Philip Brooks' Patent Infringement Updates

Reinventing Patent Law

Steve Seidenberg writes in the February 2008 print issue of the ABA Journal that "the pendulum is swinging for a system that has long favored the rights of patent holders."  The following is excerpted from his article:

Stephen Comiskey thought he knew a good thing when he saw it. And plenty of others felt the same way. The 1998 decision by the U.S. Court of Appeals for the Federal Circuit in State Street Bank & Trust Co. v. Sig­nature Fi­nancial Group Inc., 149 F.3d 1368, had opened enormous new opportunities for astute entrepreneurs.

After the court ruled that processes could be pa­tented as long as they produced “useful, concrete and tangible result[s],” both individuals and companies deluged the U.S. Patent and Trademark Office with ap­plications for patents that would give them exclusive control over cer­tain methods for dealing with various business matters.

Comiskey, a general practice attorney in Washington, D.C., was one of the eager applicants. In late 1999, he filed an application to patent a method for using man­datory arbitration to resolve disputes relating to wills and contracts.

It seemed like a good idea at the time. But times have changed.

In September, a three-judge panel of the Federal Cir­cuit threw out many of the claims supporting Comis­key’s application, finding them to be unpatentable mental processes. The ruling in In re Comiskey, 499 F.3d 1365, is a defeat for not just one business method “inventor.” The decision appears to be a major retreat from the court’s position in State Street that significantly narrows the definition of what is patentable.

Moreover, many patent law experts say, the Comiskey ruling is part of a larger trend in which the Federal Cir­cuit, the U.S. Supreme Court, the PTO and Congress all have acted to scale back the rights of patent holders and applicants, while making it easier for existing pa­tents to be attacked.

What is clear, says Donald R. Ware, a patent litigator at the law firm of Foley Hoag in Boston, is that “the Supreme Court, Congress and the patent office are moving in a di­rec­tion that is unfavorable toward patentees. That is a big change.”

Read the full article here.

An Israeli Perspective on U.S. Patent Reform

The Jerusalem Post ran an opinion piece on February 20, 2008 denouncing the Patent Reform Act of 2007.  The article is by Bernard G. Frieder who "served in the cabinet office of the British government as a technology specialist and has advised private firms in the US and the UK. He is currently working with several emerging intellectual-property-based companies in Tel Aviv."  He writes:

The United States Senate is expected to vote soon on legislation, the Patent Reform Act of 2007, which would change America's patent system significantly.

Because inventors, research organizations and startup ventures around the world rely on US patents to protect the output of their labor, changing the US patent system has global repercussions.

Here in Israel especially, US patent reform will have a profound effect.

On a per-capita basis, Israel has the largest number of biotech start-ups and is a world leader in developing revolutionary medical devices. Israeli brainpower is behind "Voice-over Internet Protocol," instant messaging, flash disks, and much more.

US PATENT filings have facilitated and protected these breakthroughs. Specifically, the number of US patent applications filed by Israeli inventors has grown from 632 in 1990 to 3,617 in 2007 - an almost 600-percent increase. In fact, Israelis have more American patents, on a per-capita basis, than the citizens of any other country.

But the changes in US patent law now under consideration by Congress would drastically weaken current protections. This is deeply problematic for Israeli start-ups and suppliers of venture capital, who rely on the US patent system.

THE PROPOSED changes would greatly increase the costs of securing a basic US patent and expand filing requirements and processing time, thereby reducing a patent's term of protection.

Also, a US patent would no longer be a secure asset since its validity could be challenged during the course of its effective life. There would be no closure.

Calculation and allocation of damages would likewise be altered in ways that reduce compensation for those whose patents are violated.

US patent reform is a global issue, and Israelis - individuals, associations, and government alike - ignore the bill's implications at our peril. We should be doing all we can to make US lawmakers aware of our concerns.

Thanks to the reader who alerted me to this article.  Read the full article here.

Special Masters and The Patent Reform Act of 2007

A press package providing a section-by-section summary of The Patent Reform Act of 2007 appears at the Committee on the Judiciary of the U.S. House of Representatives website.  Section 16 on Special Masters states the following:

Sec. 16. Study of Special Masters in Patent Cases. This section directs the Administrative Office of the United States Courts, in consultation with the Federal Judicial Center, to study the use of special masters in patent infringement cases. District courts have occasionally appointed special masters to assist them in claims construction and other technical matters but the use of special masters in patent litigation is “the exception and not the rule” and so occurs only under “exceptional” conditions. The limited use of special masters in patent cases has produced anecdotal information that suggests their use may reduce the costs and length of litigation, and result in better district court decisions. This section directs a study to determine the benefits, if any, derived from the use of special masters in patent cases. The study itself will look into such factors as the costs and length of litigation when special masters are used, the role special masters are given in patent cases, the legal and technical background of special masters and other factors.

The July 16, 2007 Manager's Amendment to HR 1908 has more detail, but the Special Masters study is covered under Section 14.

China Weighs in on U.S. Patent Reform Bill

Received the following from a reader today:

Remember the Indian newspaper article arguing that the patent reform measures being considered by Congress will make it easier for India's patent holders to enter the U.S. market? A similar story has now surfaced in China, this one written by one of that country's leading intellectual property experts.

The attached article (Download patent_reform_article_china_intellectual_property_news.pdf)  was published in China Intellectual Property News on November 7, 2007, and has just been translated into English. Its author is Yongshun Cheng, former senior judge and deputy director of the Intellectual Property Division of the Beijing High People's Court. Cheng argues that the proposed patent reform bill is bad news for American innovation and good news for foreign infringers, pointing out that the bill "is friendlier to the infringers than to the patentees in general as it will make the patent less reliable, easier to be challenged and cheaper to be infringed." He goes on:

"It is not bad news for developing countries which have fewer patents. Many of the Chinese companies are not patent owners in the U.S. market and their products are often excluded from the market because of patent infringement accusations. This bill will give the companies from developing countries more freedom and flexibility to challenge the relative U.S. patent for doing business in U.S. and make it less costly to infringe."

Cheng concludes by claiming that the proposed bill is in conflict with the U.S. government's practice of pressuring China to strengthen its own protection of intellectual property rights.

Cheng is the current director of the Beijing Intellectual Property Institute (BIPI). In 2003, he was nominated by Managing Intellectual Property as one of the 50 most influential IP figures worldwide and one of the top three in China.

Prescription Drugs — Price support

The following is excerpted from an article that appeared in the Topeka Capital Journal yesterday, November 20, 2007:

Looks like drug companies have come up with a prescription for keeping their profits in the pink.

Here's how it works: Pay lobbyists millions of dollars to convince Congress not to adopt legislation aimed at speeding the availability of cheaper, generic drugs to consumers.

According to a report from The Associated Press, congressional legislation that would help get generic drugs on the market more quickly has stalled amid a furious lobbying campaign by the drug industry.

At issue are settlements paid by brand-name drug companies to generic manufacturers to delay the introduction of generic medication. The settlements are known as "reverse payments," and the Senate bill would ban them.

The Federal Trade Commission says the ban could result in billions of dollars in savings to American consumers. But apparently, drug manufacturers are having a tough time swallowing that prospect.

Why are both major and generic companies both involved?

Here's an example of how reverse payments work, courtesy of a lawsuit that led to a 2005 federal appeals court ruling upholding the legality of the payments. In that case, Barr Laboratories Inc. accepted a $21 million payment to abandon its successful challenge to AstraZeneca PLC's patent for the breast cancer drug tamoxifen.

In addition to the financial payout, AstraZeneca also agreed to let Barr sell tamoxifen provided by AstraZeneca.

See the full article here.  See also this related article from the Daytona Beach News-Journal.

Pending Patent Bill Makes Startups Wary

In a follow-up to Friday's post, Patty Tascarella writes for the Pittsburgh Business Times:

Investors in young technology and medical device companies are concerned that proposed legislation to reform the U.S. patent system will wear down startups in lengthy and costly litigation.

Many young companies cite patents as their only asset, said Emily Mendell, vice president of strategic affairs for the National Venture Capital Association, a Vienna, Va.-based industry group. Bill 1145, currently before the U.S. Senate, provides lengthy opportunities to challenge already-granted patents and limits the remuneration awarded to patent-holders.

"Both of these measures are harmful to small, innovative companies that are often venture-backed," Mendell said. "It's important that they have protection from larger companies who can burden them with challenges and infringement."

NVCA also wants to change how damages are calculated. The legislation limits payment to the value of the specific patent.

"Say a small company has a patent on a valve that's part of a larger medical device," Mendell said. "Say this device becomes the industry standard. We think the value of the larger system should be considered when calculating damages."

Kline said it's especially difficult to anticipate the longer-term value of a patent in the life sciences arena. "That ruling could have a negative effect on that industry," Kline said.

NVCA's concerns hit home with David Palmer, CEO of ClearCount Medical Solutions Inc., a North Side-based medical device manufacturer that expects to launch its first product this spring.

ClearCount has had four patents granted and several pending, and does not yet have sales. Being dragged into lengthy litigation could be disastrous at this stage of the young company's life.

"Our patents, we feel, are a very valuable asset to our company, and if they were to be infringed on, we would certainly fight," Palmer said. "We all know the litigation process is very expensive, and larger companies typically have teams of lawyers, and smaller companies typically don't."

Read the full article here.

Patent Damage Changes Are Coming

John Dahlem of Fulcrum Inquiry made me aware of a recent article by his firm:

In September, the House of Representatives approved the most sweeping changes to the United States patent law in over 50 years. If ultimately passed into law, patents will be harder to obtain, and easier to challenge. Supporters claim that litigation will be curtailed by (i) limiting the jurisdiction in which lawsuits can be filed (to avoid filing in pro-plaintiff jurisdictions) and (ii) limiting damages.

The focus of this article is damages. The House (HR 1908) and Senate (S 1145) versions regarding damages are quite similar. Assuming Senate passage occurs, the changes described in this article are likely.

The existing patent damages statute is brief. Under the current law, a patentee is entitled to lost profits damages if the patentee can show that it would be able to make the defendant’s sales, but in no event can damages be less than a reasonable royalty. Case law provides specific guidance as to both damages measures.

The reasonable royalty remedy is the area of perceived abuse. The most important reasonably royalty guidance is contained in a landmark case, Georgia-Pacific Corp. v. United States Plywood Corp., 318 FSupp 1116, 6 USPQ 235 (SD NY 1970). The Georgia-Pacific case provides fifteen factors necessary to provide a sound economic evaluation. From the defense perspective, these fifteen factors are sufficiently broad to allow incorrect assessments. Consequently, the defense side of patent cases prefers more narrowly defined statutory guidance.

The new bill specifies three possible royalty evaluation methods:

1. Relationship of damages to contributions over prior art;
2. Entire market value; and
3. Other factors.

Surprisingly, an established royalty rate based on past licensing is now relegated to an “Other Factor”. Such “Other Factors” are considered only if the court determines that possibilities (1) and (2) are not applicable. Currently, an established royalty is afforded the greatest weight when determining a royalty rate. However, under the legislation, the royalty is instead based on prior art (possibility #1), rather than the current perspective that focuses on the market immediately before the infringement.

Read the full article here.

Glaxo Wins Injunction

I just heard from Gene Quinn of IPWatchdog.com regarding the outcome of the GlaxoSmithKline v. USPTO case.  GlaxoSmithKline, has sued the United States Patent Office challenging the Final Rules on Claims & Continuations, set to go into effect on November 1, 2007. GlaxoSmithKline is seeking both preliminary and permanent injunctive relief.

He writes in a PLI post:

John White, known to many patent attorneys across the nation as the guy who helped them pass the patent bar examination, played the role of ace reporter live from the Eastern District of Virginia.  According to John, "there was an audible sigh in the courtroom when Judge Cacheris said the rules were enjoined."  No doubt, those in attendance were quite happy that Judge Cacheris kept the status quo.

In any event, what John just told me via telephone is that Judge Cacheris did not make any statements about the likely merits of the case when making his ruling from the bench.  He will, however, be issuing a formal written opinion which will be entered sometime this afternoon.  As soon as we receive that ruling we will post it together with our analysis.

The attorney representing the Patent Office made some interesting arguments according to John.  Once again the argument that a patent application creates no rights was made.  I don't know whether John was quoting the argument or just paraphrasing, but he said that the PTO attorney said "a patent application confers no rights because it is not a completed transaction."  The response from the Glaxo attorney was simply that the statement is 100% wrong and perhaps something to the effect of - how would she know anyway, she isn't even a patent attorney.  How could the PTO send an attorney who is not admitted to the patent bar to argue this case with this set of complicated rules?  Astounding!

John also pointed out that when the question of the number of claims came up the PTO attorney said that there was no limit on the number of claims because all the applicant has to do is file "an extra document" in order to get as many claims as they want.  How could anyone call the Examination Support Document simply "an extra document"?  Outrageous!

Also playing a big role in the hearing was Senator Schumer's recent letter to Under Secretary of Commerce Jon Dudas regarding his concerns regarding these rules.  The PTO attorney tried to argue that Senator Schumer was referring to the proposed rules, not the final rules, despite the fact that his letter clearly mentions the final rules announced in the Federal Register on August 21, 2007.

Read the full post here and obtain information on the PLI briefing on Friday, November 2, 2007 by John White and Bob Sparr, who is the recently retired Director of the Office of Patent Legal Administration at the U.S. Patent and Trademark Office.

Patent Reform Legislation Approved by Full House Judiciary Committee

FOR IMMEDIATE RELEASE
July 18, 2007

CONTACT
David Mack
202-777-3523
dmack@clsdc.com

Final passage by U.S. House next step in most significant overhaul of patent law in 50 years

WASHINGTON – Legislation that would represent the most fundamental patent reform in decades today was unanimously approved by the U.S. House Judiciary Committee. The bill would foster greater innovation by American companies and enhance U.S. competitiveness. It now heads to the floor of the U.S. House of Representatives for a vote.

"Today's successful mark-up demonstrates Congress’ seriousness in dealing with the overwhelming need for balanced and comprehensive reform," said Jonathan Yarowsky, counsel to the Coalition for Patent Fairness. "Chairman Conyers, Ranking Member Smith and Representative Berman have clearly demonstrated that they are leaders on patent reform. We look forward to working with all members for swift passage on the House floor.”

The full committee mark-up follows a successful Judiciary Subcommittee on Courts, the Internet and Intellectual Property mark-up in May where the bill was considered and passed by voice vote one month after its introduction. 

A broad and diverse cross-section of U.S. businesses, leading legal scholars, economists and policymakers has recognized the need for patent reform. Leading legal scholars and economists have spoken out about how urgent the need is for patent reform and opinion-leading publications, including The Wall Street Journal, The New York Times and The Washington Post, have editorialized in support of passing patent reform legislation without delay. 

Moreover, the U.S. Supreme Court recently has found it necessary to review an unusual number of patent-related cases in order to correct – often with unanimous rulings – imbalances in the judicial interpretation of core principles of patent law and procedure.  However, only Congress can implement the comprehensive reform needed to restore balance in a number of areas of the patent system.  The Patent Reform Act of 2007 will do just that.

The Coalition for Patent Fairness supports patent reform legislation that:

·        Balance the apportionment of damages. The standard for calculating damages should be based on the fair share of the patent’s contribution to the value of a product, and not on the value of a whole product that has many other components.

·        Establish fair standards for punitive damages. Awarding punitive, triple damages for “willful” patent infringement should be reserved for cases of the most egregious conduct, as required by the U.S. Supreme Court for virtually all other punitive damages.

·        Restrict forum shopping. Cases should be brought in courts with some reasonable connection to the case and not, by gaming the system, in courts solely because they historically favor patent claims.

·        Improve patent quality. The system should promote quality patents by providing a meaningful second chance for the experts at the PTO to review potentially problematic patents in a timely manner, and should promote sharing of information with the PTO to improve the process and increase innovation.

About the Coalition for Patent Fairness

The Coalition for Patent Fairness is committed to the passage of patent legislation that will foster innovation and economic growth. Representing a broad range of companies and trade associations in the financial services, technology, energy, chemical, manufacturing and media industries, the Coalition’s members include Apple, Amazon.com, Autodesk, Business Software Alliance, Chevron, Cisco Systems, Comcast, Dell, Electrolux, Google, HP, Information Technology Industry Council, Intel, Micron Technology Inc., Microsoft, Oracle, Palm Inc., RIM, SAP, Symantec, TechNet, Time Warner and Visa.  For more information, visit www.patentfairness.org.

Head Of Patent Peer Review Deflects Infringement Concerns

CNN Money.com reported yesterday, March 28, 2007:

Initial testing for an online peer review of up to 250 patent applications is set for next week even as the program's director deflects fears that participants could be liable later for willful patent infringement.

IBM Corp. (IBM), Microsoft Corp. (MSFT) and other technology innovators have funded and agreed to public review of some software patent applications filed with the U.S. Patent and Trademark Office. Yet some engineers, attorneys and others worry whether comments on a rival's application could make them vulnerable later to willful or deliberate infringement charges.

The potential for triple damages when willful infringement is proven creates " a lot of fear," says Marc Williams, an official in IBM's governmental programs office.

Beth Noveck, the program's director, insists deliberate infringement laws apply to patents, not applications. She's a professor and director of New York Law School's Institute for Information Law & Policy, which is running the project.

General Electric Co. (GE), Hewlett-Packard Co. (HPQ), Oracle Corp. (ORCL) and Red Hat Inc. (RHT), which helped fund the project, are also participating in the program aimed at improving patent reviews. The goal is to provide government examiners with the most current and informed opinions of professional, academic and everyday experts, Noveck said earlier this week at a forum to discuss the project.

The pilot is designed for the scientific community to compile a "top 10 list" of commentary and relevant information on an application for patent examiners, Noveck said. She hopes to launch the pilot by June 1.

Read the full article here.