Archive for May, 2010

When Making Accusations of Infringement, Be Ready to Assert Patent

May 28, 2010

Earlier this week, in Aspex Eyewear, Inc. v. Clariti Eyewear, Inc., the Federal Circuit held that an allegation of infringement, followed by three years of silence, equitably estopped the patentee from suing the defendant for infringement.

On March 7, 2003, Aspex sent Clariti a letter regarding several of its patents that stated:

It is our understanding that some of the products sold by you may be covered by the claims of the above mentioned patents. In order to minimize further damage, we ask you to immediately confirm for us that you have stopped selling any frames, frame attachments or parts in violation of our rights under the patent[s]. We also ask you to supply us with the identity of the source of these goods and information concerning the number of pieces sold to date. We will then be in a position to reach a prompt and reasonable resolution of this situation.

* * * *

It has been our policy and continues to be our strong intention to fully and vigorously enforce our rights under the exclusive license to these magnetic frame attachments.

* * * *

We look forward to your immediate reply to this very urgent and serious matter.

An identical letter was sent on March 10, 2003, regarding U.S. Patent No. 6,109,747.  Clariti responded on March 18 requesting further information from Aspex on which of its products and which claims of the patents Aspex believed to be in conflict.  Aspex responded with further information on many of the patents on May 12, 2003, but did not include information on the ‘747 patent.  Clariti responded on June 26, 2003 that it was not infringing any valid claim of several of the patents listed in the May 12 letter.

No further communication regarding these patents took place until August 23, 2006 when Aspex accused Clariti of infringing the ‘747 patent.  After several more letters were exchanged, Clariti brought suit for infringement on March 22, 2007.

The district court granted summary judgment in Clariti’s favor based on the three years of silence after the initial letter regarding the ‘747 patent.  The Federal Circuit, in a 2-1 decision, affirmed.

Equitable Estoppel

Normally, a patent owner is entitled to damages for patent infringement dating back six years.  In certain circumstances, however, the patent owner can be estopped from asserting infringement for a shorter time period.  The elements of the defense of equitable estoppel are:

(1) the patentee, through misleading conduct, led the alleged infringer to reasonably believe that the patentee did not intend to enforce its patent against the infringer; (2) the alleged infringer relied on that conduct; and (3) due to its reliance, the alleged infringer would be materially prejudiced if the patentee were permitted to proceed with its charge of infringement.

The Federal Circuit held that several factors contributed to the equitable estoppel holding in this case.  First, its May 12, 2003 letter contained no reference to the ‘747 patent.  The defendant testified that by this omission it understood that Aspex had dropped its allegation of infringement with respect to that patent.  Second, Aspex waited three years before further contact with Clariti regarding infringement.  Clariti could reasonably rely on these two factors to assume that Aspex was no longer accusing it of infringement of the ‘747 patent.

Judge Rader dissented.  He argued that Aspex’s March 2003 letters did not show that it intended an “immediate and vigorous enforcement of its patent rights.”  Thus, Aspex did not create a clear duty to respond to the accused infringer regarding infringement of the ‘747 patent.  He argued that the letter was more like a license negotiation which does not create an estoppel.

He argued that this case is an undue expansion of the defense of equitable estoppel.  The record is devoid of any material prejudice to the defendant that would warrant the outcome in this case.  There is no evidence that Clariti took any action or inaction based on Aspex’s silence.

The lesson from this case is that once you begin sending out letters to potential infringers, especially if they are direct competitors, be ready to continue the discourse or assert the patent.  Silence can be dangerous after the initial contact.


Reducing Patent Pendency: The PTO Responds

May 24, 2010

I have received a response to my recent post Reducing Patent Pendency.  The following was received from Peter C. Pappas, Chief Communications Officer & Senior Advisor to the Under Secretary for Intellectual Property:

I wanted to clarify the USPTO’s pendency goals in response to your recent blog post on this topic.  The USPTO’s goal of 10 month average pendency to first action, and 20 month average pendency to final action, are goals that are based on the traditional method of measuring pendency. Under that measurement, total average pendency is currently about 35 months and we intend to reduce that to 20 months on average by 2015.  We intend in the next few weeks to launch a dashboard on our website that will provide gages of varying measures of pendency, including pendency numbers that will enable the public to measure pendency time inclusive of RCE’s.  As we have also said, we have set a separate goal of 12 months pendency to final action for those applicants who want it, and will be making an announcement on that in the coming weeks.

That is great that the PTO has plans to launch a new dashboard for calculating pendency and that it is working on reducing pendency in the coming weeks and months.

The PTO has apparently backed away from Secretary Locke’s written statement to the Senate Appropriations Subcommittee where he indicated that the PTO’s $2.3 billion budget request would “put the agency on a path to reduce first action pendency to 10 months and total pendency for patent applications to 20 months.” 

Mr. Pappas’s statement is that the goals are based on “traditional methods” of measuring pendency.  In other words, we still won’t have information on true patent pendency.  Just because the PTO has traditionally measured total pendency incorrectly, doesn’t mean it should continue to do so.  Director Kappos has indicated that he understands total pendency to be from first priority application to issuance or total and complete abandonment with no continuations, divisionals, RCEs, CIPs, etc.  Pages 90-92 of this PPAC transcript.  That is what total pendency means.  The PTO needs to use that information to be more transparent in pendency numbers.  At a minimum, they need to take RCEs into account.  The current numbers are simply misleading.

Don’t get me wrong, the PTO can do a lot of things to reduce pendency.  Anything they do to reduce it will be helpful.

PTO Expands Application Acceleration Program

May 21, 2010

In November, the PTO announced a pilot program where small entity patent applicants could receive special, accelerated patent examination for a pending patent application in exchange for abandoning another unexamined pending application.  The program would encourage applicants to review their pending applications to determine if there were any that could be abandoned, thereby reducing the PTO backlog of unexamined applications.  In return, the PTO would take up another of that entity’s applications out-of-turn and examine it in an accelerated fashion.

Earlier this week, the PTO announced that it was significantly expanding the program.  The program is now open to all applicants, not just small entities.  The PTO is limiting the program to 15 applications per applicant.  To participate, applicants must submit the necessary materials prior to December 31, 2010.

This may be the first of several PTO initiatives that could implement a quasi-deferred/accelerated examination regime.  The PTO used to have the “petition to make special” procedure such that when an applicant or invention met certain requirements, the applicant could petition to have the application “made special” and examined out of order.  The PTO has several other initiatives where technologies that are classified as “green” or the like may also be examined out-of-turn.

A true deferred examination procedure would be more efficient than these new procedures.  Deferred examination probably requires action from Congress, which seems more and more unlikely.

House Introduces PTO Fee Bill

May 19, 2010

House Judiciary Committee Chairman John Conyers (D-MI) and Ranking Member Lamar Smith (R-TX) introduced a new bill to provide the PTO with fee-setting authority and to prevent PTO user fee diversion.  The text of the bill is available here.  A press release concerning the bill is available here.

The bill provides the PTO Director with the authority to set fees by rule, fees that are currently set only by statute.  Fees are to be set with the consultation of the Patent Public Advisory Committee (PPAC) and the Trademark Public Advisory Committee (TPAC).  The bill indicates that the PTO is supposed to consider a reduction in fees in years where that is feasible.

The bill also establishes a revolving fund into which any fees that the PTO collects in excess of its budgeted amount and expenses are to be deposited.  This fund would be available for the PTO to use to cover expenses in other fiscal years when needed.  This provision would effectively end fee diversion because all collected fees would be available for PTO use in a later fiscal year if not needed during the year in which they are collected.

Other provisions include the establishment of a micro-entity for new individual filers who would receive a 75% reduction in fees, and the PTO would have the authority to enact a temporary 15% surcharge on fees (presumably until they can get the new fees set by rule?).  Curiously, the bill contains a 10-year sunset provision.

What Does This Mean for Patent Reform?

Basically, the House has thrown down the gauntlet on the Senate bill.  The House action was foreshadowed in a hearing earlier this month where Judiciary Committee members were not enthusiastic about the Senate’s version of patent reform, but questioned Director Kappos about whether he would accept a bill that merely addressed fee-setting authority and fee diversion.  So as not to appear to be giving up on comprehensive reform, Kappos indicated that he was not in favor of such a bill.

The House bill has bipartisan support and would appear to be able to pass the House.  The question is whether the Senate would hold it up in order to get S. 515 passed.

Certainly if the House bill were enacted, many members of Congress would feel less desperate to pass comprehensive reform.  It would almost defintely signal the end of comprehensive reform in this Congress.

Stay tuned . . .

Contempt Proceedings or New Infringement Trial?

May 17, 2010

You’ve just been through a multi-year patent infringement lawsuit that cost you several million dollars in attorneys’ and experts’ fees, you’ve defended your patent on appeal to the Federal Circuit, and now you’ve finally won an injunction to keep your competitor from infringing the patent again.  Several months after the conclusion of the case, you notice that your competitor now has a different product that you believe also infringes your patent.  What do you do?  Do you have the time, money, and most of all energy to go through enforcement proceedings again?

If a party violates a court order, such as a permanent injunction, that party may be guilty of contempt of court.  The court usually conducts contempt proceedings where it determines whether in fact its order has been violated and to give the party a chance to respond.  If found guilty of contempt, the party usually faces sanctions and more onerous burdens in the future.

An example of such a proceeding took place in Tivo, Inc. v. EchoStar Corp.  A jury found EchoStar guilty of infringing Tivo’s patent and awarded Tivo $74 million in damages.  The court also issued a permanent injunction against EchoStar.  Tivo then filed a motion that EchoStar was in contempt of the court’s injunction order in that its redesigned products still infringed its patent.  The district court agreed, awarding Tivo $90 million in sanctions against EchoStar and ordering that it must seek the court’s approval before marketing other redesigned products.  The Federal Circuit affirmed this order on appeal.

The question that arises in these situations is:  when are contempt proceedings appropriate and when does the newly alleged infringement require a whole new infringement trial?  The Federal Circuit granted EchoStar’s petition for rehearing en banc to clarify this issue of the law.  Specifically, the court will address the following questions:

a) Following a finding of infringement by an accused device at trial, under what circumstances is it proper for a district court to determine infringement by a newly accused device through contempt proceedings rather than through new infringement proceedings? What burden of proof is required to establish that a contempt proceeding is proper?

b) How does “fair ground of doubt as to the wrongfulness of the defendant’s conduct” compare with the “more than colorable differences” or “substantial open issues of infringement” tests in evaluating the newly accused device against the adjudged infringing device? See Cal. Artificial Stone Paving Co. v. Molitor, 113 U.S. 609, 618 (1885); KSM Fastening Sys., Inc. v. H.A. Jones Co., 776 F.2d 1522, 1532 (Fed. Cir. 1985).

c) Where a contempt proceeding is proper, (1) what burden of proof is on the patentee to show that the newly accused device infringes (see KSM, 776 F.2d at 1524) and (2) what weight should be given to the infringer’s efforts to design around the patent and its reasonable and good faith belief of noninfringement by the new device, for a finding of contempt?

d) Is it proper for a district court to hold an enjoined party in contempt where there is a substantial question as to whether the injunction is ambiguous in scope?

Chief Judge Michel: Fellow Citizens: Be On Guard

May 13, 2010

In a preview of what Chief Judge Paul Michel of the Federal Circuit plans to focus his energy on after he retires from the Federal Circuit at the end of the month, he recently addressed examiners at the USPTO.  His address should serve as a dire warning to the country.  The following is a summary of the points of his speech.  The complete speech is available here.

American economic security is threatened because our jobs, talent, technology, and production have been leaving this country for places like China and India.  We cannot compete on the cost of labor, but previously we have taken the lead in research and development.  Now, that leadership is waning. 

Research and development requires money and investment.  Public finance is largely unavailable due to fiscal mismanagement over the last decade.  Given the huge fiscal deficits facing the country, it is unrealistic to hope for large government investment.  Therefore, we must turn to private investment.

How does one get venture capitalists and other investors to provide cash and capital necessary to sustain new R&D endeavors?  By providing such investors with a reasonable return on their investment in the form of profits.  In general, a newly formed entity engaging in R&D has only a single asset:  its intellectual property.  Thus, “[t]he answer is faster, sounder, and clearer patents.”

Patents were important during technological advances in the 1800’s and during several other instances in our country’s history:  before and during World War I, after World War II, and during the information processing revolution of the 1990’s.  This was the last time the US had a balanced budget.

What is wrong with the patent system?  The PTO has suffered through at least a decade or two of neglect and underfunding.  Although many new innovative products have short life cycles, many patents take 4-6 years or more to make it through the PTO.  The 18 month publication requirement makes this even more problematic as competitors, including foreign competitors, can copy the invention with impunity until many years later when the patent issues.  By that time, the product cycle may be over, rendering the patent useless.

Several PTO problems on the funding front include a 30-year old computer system and too few experienced examiners.  The average experience level of the 6,000 PTO examiners is about 3 years.  It takes that long for new examiners to become competent and efficient.  Before that, many allow claims they should not allow and reject claims they should not reject.  This simply adds to the delay for legitimate inventions and permits issuance of more bad patents.  After about three years, many examiners are hired by the private sector, whether law firms or elsewhere, and make substantially more money than they make at the PTO.

There is too much public and congressional inaction on this problem.  The PTO needs a large influx of cash to update its computer system, hire more examiners, and increase the salaries of more experienced examiners to prevent them from leaving the PTO.

Congress should immediately allocate $1 billion to the PTO that could be used to fix these problems.  Since 1992, Congress has diverted over $900 million in patent fees to other uses.  This fiscal year, the PTO expects to collect $150-250 million more than its projections last October.  This money will also be diverted back to the general coffers.  Fee diversion needs to be ended permanently.  New Director David Kappos is doing a great job with many new initiatives, but without this influx of money, it will be difficult for him to make a significant difference.

Other ways the PTO could improve operations include opening satellite offices, raising examiner pay levels by taking them off the General Schedule, and providing the PTO the authority to conduct deferred examination which will direct PTO resources towards examining applications where the invention clearly warrants it.  Most of these changes require congressional action that seems to be lacking.

If we don’t act quickly on these matters, we risk losing our status as a technological leader.

HT:  Patently-O.


It should come as no surprise that I think Judge Michel is right on with this speech.  Bad patents have gotten a lot more play in the national media than the current state of affairs in the PTO and the patent system regarding good, legitimate inventions that need protection.  There is also the anti-patent lobby (such as those challenging the Myriad patents) that argues, without much support, that patents are unnecessary to incentivize investment in R&D.  All patents do is block competitors from using the technology.  Common sense tells you that without a legitimate return, investors won’t invest in new technologies or R&D.  The judge’s suggestions are badly needed.

As far as a bailout for the PTO, given Congress’s theft of PTO fees through fee diversion, I wouldn’t consider it a bailout, but simply a return of the money previously stolen.  This would go a long way toward fixing the state of the PTO.

Reducing Patent Pendency

May 11, 2010

The Obama Administration has been trumpeting an unrealistic goal of 10 months to first Office Action and 20 months total pendency for patent applications.  This would be the real total pendency of patent applications, not the PTO’s current pendency numbers that count RCE’s and continuing applications as abandonments.  Several initiatives have been discussed, proposed, and implemented towards this goal.  What is the status?

What Happened to Deferred Examination?

In February 2009, the PTO held a roundtable discussion to determine whether there was support for a system of deferred examination.  The general sentiment at that meeting was in favor of such a system.  The main holdup was to work on the details of implementation.  The PTO even extended the comment period on deferred examination to May 23, 2009.  Since then, there has been almost no discussion of the issue.

The purpose of deferred examination would be to reduce the PTO’s enormous backlog of unexamined applications by weeding out those that applicants choose not to have examined.  This should also decrease the pendency of applications that applicants do want examined.  The key to successful implementation of a deferred examination system is deferment of the fees for examination.  Unless an applicant can save on fees, it will generally not defer examination of the application.

Deferred examination would almost certainly require a legislative change.  Yet, the pending patent reform bills in Congress contain nothing on deferred examination.

Is Count Reform Working?

Since new PTO Director David Kappos took over leadership of the PTO, he has implemented changes to the examiner count system in an effort to keep examiners from “churning” RCEs.  Examiners now get less production credit for RCEs and thus have less incentive to force them on applicants.  The PTO announced that the changes to the system went into effect the week of February 18, 2010.

Estimates are that about 200,000 of the 460,000 applications filed during FY2009 were applications that were “refiled”, many as RCEs.  These refilings thus account for nearly 43% of all applications filed.

In March, less than a month after implementation of the changes, Hal Wegner, a highly-respected patent commentator and patent attorney with Foley & Lardner, declared that “‘Count’ Reform Has Failed.”  He noted that based on the PTO’s computer model on patent pendency, the PTO projects that RCE filings for FY2010 will drop only from 30% of all filings to 28% and that the drop will only reach 22% of filings by FY2014.  During the same period, pendency will drop from 42.6 to 34.6 months, a drop of nearly 19%.  This 8 month drop does seem rather significant.

Then, in April, Mr. Wegner published a paper entitled “Commerce Department Pronounces ‘Count Reform’ DOA.”  He suggests that the Commerce Department White Paper supporting patent reform implicitly acknowledges this fact and “sub silentio rejects further count reform as a solution” to the backlog.  He goes on to say that the PTO has “candidly admitted” the failure of count reform through the projections of only a slight decrease in RCE filings as cited in his March 2010 report.  Finally, he suggests that the Commerce Department paper argues to abandon count reform and simply hire more examiners.

I agree with Mr. Wegner that count reform, especially in its current diluted form,  is not a complete solution to the pendency and backlog problem and will not eliminate RCE “churning.”  With all due respect, however, I think it’s a bit too early in less than a month after implementing the change to call it a complete failure.  I agree that the Commerce Department paper was simply a political tool to get Congress to pass patent reform and does not address other proposed solutions to the PTO’s problems; but I don’t see any admission or acknowledgment from the PTO or the Commerce Department that count reform has failed.  Let’s give it some time and possibly take it further before we give it up for dead.  And, we should remember that some RCEs are warranted in certain circumstances.

Would Worksharing Help?

Director Kappos has been pushing hard for patent worksharing with other leading patent offices such as Europe,  Japan, Korea, and China.  This is a form of deferred examination where the application will be examined first in the country where the application is originally filed, usually the applicant’s home country.  Examination would be accelerated in that country; only once the original examination is complete would the application be examined in other countries.  Those countries would benefit from the original examination in that the claims and arguments could be tailored with respect to the original examination, thus resulting in more efficient subsequent examinations.

Currently, because the US does not have deferred examination as many other countries do, the US PTO tends to do the lion’s share of original examinations.  This at least partially explains the extreme backlog of applications at the US PTO.

Although it appears to have been removed in the Manager’s Amendment, S. 515 as introduced stated that “search and examination functions are sovereign functions to be performed by US citizens who are employees of the US government.”  This provision would make patent worksharing very difficult.


Many initiatives and changes at the PTO could work together to reduce patent pendency to more reasonable levels.  It is probably impossible to cut total pendency to 20 months (and many applicants would not want this), but cutting it from its present levels of over 4 years can certainly be achieved.

House Judiciary Committee is Less Than Enamored with Senate Manager’s Amendment

May 6, 2010

Yesterday, the House of Representatives Judiciary Committee conducted an oversight hearing of the PTO.  Director Kappos and Robert Budens, president of the Patent Office Professional Association, the PTO employees’ union, were several of the witnesses who testified.  Although ostensibly to discuss operations at the PTO and happenings during Director Kappos’ first year in office, the discussion quickly turned to the issue of patent reform.

Although the House passed patent reform bills that died in the Senate during the last several congresses, this time the House seems less inclined to do so.  Several members of the committee expressed serious dissatisfaction with the Senate Manager’s Amendment.

Some members of the committee, chiefly Rep. Zoe Lofgren (R-CA), questioned Kappos as to whether he would accept a simpler patent bill that merely addressed the PTO’s most serious problems of funding.  Such a bill would cover the issues of fee diversion and PTO fee-setting authority.  She clearly does not support the Senate reform bill of which Kappos is an ardent supporter. 

Others on the committee also posed questions along this line.  In an exchange with Chairman John Conyers (D-MI), Kappos responded that “[w]e have a heritage opportunity on the part of the intellectual property system to pass legislation that has been generations in the making and badly needed.”  Rep. Lofgren found Kappos’ refusal to consider a simpler bill dealing only with funding to be “stunningly disappointing.”  Rep. James Sensenbrenner, Jr. (R-WI), a former chair of the committee, remarked that “[t]he enemy is . . . on the other side of the Capitol” in reference to the Senate bill.

During his testimony, Robert Budens was particularly critical of the post-grant review provisions of the Senate bill.  He believes that these administrative challenges will “siphon resources” from the examining corps to handle these procedures which would further exacerbate the backlog and increase application pendency.

Negotiators for the two houses of Congress have apparently been unable to resolve the differences between the bills.  This may further explain why the Senate bill has not yet reached the floor.  It is very difficult to get a solid read on statements by members of Congress as to whether they are being sincere or are merely conducting political grandstanding.  After yesterday’s hearing, however, it does appear that comprehensive patent reform is less likely in the current Congress.

PTO Issuing Many More Patents in 2010

May 5, 2010

Earlier this week, Patently-O reported that the PTO is issuing patents at a much higher rate in 2010 compared to 2009.  Last year the PTO issued 167,349 utility patents or about 3,218 per week.  The 2010 rate wasn’t significantly higher in January, but has been increasing as seen in the chart on the Patently-O site.  In April 2010, the PTO issued an average of 4,385 utility patents per week, a 35% increase over the 2009 weekly average.  If this rate continues, the PTO will issue about 220,000 utility patents in 2010 or over 50,000 more than in 2009.

Is the PTO allowing patents at a higher rate than its notoriously low rates of under 45% in recent years?  Probably so, but it’s too early to get a clear indication of where the allowance rate is going.  That is, of course, a good sign for applicants and innovators.  Patents issuing in the first third of 2010 were probably allowed during the third and fourth quarters of 2009.

Is the PTO making progress on the backlog of over 700,000 unexamined applications?  They had made slight headway at the end of FY2009.  Again, it’s too early to tell, but this would also be good news.

Other PTO News

In the PTO’s Spring 2010 unified agenda, one of the proposed initiatives under consideration within the Office is to stop issuing ribbon copies of patents and to instead issue them electronically.  This would cut patent pendency down by a month or two.  It typically takes the PTO 2-4 months (although this time has been decreasing) from the time the Issue Fee is paid until the patent issues.  Others have been suggesting issuing patents electronically for a while to reduce pendency.  There is no specific information on how or when the PTO may consider this proposal other than to note that applicants who still desire a ribbon copy of their patent can obtain one for an additional fee.

Certainly the Rogan and Dudas years will go down as the dark days at the PTO.  Kappos is clearly doing some good work to make improvements in the PTO’s patent business.