Philip Brooks' Patent Infringement Updates

Microsoft Word Sales Face U.S. Ban

The following is excerpted from a December 22, 2009 InformationWeek article by Paul McDougall:

An appeals court on Tuesday ordered Microsoft to stop selling Microsoft Word 2007 and other Office 2007 products by Jan. 11 because the software infringes on a patent held by a Canadian company. The judge also hit Microsoft with a $290 million fine.

In ruling, the U.S. Court of Appeals struck down Microsoft's appeal of a lower court's finding that Word 2007, the most current version of the product, infringes on a patent held by Toronto-based i4i Inc.

The ruling means Microsoft can't sell versions of Word that can open documents saved in the .XML, .DOCX, or .DOCM formats that contain custom XML.

Those formats were at the heart of the patent dispute. DOCX is the default format for the most current version of Word, which is included in Microsoft Office 2007. Custom XML is used by businesses to link their corporate data to Word documents.

The court left an out for Microsoft. The company can continue to sell Word 2007 after Jan. 11 if it removes the offending technology from the product. Microsoft said it plans to do just that.

Read the full article here.

New Patent Test for Machines Using Mathematical Algorithms

The following is excerpted from a blog post by Erik Sherman published by BNET on Dec 22, 2009:

Industries, particularly high tech, may be waiting for the U.S. Supreme Court decision, expected this coming spring, in the Bilski case to decide some fundamental questions of when you can patent business methods. But in the meantime, there’s a newly published decision from the Board of Patent Appeals and Interferences that establishes a new test to determine whether a machine or manufactured article that depends on a mathematical algorithm is patentable. The ruling is a big deal because it’s one of the few precedential decisions that the BPAI issues in a given year, and it will have a direct impact on patents involving computers and software.

For a claimed machine (or article of manufacture) involving a mathematical algorithm,

1.)  Is the claim limited to a tangible practical application, in which the mathematical algorithm is applied, that results in a real-world use (e.g., “not a mere field-of-use label having no significance”)?
2.)  Is the claim limited so as to not encompass substantially all practical applications of the mathematical algorithm either “in all fields” of use of the algorithm or even in “only one field?”

If the machine (or article of manufacture) claim fails either prong of the two-part inquiry, then the claim is not directed to patent eligible subject matter.

Although the decision came out in August, it wasn’t until this month that it became precedential, and so applicable going forward to other patent cases.

Read the full post here.

Patent Facts and Stats

I received an inquiry from a consultant today posing three questions.  I obtained some preliminary information and have presented this below.  I realized during this research that I have included this type of information in posts over the years, but other than allowing readers to do searches of these prior posts using the blog search tool (Rollyo) I have not classified posts with this type of information.  As a result, I have added a new category for this information titled, "Facts & Stats."

In addition, if you have additional resources for this reader's questions, please post a comment here.

(1) # of US patents that are software/internet patents

Patent Counts By Class By Year

Class 717: Data Processing: Software Development, Installation, and Management

Pre-1988 - 35
1988 -15
1989 - 20
1990 - 16
1991 - 16
1992 - 33
1993 - 53
1994 - 96
1995 - 117
1996 - 126
1997 - 128
1998 - 308
1999 - 406
2000 - 372
2001 - 507
2002 - 334
2003 - 343
2004 - 416
2005 - 467
2006 - 752
2007 - 707
2008 - 707
TOTAL - 5,974

(See Part A1-1. Patent Counts By Class By Year; Patent Counts Based on ORIGINAL Classification Only; Number of Patents Granted as Distributed by Year of Patent Grant, Breakout by U.S. Patent Classification System Class; Table A1-1, Breakout by U.S. Patent Classification System Class; Patent Counts Distributed by Year of Patent Grant; Patents Granted: 01/01/1977 - 12/31/2008; http://www.uspto.gov/web/offices/ac/ido/oeip/taf/cbcby.pdf.)

(2) # of US patents (all patents) that are declared invalid in US (annually) via litigation (%)

John R. Allison & Mark A. Lemley, Empirical Evidence on the Validity of Litigated Patents, 26 AIPLA Q.J. 185 (1998), at 205.  The authors analyzed data on Federal Circuit patent validity rulings during 1989-96 in cases in which the court provided written opinions, concluding that the court had upheld validity in 54% of the cases and found invalidity in 46%.  Donald R. Dunner et al., A Statistical Look at the Federal Circuit’s Patent Decisions: 1982-1994, 5 FED. CIR. B.J. 151 (1995), at 153-55.  Studied Federal Circuit validity rulings on a statutory section-by-section basis for the period 1982-94.  They concluded, for example, that the court had ruled in favor of validity under 35 U.S.C. §§ 102 and 103, 58% of the time, at 154-55. (See footnote 10 of Janicke, Paul M. and Ren, LiLan, Who Wins Patent Infringement Cases?. American Intellectual Property Law Association Quarterly Journal, Vol. 34, p. 1, 2006. Available at SSRN: http://ssrn.com/abstract=960633)

(3) # of US software patents that are declared invalid in US (annually) via litigation (%)

Observed as a single factor, win rates varied to some extent with the main technology involved in the case.  Unfortunately, dividing our limited population into nine separate technologies reduced the number of data points in most of them to numbers that are not statistically meaningful.  The selection was largely arbitrary, based on perceived interest among commentators and the profession.  Other commentators have looked at this phenomenon.  See, e.g., Dan L. Burk & Mark A. Lemley, Is Patent Law Technology-Specific?, 17 BERKELEY TECH. L.J. 1155, 1156 (2002) (concluding that the patent system, while technology-neutral in theory, is technology-specific in application); Amir A. Naini, Convergent Technologies and Divergent Patent Validity Doctrines: Obviousness and Disclosure Analyses in Software and Biotechnology, 86 J. PAT. & TRADEMARK OFF. SOC’Y 541, 544-63 (2004) (discussing differences in validity standards for biotechnology and software patents).  (See page 19 - 20 and footnote 31 of Janicke, Paul M. and Ren, LiLan, Who Wins Patent Infringement Cases?. American Intellectual Property Law Association Quarterly Journal, Vol. 34, p. 1, 2006. Available at SSRN: http://ssrn.com/abstract=960633)

Tech Patents Run Amok

Rob Preston, VP and editor in chief of InformationWeek, writes in the October 12, 2009 print issue:

Opposition to software patents, especially the specious ones, makes for strange bedfellows. Big business aligning with digital freedom fighters. The open source faithful breaking bread with the commercial software elite. All in the name of defeating so-called patent trolls whose lawsuits extract billions of dollars each year from U.S. industry--and thus every one of us.

There's a reason so many diverse interests are in agreement. This isn't just a "software industry" problem. Every company that develops software or uses a Web site that implements software processes is a potential target of the trolls.

Case in point is a suit filed last week by University of California spin-off Eolas Technologies related to its patent for technology, developed 15 years ago, that lets Web browsers "act as platforms for fully interactive embedded applications." The suit reaches beyond software industry giants such as Adobe (NSDQ: ADBE), Apple, and Google (Eolas reached a settlement with Microsoft (NSDQ: MSFT) years ago) to the likes of Blockbuster, Frito-Lay, JPMorgan Chase, and JCPenney. As my colleague Paul McDougall reported, an Eolas victory "could give the company a claim on virtually every Web site that hosts interactive applications." I'm in no position to judge the validity of the Eolas suit, but it's worth noting that it was filed in U.S. District Court in Eastern Texas, known for its favorable patent rulings.

Read the full article here.

Microsoft Sale Of Linux Patents Roils Open Sourcers

The following is excerpted from a September 11, 2009 InformationWeek article by Charles Babcock:

Microsoft (NSDQ: MSFT) put 22 patents up for sale in July, listing them all as in the "open source" category, with some of them, "Linux-focused." The ultimate buyer was the Open Invention Network, a consortium of Linux backers that wanted to take them off the market.

But in between Microsoft marketing and OIN ownership there was a bit of behind the scenes maneuvering. OIN was never approached by Microsoft to buy the patents, even though it was an obvious, interested party.

And the actual bidder, Allied Security Trust, was acting as a front man for OIN as well as its own 11 members. OIN was approached by AST "early in the process and invited to be a surrogate bidder," unbeknownst to Microsoft, says OIN CEO Keith Bergelt.

When AST's bid won the auction, AST and OIN signed a deal that made OIN the ultimate holder of the patents. The irony of the maneuver is that it was an unlikely outcome.

AST normally bids for patents on the open market, licenses its members to protect themselves from them, then quickly resells the patents. By using this "catch and release" policy, it leverages its members investments and gets income that allows it to protect its small membership from more patents. One result is that many AST acquired patents end up on the open market and in the hands of patent trollers, who claim royalties from companies whose products might be covered by their patents.

Read the full article here.

Cognex Receives Settlement in Patent Dispute

The following is excerpted from a September 8, 2009 Cognex press release available at Business Wire:

Cognex Corporation (NASDAQ:CGNX) has accepted a settlement offer from Multitest Elektronische Systeme GmbH and its U.S. subsidiary in a dispute concerning Multitest’s importation and sale of equipment containing MVTec HALCON™ machine vision software. Terms of the settlement between the parties were not made public.

Cognex has alleged in complaints filed with the U.S. International Trade Commission (ITC) and in federal court in Massachusetts that HALCON software, marketed by MVTec Software GmbH, infringes at least three Cognex machine vision patents. In addition to Multitest, the ITC is investigating 20 other companies for violating Cognex patents by selling, importing and using MVTec products that contain machine vision technology invented and patented by Cognex.

The current settlement agreement releases Multitest from the ITC investigation. Multitest is not a party to the federal court lawsuit.

Read the full press release here.

Microsoft Says i4i Victory Requires Time to Redesign Word Office

The following McLean Watson press release was published at PR Newswire on September 4, 2009:

In i4i vs. Microsoft, the Federal Circuit Court of Appeal has granted a stay of i4i's injunction against Microsoft Word pending appeal.

Loudon Owen, Chairman of i4i, Plaintiff, says, "Defendant-Appellant Microsoft claims it may have to stop distributing Word and Office in the U.S. market until it can redesign both products. Microsoft's scare tactics about the consequences of the injunction cannot shield it from the imminent review of the case by the Federal Circuit Court of Appeal on the September 23 appeal." Mr. Owen continues, "i4i is confident that the Final Judgment in favor of i4i, which included a finding of willful patent infringement by Microsoft and an injunction against Microsoft Word, was the correct decision and that i4i will prevail on the appeal."

Microsoft filed an Emergency Motion seeking more time to redesign Word and Office to comply with the Court Order. Mr. Owen adds, "To paraphrase the great heavyweight boxing champion Joe Louis, 'they can run, but they can't hide'. Microsoft's time will eventually run out."

i4i will file its responding brief with the Court on September 8, 2009.

Dish Prevails Over TiVo in Initial Patent Ruling

The following is excerpted from an Associated Press August 5, 2009 article at Forbes:

Dish Network Corp. said Tuesday that it has received an initial favorable ruling related to its patent fight with TiVo Inc.

The satellite TV operator, and sister company EchoStar Corp., said the U.S. Patent and Trademark Office has rejected TiVo's software claims that lay at the heart of their lawsuit.

The patent fight revolves around TiVo's "time-warp" technology, which lets viewers rewind, pause or fast-forward live TV.

TiVo said the finding is preliminary and the company hasn't yet had the opportunity to present its views.

TiVo sued Dish in 2004, alleging that Dish infringed on its DVR technology. Dish lost and was ordered to pay $105 million to TiVo. While the case was on appeal, Dish designed a modified software that it downloaded to customers' DVRs.

But TiVo said the workaround software still infringed on its patent and asked the district court for a permanent injunction. TiVo prevailed but Dish appealed the ruling.

See the full article here.

Patent Exploitation "Made in Germany"

A press releaseappeared today, August 4, 2009, at PR Newswire that really caught my eye.  The article describes the importance of considering patent value in lending decisions and in potentially avoiding bankruptcy.

I was retainedby a public company several years ago to explore their industry for potential infringers of the patent that formed the foundation for their financial software.  The software offered them a competitive advantage and through our research we identified several companies that appeared to have potentially infringing products.  Before we could expand our research the company filed for bankruptcy and was liquidated.  I approached counsel for the trustee, but was unsuccessful in getting their interest in exploring further the potential income stream that might be derived from the patent.  I believe this was a tremendous lost opportunity and may in large part be due to lack of focus on the asset value of patents in bankruptcy.

Here is the press release:

Economic experts expect up to 35,000 business failures in Germany in 2009. Intangible assets such as patents are not sufficiently taken into account by many banks when making lending decisions. This is proved by a new study by the KfW banking group."A misjudgement which can cost companies their existence. Active patent management is essential to ensure it does not come to this and this is especially true in times of economic crisis," says Daniel Papst, Patent Attorney at Papst Licensing GmbH & Co. KG. "Successful patent exploitation can prevent bankruptcy."

For this reason, SMEs should no longer regard intellectual property rights merely as an instrument to block competitors, rather they must view them as a core element of an "offensive corporate strategy" - for example, in order to tap into new markets. "In doing so, they require assistance. Particularly if there is a risk of inability to make payments due to patent infringements, it is vital to take early action," continues Papst. The expert in patent exploitation knows exactly what he is talking about.

His father's company, Papst Motoren, was subject to wide-scale patent infringements. In the 1980s, competitors, above all in Asia, began to illegally copy the patented drive motors of Papst Motoren GmbH & Co. KG and dump them on the world market. The founder Georg Papst did not think that he was in a position to be able to effectively proceed against the infringements of his patents. In 1992, the house banks cancelled the line of credit and Georg Papst had to sell his company. He invested the revenue from the sale, at high risk, in buying back the around 600 patents and patent applications in order to prosecute the infringements of them. He founded Papst Licensing GmbH & Co. KG, bought the products of the infringers and examined them. If he were able to ascertain patent infringement, he would call in licence fees from the patent infringers. It was a David against Goliath battle. The patent-infringing companies thought that they could sit out the problem and that Georg Papst would run out of funds. However, he stuck to his guns and took the case to court where necessary. This resulted in more than 140 licensing agreements with many well-known companies in the IT and electronics sectors.

Today, Papst Licensing GmbH & Co. KG offers companies professional prosecution services in the event of patent infringements. The aim is always to agree a licensing agreement with patent infringers. "Particularly in the case of companies facing bankruptcy, there is the risk that key patents will be simply sold as fast as possible, instead of putting the company on a more stable footing as a result of licence income generated at an early stage," concluded Papst.

Protection of Business Method Patents Outside the United States

The above-titled article in the Vol.1 No.5 May/June 2009 print issue of Landslide (a publication of the ABA Section of Intellectual Property Law) by Eugene F. Derényi, Vivien Tzau, Nicholas Zweck, Huw Evans, Ramesh C. Dhawan, Anuj Kulshreshtha, Lena Shen, Kazuhiro Yamaguchi, Indra Bhattacharya, and Wayne McMaster (practitioners in Australia, Canada, China, India, Japan and the U.K.) includes comments "on the level of protection offered in those countries for equivalents to business method patents granted in the United States."

See the following excerpt from the China section:

The trend of the Chinese Patent Office (SIPO) is to allow business method patents. Nevertheless, the requirements of patenting business methods are strict, and SIPO is still very careful with the examination and approval of business method patent applications. Until now, only a very insignificant number of applications for business method patents have been approved.

In late 2002 and early 2003, the intellectual property sector in China, especially in the financial fields, gave much attention to the question of patentability of business methods. The granting of two business method patents filed by CitiBank was the trigger for such discussions...

Article 25 of the Chinese Patent Law prescribes that patent rights shall not be granted to rules and methods for mental activities. Generally speaking, business methods are categorized as (1) common business modes and (2) computer software-related business methods. The first category of subject matter is regarded as rules of pure mental activities and is not granted patent protection. The second category may be patented if certain requirements are met.

As it stands, the requirements for business method patents in China are as follows.
(1) A business method patent application must be an invention that implements a business method through computer or network technologies, rather than software technology per se expressing and implementing such a method.
(2) The claims of a business method patent application must solve technical problems, adopt technical solutions, and acquire technical effect.
(3) The business method must be novel and inventive.
(4) The invention should be able to capable of repeated application in industry and business activities.

There is yet to be a case dealing with infringement of a business method patent in China.