Archive for the ‘Patent’ Category

Ask Dr. Copyright …

Friday, February 28th, 2014

copyright question Dear Doc:

Last month, you promised that you’d continue your explanation of patents and copyrights with a rant about patents and trolls. So…? What, exactly, do you have against trolls, other than the fact that they live under bridges and threaten goats?

Signed,

Been Waiting a Month

Dear BWaM:

OK. So as not to disappoint, here goes!

The press has been overflowing for the past few years with breathless articles about evil “patent trolls”.  You see, back in the late 1990s semiconductor giant Intel was being sued for patent infringement by many patent owners. The company’s lawyer, Peter Detkin, called one of the lawyers representing the patent owners a “patent extortionist” in an article about the company, but others at Intel did not like that term. There was a contest, and Detkin, Anne Gundelfinger and Mark Davis somehow came up with “patent troll” as an alternative.

Remember the story of how the trolls hid under a bridge that they had not built, but demanded a toll from everyone who crossed?  Me neither. The original Norwegian folk tale is completely silent on who built the bridge, but it’s pretty clear that the goats had not done so, right? Goats lack opposable thumbs.  And as there is no other character in the story…but I digress. The troll term struck a chord, and came to mean a company that asserted patents on technology that they had not invented, seeking royalties. Such companies are clearly evil villains, because they don’t invent anything, and they sue other people using patents that they buy from inventors. Boo! Hiss! The media climbed on board, and there have been thousands of publications decrying the “rent seeking behavior” of the trolls. For a very entertaining overview, click here.

Fast forward to 2014, and you have bills in Congress and the President of these United States promising to do something to stop the trolls because they hurt innovation! But…do they really? Let’s think about this.

Suppose you passed a law that says that anyone who owns a piece of ground  and who built a building there could do only one of two things: occupy it himself, or occupy part of it, and rent the other part out. He can sell the building, but only to someone who will only occupy it – and never rent it out, because otherwise, the new owner would not be the one who built the building – he would only be seeking to collect rent.  He can’t move out and rent the entire building because then he would not be using what he had built, only seeking to collect rent. Oh, and the original owner would not be allowed to hire a manager by promising to pay a portion of the rent collected, and he can’t buy the building next door, since he didn’t build it. Forget real estate investment trusts that buy properties to build a portfolio – they don’t build things…they must be evil too.

So under this new law, what is a property worth? What incentive does the land-owner have to build his building if he has to live in it until he can sell it to someone who can only live in it? Easy – you’ve just reduced the value of almost every property in America by a huge amount. No one can be a real estate investor in the resale market. Period. So why would our country want to do the same thing to inventors, by limiting their ability to sell their patents? Because big companies that infringe patents are sick and tired of getting caught with their hands in the cookie jar, and can afford to create a fable and lots of press to convince us that their problem is actually our problem. Congress has taken their money that comes wrapped in that same fable, and the President knows a good story when he hears it.

It has been pointed out that it costs millions of dollars to defend against a patent infringement law suit, and that these suits take years to work their way through the courts. True. But the same is true of other high-stakes business litigation in many fields. It’s not only the “trolls” who suffer from our less than efficient court system: Apple and Samsung have been battling for many years, and there is no end in sight. Few call either of these companies patent trolls (some surely do), but that doesn’t stop anyone from complaining that these suits are harmful. It’s just strange that these same complainers seem to be perfectly happy to have and use the innovations that are supposed to be protected by patents, while never bothering to ask what the world would look like if nobody could raise capital by having effective patents in the first place. (For a great explanation, read William Rosen’s The Most Powerful Idea in the World)

As a registered patent attorney who has represented all kinds of inventors for more than thirty years (from garage inventors to the largest multinational corporations) and has been involved in patent licensing and sale for all of that time, the Doc can simply say that there is another, more honest definition of “patent troll” — one given by Professor R. Polk Wagner of the University of Pennsylvania School of Law, who said that a patent troll is simply anyone who would dare to sue ME for patent infringement.

So there you have it. The same old story: don’t believe everything you read on the Internet…World War I started that way.

To get the straight story on intellectual property issues, be sure to ask the attorneys at LW&H. For reasons that nobody can explain, they actually enjoy thinking about this stuff.

Until next month,

The Doc.

– Lawrence Husick, Esq.

State of the Union

Friday, January 31st, 2014

In his state of the union speech, President Obama said:  “And let’s pass a patent reform bill that allows our businesses to stay focused on innovation, not costly, needless litigation.”

Both houses of Congress are well on the way to enacting new patent legislation, in part as a  reaction to the bullying of small businesses by MPHJ Technologies through demand letters alleging patent infringement.

H.R. 3309, entitled ‘Innovation Act,’ was introduced in the Republican-controlled House of Representatives on October 23, 2013 and passed the House on December 5, 2013 with a majority vote of both parties.   H.R. 3309 has now been referred to the Senate Judiciary Committee.  The stated purpose of H.R. 3309 is to curb abusive patent infringement litigation, particularly by ‘patent asserting entities’ that own patents but do not produce products.  H.R. 3309 includes several changes, but the one that is most eye-popping  is that the plaintiff must pay the defendant’s expenses including attorney’s fees if the court determines that infringement claims are not reasonably justified or are made in bad faith.

The cost-shifting provisions of H.R. 3309 are radical.  In the U.S., each party to litigation generally bears its own costs.  H.R. 3309 would adopt the standards of the Equal Access to Justice Act, 28 U.S.C.§2412(d)(1)(A), and apply those standards to private patent litigants.  The Equal Access to Justice Act applies to payment of costs and attorneys fees by the Federal government.   In a civil suit by or against small businesses or individuals of limited means, the Federal government is liable for cost and attorneys fees UNLESS the government demonstrates that its position in the litigation was ‘substantially justified.’

H.R. 3309 would certainly avoid the defendant’s costs of patent infringement litigation, but it would also severely limit the value of inventions and patents.   If H.R. 3309 becomes law, only the very brave, the very foolish, or the very rich will initiate patent infringement litigation.

S. 1720 was introduced on November 18, 2013 by Democratic Sen. Patrick Leahey, Chairman of the Senate Judiciary Committee.  S. 1720 includes some of the procedural improvements of H.R. 3309, but excludes the cost-shifting provisions.   S.1720 takes direct aim at the practices of MPHJ Technologies by adding that the Federal Trade Commission will police false or misleading demand letters.  We expect that Sen. Leahey’s version of the bill is the one that will advance from Sen. Leahey’s committee.

– Robert Yarbrough, Esq.

Inducing Patent Infringement: New Case May Reach the U.S. Supreme Court

Tuesday, December 31st, 2013

The ‘claims’ of a patent dictate the rights of the patent owner and define the property created by the patent.

Where the invention is something physical, such as a machine or a drug, it is relatively easy to show infringement – the patent owner must show that the infringer made, used, or sold the machine or drug that meets all of the elements of a claim.   Alternatively, the infringer is liable if the patent owner can show that the infringer ‘induced;’ that is, caused, someone else to make, use or sell the machine or drug and that other person actually did make, use or sell the machine or drug.  The requirement that someone must actually make, use or sell the invention as claimed works well for patents to machines and drugs.

An injustice occurs when the claim addresses a method that can be performed by more than one person.  This situation is common for Internet inventions.  Consider the following (highly hypothetical) claim. A method of distributing content over the Internet comprising:

(a) uploading a video by a content provider to a server;

(b) modifying a website to instruct browsers to access the server to download the video.

In this hypothetical claim, the actions of two different persons can perform the two steps – the content provider and the person who modifies the website.   If two different persons perform the two tasks, then the patent owner cannot produce any one person who performed both steps.  There is no one person who ‘directly’ infringed the patent claim.  As a result, if a copyist can split a patented method into pieces and have someone else perform another piece, then the copyist is not an infringer and the patent is unenforceable.

This situation has been a thorn in the side of Internet inventors.  The Court of Appeals of the Federal Circuit decided to do something about it in the case of Akamai Technologies v Limelight Networks.  In that case, the Federal Circuit concluded that Limelight Networks performed some of the steps of the patent claim and induced someone else to perform the remaining steps.  The Federal Circuit held that Limelight was liable for infringement even if no one person performed all of the steps of the patent claim.

The joy of Internet inventors was short lived.  Limelight asked the Supreme Court to hear an appeal and the Supreme Court asked the Federal government for advice on whether the Court should take the case.  On December 10, 2013 the Federal government filed its brief saying that the Court should hear the case and should overturn the result.  It now is likely that the Supreme Court will hear the appeal.   The Court likely will issue a decision in late 2014 or 2015.

– Robert Yarbrough, Esq.

PTO’s ‘After Final Consideration’ Pilot Program

Wednesday, November 27th, 2013

USPTO Seal By filing a patent application and paying the filing fee, you are entitled to two reviews by the patent examiner.  The examiner has a very short and strict time limit to review your application.  If the examiner does not meet that time limit, then he or she may not meet productivity goals and may be denied raises and promotions.  If the examiner does not meet productivity goals three times, then he or she is out of a job.  By the second rejection of your application, the examiner likely has reached the end of the time allotted and can afford to give your application no more time.  In the past, when you received a ‘final’ rejection; that is, when the PTO patent examiner rejected your application for the second time, you generally had three options.  You could:

(1) File amendments that placed the application in condition for allowance.  Such amendments generally are limited to accepting what the examiner has decided that he or she will allow.

(2) File a ‘request for continuing examination’ and pay an additional filing fee for two more reviews.  In addition to the extra cost, this option generally defers final resolution for another six to nine months.

(3) File an appeal to the Patent Trial and Appeal Board.  The cost for an appeal is at least several thousand dollars and average time to resolve an appeal is three years.

You now have a fourth, and highly attractive, option: you can ask for additional consideration under the ‘after final consideration’ pilot program.  The ‘after final consideration’ program gives the examiner extra time to review your application and hence makes the examiner willing to further consider your application.  That further consideration may include an interview with the examiner and amendments to the claims.  There is no filing fee to take advantage of the program and no additional delay.  What’s not to like?

– Robert Yarbrough, Esq.

Abusive Patent Enforcement – The States Step Up

Monday, September 30th, 2013

policeIn general, only the Federal government and Federal courts have jurisdiction over patent matters.   However, the Federal government does not have effective tools for protecting individuals and small businesses from abusive and unjustified bullying by patent owners.   A small business often cannot afford to defend against a threat of patent litigation and agrees to pay license fees, regardless of the merit of the claim.

In the absence of Federal regulation, the states are filling the gap.

The State of Vermont, of all places, is the pioneer.  Vermont enacted a new state consumer protection law to shield its citizens from bad faith patent infringement claims.   The Vermont attorney general filed suit to enforce the new law against MPHJ Technology Investments LLC, which claims to own patents to the technology of scanning to e-mail.  MPHJ sent letters to thousands of small businesses, demanding licensing fees of $900 to $1200 per worker.   According to court filings by the Vermont attorney general, the demand letters include several false statements and MPHJ allegedly performed no investigation to determine whether the recipients of the letters were infringing the patents.  The litigation is ongoing.

Minnesota’s attorney general subsequently extracted an agreement from MPHJ not to send demand letters in that state unless the letters are first approved by the Minnesota attorney general.  This result appears to be a complete victory for Minnesota.

Nebraska’s attorney general followed the lead of Vermont and Minnesota, but in a ham-fisted manner, without a targeted law and without a defendant as unsympathetic as MPHJ.  Nebraska’s attorney general took aim not MPHJ, but at  its Texas-based lawyers, Farley Daniels LLP.   Farley Daniels sent out patent infringement demand letters in Nebraska on behalf of a different client, Activision TV, which manufactures and sells flat panel displays.   The Nebraska attorney general then sent a letter to Farley Daniels  ordering the law firm to stop patent enforcement in Nebraska

Farley Daniels promptly added the Nebraska attorney general as a defendant in a pending Nebraska patent infringement lawsuit by Activision TV.  The Federal judge ruled that Farley Daniels could continue to file and prosecute patent infringement cases in Nebraska.  The judge did not decide whether Farley Daniels could continue to send cease-and-desist letters.  The Nebraska attorney general subsequently acknowledged that his complaint is not with Activision TV, which appears to actually make and sell products.

Draft bills are under discussion in Congress to deal with the issue of abusive patent enforcement.   The draft bills would require patent owners to present much more information to defendants in the complaint.  In a provision that risks throwing out the  baby with the bathwater, the draft bill requires that the losing party in patent infringement litigation pay the attorneys fees of the prevailing party.   The legislation is being circulated for discussion, but is in a very early stage.

–Robert Yarbrough, Esq.

Beware of the On-Sale Bar

Friday, August 30th, 2013

police If you are a regular reader of this newsletter, then you know that a sale or offer for sale of your invention will terminate your patent rights unless you first file a patent application.   Did you know that the on-sale bar also applies to commercial sales of the invention to you, as from a contract manufacturer or prototype-maker?

Hamilton Beach recently learned to its sorrow that the on-sale bar applies not only to sales by the patent owner but also to purchases by the patent owner.  Hamilton Beach invented an improved slow cooker.  Hamilton Beach did not manufacture the slow cooker itself and instead negotiated with a foreign manufacturer.  The foreign manufacturer offered to sell the improved slow cooker to Hamilton Beach.  Hamilton Beach subsequently filed an application and obtained a patent for the improved slow cooker.  Hamilton Beach later sued Sunbeam for patent infringement.  Sunbeam argued that the Hamilton Beach patent was invalid because of the offer to sell the invention by the manufacturer to Hamilton Beach.

The U.S. Circuit Court for the Federal Circuit ruled that the offer by the manufacturer to sell the slow cookers to Hamilton Beach was an ‘offer of sale’ that tripped the ‘on sale’ bar and invalidated the patent.

Why is this decision important to small businesses and individual inventors?

The hidden risk of the Hamilton Beach decision lies in the production of prototypes.  The on-sale bar requires (a) a commercial sale or offer for sale of (b) an invention that is ready for patenting.  An estimate from, say, a machine shop to produce a prototype of an invention could be a commercial offer to sell the invention triggering the on-sale bar if the invention is ready for patenting.  An invention is ‘ready for patenting’ when (a) the inventor has a working prototype or (b) the invention is described in drawings or in written descriptions sufficient to allow a knowledgeable person to build and use the invention.

The only way sure way to avoid the on-sale bar is to not buy or sell the invention until after you file a patent application.  The Hamilton Beach case is yet another reason to file provisional patent applications early and often.

– Robert Yarbrough, Esq.

New Rules, New Strategies for Innovators

Wednesday, July 31st, 2013

coke bottle patent The past 15 years have seen an unprecedented attack on patents and patent-owners in the United States. Orchestrated by foreign nations, multinational corporations, and a variety of other groups, largely funded by similar vested interests, this attack has reduced much of the value formerly associated with patented innovations. In past issues of our newsletter we have described how patent owners can no longer realistically expect to block sales of products that infringe their patents through the injunction process, how infringers can conspire to divide patented processes among several actors to avoid infringement, how multiple infringers must now be sued separately, rather than joined in a single action, and how delays at the Patent Office and increasing fees put university researchers, solo inventors, and small companies at a disadvantage. We have also been counseling our clients to help them construct valuable patent strategies.

In the latest round of anti-patent actions, a committee of the Federal Courts including some noted judges and attorneys has issued a model order that they recommend be adopted by federal trial courts to govern patent suits. Such model orders are usually adopted quickly and without significant change by courts around the country. What is troubling about the present document, “A MODEL ORDER LIMITING EXCESS PATENT CLAIMS AND PRIOR ART” is that for the history of our patent system, which dates back to the time of Thomas Jefferson, inventors have always been able to present claims in as much detail as they wish, so that their patents would clearly and particularly cover all aspects of their inventions, and, at least since the 1950s, inventors and their attorneys have been required by both the Patent Law and the rules of the Patent Office to submit every relevant item of prior art of which they were aware. The background of the model order cites a study that shows that litigated patents contain an average of 24 claims, and cite 31 prior art references, which the committee calls, “problematically excessive.”

Some recent cases have seen individual judges impose limits on patent owners, requiring that they limit the number of patents in a suit, and that they throw away claims in the patents that they assert to reach some arbitrarily small number. In other cases, the number of products accused of infringement has been limited by court order. All of this trimming is claimed to streamline cases and to promote the administration of justice. In reality, however, such rules are evidence that our judicial system often fails to handle the technical complexity of our modern technological world. When it takes teams of hundreds of researchers years of effort to develop and commercialize complex inventions such as synthetic proteins, chips with millions of components, and software with tens of millions of lines of code, the refusal of our courts to expend the mental energy needed to understand and to protect such innovations harms innovators. For courts to say to inventors, you have done the hard work of creating value, but we require you to be able to explain it to judges and juries in monosyllabic terms, and to choose, “not more than ten claims from each patent, and not more than a total of 32 claims,” means that for some inventors, they will have a more difficult task to defend the value that they create.

Inventors must and will respond. Already, we are counseling clients to submit more patent applications with fewer claims per application. In litigation, the proposed limits will mean that separate law suits will have to be filed on small groups of patents against the same defendant. The erosion of the patent system has caused some innovators to opt for trade secrecy, at least in part, rather than patenting every aspect of their inventions, and this impoverishes our entire society, because it keeps technical advances out of the public view, which slows follow-on innovation.

We are confident that Americans will continue to innovate, despite the limits being imposed on the patent system. We are confident that we, and others who value our tradition of individual innovation will continue to find strategies to protect the value generated by inventors. Because we believe in the long-term value of innovation and the patent system that protects innovation, we at LW&H continue to develop new strategies for our clients, and particularly university researchers, garage inventors, startup companies, and established concerns to implement effective and efficient legal strategies for protecting their inventions.

– Lawrence A. Husick, Esq.

Patentable Subject Matter, the Sequel

Saturday, June 29th, 2013

DNA In the issue that will not die, the Supreme Court again considered what can or cannot be patented.  This time the question was whether human genes can be the subject of a patent.

The U.S. Constitution at Article One, Section 8 gives Congress the power “to promote science and the useful arts, by securing for limited times…to inventors the exclusive right to their…discoveries.”  Congress exercised that authority in Section 101 of the patent statute, which authorizes patent protection to “[w]hoever invents or discovers any new and useful… composition of matter.” In the past, the Supreme Court has created exceptions preventing patenting of laws of nature, natural phenomena and abstract ideas.

Myriad Genetics discovered the precise locations of certain genes, the mutation of which increased the risk of certain cancers.  The U.S. Patent and Trademark Office issued patents to Myriad for the genes.  The Federal Circuit Court of Appeals agreed that Myriad’s discovery of the genes was patentable.

The Supreme Court decided that the naturally occurring genes that Myriad located and isolated are a ‘product of nature,’ fall within the ‘law of nature’ exception and are not patentable; however, genes that were modified by Myriad are patentable.

Naturally-occurring materials are staples of biotechnology patenting. Because of the complex questions involved, the transactional costs for the industry to identify and investigate the effects of the Myriad decision will be very high. We can anticipate that the value of companies holding patents to naturally occurring biological materials may be affected.

– Robert Yarbrough, Esq.

The Fable of the Supreme Court and the Beanstalk

Thursday, May 30th, 2013

Once upon a time, a farmer purchased a magic bean.  The farmer planted his magic bean, as farmers do.  The magic bean grew into a magic beanstalk and made more magic beans.  The farmer harvested the magic beans, as farmers do, and saved the new magic beans for the next year.   For eight years, the farmer planted his new magic beans, grew new magic beanstalks and harvested magic beans for re-planting.

Monsanto, which owned a patent on the magic bean, filed suit against the farmer.  Monsanto believed that the farmer infringed Monsanto’s patent because the farmer made copies of the magic beans, violating the prohibition on making or using a patented product.  Monsanto’s beans were magic because they were genetically modified to survive treatment with glyphosate herbicides.  Use of the genetically modified bean allowed the farmer to kill the weeds in the farmer’s fields using herbicides without damaging his crop.

The farmer believed that once Monsanto sold the magic bean, then Monsanto had no further rights to the bean. The farmer’s friends agreed.  The farmer argued the doctrine of ‘patent exhaustion,’  which means that once a patent owner sells a patented product, the purchaser and any subsequent purchasers can use or sell the product and the patent owner has no further rights to control the patented product.  In this case, the genetically modified soybeans were twice-removed from Monsanto – Monsanto sold the patented soybeans to farmers, the farmers planted the beans, raised crops and sold their crops to a grain elevator, and the grain elevator sold soybeans from the crops to Vernon Bowman, the farmer of our fable.

The case of the magic bean went all the way to the Supreme Court.  On May 13, 2013 a unanimous Court ruled in favor of Monsanto.   The Court concluded that the doctrine of ‘patent exhaustion’ applies only to a particular patented article sold, in this case each genetically-modified soybean sold by Monsanto.  The doctrine allows the farmer to plant or eat soybeans purchased from Monsanto, to grow a crop and to sell the crop.  For soybeans that had the genetic trait and that Mr. Bowman purchased from the grain elevator, Mr. Bowman could re-sell those soybeans, feed the soybeans to animals or eat the soybeans.   However, ‘patent exhaustion’ did not allow Mr. Bowman to make copies of the patented soybeans.  Otherwise, a patent for a seed could never be of any value.  The patent owner could sell the first seed, which would then be copied by infringers, using the self-replicating nature of the seed.  The Court expressly limited the ruling to the facts of the case, recognizing that other situations may arise with other self-replicating inventions, such as computer programs, that might require a different result.

The facts were favorable to Monsanto – Mr. Bowman acted to isolate and duplicate the patented Roundup Ready® soybeans and to take advantage of the herbicide-resistant genetic trait.  He treated his fields with glyphosate herbicide, ensuring that only soybean plants with the Monsanto-owned trait survived.  He also was familiar with the Roundup Ready® beans and used Monsanto-supplied beans for some of his needs.

The Monsanto patents address DNA having specific characteristics and seed and plants containing that DNA.  The Monsanto genetic modification now has been part of the environment for years and eventually will find its way as a contaminant into many, if not all, soybean crops.  The Court was silent on an issue raised in friend-of-the-court briefs; namely, what happens when an organic farmer who does not use herbicides saves seed contaminated with the Monsanto genetic modification.  Isn’t the organic farmer infringing Monsanto’s patent?  In a related question, how can any farmer ever grow any soybeans without being forced to buy Monsanto’s seed due to unintentional genetic contamination?  Those questions currently are in the courts in Organic Seed Growers & Trade Association v Monsanto.

To Be, or Not To Be..

Thursday, May 30th, 2013

Patent Illustration

Pardon the quote of the Bard, but there is one area of patent law that, indeed, ponders “that is the question.” Bear with us for a moment while we try to set the stage. To qualify for a patent, the patent law statute passed by Congress states that an invention must meet three criteria: it must be new, useful, and non-obvious. For our present purposes, we will set aside the useful and non-obvious qualifications. To be new, in essence an invention must not have been thought of (or at least, disclosed) by anyone else. Simple enough.

But the U.S. Supreme Court, as judge made law, has grafted onto patent law the concepts that one cannot obtain a patent on a law of nature, a natural phenomenon, or an abstract idea. For instance, Einstein’s famous equation E=MC2 is said to represent a law of nature and, therefore, be unpatentable. Devices utilizing the law, like the bomb, are patentable. The idea here is that laws of nature belong to everybody and cannot be the exclusive property of anyone, while new applications of the law are patentable. In concept, a pretty straight forward approach. However, recently in the biotechnology realm, the concept of a law of nature has become twisted, contorted, stretched, strained, and abused – but we’ll talk about that another time.

For today, we weill briefly delve into what is meant by “abstract” although we confess up front, that we cannot give you an unambiguous explanation. The meaning of “abstract” lies hidden under the murky waters of patent law involving much judicial semantic nonsense promulgated in major part by the U.S. Supreme Court. One interpretation is that a basic idea of an invention is abstract if it totally captures all possible uses of an idea. In this guise, patent examiners routinely reject applications that seem to have a mathematical expression at their core, especially computer and software implemented inventions. One court has recently expanded the  concept of what may be abstract to the analysis of a method for hedging risk in financial dealings between two parties. Lest you think that we are ducking a good explanation of abstract, another federal appellate court recently decided (CLS Bank Int’l v. Alice Corp.) such a hedging idea was abstract, but could not articulate a consistent interpretation of why. In fact, seven different opinions were filed including at least three different tests for evaluating patent eligibility. Like pornography, the courts seem to know “abstract” when they see it.

 

Which brings us full circle: To be (abstract) or not to be (abstract), that is the question.