents Act of 2011. Note – my list largely agrees with Prof Ouellette’s
By Dennis Crouch
Over the past year, the Federal Circuit has decided dozens of important patent cases. Of those, one of the most important appears to be 3M Innovative Props. Co. v. Tredegar Corp., 725 F.3d 1315 (Fed. Cir. 2013). When I wrote about the decision in August 2013, I titled my post “Judge Plager: Construe Ambiguous Terms Against the Drafter.” In the decision, Judge Plager’s concurring opinion was the most pointed and poignant. However, each of the judges wrote their own opinions, with Judge Reyna writing for the majority and Judge O’Malley both concurring-in-part and dissenting-in-part.
Judge Plager’s concurring opinion focuses on the intentional ambiguity inserted into the claims by 3M. Judge Plager argues that courts should begin to apply the contract doctrine of contra proferentem and construe ambiguous terms against the drafter (i.e., against the patent holder). Judge Plager writes:
Sometimes such ambiguity [in claim drafting] is the result of sloppy drafting, and sometimes it appears that claims are drafted with a degree of indefiniteness so as to leave room to later argue for a broad interpretation designed to capture later-developed competition. . . .
Cases like this—claim construction issues such as this one—may well deserve application of a principle analogous to the contract doctrine of contra proferentem. See Williston on Contracts § 32:12 (4th ed.). When a term is ambiguous, a crystal ball matter, the ambiguity should be construed against the draftsman. (Or better yet, the claim should simply be invalidated as indefinite, though our court has not seen fit to go there as yet.)
Following this case, the Supreme Court decided Nautilus, Inc. v. Biosig Instruments, Inc., 134 S.Ct. 212 (2014) in a way that very much agrees with Judge Plager’s suggestions – but goes further by substantially lowering the standard for invalidating ambiguous claim terms by applying the doctrine of indefiniteness. The Supreme Court also highlighted the intentional-ambiguity problem – noting that “absent a meaningful definiteness check, we are told, patent applicants face powerful incentives to inject ambiguity into their claims.” In Nautilus, the Supreme Court was not asked to decide the Supreme Court did not directly indicate that ambiguity should be construed against the drafter. However, the court’s discussion suggest this possibility.
I wonder how patentees would alter their claim drafting if Judge Plager’s rule became law?
On 18 September 2014 the people of Scotland will vote in a referendum to decide their future: whether to continue as part of the United Kingdom, or whether to re-establish themselves as an independent country. For all Scottish people (and many British people from the remainder of the UK) this is an emotive debate, with strong opinions on both sides. As Scotland prepares for the referendum this article considers the possible impact of a ‘Yes’ vote on intellectual property.
Background: Intellectual Property in Scotland
The structure of the United Kingdom can sometimes be confusing, even for its own residents. The UK is a sovereign state that comprises four different countries: England, Northern Ireland, Scotland and Wales. It is a long and complex history that has led to the current situation, but for Scotland it was the Act of Union in 1707 which signalled the end of its independence, and a political union with England.
Today Scotland has its own parliament, which provides limited self-government. In addition Scotland has representatives in the UK parliament, which retains control over reserved matters such as defence and international relations. Scotland also has its own legal system, which is different from that of Northern Ireland and England and Wales.
UK and European Community intellectual property rights apply in Scotland, just as they would in the rest of the UK. Importantly, there is no geographic sub-division of IP rights in the UK. Thus, it is not possible, for example, to obtain a Scottish patent, a Welsh trade mark, an English registered design or Northern Irish copyright.
Issues relating to intellectual property can be dealt with in various different Courts in the UK. Often IP issues are handled in the Courts of England and Wales, which include the High Court in London. However, it is also possible for IP issues to be handled by the Courts of Scotland (and indeed the Courts of Northern Ireland). If there is a suitable connection with Scotland then the Court of Session in Edinburgh is competent to decide on issues of infringement, validity and ownership. In these cases decisions of the Scottish Courts can be made binding on the remainder of the UK.
Memberships of International Organisations Following Independence
There is significant uncertainty about the status that Scotland would have with respect to international organisations of which the UK is currently a member. The view of the UK government is that, following independence, the remainder of the UK would continue as a successor state, and that a newly independent Scotland would be a new state. This new state would then need to apply for membership of various international organisations such as the EU. There are various alternative views, however. In one scenario it is arguable that the independence of Scotland would actually create two new states, both of which would need to apply to join international organisations (a similar situation arose in the dissolution of Czechoslovakia in 1993). In another scenario, perhaps justified by the fact that Scotland was independent prior to 1707, independence could create two successor states, with equal rights to continue as members of international organisations to which the UK is a member.
The status of Scotland with respect to various international organisations is, of course, important in the case of intellectual property. For the EU the Scottish Government proposes that it will agree the terms of Scotland’s continued membership between the date of the referendum on 18 September 2014, and the proposed date of independence on 24 March 2016. However, the President of the European Commission, Jose Manuel Barroso, recently said that an independent Scotland would have to apply for EU membership and would need to secure the approval of all its current member states. The status that Scotland would have is equally unclear in respect of other international treaties such as the European Patent Convention, the Madrid Protocol, the Hague Agreement, and the new agreements involved in the establishment of the Unitary Patent and the Unitary Patent Court. It would appear that Scotland’s status in these matters will only become clear following a ‘Yes’ vote, during the 18 months in which Scotland would negotiate the terms of its independence.
Effects on existing IP rights
There are two broad categories of IP in the UK. Firstly, there are Community rights that apply across the European Union, which include Community Trade Marks, and registered and unregistered Community Designs. Secondly, there are national rights that apply only in the UK, which include national trade marks, national patents, copyright, registered and unregistered designs and European patents that are validated in the UK.
In the case of Community IP rights, these would appear to apply in an independent Scotland, only if it were to be a member of the EU. As discussed above, this remains an unresolved issue.
In the case of UK national rights, it is difficult to find clear basis regarding how and whether these would apply in an independent Scotland. In order to seek clarity on this issue we contacted both the Yes Scotland Campaign and the UK-IPO.
The UK-IPO had this to say:
In the event of a vote for independence, existing intellectual property rights, including rights registered by Scottish nationals, would remain valid in the continuing UK.
Whether existing and future intellectual property rights registered in the UK would be permitted to extend to an independent Scotland would be a matter for the Scottish Government. There would be no need for the UK Government to approve such an arrangement.
Yes Scotland said this:
“In ‘Scotland’s Future’, the Scottish Government explains that it will ensure ‘continuity of the legal framework for protecting intellectual property rights’ – so existing patents and trademarks will be protected”
Thus, it would appear that the Scottish Government intends that existing UK national rights would continue to be protected in an independent Scotland. The mechanism for this remains unclear, but it seems likely that some kind of re-registration process would be required in Scotland (at least for registered rights). One possible precedent for this comes from Montenegro’s independence from Serbia in 2007. In that case existing IP rights for the territory of Serbia and Montenegro continued to be automatically valid in Montenegro. These rights were then independently renewable in Montenegro when renewal fees became due. For pending applications there was an opportunity to re-file in Montenegro within six months of the establishment of the Montenegrin Patent Office. The Yes Scotland Campaign was unable to say whether Scotland would establish its own Patent Office, although it seems very likely that this would be required.
The Scottish Government’s White Paper on Independence
The Scottish Government has published a white paper on independence which is intended to set out the case for independence, and explain what an independent Scotland would look like. The white paper contains only a few brief comments about intellectual property. For example, the white paper states that the Scottish Government will ensure “continuity of the legal framework for protecting intellectual property rights” and that “as an EU member state, Scotland will meet European regulations and directives on IP rights protection, as well as international patent and trademark protections.”
Additionally, the white paper states that:
“Independence will also allow Scotland to offer a simpler and cheaper, more business-friendly model than the current UK system, which is bureaucratic and expensive, especially for small firms. The UK is one of the few EU countries which does not offer a scheme which covers the basics of protection. Scotland could follow, for example, the German model which protects technical innovations”.
To an IP practitioner, these statements are more than a little surprising. In particular, it is not clear how Scotland would offer a “simpler and cheaper, more business-friendly model” than the current UK system. Taking patents as an example, it would appear that the Scottish Government intends to allow patents to be granted using the European Patent Office, given its stated aim to ensure continuity of the legal framework. If this is the case then the cost of obtaining patent protection in Scotland would be at least the same as in the current system. In fact, the cost would probably be slightly higher since an additional step (and possibly additional official fees) would be required to obtain protection in Scotland as well as the remainder of the UK. The same logic would appear to apply in the case of national trade mark or registered design applications since two applications would likely be required to cover the same geographic area that would be covered by a single application at present.
In terms of enforcement, it is already possible to enforce UK national IP rights in the Scottish Courts. Therefore, Scotland already offers a forum for deciding issues relating to IP in the Courts. This forum can sometimes be cheaper than the Courts of England and Wales, but independence would not be required to realise this advantage. One possible disadvantage in the Scottish Court structure is the absence of a specialised court for small and medium sized enterprises. Such a Court exists in England and Wales: the Intellectual Property and Enterprise Court (IPEC). This could actually increase the cost of the IP system for small companies, by depriving them of access to a lower cost forum.
The suggestion regarding German-style utility models is also surprising. This author cannot comment on whether an IP system that includes utility models is a better system. Utility model systems do appear to be effective in some countries, although they also generate some problems, especially due to the existence of unexamined rights which are clearly lacking in novelty.
There are a great many unanswered questions about what an independent Scotland would look like. The question of EU membership, in particular, is important, as well as other issues such as the currency that would be used. In this context it is perhaps unsurprising that there are outstanding questions about how IP rights would be disentangled following separation. It seems that we will need to wait and see how things develop, if a ‘Yes’ vote materialises.
From a personal perspective it feels strange to be participating in this debate. Personally, I do not have a conflict between my cultural and national identities (Scottish, British, and European in that order); although I recognise that many others feel differently. In fact, as I work and live in London I am ineligible to vote in this referendum (since eligibility is based on residency). I will therefore watch with interest from the side-lines as my national identity is decided by others.
At present the polls suggest that a ‘Yes’ vote is unlikely on 18 September (at present around 30% of the electorate are in favour). However, there is a significant number of ‘don’t knows’, and therefore it does not seem implausible that Scotland could soon become an independent country once more. In the event of a ‘Yes’ vote, IP rights holders will need to take an active interest in this issue in order to ensure that they have an appropriate protection strategy for Scotland, ready for the anticipated independence day of 24 March 2016.
By Dennis Crouch
Society should always question rules where the rule-maker is not itself bound by the rules. Courts strongly enforce trade secret rights – except when it comes to discovery. The discovery process in litigation involves the forced disclosure of information between the various parties (as well as others with relevant information). The fact that information requested is a trade secret generally does little to prevent its disclosure. Rather, as with essentially all discovery requests, courts balance the need for disclosure against any countervailing privacy concerns. (The rules indicate courts should be mindful when a discovery request requires disclosure of a “trade secret or other confidential research, development, or commercial information.”)
In Innovative Communication Sys v. Innovative Computing Systems, 2014 WL 3535716 (W.D. Tex. July 16 2014), the court ordered disclosure of the plaintiff’s non-Texas client list – finding that the information is potentially relevant and therefore discoverable.
Even accepting Plaintiff’s argument that its client list is a trade secret, the Court disagrees with Plaintiff that the information is not discoverable. Although Plaintiff highlights that its client list is confidential and valuable, that does not necessarily render the information undiscoverable. The Federal Rules of Civil Procedure provide that “[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense.” FED. R. CIV. P. 26(b)(1). Additionally, the information “need not be admissible at trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.” Id. Consequently, “courts construe Rule 26 broadly, and generally hold a request for discovery should be allowed unless it is clear that the information sought can have no possible bearing on the claim or defense of a party.” United Servs. Auto. Ass’n v. Mitek Sys., Inc., 289 F.R.D. 244, 246 (W.D.Tex.2013) (internal quotations omitted). Furthermore, the fact that the information requested involves trade secrets does not prohibit its discovery. With regard to trade secrets, the Advisory Committee Notes to Rule 26 explicitly state that “courts have not given trade secrets automatic and complete immunity against disclosure, but have in each case weighed their claim to privacy against the need for disclosure.”
As you’ll see below, the court here has interesting if odd reasoning for finding the information relevant.
The issue here involves the “ICS” mark. The plaintiff registered the ICS mark with the USPTO and, as part of that registration process, indicated that the mark had been used in interstate commerce. In defense to the trademark infringement action, the defense has alleged that the mark was fraudulently registered since the plaintiff was operating wholly within Texas rather than actually in interstate commerce. The court writes:
Defendant claims that Plaintiff falsely stated in its application to the USPTO that the “ICS” trademark had been used in interstate commerce. Based on the parties’ allegations alone, it is clear that information concerning Plaintiff’s clients located outside Texas are relevant to the case. Information concerning Plaintiff’s clients is certainly relevant to Defendant’s counterclaim that Plaintiff committed fraud upon the USPTO in stating that it had used the “ICS” mark in interstate commerce.
The court’s suggested limit on interstate commerce likely misses the mark of prior precedent that generally identifies interstate commerce as anything beyond “purely intrastate use.” See T.M.E.P. § 901.03.
By Dennis Crouch
Earlier this summer, the Supreme Court decided the subject matter eligibility case of Alice Corp. v. CLS Bank Int’l, 573 U.S. ___ (2014). The main point of Alice Corp. was to find that the eligibility-limiting holding of Mayo v. Prometheus, 566 U.S. ___ (2012) applies equally to the patenting of abstract ideas. (Mayo focused on laws of nature).
Alice Corp. offers a two-step process for determining patent eligibility of a claimed invention:
- Building Block: First, determine whether the claim recites or is directed to a patent-ineligible concept such as an abstract idea, law of nature, or product of nature. The court calls these “building blocks of human ingenuity” that should not themselves be patentable.
- Something More: Second, determine whether the claim recites sufficient additional inventive features such that the claim does not solely capture the abstract idea.
Although Alice Corp decision stemmed from a district court challenge to an issued patent, the law of subject matter eligibility applies (roughly) equally to pending patent applications. In particular, the USPTO is charged with the task of ensuring that patents are only issued for eligible inventions. Thus, following Alice Corp the USPTO issued a set of guidance instructions to its examiners that follow the two step process. Although the two step approach appears straightforward. There is no standard definition for “abstract” and so it is difficult to identify abstract ideas from non-abstract ideas. Further, we do not know the threshold of “something more” that would allow patentability.
As I have written before, every patent claim serves as an abstraction from any physical implementation of an invention – and so any line-drawing rules on this front will necessarily be either arbitrary or murky. Still, the USPTO is charged with moving forward and examining these cases and, in the absence of concrete guidance in the law, the USPTO must create its own policy. At this stage, USPTO policy on examining for 101 can be largely impacted by White House views on patentability. And the current White House viewpoint seems to be that information-software focused inventions are likely unpatentable under 101 unless tied to inventive technology.
Based on information from several sources, it appears that the USPTO is now taking a more aggressive stance on subject matter eligibility and is particularly re-examining all claims for eligibility grounds prior to issuance. This is most apparent in technology centers managing data-processing inventions classes (Classes 700-707).
A set of form-paragraphs are being used that may present a prima facie case but that do not really provide much analysis:
Claims XXXX are rejected under 35 U.S.C. § 101 because the claimed invention is directed to non-statutory subject matter, specifically an abstract idea.
Claims are directed to a judicial exception (i. e., law of nature, natural phenomenon, or abstract idea), specifically, the abstract idea of [INSERT INVENTION HERE]. After considering all claim elements, both individually and in combination, it has been determined that the claim does not amount to significantly more than the abstract idea itself. Further, while the claims recite [hardware or software elements, such as processors or modules], these limitations are not enough to qualify as “significantly more” being recited in the claim along with the abstract idea. Therefore, since there are no limitations in the claim that transform the exception into a patent eligible application such that the claim amounts to significantly more than the exception itself, the claim is rejected under 35 USC § 101 as being directed to non-statutory subject matter.
. . . Indeed, the claims fail to recite any improvements to another technology or technical field, improvements to the functioning of the computer itself, and/or meaningful limitations beyond generally linking the use of an abstract idea to a particular environment. Although the claims do recite the use of a computer, nothing more than a generic computer, performing generic, well-understood and routine computer functions, would be required to implement the aforementioned abstract idea.
Therefore, because there are no meaningful limitations in the claim that transform the exception into a patent eligible application such that the claim amounts to significantly more than the exception itself, the claim is rejected under 35 U.S.C. § 101 as being directed to non-statutory subject matter.
It appears that applications whose inventive features are found in software or information processing will now have a difficult time being patented.
By Dennis Crouch
Digitech Image v. Electronics for Imaging (Fed. Cir. 2014)
Digitech sued dozens of companies for infringing its U.S. Patent No. 6,128,415. As I wrote back in April 2014, basic idea behind the invention is to tag digital images with particular information about the camera and its color/spatial image qualities in a form that is device-independent. The patent includes claims directed to both a “device profile” and a “method of generating a device profile.” The profile is simply a set of data elements regarding the camera qualities discussed above and the method simply involves generating and combining those data elements. This sort of tagging of digital images has become ubiquitous and so the patent could be quite valuable – except that the Federal Circuit has held the patent invalid as lacking subject matter eligibility under 35 U.S.C. §101.
Claim 1 is drafted as follows:
1. A device profile for describing properties of a device in a digital image reproduction system to capture, transform or render an image, said device profile comprising:
first data for describing a device dependent transformation of color information content of the image to a device independent color space; and
second data for describing a device dependent transformation of spatial information content of the image in said device independent color space.
The District Court found the claims invalid and that decision has been affirmed by the Federal Circuit. Decision by Judge Reyna, joined by Judges Moore and Hughes. Because subject matter eligibility is a question of law, the Federal Circuit reviews that issue de novo without giving deference to the district court analysis.
Most subject matter eligibility cases rely upon the non-statutory limitations on eligibility (abstract idea, law of nature, natural phenomenon). However, the court here begins with the statute:
Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.
35 U.S.C. §101. The statute identifies four categories of patent eligible inventions: processes, machines, manufactures, and compositions of matter. In considering the “device profile” claim, the appellate panel concluded that the claim did not properly fit within any category and is therefore not eligible for patenting. The court writes:
Data in its ethereal, non-physical form is simply information that does not fall under any of the categories of eligible subject matter under section 101.
At the Federal Circuit, the patentee argued that one of skill in the art would understand that the claims required hardware or software within a digital image processing system. However, in an implicit claim construction, the appellate panel rejected that argument – finding that the claims are not so limited. “The claims encompass all embodiments of the information contained in the device profile, regardless of the process through which this information is obtained or the physical medium in which it is stored.” The underlying problem with this analysis is the reality that data is always stored in a physical form lest it disappear.
This first portion of the opinion has the important resulting holding that patent eligible subject matter must be in “a physical or tangible form.” Quoting Burr v. Duryee (1863) (“a concrete thing, consisting of parts, or of certain devices and combination of devices”). The court declined to discuss how it would hold if the claimed data structure had been linked to a physical item such as some sort of computer hardware. Of course, this physicality test as an absolute rule was seemingly rejected by the Supreme Court in Bilski.
In the second part of the short opinion, the Federal Circuit addressed the method claims. Those claims clearly passed the statutory category test as being drawn to processes. For the method claims then, the court turned to the abstract idea limitation recently discussed by the Supreme Court in Alice Corp. v. CLS Bank Int’l, 573 U.S. ___ (2014).
Alice Corp. offers a two-step process for determining patent eligibility of a claimed invention:
- Building Block: First, determine whether the claim recites or is directed to a patent-ineligible concept such as an abstract idea, law of nature, or product of nature.
- Something More: Second, determine whether the claim recites sufficient additional inventive features such that the claim does not solely capture the abstract idea.
As the Court wrote in Alice:
At some level, “all inventions . . . embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.” Mayo. Thus, an invention is not rendered ineligible for patent simply because it involves an abstract concept. See Diamond v. Diehr, 450 U. S. 175, 187 (1981). “[A]pplication[s]” of such concepts “‘to a new and useful end,’” we have said, remain eligible for patent protection. Gottschalk v. Benson, 409 U. S. 63, 67 (1972).
Accordingly, in applying the §101 exception, we must distinguish between patents that claim the “‘buildin[g] block[s]‘” of human ingenuity and those that integrate the building blocks into something more, Mayo, 566 U. S., at ___ (slip op., at 20), thereby “transform[ing]” them into a patent-eligible invention, id., at ___ (slip op., at 3). The former “would risk disproportionately tying up the use of the underlying” ideas, id., at ___ (slip op., at 4), and are therefore ineligible for patent protection. The latter pose no comparable risk of pre-emption, and therefore remain eligible for the monopoly granted under our patent laws.
Although the Supreme Court provided this two-step framework, it left some gaps for lower courts to discern, such as the meaning of “abstract idea” and “something more.”
The process claim at issue here is directed to a method of generating a device profile and includes three steps:
[Transform First Data] generating first data for describing a device dependent transformation of color information content of the image to a device independent color space through use of measured chromatic stimuli and device response characteristic functions;
[Transform Second Data] generating second data for describing a device dependent transformation of spatial information content of the image in said device independent color space through use of spatial stimuli and device response characteristic functions; and
[Combine Data] combining said first and second data into the device profile.
In reading these steps, the Federal Circuit identified what it sees as the abstract idea:
The two data sets are generated by taking existing information—i.e., measured chromatic stimuli, spatial stimuli, and device response characteristic functions—and organizing this information into a new form. The above claim thus recites an ineligible abstract process of gathering and combining data that does not require input from a physical device.
According to the court, the reason this result is abstract is that it is simply a “process that employs mathematical algorithms to manipulate existing information to generate additional information.” As the Supreme Court wrote in Flook,
If a claim is directed essentially to a method of calculating, using a mathematical formula, even if the solution is for a specific purpose, the claimed method is nonstatutory.
Parker v. Flook, 437 U.S. 584 (1978).
After identifying the abstract idea, the Court considered and rejected the notion that the patent provided “something more” that would be sufficient to transform the result into something patentable.
The Federal Circuit did not raise or discuss the presumption of validity afforded patents under 35 U.S.C. §282. In i4i, the Supreme Court ruled that invalidity for missing the §102(b) statutory-bar date must be proven with clear and convincing evidence. However, that defense is a question of fact. As discussed above, subject matter eligibility is a question of law and such questions are generally not controlled by the same evidentiary standards.
= = = = =
A major difficulty in abstract idea cases is defining the “abstract idea.” Here, the court’s description of the abstract idea at issue is somewhat confusing. Its clearest statement is that it is the “abstract process of gathering and combining data that does not require input from a physical device.” That statement has the qualities of (1) being well known and old; (2) being totally divorced from any physical device or technology; and (3) focused on information transformation rather than the transformation of anything in the physical realm. These clues here closely follow the machine-or-transformation test that the Federal Circuit implemented in its Bilski decision. Later, the Supreme Court rejected the reasoning that the MoT test was the absolute test, but agreed that it served as an important clue of subject matter eligibility.