Archive for October, 2013

New Patent Bills

October 31, 2013

As I noted last week, Rep. Bob Goodlatte (R-VA), chairman of the House Judiciary Committee, introduced the “Innovation Act” that contains a number of draconian provisions that would severely change the way patent litigation is conducted.  The Committee held a hearing on the bill earlier this week.

Several Republicans on the Committee, including Chairman Goodlatte and Rep. Howard Coble (R-NC) raised serious concerns about patents to “basic ideas” and how patent litigation is causing people to lose jobs.  Abusive litigation tactics in the patent realm require a bill such as H.R. 3309.

On the other side of the issue, Rep. John Conyers (D-MI), the Committee’s ranking member, cautioned against taking so much discretion out of the hands of district court judges.  He specifically objected to the limited discovery provisions and the automatic fee shifting required by the bill.  He also suggested waiting to see how the PTO and the courts handle some of the business method and post-grant reviews before expanding these proceedings.

Rep. Mel Watt (D-NC) suggested that the problem of patent trolls has been overblown.  He has apparently been reading the GAO report on patent litigation.  Some of the requirements would be overly prescriptive to the courts.

Several witnesses spoke favorably of the bill.  Former USPTO Director David Kappos suggested that the bill not be rushed through Congress.  Several provisions are good, while others require further study and revision.  Smaller inventors have not had their views heard regarding these matters.  Kappos is now a partner at Cravath, Swaine & Moore.

Meanwhile, Reps. Conyers, Watt, and Doug Collins (R-GA) have introduced the Innovation Protection Act, H.R. 3499.  This bill seeks to attack a separate problem that the PTO has been facing for many years:  fee diversion.  It would permit the PTO full access to its fees regardless of government shutdown, sequestration, or failure of appropriations.  This would be until Congress decides otherwise of course.

HT:  Patently-O.

Rep. Goodlatte Introduces “Innovation Act”

October 25, 2013

195px-Bob_Goodlatte_OfficialAfter introducing several “discussion drafts” of his bill to curb abusive patent litigation tactics, Rep. Bob Goodlatte (R-VA) has now introduced the innocuously titled “Innovation Act,” H.R. 3309.  This is his revision to the bill that he introduced in September.

Rep. Goodlatte specifically states the purpose of his bill to be ending “[a]busive patent litigation [that] is a drag on our economy.”  The bill seeks to move patent litigation away from the standard notice pleading required in virtually all other areas of litigation in federal courts (with several exceptions generally related to fraud) to a much more detailed requirement that points out specific claims of the patents that are alleged to be infringed, the theory of infringement (direct, indirect, literal, doctrine of equivalents), and a detailed explanation of how each accused product or service meets the limitations of the claims.  This type of information is currently not required until much later in the litigation process, once the parties have had an opportunity to engage in discovery.

The proposed bill seeks to make it so that many of these suits do not make it to the discovery stage.  Discovery will be limited until after a court provides a ruling on claim construction.  This will make it more difficult for patent owners to acquire information necessary to proceed with patent infringement suits.

Fee shifting under current § 285 of the Patent Act is provided in “exceptional cases.”  District court judges are provided with great discretion as to the awarding of such fees.  It generally occurs when a party has engaged in litigation misconduct, inequitable conduct, or if the case is extremely frivolous.  Whether a case is “exceptional” is in the eye of the beholder and the district court judge.

The proposed bill seeks to change the default in patent cases to a fee shifting system.  Courts will be instructed to award attorneys’ fees to the prevailing party “unless the court finds that the position of the nonprevailing party . . . was substantially justified or that special circumstances make an award unjust.”

Many other provisions from earlier bills continue in H.R. 3309.

Patent owners must disclose all parties will financial interests in the outcome of an infringement suit.  If the patent owner sues a manufacturer and its customer, the suit against the customer is automatically stayed until the suit against the manufacturer is resolved.  Civil actions against the PTO would no longer be permitted to obtain a patent; all final rejections from the Patent Trial and Appeal Board must be appealed to the Federal Circuit (what does this have to do with curbing litigation abuse?).

Post-grant review estoppel would be narrowed from grounds a challenger reasonably could have raised to only grounds he actually did raise.  In conducting post-grant reviews and similar proceedings, the Patent Office would be required to construe patent claims as the courts currently do; the office would no longer be able to use the “broadest reasonable” interpretation.  Double patenting rejections would be codified.  The practice of requiring a terminal disclaimer to overcome an obviousness-type double patenting rejection is currently a judicially created law.  The bill would slightly modify the covered business method procedure to limit it to post-AIA applications.  This procedure would also be made permanent.

Several good summaries of the bill are available here, here, and here.

A hearing before the House Judiciary Committee (of which Rep. Goodlatte is the chair) is scheduled for Tuesday to consider the bill.  The consensus seems to be that there is strong support in Congress to pass the bill.  Much of this support has been generated by the mainstream media, which has been condemning the patent system in general and “patent trolls” in particular.  Of course, most of this criticism is largely devoid of factual support or an understanding of how the system currently works.

Prior Art Searches

October 21, 2013

A question that is often asked by new inventors is:  should I do a prior art search before filing a patent application?  The answer, as in most areas of law and life in general, is that it depends.

For individual inventors and smaller companies including start-ups, in most circumstances, I would suggest that yes you should do a prior art search.  Many larger companies have a number of scientists and technologists who are familiar with the technology and what their competitors are doing.  They can also absorb the potential risks of not doing a prior art search.  Most small entities and start-ups do not and can not.

Many, if not most, new inventors are convinced that they are the only ones that have thought of the idea that they seek to patent.  They believe that they have had a flash of insight that no one else has had.  They may even do a bit of Internet research to convince themselves that they are in the clear and that there is no need to do a prior art search.  They are often surprised by the results when they do have a search conducted.

The risks of not doing a search are several.  First, and most importantly, if you plan to commercialize or market the invention as a product or service, you don’t want to get slapped with an infringement lawsuit right out of the gate.  These suits are extremely expensive even if you don’t get hit with a large damage award.  There is a risk that you will not be able to afford to defend such a suit and that all of your hard work in developing the invention, getting it through the prototype stage, and getting it to market would be wasted.  Usually, there is a significant monetary and time investment involved with these steps.  There is also a risk that a court could issue an injunction that would prohibit you from making, using, selling, or offering the invention for sale.

Second, conducting a prior art search prior to preparing a patent application may make prosecution of the application more efficient and cost-effective.  By knowing the closest prior art, the patent application and the claims may be prepared more strategically to take advantage of areas of patentability.  Claims may be prepared that get close to the prior art without encroaching on it.  It may be possible to develop arguments and strategies for convincing the patent examiner that the invention is non-obvious vis-a-vis the prior art.

You may find that the invention needs to be reconfigured to “design around” patents that are found.  This could add to the value of the invention and potentially give you a competitive advantage.  You may find, however, that someone else has a patent that directly prevents you from patenting your invention.  In such a case, you may determine whether to abandon your endeavor or seek to partner with or secure a license from the patent holder.

The main disadvantages of conducting a prior art search are that it will cost some money and that any material prior art that is uncovered must be disclosed to the Patent Office during prosecution of any patent application that is filed for your invention.  The cost is usually not significant in the overall scheme of bringing a new product or service to market and preparing and prosecuting a patent application.  In fact, a good prior art search can make these endeavors more efficient.  Most patent applicants are looking for strong patent protection in which case it is not a disadvantage to bring prior art to the patent examiner’s attention.  This will permit the patent to be “vetted” over that prior art.


A patent attorney can assist you in having a prior art search performed.  A brief written description and possibly a few drawings or sketches of the invention should be prepared.  This information is provided on a confidential basis to a professional patent search firm that will conduct the patent search.  These firms are usually located in Northern Virginia near the PTO and are staffed with engineers and scientists, at least some of whom may be former patent examiners.  The search firm provides the information to a person with skill in searching the subject matter of the invention who conducts the search.

A good “freedom to operate” and patentability search takes a couple of weeks to complete and usually costs less than $2,000, often less than $1,000.  For a “freedom to operate search,” the searchers will search that claims of US patents that are currently in effect.  For a patentability search, the searchers will also search for older US patents, foreign patents, and non-patent literature that may disclose the invention.

The results will typically include a stack of the closest 20-30 patents and other prior art references.  My practice is to provide these results to the inventor with instructions to review them in detail and to bring any that the inventor believes warrant further review by me to my attention, in any event the closest 3-4.  This saves on attorney time of having to review the entire stack.  The inventor is usually in the best position to determine any differences or similarities between the references and the invention.  At that point, we determine how best to proceed with the matter based on the search results.

One might reasonably ask why the inventor or the attorney cannot themselves conduct the prior art search on Google, the PTO website, or another search engine.  One answer is that it is far more efficient for these experts to perform the search than for the attorney to do so.  Their hourly rates are typically much less.  Second, I am always amazed that the professional searchers find prior art that I or the inventors have not been able to find.

In sum, I almost always advise a new inventor, small company, or start-up to have a prior art search done prior to marketing the invention or preparing a patent application.  In my opinion, the advantages of such a search far outweigh the risks or costs of doing so.

PTO Numbers – End of FY2013

October 15, 2013

The following is a comparison of the PTO’s numbers from September 2013 with June 2013 (at my last numbers update).  Time to refer again to the PTO’s Data Visualization Center to see how things are going.

First Action Pendency – 18.2 Months

At the end of June, first action pendency was 18.3 months, and was 21.9 months at the end of FY2012 (and 28 months at the end of FY2011).  That number is a significant improvement.  That’s a 16.9% drop in the during the fiscal year.  The PTO continues to make significant improvements in this area.

“Traditional” Total Pendency – 29.1 Months

Traditional pendency is down from 29.8 months in June and 32.4 months at the end of FY2012.  The number was over 35 months at the beginning of FY2011.  The 10.2% reduction during the year continues to demonstrate significant progress in this area.

Application Pendency with RCEs – 37.1 Months

This number is unchanged from June, but is down from 39.4 months at the end of FY2012.  This is progress, but the increasing number of RCE filings (and appeals) makes this number look better than it actually is.

Applications Awaiting First Office Action – 584,998

This number is down from 591,785 in June and represents a continued drop from 608,283 at the end of FY2012.  Even after the huge spike in new filings to beat the first-to-file transition, the PTO has worked to reduce this number.

Patent Application Allowance Rate – 53.5%, 70.7%

The first number counts RCE filings as abandonments, while the second number does not, but counts them as continuing prosecution.  These numbers are up from 52.1% and 69.4%, respectively, in June.  The 17+% difference between the two numbers is, however, troubling.  Especially considering the next number.

RCE Backlog – 78,272

Believe it or not, this number is really dropping.  At the end of June, it was at 100,403.  At the end of FY2012, the PTO reported 95,200 applications with RCE filings that awaited action; at the end of FY2011 that number had crept up to 63,487.  Progress is being made, and it needs to continue.  Perhaps the After Final Pilot Program is working as examiners churn fewer RCE filings?

Number of Patent Examiners – 7,931

Perhaps the PTO has overcome sequestration?  This number is up from 7,740 in June and is at its highest level ever.  How will the government shutdown affect this number?

Pendency from Application Filing to Board Decision – 88.5 Months

The crisis at the Board continues, as the pendency is up from 87.3 months in June.   We are now at over 7 1/3 years from filing to Board decision.  New technologies become obsolete prior to getting a patent or decision by the Board.  The PTO hired a number of additional patent judges and attorneys to deal with this issue, but the sharp increase in the number of appeals filed has made tackling this an impossibility.   The Board now has significantly greater responsibilities with the beginning of the new post-grant review proceedings.

At the end of August (the Board doesn’t have its September numbers available yet), the Board had 25,697 pending appeals from ex parte application prosecution, a drop of 322 since May.  9,980 new appeals were filed since September (a pace for 10,887).  This is down from FY2012 when 12,433 new appeals were filed.  Meanwhile, the Board disposed of 10,767 cases during FY2013 (a pace for 11,746).  They’re keeping pace here, but having a hard time denting the backlog.

In other types of cases, 458 inter partes review cases have been filed, 150 trials instituted and 37 concluded.  399 of these cases remain pending.  48 transitional business method cases were filed with 12 trials instituted.  3 of these have been concluded.  The first post grant review petition was filed in June and was disposed of without trial.  Similarly, the first derivation petition was filed in June with no decision yet.  43 new interferences were declared, with 49 concluded, leaving the Board with 47 still to be decided.  97 new ex parte reexamination appeals were filed, with 101 being disposed.  18 such cases remain pending.  202 inter partes reexaminations have been filed.  The Board has decided 151, leaving an inventory of 115 cases pending.


The PTO is doing a good job on the front end.  Significant progress is being made on first office action pendency.  The problems begin, however, once an application reaches a final office action.  RCE filings seem to be dropping somewhat, but the rate is still pretty high.  Many or most of these are the result of examiners forcing them on applicants.  This is very inefficient and increases application cost and pendency significantly.

The PTO has still not come up with a plan to deal with its crisis at the Board.  Applicants deserve the ability to get a final agency decision on a patent application within a reasonable time frame.  The Board’s added workload with numerous types of proceedings for it to decide has made things more congested.  Presumably, if the proceedings work well, there may be many more filed in the coming months and years.  This could make things even worse.  Appeals must be decided more quickly.

Filing a False Declaration Constitutes Inequitable Conduct

October 10, 2013

Earlier this week, the Federal Circuit affirmed a district court’s judgment that a patent was unenforceable due to inequitable conduct.  Intellect Wireless, Inc. v. HTC Corp.

After the Federal Circuit’s opinion in Therasense, it is widely thought to be much more difficult to prove inequitable conduct than under the court’s prior standard that seemed to be a moving target.  In this case, the court made clear that filing a declaration with clearly false statements will still result in an inequitable conduct holding.

In Intellect Wireless, during prosecution of the application that resulted in the patent at issue in the case, the inventor filed a declaration under 37 C.F.R. § 1.131 to ante-date or swear behind a reference.  This means that the inventor sought to remove a piece of prior art by demonstrating an earlier invention date (something that can no longer be done under the AIA’s first-to-file system).

In the declaration, the inventor averred that “the claimed invention was actually reduced to practice and was demonstrated at a meeting . . . in July of 1993.”  In reality, the invention was never actually reduced to practice, i.e., was never actually constructed or made.  The court held that, absent curing the unmistakably false declaration, this alone establishes materiality under the test for inequitable conduct.

To cure a false declaration, the applicant is required to expressly advise the PTO of the misrepresentation and specifically point of the error.  The applicant must point out to the PTO what the correct facts actually are.  This requirement requires the applicant to be quite unequivocal in the correction.

In this case, the court found that the applicant, despite filing additional “corrective” declarations, did not meet this standard.  The corrective declaration further obfuscated the truth by continuing to refer to prototypes and product brochures, when no such prototypes or products shown in the brochures existed.  There were still references to bringing the product to commercialization and to actual reduction to practice.

Furthermore, the court found that the applicant had a specific intent to device the PTO.  The submission of a declaration that included clearly fabricated examples showed the applicant’s intent to deceive the PTO.  This intent was further demonstrated by a pattern of misleading the PTO with false declarations in related patent applications that referred to prototypes that did not exist or that clearly could not perform the claimed functions.

Inequitable conduct is clearly not dead as a defense.  This particular set of facts was particularly egregious.  It continues to demonstrate that candor with the PTO is required under the duty of disclosure.

Supreme Court to Hear Two More Patent Cases

October 1, 2013

USSupremeCourtWestFacadeThis morning, the Supreme Court issued orders granting certiorari in two more patent cases that it will hear during the October 2013 Term.

Highmark, Inc. v. Allcare Health Management Systems, Inc.

Section 285 of the Patent Act permits a trial court to award attorneys’ fees to the prevailing party in “exceptional” cases.  What exactly constitutes an exceptional case?  Typically, these would be cases where a party engages in misconduct, cases involving inequitable conduct, or cases where the party’s allegations or defenses are “objectively baseless.”  As you might expect, these determinations are highly fact specific.

What is the standard of review on appeal?  Factual determinations by a trial court are typically reviewed for “substantial evidence” or clear error.  This means that, when reviewing the record, is there sufficient evidence to support the trial court’s decision (usually for jury verdicts) or did the trial court commit clear error?  If there is substantial evidence or the trial court did not commit clear error, the appellate court should affirm the judgment even if the appellate judges might have decided the issue differently.

In Highmark, a divided Federal Circuit panel held that these determinations should be subject to de novo review; that is, the appellate court should give no deference to the trial court’s factual findings and simply rule on the issue itself anew.  The court denied en banc review by a vote of 6-5.  Judge Moore filed a lengthy dissent from that denial.

The question the Supreme Court will decide is whether determinations of objective reasonableness by a trial court under § 285 are entitled to deference.

Octane Fitness, LLC v. Icon Health & Fitness, Inc.

In this case, the petitioner seeks to challenge the Federal Circuit’s standard for determining whether a case is exceptional under § 285.  The petitioner argues that it is more difficult for a defendant to be awarded attorneys’ fees than for a plaintiff bringing an infringement suit.  The standard is higher and encourages companies to bring spurious lawsuits alleging infringement.

The Federal Circuit dismissed this cross-appeal in a single paragraph in its opinion in the case.

The Court will hear arguments in these cases in the coming months with decisions expected by the spring.

HT:  Hal Wegner.

FTC Seeks Public Comments on Patent Trolls

October 1, 2013

150px-US-FederalTradeCommission-Seal.svgLast week, the Federal Trade Commission published a notice that it will obtain information and study how Patent Assertion Entities (PAEs) impact innovation and competition.  Specifically, the FTC seeks to obtain information on a number of questions related to PAE activity.

How do PAEs organize their corporate legal structure, including parent and subsidiary entities?

What types of patents do PAEs hold, and how do they organize their holdings?

How do PAEs acquire patents, and how do they compensate prior patent owners?

How do PAEs engage in assertion activity (i.e. demand, litigation, and licensing behavior)?

What does assertion activity cost PAEs?; and

What do PAEs earn through assertion activity?

The initial step is to get public comments on these issues.  Then, the FTC will seek to compel information from 25 companies who are in the business of buying and asserting patents.

The purpose of the study is to find out how PAEs work and to determine their impact on competition and consumer protection in relation to the US economy.

The text of the Federal Register Notice for the study is available here.