Archive for March, 2011

America Invents Act Introduced in House

March 31, 2011

Prior to passage of S. 23 by the Senate, the name of the bill was changed to the America Invents Act.  Yesterday, Rep. Lamar Smith (R-TX), chair of the Judiciary Committee, introduced the bill into the House as H.R. 1249.  The bill is very similar to the one passed by the Senate, but there are some striking differences.

Post-Grant Review

The House version of the bill seeks to expand inter partes post-grant review over the Senate’s version.  S. 23 only permits the first-window review within 9 months of a patent’s issuance, while H.R. 1249 would expand the time to 12 months. 

Perhaps more importantly, the House version seeks to lower the threshold for instituting the review.  S. 23 requires that the petitioner show that it is more likely than not that at least 1 claim of the patent is not patentable.  H.R. 1249, by contrast, would merely require the petitioner to demonstrate a substantial new question of patentability.  This is the current standard for instituting a reexamination proceeding.  The PTO hardly ever denies the existence of a substantial new question of patentability in the current reexamination context.

Prior User Rights

Another major difference between the bills concerns prior user rights.  Under current law, there is a limited defense of prior user rights as against business method patents.  H.R. 1249 seeks to expand this defense to nearly all inventions and areas of technology.

Prior user rights is a defense to patent infringement.  The accused infringer must prove that it actually reduced an invention to practice more than one year before the  patent owner filed a patent application for the invention and that it commercially exploited the invention prior to the patent application’s filing date.  The burden is on the party asserting the defense.  It is currently limited to business methods.

Prior user rights reward parties that keep innovation secret and such rights weaken the value of patents.  This is contrary to the goal of the patent system, which is the public disclosure of new inventions to add to the public knowledge.  To be sure, trade secrets have their place, but the owner of a trade secret holds the technology in secret with the risk that it could be patented by someone else.  An expanded prior user rights defense would provide an incentive to keep new inventions secret.  Why bother with the patent system when you can simply practice your technology in secret and be shielded from liability for infringement of other parties’ patents?

It is clear that there will be a huge fight over this issue.  John Vaughn, executive vice president of the Association of American Universities, decried prior user rights suggesting they would severely damage universities’ ability to protect patents.  Similarly, Steven Miller, vice president and general counsel for intellectual property at Procter and Gamble, said that expanded prior user rights could be a sticking point for some stakeholders and could cause them to pull their support for the bill.

On the other side of the issue, Mark Chandler, senior vice president and general counsel of Cisco Systems, argued that switching to a first-to-file regime requires a robust prior user rights defense.  Otherwise, challengers can hold companies hostage with bogus claims on improvements to existing products.  PTO Director David Kappos argued that the defense is helpful to manufacturers and small businesses.  The expanded defense is necessary to stop companies that are moving from the US to other countries that have a stronger prior user defense.

Meanwhile, a member of the Subcommittee on Intellectual Property, Competition and the Internet, Rep. Joe Sensenbrenner (R-WI), argued that prior user rights is “a get out of jail free card” for Chinese intellectual property pirates.  He believes this issue could be the “poison pill” that kills the patent reform effort.

We should also expect to see the fight continue on the change from first-to-file to first-inventor-to-file.  This provision is the same in both the Senate and House bills.

IPWatchdog has an extensive post on the prior user rights issue.


District Court Holds False Marking Statute is Constitutional

March 28, 2011

A New York district court judge has explicitly disagreed with the Ohio judge who last month ruled that the Patent Act’s false marking statute is unconstitutional as violating the Take Care Clause that reserves the power to enforce laws to the Executive Branch of the government.

Specifically, the New York court ruled that the statute is civil in nature and not a criminal statute as the Ohio court had held.  Therefore, the law does not give private entities and individuals the ability to exercise power that is properly reserved to the Department of Justice.  The statute provides the Executive Branch with sufficient ability to assert its interests and to control such cases.

In the Ohio case, the government moved to intervene to defend the constitutionality of the law after the court’s initial ruling.  The court reluctantly permitted the government’s motion while stating that the Justice Department had received sufficient notice of the constitutional challenge in the case at an earlier date and failed to intervene at that time.  Nevertheless, the court permitted the motion, but maintained the statute’s unconstitutionality.  The government had also argued that the statute is civil and not criminal in nature.

The government filed a notice of appeal in the Ohio case last week.  This issue will need to be addressed by the Federal Circuit.

House to Take up Patent Reform Next Week

March 25, 2011

The Patent Reform fight is about to move to the House of Representatives.

The National Journal is reporting that Judiciary Committee Chairman Rep. Lamar Smith (R-TX) plans to introduce a Patent Reform bill in the House next week.  The Subcommittee on Intellectual Property, Competition and the Internet has scheduled a hearing for Wednesday, March 30.

The National Journal article suggests that the House bill will differ from the Senate bill on the issues of post-grant review and fee diversion.

Burden of Proof for Patent Challenges

March 22, 2011

On April 18, the Supreme Court will hear arguments in Microsoft v. i4i regarding the proper burden of proof for challenging the validity of an issued patent.  I previously covered the issues in this case, including the meaning of the various standards of proof discussed below.

Last week, the US Government filed an amicus brief where it, somewhat surprisingly, sided with the respondent that the burden to challenge a patent should be clear and convincing evidence, regardless of whether the prior art had been previously considered by the patent examiner.

United States Brief

The Solicitor began the brief by arguing that § 282’s presumption of validity merely codified Supreme Court precedent prior to enactment of the 1952 Patent Act that required a higher standard of proof than a preponderance to overturn an issued patent.  The prior Supreme Court decisions cited in the brief refer to the challenge of a patent as a collateral attack on the agency’s decision to grant the patent.  Thus, principles of administrative deference require a heightened standard of proof.

The next argument is that permitting a lay jury de novo review of the PTO’s decision to grant the patent is inconsistent with administrative law principles.  The patent examiner, having expertise in the field of the invention, conducts fact-finding pursuant to the PTO’s statutory authority.  The heightened standard to challenge the issued patent supports the theory of the PTO’s expertise, which the lay jury clearly does not possess.

The Solicitor then rebuts the petitioner’s argument of PTO bias in the examination process in favor of patent applicants.  To take this argument to the extreme, why have a PTO examination process at all?  Why not simply issue all patent applications and let challengers fight them in court?  Congress has made the determination that ex parte patent application proceedings strike the proper balance between agency resources and protection of the public interest.

Patents create property interests on which patent owners and the public rely.  Many parties invest significant money on innovation and the patenting process.  In return for the inventor’s disclosure of the invention, he may be granted a patent if the PTO determines that the application meets the statutory standards.  To permit a jury, whose decision is granted deference on appeal, the ability to overturn the agency decision on a mere preponderance of the evidence, would disrupt this reliance and perhaps cause less investment in and disclosure of inventions.  The agency’s decision should only be overturned if it is clearly erroneous.

When a party challenges the validity of a patent, it has the choice to present the evidence of invalidity in a court proceeding or in a reexamination proceeding before the PTO.  Courts, unlike the PTO during a reexamination proceeding, do not have the ability to permit amendments or narrowing of a patent claim.  Thus, there is the lower burden of establishing invalidity in a reexamination proceeding that requests the agency to reconsider its own decision.  This justifies the higher burden of proof for challenging the patent in court even when the prior art had not been previously considered by the PTO. 

Reexamination proceedings should be encouraged as an alternative to litigation.  The lower burden of proof is one way Congress has chosen to do so.

Furthermore, having different burdens of proof for evidence that was considered by the patent examiner and that which was not puts the jury in a position to second-guess the PTO.  Difficult questions may arise as to whether the evidence is actually different or is merely cumulative of what the examiner did consider.  It also requires the jury to determine what the examiner would have or should have done when confronted with the evidence.

Any changes to the settled standards of proof for patent challenges should be made by Congress and not by the Court.

The Court’s Options

It is generally accepted that the Supreme Court has three options for this case. 

First, it could affirm the Federal Circuit and continue to require all challenges to issued patents to be by clear and convincing evidence.  This seems unlikely.

Second, it could change the standard to permit all challenges to be proven by a preponderance of the evidence.  If it goes this route, what does the statutory presumption of validity mean? 

Third, it could take a hybrid approach.  For prior art that was considered by the patent examiner, the burden would remain clear and convincing evidence.  For all “new” evidence, the standard would only be a preponderance of the evidence.

While this third option seems like the fairest and most logical approach, it is also the one that has the greatest unintended consequences.  Under US law, patent applicants have no requirement of performing a search of the prior art before or during the patenting process.  If the applicant, patent attorney, or others that are substantively involved in the prosecution have knowledge of prior art or other evidence that is material to the patentability of a pending claim, they have the duty to disclose this evidence to the PTO.  There is an exception, however, if the evidence is cumulative to evidence already of record.

What do you think will happen if the Supreme Court chooses this hybrid burden approach?  Patent applicants will obviously have an incentive to flood the patent examiner with prior art references, whether or not the applicant believes them to be relevant to patentability.  This will significantly increase the burden on an examination process that is already time-crunched.  It will also place the burden on juries to determine whether the evidence was not considered because it is cumulative.

A Fourth Approach

A group of law, business, and economics professors has suggested yet another approach.  They recognize that the hybrid burden suggested above would cause a flood of submissions to the PTO.  Thus, they suggest that the clear and convincing standard should only apply to “prior art or arguments actually discussed in writing by a patent examiner in an office action.”  Their brief does suggest that applicants can also discuss specific references on the record at their own behest to get the higher burden of proof.  In effect, a small percentage of references considered by the examiner during prosecution actually reach the level of discussion on the record or use in a rejection.  Thus, the proposal seeks to limit the higher burden to those few instances.

This proposal, unfortunately, does not live in the real world.  First, it basically renders irrelevant any prior art that applicants must now submit to fulfill their duty of disclosure to the PTO.  Why should applicants bother to or be required to submit references to the PTO if we assume that the references are ignored by the patent examiner?  Why not just do what a number of countries, including the EPO, do and not require any applicant submissions?

Next, the proposal seeks to encourage applicants to discuss references on the record that are not raised by the patent examiner.  This is actually a good suggestion provided that we eliminate most of the Federal Circuit’s jurisprudence on the issue.  The risk of estoppel, inequitable conduct, unintended claim construction, and frankly malpractice is simply too great to take this suggestion seriously.

There is no question that patent examination could be conducted in a better and more efficient and focused manner if applicants felt free to have frank discussions on the record with the patent examiner.  The Federal Circuit has done too much, however, to discourage this type of free exchange.  It simply won’t happen.

The professors even want their proposal enacted retroactively.  They suggest that applicants who relied on the current regime to obtain their patents and now desire the higher burden for challenging their patents could simply file reissue applications or requests for reexamination of their patents. 

This argument is a red herring.  Under the law, a reissue application can only be filed to correct an error in a patent.  An applicant should argue that the error in his patent is that he didn’t discuss references on the record that the patent examiner didn’t consider to be relevant enough to the patent to use to reject the claims in an office action?  Reexamination requires a substantial new question related to patentability.  If the prior art is already of record, the applicant must now argue that it does constitute a new question?  Are you serious?  This would be suicide for the patent.


Because the PTO has, justifiably or not, been getting a lot of bad press for issuing “bad” patents, the Supreme Court will probably feel obligated to change the burden of proof for challenging an issued patent.  And naturally, they would not have agreed to hear the case if they didn’t intend some change.  The question is, what will it be?

I sympathize with the difficulty in challenging patents and see merit in the view that the examiner’s expertise should not warrant the higher standard for prior art not considered during prosecution (by considered, I mean submitted or found by the examiner, not that the art had to be actually discussed on the record).  The consequences of this change, however, will significantly alter the patent process, both during prosecution and during later litigation.

The Chief Justice has recused himself from this case, so it will be heard by the other 8 justices.  A decision is expected by the end of the Court’s term in June.  i4i has collected the various briefs and other documents in the case here.

False Marking Must be Pled with Particularity

March 15, 2011

In the ongoing saga of the false marking cases . . .

Today, the Federal Circuit issued a wirt of mandamus ordering the district court to dismiss a false marking case in In re BP Lubricants USA Inc.  The court held that, like inequitable conduct, particular facts relating to allegations of false marking must appear in the initial complaint.

In most cases in Federal Court, the initial complaint is only required to put the defendant on notice of the plaintiff’s allegations.  These pleadings are often quite short on facts and merely point to the statute and the facts that give rise to the cause of action in a very general manner.  The particular facts of the case are then developed during discovery through interrogatories, document production, depositions, and the like.

Federal Rule of Civil Procedure 9(b) requires that allegations of fraud or mistake must be pled with particularity of the circumstances constituting the fraud or mistake, while the intent or knowledge of a person’s mind may be pled generally.  The Federal Circuit previously held that this provision applies to inequitable conduct allegations because these are generally allegations of fraud on the Patent Office.  Today, the court held that Rule 9(b) also applies to false marking allegations.

In this case, the district court did not rule otherwise, but ruled that the plaintiff had met its burden.  The complaint alleged that (who) BP had deliberately and falsely marked (how) at least one line of motor oil products (what) with expired patents and continues to so mark (when) throughout the US (where) with intent to deceive competitors and the public.  The district court said that this was sufficient under Rule 9(b).  The Federal Circuit disagreed.

The Federal Circuit found the complaint deficient because it did not allege any facts regarding BP’s knowledge of the expiration of the listed patent.  The plaintiff argued that BP was a sophisticated company with a lot of experience with patents.  This is simply not sufficient to meet the requirements of Rule 9(b).  There must be some allegation that the defendant knew the patents had expired or otherwise intended to deceive the public.

The Federal Circuit thus ordered the case dismissed.  Given that the case presented an issue of first impression, the court did grant the plaintiff leave to re-file the case provided it can meet the requirements of Rule 9(b) and provide particular facts related to BP’s state of mind.

Federal Circuit Nomination Update

March 14, 2011

As the U.S. Senate continues its glacial pace on judicial nominations, Jimmie Reyna’s nomination finally cleared the Judiciary Committee last week.  He still requires a confirmation vote by the full Senate before he can take a seat on the court.  Five and a half months from nomination to Committee vote isn’t too bad.

Meanwhile, Edward DuMont’s nomination continues to languish at the Committee.  Although nominated last April, he has yet to receive a confirmation hearing.  One news source on lesbian, gay, bisexual, and transgender news has begun to speculate that the hold-up might be due to Mr. DuMont’s sexual orientation.  There are apparently no openly gay Federal judges.  The Committee has, however, scheduled a hearing for J. Paul Oetken who was nominated to the District Court in New York City.  Boths Messrs. DuMont and Oetken are openly gay.

Judiciary Committee Chair Sen. Patrick Leahy (D-NV) would only comment that Republicans are still reviewing information on Mr. DuMont.  Ranking Member Sen. Charles Grassley (R-IA) did not comment on the delay.

S. 23 Passes the Senate 95-5

March 9, 2011

The reality of Patent Reform took one huge step forward yesterday when the U.S. Senate passed S. 23 by a vote of 95-5.  Only the senators who have been trying to stop the bill voted against it:  Barbara Boxer (D-CA), Maria Cantwell (D-WA), Mike Crapo (R-ID), John Ensign (R-NV), and James Risch (R-ID).

As expected, Sen. Patrick Leahy (D-VT) (what’s he going to do now, retire?), who takes personal ownership of the bill and the patent reform initiative, praised the passage.  He noted that similar bills have been pending for the last three congresses and that there had been eight hearings, hundreds of meetings, and dozens of briefings.  Likewise, the White House praised the passage and urged the House to pass the bill so that it can become law.  AIPLA also issued a statement commending the Senate for passing S. 23.

House of Representatives

The drama now shifts to the U.S. House of Representatives.  Judiciary Committee Chairman Lamar Smith (R-TX) has indicated that he will introduce a bill later this month.  There are already hearings planned to review the matter.  For example, tomorrow the Subcommittee on Intellectual Property, Competition, and the Internet will hold a hearing on “Review of Recent Judicial Decisions on Patent Law.”  Professor Dennis Crouch of Patently-O has indicated that he will present testimony.

Barring a huge crisis, like a financial collapse or the like, or a huge political controversy like health care reform, it seems that patent reform is more likely in 2011 that at any time since it has been introduced.  The biggest criticism, and I’m not sure that it’s warranted, that continues to be raised regarding S. 23 is that it hurts little guy and favors big corporations.  The argument goes that big corporations can afford to file massive numbers of patent applications on new ideas (although ideas are not patentable), while the little guy needs to raise capital and make sure he has a solid invention before he can afford to file.  A similar argument is made regarding start-ups and venture capitalists.  This was the impetus behind Sen. Feinstein’s proposed amendment last week.

One unknown in the debate yet is the role that the Tea Party will play.  After the 2010 election, there are vastly more Tea Party members in the House than in the Senate.  The Tea Party is supposed to be attuned to the little guy, to Main Street as opposed to Pennsylvania Avenue or even Wall Street.  It is yet unknown what roll the Tea Party will play.  This question was also raised here.

The bottom line is that it is definitely time for all interested parties, whether you favor or oppose the bill, to contact your representative and tell them how they should vote on Patent Reform.

Senate Votes to End Debate on Patent Reform Bill

March 8, 2011

Yesterday, the Senate approved Sen. Harry Reid’s (D-NV) motion for cloture to end debate on S. 23.  The vote passed by a wide margin 87-3 with only Sens. Maria Cantwell (D-WA), Mike Crapo (R-ID), and James Risch (R-ID) voting in the negative.  A final vote on the bill could come by tomorrow.

There are still a few amendments that are pending in the bill.  It is believed that these amendments will not receive debate and will be laid on the table.  The bill will likely pass in its present form.

Fee-Setting Authority

Meanwhile, the Congressional Budget Office (CBO) has issued a report on the bill that suggests that the PTO’s new fee-setting authority, as well as the new mandates on the Office, will permit it to collect $1.7 billion in additional fees in FY2011-2016.

Along those lines, Hal Wegner has been suggesting that the bill will give the PTO the ability to significantly reduce its backlog problems to the extent they are based on RCE filings and appeals to the Board.  Perhaps the PTO will simply charge $20,000 for RCE filings and $10,000 for appeals.  In that case, only really important cases will be appealed or re-filed as RCEs.

Such outrageous increases would be an extreme abuse of the fee-setting power.  If the PTO is going to use its authority to direct applicant behavior, it should simply get RCEs and appeals prohibited by statute.  This activity is the purview of Congress, not the agency itself.

If examination at the examiner level was perfect, a raise in the fees to several multiples of their current levels might make sense.  As detailed earlier, the problem is that examination is not perfect and applicants need the ability to file RCEs and appeals. 

Hopefully, the bar through the Patent Policy Advisory Committee (PPAC) will have sufficient input into the process to prevent an abuse of this type.

Senate Nearing Vote on Patent Reform

March 7, 2011

The Senate is moving closer to a vote on S. 23.  Senate Majority Leader Harry Reid (D-NV) filed a motion for cloture last week that would end debate on the bill and move it to a final vote.  The vote to end debate will likely take place after 5:30 pm today.  Amendments must be filed by 5:00.

Rep. Lamar Smith (R-TX), chair of the House Judiciary Committee, has indicated that the he will introduce a patent reform bill in the House in the coming weeks.

In order for Patent Reform to become law, both houses of Congress must pass identical bills that are signed by Pres. Obama.  If the House passes a different bill from S. 23, a conference committee must resolve the differences between the bills, with the resulting bill passing both houses.

Senate Debate on Patent Reform Continues

March 3, 2011

Yesterday, the Senate continued its debate on patent reform bill S. 23.  Several amendments were approved, including the authorization of three more satellite offices over the next three years, the creation of an ombudsman to assist small businesses with patenting, a requirement that the PTO prioritize examination of applications “important to the national economy competitiveness” such as green or clean energy technology, and authorization for the PTO to charge small entity fees for Track I prioritized examination.

First-to-Invent v. First-to-File

The real fight, however, seems to be looming over the provision changing the US from a first-to-invent system to a first-to-file system.  Sen. Dianne Feinstein (D-CA) offered an amendment to remove the provision from the bill that would change the US system.  The amendment was co-sponsored by Sens. Barbara Boxer (D-CA), Mike Crapo (R-ID), John Ensign (R-NV), James Risch (R-ID), and Majority Leader Harry Reid (D-NV).  It is interesting to note that the 6 co-sponsors represent three states, all within the same geographic region.

Proponents of the first-to-invent system essentially argue that if it ain’t broke, don’t fix it.  The US is an innovative leader with its first-to-invent system; there is simply no need for a change.  The change would harm small inventors, start-ups, and small businesses who will be forced to file patent applications before their inventions are ready.  If the change is made, the PTO will be flooded with half-baked inventions.

Judiciary Committee Chairman Patrick Leahy (D-VT) is the strongest proponent of changing to a first-to-file system.  He argued that the change is necessary to eliminate confusion and inefficiency in the patent system.  The change would add certainty and spur investment, thereby growing businesses and creating jobs.

Sen. Leahy has also expressed frustration with the slowness with which the Senate is proceeding on S. 23.  Most others would argue that there still hasn’t been adequate input and testimony from all concerned parties.  In fact, this is virtually the first time the entire Senate has debated patent reform during the latest iteration.

Debate on the bill is expected to continue today.

UPDATEThe Senate has voted 87-13 to kill the First-to-File Amendment.