The Importance of the Federal Circuit - Chief Judge Rader Speaks Out About Patent Litigation Abuse

I was fortunate to work at Lyon & Lyon after graduating from USC Law. At that time it was the largest patent law firm in LA and a great place to start. As with any large law firm it had different personalities, but a common understanding that in advising a client, formulating strategy, or preparing legal papers what mattered were the decisions of the Court of Appeals for the Federal Circuit (CAFC). Law students learn appeals are where much of the significant case law is developed. Since the CAFC has had exclusive jurisdiction over patent appeals since 1982, it has considered many issues that arise in patent law. Thus, much can be learned about U.S. patent law when a CAFC judge gives a public talk. In that vein, here's Gene Quinn's article Chief Judge Rader Speaks Out About Patent Litigation Abuse.

Copyright © 2013 Robert Moll. All rights reserved.

SHIELD Act of 2013 - A Problematic Solution to Patent Trolls

I thought the effort to pass the SHIELD Act died last year, but read Joe Mullin's article tonight: Peeved politicians want "loser pays" rule for patent trolls - SHIELD Act would target patent shell companies, exempt inventors, universities. I was wrong, it's repackaged as the SHIELD Act of 2013! It's changed a bit, but still not a good idea.

Part of the problem is it's a huge departure from centuries of America law. The America rule requires each party in litigation bear its own expenses, including attorney fees. In 1946, the U.S. patent statute was amended to "discourage infringement of a patent by anyone thinking all he would be required to pay if he loses the suit would be a royalty." The Senate Committee at that time noted, "it is not contemplated that the recovery of attorney fees will become an ordinary thing in the patent suits." In 1952, the U.S. patent statute was amended to add that attorney fees would only be recoverable in "exceptional cases." Even then attorney fees are intended to compensate the "good party" for its expenses and not punish the "bad party." So despite the rhetoric U.S. patent law already has a mechanism to tackle patent trolls.

This Act's proposed fee shifting ignores that plus opens a can of worms when parties have vastly different financial resources. For example, if a small company becomes aware a large company is infringing its patent, offers a license, which is ignored, it may need to go to court to seek redress. This bill would encourage defendants to engage a large law firms (many attorneys are assigned to the case) to quickly run up a huge legal bill, which is not difficult if you bill at $600-$1,000/hour, generate a "victory," and hand the entire legal bill (which should belong to the defendant for not exercising any judgment and ignoring the relatively low cost inter partes review in the USPTO) to punish the small company for having the audacity to want to license its patent. Ultimately if passed, the SHIELD Act may just shield large companies who want to freely infringe small companies patented inventions.

The SHIELD Act definitions of a patent troll is also problematic. A company or individual risks being held a patent troll by defendant's motion if (1) it doesn't practice the invention; (2) it doesn't have at least one inventor in its employ; or (3) it is not the original patent owner. Assigning so much importance on practicing the invention has no basis in US patent law. Wouldn't the bill's definition of patent troll be met by companies none of us consider to be patent trolls? For example, is Google forced to litigate as a patent troll under this bill if it seeks to enforce the Motorola Mobility patents? Better not lay off the affected Motorola inventors then. How about Facebook's purchase of AOL and IBM patents? How much practice of the invention suffices to defeat the patent troll label? Could a company avoid the patent troll label by building and selling a prototype? Couldn't someone be exempt from the Act simply by hiring one of the inventors? Maybe plaintiff and defendant could bid for the inventor. Does exempting an original owner but not any subsequent assignee discourage transfer of patents? Congress may mean well, but these types of consequences make the bill worse than the problem.

Copyright © 2013 Robert Moll. All rights reserved.

Google Motorola Mobility - Standard-Essential Patents

When Google acquired Motorola Mobility, it obtained talented engineers, fundamental cell phone technology and a huge number of patents. It is difficult to place a value on a single patent without monetizing it, much less 17,000 patents, but it appears the standard-essential patents (SEPs) obtained in this acquisition have been particularly difficult to value.

As far as litigation, FOSS Patents reports Google (Motorola Mobility) has only won 1 out of 10 SEP cases asserted against Apple, while Samsung has only won 3 out of 24. Further, all Samsung's wins were outside the USA: two in South Korea and one in Netherlands. See Apple to FTC: Samsung and Google lose most of the cases over declared-essential patents

As far as the FTC, the Proposed Consent Order In the Matter of Google Inc., FTC File No. 121-0120, states Google's settlement with the Commission requires Google withdraw its claims for injunctive relief on FRAND-encumbered SEPs around the world, and offer a FRAND license to any company that wants to license Google's SEPs in the future.

The 25 public comments and related filings relating to the FTC-Google proposed consent decree reveal serious company opposition on injunctive relief being granted for FRAND-encumbered SEPs.

In The CCIA and RIM Tell the FTC Banning Injunctions for FRAND Patents Can Make Smartphone Wars Worse Groklaw decries this situation as robbing Google of its property right (Groklaw's concern is surprising) but in the end this will not influence the FTC or the courts.

So we don't know the value of the Motorola Mobility SEPs, but the answer for now is less than many thought. It is not always wonderful that "everybody in the industry" infringes a patent. Maybe this is the time companies realize the risk of over-declarations that certain patents are essential to an industry standard. At least it will be forseeable that seeking injunctive relief against a company stating a willingness to take a license of a SEP will be a problematic endeavor.

Copyright © 2013 Robert Moll. All rights reserved.

USPTO Public Forum to Discuss First-Inventor-to-File, Micro Entity, and Patent Fee Final Rules on March 15, 2013

The USPTO has changed the time of the public forum on the first-inventor-to-file, the micro entity and fee final rules. Here is the agenda: First-Inventor-to-File, Micro Entity, and Patent Fee Public Forum Agenda

The forum will be held at the Madison Auditorium on the Alexandria campus 1-4 pm ET, Friday, March 15, 2013. This enables the West coast to participate by webcast, but remains close to the effective date of the final rules: first-inventor-to-file rules become effective on March 16, 2013 and micro entity and fees rules become effective on March 19, 2013.

Here is the WebEx Webinar Access Information:
Event number: 996 254 133
Event password: 123456
Event address for attendees: https://uspto-events.webex.com/uspto-events/onstage/g.php?d=996254133&t=a

Copyright © 2013 Robert Moll. All rights reserved.

Software Patent Debate - BSA and National Association of Manufacturers Capitol Hill Briefing on February 21, 2013

On February 21, 2013, a group of leading executives and lawyers came together at a Capitol Hall briefing event co-hosted by the BSA | The Software Alliance and National Association of Manufacturers to talk about software patents. The software industry is vital to the growth of the U.S. economy so how we protect software innovation has become important.

Among those attending this event: panel discussion moderator Robert Stoll,a  law firm partner and former Commissioner of Patents, panelists Dorian Daley, Senior VP, GC and Secretary of Oracle, Brad Smith, GC and Executive VP of Microsoft, Neil Abrams, VP and Assistant GC of IBM, David Kahn, CEO of Covia Labs, and Thomas Lange, Director of Corporate RD, Modeling and Simulation for Procter & Gamble.

This briefing is welcome because the anti-software patent camp garners lots of press that drowns out the views of those in favor of software patents. They speak of problems (some imagined) engendered by software patents and patent trolls leading one to conclude let's just abolish them. Problem solved, right?

The Capitol Hall briefing lets the public consider the benefits. The major companies are well aware. That's why Amazon, Apple, Facebook, Google, IBM Microsoft, and Oracle have heavily invested in software patents. Is it just "mutually assured destruction?" Some tell me this is less the case today, and the current problem is patent trolls. If so, the cure should be narrowly aimed at abusive patent trolls not at software patents. Otherwise, you reduce or eliminate protection large and small operating companies require to protect software in the USA.

The value of software patents isn't lacking. What's lacking is a full discussion in the press. Part of the USA's strength is it believes in a marketplace of ideas and the public's ability to sort out what is the best ideas. I am comfortable with America's ability to make good choices if presented with both sides. So it makes sense for the public to hear from leaders how software patents have an important role in fostering software innovation, have encouraged investment in startups, and have proposals for improving the U.S. patent system. Here are some related articles on BSA's views:

Microsoft's Brad Smith: The Patent System: Fix What's Broken, Don't Break What's Working

BSA President & CEO Robert Holleyman: Clear Thinking on Software Patents

Copyright © 2013 Robert Moll. All rights reserved.

USPTO Software Patent Roundtable - Presentations

I posted an article USPTO Seeks Software Community's Input on Software Patents that noted the USPTO planned roundtables at Stanford and NYU. For details see the Federal Register: Request for Comments and Notice of Roundtable Events for Partnership for Enhance of Quality of Software-Related Patents.

The USPTO proposed three topics: (1) establishing clear boundaries for claims that use functional language; (2) future topics for the software partnership; and (3) oral presentations on preparation of patent applications.

After the Stanford roundtable, the USPTO published the following presentations:

Chien, Colleen SCU Professor & Karkhanis, Aashish SCU student [PPT]

Ellis, John [PPT]

Gutierrez, Horacio, representing Microsoft [PPT]

Hewitt, Carl [PPT]

Molino, Tim, BSA [PPT]

Patel, Aseet, Banner & Witcoff, Ltd. [PPT]

Russell, Jeremy [PPT]

To better understand the presentations, you may want to watch the webcast of the NYU roundtable at 9 am - noon, February 27, 2013:

Event number: 392 887 849
Event password: 123456
Event address: https://fedgov.webex.com/fedgov/onstage/g.php?d=392887849&t=a

Copyright © 2013 Robert Moll. All rights reserved.

USPTO - Final Rules and Examination Guidelines to Implement the First-Inventor-to-File Provision of the America Invents Act

Today, the USPTO published the final Rules implementing the first-inventor-to-file provision of the America Invents Act (AIA) effective on March 16, 2013.

See the Federal Register publications: Changes to Implement First Inventor to File Provisions of Leahy-Smith America Invents Act and Implementing First Inventor to File Provisions of Leahy-Smith America Invents Act: Examination Guidelines

The USPTO also published guidelines setting forth its interpretation of how the first inventor to file provision changes the current novelty and obviousness requirements. The guidelines inform how the law has changed (expanded) the scope of prior art and changed (narrowed) the scope of the grace period.

The Acting Director of the USPTO Teresa Stanek Rea states: "Migration to a first-inventor-to-file system will bring greater transparency, objectivity, predictability, and simplicity to patentability determinations and is another step towards harmonizing U.S. patent law with that of other industrialized countries."

Usually if the law changes radically, a litigant will push for a favorable interpretation of the new law. Until the court decisions build up and limit possible interpretations, the law is likely to be less predictable. On the other hand, the first inventor to file system provision may bring greater predictability in the long term, since many priority disputes will be resolvable by filing date.

On the flip side, unpredictability may arise in the new derivation proceedings that are intended to ensure a person will not be able to obtain a patent even when filing first for an invention that he or she did not actually invent. The scope of the one-year grace period is another area to expect unpredictability. Sure patentability of an invention is not defeated by the inventor’s own disclosures, disclosures of information obtained from the inventor, or third party disclosures of the same information as the inventor’s previous public disclosures, but what happens when the third party disclosure is not identical to the "first" inventor's disclosure? Do we have a one-year grace period against the third party disclosure? Further, do we have a grace period for an third party offer for sale or public use? Thus, unpredictability exists on the grace period of the new law.

The migration to the first inventor to file system is another step toward harmonizing U.S. patent law with that of the rest of the world, but the US definition of prior art and scope of the grace period is different. And the steps proceed in parallel for better or worse. For example, the USPTO implemented a common classification system for the USPTO and the EPO to enhance examination on January 1, 2013. The so-called Tegernsee Group is another effort to harmonize patent law among the major offices.

The USPTO is also giving a fair level of customer support. It will give more information on the first-inventor-to-file provision at a public training session held at the USPTO in Alexandria, Virginia on March 8, 2013, which will also be available on the Web. See details at www.uspto.gov/americainventsact. Also one may contact the AIA help line at 1-855-HELP-AIA (1-855-435-7242) or send an email to helpaia@uspto.gov for first-inventor-to-file and other AIA questions. The USPTO also suggests if we have questions regarding the final rules to call Ms. Susy Tsang-Foster, Legal Advisor, Office of Patent Legal Administration, Office of the Deputy Commissioner for Patent Examination Policy, at 571-272-7711 and direct questions about the first-inventor-to-file final examination guidelines to Ms. Mary C. Till, Senior Legal Advisor, Office of Patent Legal Administration, Office of the Deputy Commissioner for Patent Examination Policy, at 571-272-7755.

Copyright © 2013 Robert Moll. All rights reserved.

CLS Bank v. Alice Corporation - Oral Arguments Recording

The United States Court of Appeals for the Federal Circuit heard oral arguments regarding software patent eligibility in CLS Bank v. Alice Corporation today. The Federal Circuit has an oral argument recording page and the oral arguments are at the top of the list today. The recording is 74 minutes and downloadable as a MP3 file. For later retrieval search on the case name or the appeal number 2011-1301.

Professor Crouch's CLS Bank v. Alice Corp: Oral Arguments Lead to More Questions analyzes the oral arguments, Federal Circuit law, and gives readers' comments.

Also see my related articles:

CLS Bank v. Alice Corp. - US Government's Amicus Brief Addressing Software Patents

CLS Bank v. Alice Corp. - Amici Briefs Addressing Software Patents

CLS Bank v. Alice Corp. - Federal Circuit Revisits Test for Software Patent Eligibility

Copyright © 2013 Robert Moll. All rights reserved.

Parallel Networks Seeks to Vacate Arbitrator's $3 Million Award to Former Contingency Fee Law Firm Jenner & Block

Joff Wild of IAM has a story (see link below) about a law firm's fee dispute with a non-practicing entity. It might illustrate many things, but to me it indicates a contingency fee arrangement with a hourly fee fall back provision may misalign the lawyers and patent owners interests.

Parallel Network's appeal papers to the district court give a compelling story of what happened. Parallel Networks engaged the Jenner & Block law firm to represent it in a patent enforcement and licensing program. As part of the program, Parallel Networks sued Oracle. After losing a summary judgment motion filed by Oracle for non-infringement, Jenner & Block decided to terminate the atttorney-client relationship. Parallel Networks used Jenner & Block's emails to show how it weighed the economics in handling the appeal on contingency or quitting and seeking payment on an hourly basis. It seems the "contingency" fee arrangement gave no incentive to stay in the case if it got difficult.

Even though some Jenner & Block attorneys felt the basis for appeal was good because of three reversals of this judge in the past and possible error in this case, Jenner & Block decided it was time to quit. Initially, Jenner & Block did not seek the legal fees for the work performed. But after Parallel Networks reached a $20 million settlement two years later with another firm, Jenner & Block demanded $10 million in fees on an hourly basis.

When Parallel Network refused to pay, Jenner & Block sued to have the unpaid fee arbitrated. After arbitrator awarded Jenner & Block $3 million, Parallel Networks filed a motion and petition to vacate the arbitration award of $3 million, arguing the hourly basis provision was unenforceable in Texas.

Even if the provision is held unenforceable, it appears Jenner & Block should be paid something for its services as the record below was likely the foundation required to win the appeal. At the same time, Jenner & Block decision to quit seems influenced by the contingency fee arrangement with the hourly fall back provision. If it goes to trial, I will be interested to see if such a provision is enforceable in Texas.

See Mr. Wild's article: NPE, a law firm and a claim for $10 million in unpaid fees

Copyright © 2013 Robert Moll. All rights reserved.

Silicon Valley Ranks No. 1 in US Patent Grants 1988 - 2012

Today, the San Jose Mercury News published an article Silicon Valley is the nation's top dog for innovation that uses US patents to measure innovation leadership. As Mr. Steve Lohr states in NY Times Patent Producers Clustered in Only a Few Cities: "Patents, for all their flaws, are a widely used proxy for innovation."

The Brookings Institution Report below discussed in the Mercury News states that Silicon Valley (i.e., Santa Clara County) received more US patents than any other metropolitan area in the United States in 2012. Mr. Rothwell, an author of the Brookings report stated: "The Bay Area is extremely strong in every measure of innovation and in many industries" such as those relating to computers, electronics manufacturing, data processing, software, telecommunications, and web hosting.

The Mercury News says No. 1 Silicon Valley received 12.57 patents per 1,000 employees, The No. 2 metropolitian area centering on Corvallis, Oregon,  had 5.27 patents per 1,000 employees. No. 4 Santa Cruz County had 4.24 per 1,000 employees, and No. 6 San Francisco East Bay had 3.96 per 1,000 employees. Silicon Valley has been on top for US patents grants every year since 1988.

Thanks to Mr. Alan Cooper for passing along Mr. Lohr's NY Times article, which had a link to a PDF copy of Brookings Institution Report by Jonathan Rothwell, Jose Lobo, Deborah Strumsky, and Mark Muro's Patenting Prosperity: Invention and Economic Performance in the United States and its Metropolitan Areas.

Copyright © 2013 Robert Moll. All rights reserved.