FTC - Patent Assertion Entity Activity: An FTC Study

The Federal Trade Commission (FTC) published a report that investigates patent assertion entities (PAEs) that acquire patents then try to monetize them and makes recommendations for patent reform.

Here is the FTC press release:

"This report is a big step forward in enhancing our understanding of PAEs and provides an empirical foundation for ongoing policy discussions,” said FTC Chairwoman Edith Ramirez. The recommendations we are proposing are designed to balance the needs of patent holders with the goal of reducing nuisance litigation.

The report, Patent Assertion Entity Activity: An FTC Study, examines non-public information and data covering the period 2009 to 2014 from 22 PAEs, 327 PAE affiliates, and more than 2100 holding entities (those entities that did not assert patents) obtained through compulsory process orders (subpoenas) using the agency’s authority under Section 6(b) of the FTC Act.

The report found two types of PAEs that use distinctly different business models. One type, referred to in the report as Portfolio PAEs, were strongly capitalized and purchased patents outright. They negotiated broad licenses, covering large patent portfolios, frequently worth more than $1 million.

The second, more common, type, referred to in the report as Litigation PAEs, frequently relied on revenue sharing agreements to acquire patents. They overwhelmingly filed infringement lawsuits before securing licenses, which covered a small number of patents and were generally less valuable.

The report found that, among the PAEs in the study, Litigation PAEs accounted for 96 percent of all patent infringement lawsuits, but generated only about 20 percent of all reported PAE revenues. The report also found that 93 percent of the patent licensing agreements held by Litigation PAEs resulted from litigation, while for Portfolio PAEs that figure was 29 percent.

The study found that the royalties typically yielded by Litigation PAE licenses were less than the lower bounds of early stage litigation costs. This data is consistent with nuisance litigation, in which defendant companies decide to settle based on the cost of litigation rather than the likelihood of their infringement.

'The FTC recognizes that infringement litigation plays an important role in protecting patent rights, and that a robust judicial system promotes respect for the patent laws. Nuisance infringement litigation, however, can tax judicial resources and divert attention away from productive business behavior,' the report states. With this balance in mind, the FTC proposes reforms to:

• Address the imbalances between the cost of litigation discovery for PAE plaintiffs and defendants;
• provide the courts and defendants with more information about the plaintiffs that have filed infringement lawsuits;
• streamline multiple cases brought against defendants on the same theories of infringement; and
• provide sufficient notice of these infringement theories as courts continue to develop heightened pleading requirements for patent cases.

The report examined the types of patents held by PAEs, and found that 88 percent were in the information and communications technology sectors; more than 75 percent of those patents were software-related patents.

The report also looked at whether PAEs were able to make money by mass-mailing so-called 'demand letters'; however, the FTC observed an 'absence of large demand letter campaigns for low-revenue licenses among the Study PAEs.'

To gain a better understanding of how PAE behavior compares with the behavior of other firms that assert patents, the report also looked at  the wireless chipset sector, examining how reported PAE assertion behavior compared to certain manufacturers and non-practicing entities (NPEs) (who primarily seek to develop and transfer technology ). For this study, the FTC obtained non-public data from eight manufacturers and five NPEs, for the same timeframe using its 6(b) authority.

The wireless case study found that Litigation PAEs and manufacturers behaved differently. Within the study, Litigation PAEs brought far more infringement lawsuits involving wireless patents—nearly two-and-a-half times as many as manufacturers, NPEs, and Portfolio PAEs combined. Litigation PAE licenses involved simple lump-sum payments with few restrictions, if any, whereas the reported manufacturer licenses frequently included field-of-use restrictions, cross-licenses, and complicated payment terms.

This new report furthers the Commission’s commitment to addressing patent policy issues, that began with its 2003 report, To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy, and continued with its 2011 report, The Evolving IP Markeplace: Aligning Patent Notice and Remedies with Competition."

Copyright © 2016 Robert Moll. All rights reserved.

Apple loses patent retrial to VirnetX, owes $302.4 million

On September 30, a federal jury ordered Apple to pay $302.4 million for its infringement of VirnetX's patents relating to virtual private networks and secure communications links.

This retrial occurred after Judge Schroeder vacated VirnetX's $625.6 million win over Apple in a previous trial, because jurors may have been confused. The patents are complex, and even if not it appears patent litigation with big money at stake is likely to stretch for years. As noted, Apple's continued fight may have saved over $300 million less its attorney's fees.

For further details see Reuters Apple loses patent retrial to VirnetX, owes $302.4 million

Copyright © 2016 Robert Moll. All rights reserved.

Federal Circuit - Apple v. Samsung - Apple Wins Appeal Reinstating $199.6M Samsung Verdict

Today in Apple v. Samsung Electronics the Federal Circuit reinstated a $199.6M jury verdict for Samsung's infringement of Apple's US Patent Nos. 5,946,647, 8,046,721, and 8,074,172  because the verdict was supported by substantial evidence in the record and the trial court didn't err in denying Samsung's judgment as a matter of law (JMOL).

The Federal Circuit stated it must limit its appellant function to the trial court's record:

"We granted Apple's en banc petition to affirm our understanding of the appellate function as limited to deciding the issues raised on appeal by the parties, deciding these issues only on the basis of the record made below, and as requiring appropriate deference be applied to the review of fact findings. There was no need to solicit additional briefing or argument on the question of whether an appellate panel can look to extra-record extrinsic evidence to construe a patent claim term. “The Supreme Court made clear that the factual components [of claim construction] include ‘the background science or the meaning of a term in the relevant art during the relevant time period.’” Teva Pharms., Inc. v. Sandoz, Inc., 789 F.3d 1335, 1342 (Fed. Cir. 2015) (quoting Teva Pharms., Inc. v. Sandoz, Inc., 135 S. Ct. 831, 841 (2015)). After Teva, such fact findings are indisputably the province of the district court. ... We likewise did not need additional briefing or argument to determine that the appellate court is not permitted to reverse fact findings that were not appealed or that the appellate court is required to review jury fact findings when they are appealed for substantial evidence. The panel reversed nearly a dozen jury fact findings including infringement, motivation to combine, the teachings of prior art references, commercial success, industry praise, copying, and long-felt need across three different patents. It did so despite the fact that some of these findings were not appealed and without ever mentioning the applicable substantial evidence standard of review. And with regard to objective indicia, it did so in ways that departed from existing law.

The dissents, and Judge Dyk’s dissent in particular, raise big questions about how aspects of the obviousness doctrine ought to operate. But no party—at the panel or the petition for rehearing en banc stage—invited this court to consider changing the existing law of obviousness. We did not take this case en banc to decide important legal questions about the inner workings of the law of obviousness."

See Gene Quinn's IP Watchdog article Federal Circuit recognizes its role as only an appellate court in Apple v. Samsung and Susan Decker's Bloomberg article Apple Wins Appeal Reinstating $199.6M Samsung Verdict.

Copyright © 2016 Robert Moll. All rights reserved.

Stanford Program in Law, Science & Technology - The Changing Patent Landscape Conference - October 7, 2016

Stanford Program in Law, Science & Technology and Samsung Electronics are co-sponsoring a conference: The Changing Patent Landscape 8:30 am - 4:15 pm tomorrow.

Here's the details: "The patent system has gone through some dramatic changes in the last decade. This conference will explore the impact of those changes on patent litigation, patent prosecution, and management, and will look at alternatives to patent protection.

Topics that will be covered at the conference include:

o The Changing Nature of Patent Prosecution and PTO Review
o The Changing Nature of Patent Litigation
o What Does the Future Hold?

Keynote Speaker - Chief Judge David P. Ruschke, USPTO

Speakers

o Judge Leonard Davis, Fish & Richardson P.C.
o Christen Dubois, Facebook
o Kenneth S. Korea, Samsung Electronics
o Kathy Ku, Stanford University
o Mark A. Lemley, Stanford Law School; Durie Tangri LLP
o Sonal N. Mehta, Durie Tangri LLP
o Lisa Larrimore Ouellette, Stanford Law School
o James Pooley, Orrick, Herrington & Sutcliffe
o Ashok Ramani, Keker & Van Nest LLP
o Teresa S. Rea, Crowell & Moring LLP
o Lee Van Pelt, Van Pelt, Yi & James LLP
o Judge Christa Zado, Silicon Valley USPTO"

It is free and open to the public at the Paul Brest Hall, Munger Graduate Residences.

Registration: http://web.stanford.edu/dept/law/forms/oct7_patentconference.fb

Copyright © 2016 Robert Moll. All rights reserved.

Santa Clara University Law School - 2016 Corporate Intellectual Property Strategy Conference - November 17, 2016

Today, Santa Clara University Law School notified:

"The High Tech Law Institute at Santa Clara Law is pleased to partner with Unified Patents, Inc. in hosting a 2016 Corporate Intellectual Property Strategy Conference at Santa Clara on November 17, 2016.  The conference will focus on PTAB trends and updates, patent quality and validity data, the current status of patent pools and standard-essential patents, as well as the secondary market for buying and selling patents.

The conference will take place from 1:00 pm to 5:30 pm on November 17, 2016 and is complimentary but requires registration.  For more information and to register online, visit the event page."

Copyright © 2016 Robert Moll. All rights reserved.

USPTO - Proposed Fee Increase

The USPTO is proposing to increase fees. See the Federal Register Notice of Proposed Rulemaking (NPRM).

Today, Commissioner for Patents Drew Hirshfeld and Chief Judge of the Patent Trial and Appeal Board David Ruschke have a blog post which appears to be a justification for the proposed fee increase:

"The Patent and Patent Trial and Appeal Board (PTAB) organizations continue to identify ways to deliver increasing value to the global intellectual property community. The USPTO has made tremendous progress reducing overall patent pendency, reducing our inventory of unexamined applications, enhancing patent examination quality, reducing the ex parte appeal inventory, and implementing the post-grant review proceedings established by the America Invents Act (AIA). While great progress has been made, there is still much to be accomplished.

Today, the USPTO issued a notice of proposed rulemaking (NPRM) using the fee setting authority of the AIA to strategically change certain patent and PTAB fees. The targeted fee increases proposed in the NPRM are projected to produce approximately 5% more patent revenue each fiscal year once fully implemented. With the added funding, we aim to:

• Continue progress towards the goals and objectives of the USPTO FY 2014 – 2018 Strategic Plan including reaching target pendency and backlog levels
• Build upon the success of the Enhanced Patent Quality Initiative (EPQI) and continue to strengthen the work products, processes, and services at all stages of the patent process
• Advance our multi-year effort to update our critical information technology infrastructure via solutions like Patents End-to-End (PE2E) and PTAB End-to-End (PTAB E2E)—modern, enterprise solutions designed to improve efficiency, enhance accountability, and provide greater stakeholder satisfaction during interactions with our organizations
• Support the PTAB’s continued efforts to recruit and hire staff to deliver high quality and timely decisions, particularly for AIA trials and reexamination and ex parte appeals
• Work towards an optimal reserve balance, which will enable the USPTO to maintain service delivery when faced with immediate and temporary changes in economic conditions and/or operating circumstances

After consultation with the Patent Public Advisory Committee (PPAC), several key Patent organization fees have only modest increases, e.g.,utility filing, search, examination, and issue fees; others have slightly larger increases, e.g., design filing, search, examination, and issue fees. Small and micro entity fees remain in place to foster innovation among small businesses and independent inventors. Maintenance fees remain unchanged. We propose to increase slightly the request for continued examination (RCE) fees to better align them with our costs. Other fee proposals affect excess claims, information disclosure statement (IDS) submissions, and Office of Enrollment and Discipline (OED) fees among others. A full list of fee change proposals is available on the USPTO’s Fee Setting and Adjusting website.

For the PTAB organization, since the initial AIA patent fee rulemaking in 2013, ex parte appeal fees have enabled the PTAB to hire more judges and greatly reduce the appeals backlog, which reached over 27,000 (in 2012), to under 17,000 (in August 2016). Additional fee revenue from higher appeal fees will support further backlog and pendency reductions.

The PTAB has significantly strengthened capacity in recent years to manage its growing workload. The PTAB received more than 4,700 petitions for AIA trial proceedings since 2012 and has met every deadline set by Congress for such trials. In the last iteration of patent fee setting, we had to estimate both demand (e.g., workload) and cost with little data available for the Inter Partes Reviews (IPRs), Post Grant Reviews (PGRs), and Covered Business Method Reviews (CBMs). Now, with three years of historical cost data, we have better insights into the full cost of services and can better estimate demand, which enables the USPTO to align fees more appropriately. Still, compared to their FY 2015 unit cost, all of the trial fees remain at or below our cost to deliver the service and offer a lower-cost alternative to costly litigation.

Given our goal to support the global intellectual property community, we take fee setting very seriously and thoroughly analyze the effects of proposed fee changes on our stakeholders. Following the last AIA patent fee setting that became effective in March 2013, this current rulemaking is the result of a comprehensive biennial fee review that began in 2015 and concluded with a recommendation for additional, targeted fee adjustments to help us achieve the aims delineated above.

In keeping with the AIA fee setting process, the results of the comprehensive biennial fee review were presented to the PPAC in October 2015 as an initial fee setting proposal. The PPAC conducted a hearing in November 2015 and accepted public comments before preparing a written report in response to the initial proposal. The USPTO considered the PPAC report (released in February 2016) and as a result made several revisions to the initial proposal to arrive at the package of fee adjustments contained in the NPRM.

A 60-day public comment period has now opened, and we welcome feedback from our stakeholders. After reviewing the comments, we plan to prepare a final rule for publication during the summer of 2017. Comments on the fee proposals are due by December 2, 2016."

Copyright © 2016 Robert Moll. All rights reserved.

Federal Circuit - Comment on IP Watchdog - Rule 36 Judgment: The growing problem of one word affirmance

Have you noticed how often the US Supreme Court disagrees with the Federal Circuit on patent cases? Some years they never agree! For example, Bleich et al. The Federal Circuit Under Fire notes the Supreme Court disagreed with the Federal Circuit on all six cases in 2013. The disagreements have continued. Despite this unsettling fact patent attorneys primarily turn to the Federal Circuit for guidance, because it has had exclusive jurisdiction over all patent appeals in the US since 1982 so has published the vast majority of the US patent law decisions that matter today.

Gene Quinn's article Rule 36 Judgment: The growing problem of one word affirmance by the Federal Circuit highlights the Federal Circuit is increasingly giving no explanation to support affirmances in 43% of the trial court decisions and nearly 50% of the USPTO decisions. Perhaps the Federal Circuit should at least cite the court decision(s) and give a pithy analysis of the law to the key facts it considered in affirming the decision below. Otherwise, this high rate of Rule 36 affirmance is reducing the primary source of case law for many practitioners.

Copyright © 2016 Robert Moll. All rights reserved.

Berkeley Center for Law & Technology - Patent Case Management Judicial Guide Updated

The Berkeley Center for Law & Technology (BCLT) recently published the third edition of the Patent Case Management Judicial Guide (treatise).

As stated in the abstract: "This treatise updates and expands upon the second edition of the Patent Case Management Judicial Guide (2012). Since that time, patent litigation has continued to increase in complexity. This edition encompasses implementation of the America Invents Act (“AIA”), the emergence of review proceedings at the Patent Trial and Appeal Board (“PTAB”), the Supreme Court’s many recent patent decisions (patent eligibility, claim construction, claim indefiniteness, infringement analysis (rejecting “joint infringement”), the intent requirement for induced infringement liability (rejecting a defense of good faith belief of a patent’s invalidity), and attorney fees), and the Federal Circuit’s damages jurisprudence (including damage awards for standard essential patents (SEP) licensed pursuant to fair, reasonable, and nondiscriminatory (FRAND) terms. It also includes case management checklists, model case management orders, and other materials developed by district judges and advisory bodies for streamlining patent case management. Finally, this volume adds a chapter on patent litigation at the Court of Federal Claims."

Today, BCLT emailed a notice that a hard copy of the Guide is available for purchase or can be downloaded for free: "The third edition of the Patent Case Management Judicial Guide (PCMJG3d), written by BCLT faculty director Peter Menell and a team comprised of some of the nation's leading patent litigators, is now available for purchase in hardcopy or for free electronically. The PCMJG, constructed around the stages of patent litigation, is designed for federal judges and their law clerks, but, for that very reason, is also highly valuable to litigators. The Federal Judicial Center publishes the PCMJG for judges. Patent practitioners may purchase copies though Clause 8 Publishing at very modest cost. Moreover, recipients of this email can use discount code "HM978SBZ" to obtain 15% off at the Clause 8 eStore. In addition, Clause 8 Publishing offers a 20% discount and free shipping for bulk orders (10 sets or more). Please have your law firm or in-house librarian contact Professor Peter Menell at pmenell@law.berkeley.edu to place a bulk order.

The PCMJG3d (all 1214 pages!) can also be downloaded for free from SSRN at this link."

No I don't work for BCLT, but this is an amazing thing in a world where nearly all things of such value have a cost.

Copyright © 2016 Robert Moll. All rights reserved.

Berkeley Center for Law & Technology - Patent Damages

Today, the Berkeley Center for Law & Technology emailed a notice and a paper on patent damages:

"On March 3, 2016, the Berkeley Center for Law & Technology hosted a day-long workshop on patent damages, one of the most important and contentious topics in patent law and policy. Organized by Professors Stuart Graham (Georgia Tech, Scheller College of Business), Peter Menell (BCLT Director and Berkeley Law), Carl Shapiro (Haas Business School at UC Berkeley), and Tim Simcoe (Boston University Questrom School of Business), the workshop brought together in-house counsel, litigators (from both the assertion and defense sides), patent licensing professionals, testifying expert witnesses, and academics (both law professors and economists).

Today, Profs. Graham, Menell, Shapiro and Simcoe issued a paper summarizing the workshop discussion, key findings, and ramifications for patent case management. The paper includes a background memo summarizing patent damages law prepared by Professors Thomas Cotter (Univ. of Minnesota Law School) and John Golden (Texas Law). The organizers welcome your feedback on this report and hope to continue a conversation with all interested parties regarding patent damages."

Copyright © 2016 Robert Moll. All rights reserved.

USPTO - New Certificate of Mailing or Transmission Form under 37 CFR 1.8

Today, the USPTO announced it has posted a new Certificate of Mailing or Transmission under 37 CFR 1.8 (PTO/SB/92) for mail, fax or EFS-Web. The old Certificate of Transmission under 37 CFR 1.8 (PTO/SB/97) form is no longer needed and is deleted on the USPTO form page.

For assistance the USPTO recommends contacting the Patent Electronic Business Center 6:00 am - noon ET, Monday - Friday: 1-866-217-9197 or ebc@uspto.gov or patentpractice@uspto.gov.

Copyright © 2016 Robert Moll. All rights reserved.

Federal Circuit - The Medicines Company v. Hospira, Inc. - On Sale Bar of Product-By Process Claim Requires Commercial Sale or Offer for Sale

An inventor will lose US patent rights if an invention is held to be "on sale" more than one year before filing the patent application. Because inventors often engage in business activity before filing the application, attorneys often dispute in litigation if the activity placed the invention on sale. In The Medicines Company v. Hospira, Inc. the Federal Circuit revisited this issue en banc for pre-AIA cases. It concluded that to be on sale a product must be the subject of a commercial sale or offer for sale, and that a commercial sale is one that bears the general hallmarks of a sale pursuant to Section 2-106 of the Uniform Commercial Code. The product-by-process claims were held not invalid since the contract manufacturer was considered the inventor of manufacturing services where neither the title to the embodiments nor the right to market them passed to the supplier. 

Copyright © 2016 Robert Moll. All rights reserved.

USPTO - New Post-Prosecution Pilot - July 11, 2016

USPTO's Michelle Lee announced the launch of final Office action programs on July 11:

"I am pleased to announce the launch of the Post-Prosecution Pilot (P3), which was developed as part of the USPTO’s commitment to collaborating with our stakeholders and providing new programs to assist applicants and practitioners during the application process. It is our job to ensure that patent quality and our larger patent system keep up with the rapid pace of American innovation. The P3 program, which is part of the Enhanced Patent Quality Initiative, provides applicants with the opportunity to make an oral presentation to a panel of examiners after a final rejection has been issued at the close of prosecution but before the filing of a notice of appeal to discuss a proposed amendment. It is our goal to illuminate the next available steps and offer an after final option that is more useful to you. Specifically, the P3 program combines the best features of two of our existing programs, the Pre-Appeal Brief Conference Pilot Program (Pre-Appeal) and the After Final Consideration Pilot Program 2.0 (AFCP 2.0).

Under the Pre-Appeal program, applicants can request a panel of examiners to formally review the legal and factual basis of rejections made in their application before a formal appeal brief is filed. Additionally, the AFCP 2.0 program further includes an interview with the examiner for instances when applicant’s after final response does not result in an allowance. Now, through the P3 program, an applicant with a utility patent application can submit a proposed after final amendment to be considered by a panel of experienced examiners. Further, the applicant will have the opportunity to make a presentation to the panel, either in-person or via phone, and the panel will provide a brief written summary of the status of the pending claims as well as the reasoning for maintaining any rejection.

The P3 program runs until January 12, 2017. Under the terms of the program, each technology center will accept a maximum of 200 compliant requests. Thus, the ability to take advantage of the P3 program may end earlier in a given technology center. The P3 website includes a tally for each technology center to allow you to see whether a technology center is still accepting applications for the pilot.

Please refer to the Federal Register Notice for more information about the P3 program including its submission requirements. The Federal Register Notice also requests comments and feedback from our stakeholders on ways to improve after final practice to reduce the number of issues and applications appealed to the Patent Trial and Appeal Board and to reduce the number of Requests for Continued Examination. The USPTO plans to evaluate this feedback as well as the results of the P3 program to determine what we can do to improve after final practice.

Simplifying and strengthening the after final landscape is an important piece of the Enhanced Patent Quality Initiative, and my team and I are excited to work together with all of you to improve the quality of the patents issued by the USPTO.

I encourage you to share your feedback on the Federal Register Noticevia email to afterfinalpractice@uspto.gov or via postal mail addressed to: United States Patent and Trademark Office, Mail Stop Comments – Patents, Office of Commissioner for Patents, P.O. Box 1450, Alexandria, VA 22313-1450, marked to the attention of Raul Tamayo. The deadline for public comment is November 14, 2016. Thank you for your collaboration in this important effort."

Copyright © 2016 Robert Moll. All rights reserved.

PTAB - Replaces Patent Review Processing System (PRPS) with Patent Trial and Appeal Board End to End (PTAB E2E)

Today, David P. Ruschke, Chief Judge for the Patent Trial and Appeal Board (PTAB) notifies:

"The USPTO deployed an e-filing system known as the Patent Review Processing System (PRPS) for trials under the America Invents Act (AIA) on September 16, 2012. Since then, usage of PRPS has exceeded our expectations, and the time has come to transition to a new system to better serve the needs of the public. 

That new system is called Patent Trial and Appeal Board End to End (PTAB E2E). PTAB E2E uses a web browser (Chrome is the preferred browser) and a step by step filing program to enable petitioners and patent owners to provide metadata and upload PDF documents to the system.

PTAB E2E also provides an interface to the USPTO Next Generation financial system (FPNG) for paying fees.

The target date to deploy PTAB E2E is July 9, 2016. Upon initial deployment, PTAB E2E will be used for Inter Partes Review (IPR), Covered Business Method Review (CBM), and Post Grant Review (PGR). Derivations (DER) will still be processed in PRPS until they are migrated into PTAB E2E later in 2016. During this initial deployment both PRPS and PTAB E2E will be unavailable beginning Saturday, July 9, 2016 at 12:01 AM until 5:00 AM, Monday, July 11, 2016.

The new features of PTAB E2E include:

For all external users, with or without a login email address:
• full text document search
• metadata search
• additional search filters

For external users with a login email address:
• a dashboard that includes the most recent document upload activity and status of filed cases
• an improved docket
• easier navigation of AIA review papers and exhibits
• filter search on the docket

The PTAB E2E system link, a user manual, FAQ, and quick reference guides will be available on July 11, 2016 at http://www.uspto.gov/ptab in the upper right portion of the web page.

In the near future, an Application Programming Interface (API) will make PTAB trial data available for bulk data download.

As the system is deployed, we encourage you to provide feedback about the PTAB E2E system by sending your comments to PTABE2EADMIN@uspto.gov. 

Customer support will be available Monday-Friday from 8:00 AM until 6:00 PM EST at 571-272-7822. Additional transition coverage will be available during the week of July 11th until 12:30 AM EST. Read more from the Director's Forum Blog"

Copyright © 2016 Robert Moll. All rights reserved.

Supreme Court - Halo Electronics, Inc. v. Pulse Electronics, Inc.- Test for Enhanced Damages

If a district court holds you infringe a patent, just how much are you liable to pay?

35 USC 284 provides a court shall award damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court. But a court may increase the damages up to three times the amount found or assessed.

Sounds simple but it has been difficult to get enhanced damages since the In re Seagate decision held that a patent owner must show by clear and convincing evidence: (1) the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent; and (2) the risk of infringement was known or so obvious that it should have been known to the accused infringer.

Part of the reason enhanced damages were rarely awarded is the Federal Circuit required clear and convincing evidence. Another was the Federal Circuit stated objective recklessness would not be found if the infringer raises a substantial question as to the validity or non-infringement during the litigation even when the defendant was unaware of the defense while infringing. It could be argued Seagate encouraged "efficient infringement" based on the idea if and when the patent owner comes after me us we will hire smart lawyers to come up with a reasonable defense to avoid payment of more than a reasonable royalty.

In Halo Electronics, Inc. v. Pulse Electronics, Inc., the Supreme Court rejected the Seagate test entirely stating the substantive requirement for “objective recklessness” and the “clear and convincing” burden of proof were inconsistent with 35 USC 284. But again left general guidance at best. When can you expect to get more than a reasonable royalty? I would say when the court sees the defendant is not just an infringer but a "pirate." You know the kind of guy everyone hates more than a patent troll. As the Supreme Court stated awards of enhanced damages under the Patent Act over the past 180 years establish that they are not to be meted out in a typical infringement case, but are instead designed as a 'punitive' or 'vindictive' sanction for egregious infringement behavior. The sort of conduct warranting enhanced damages has been variously described in our cases as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, indeed—characteristic of a pirate. So District courts enjoy more flexibility than the Seagate test permitted but still enhanced damages will be generally appropriate under §284 only in egregious cases.

Copyright © 2016 Robert Moll. All rights reserved.

Supreme Court - Cuozzo Speed Technologies, Inc., v. Lee - Institution of Inter Partes Review is Non-Appealable and Broadest Reasonable Interpretation of Claims is Standard

In Cuozzo Speed Technologies, LLC v. Lee, the US Supreme Court held that a decision by the Patent Trial and Appeal Board (PTAB) on whether to institute an inter partes review (IPR) is final and non-appealable in nearly all cases. The Court also held that PTAB's use of the broadest reasonable interpretation ("BRI") of a claim consistent with the specification is proper in an IPR and within the USPTO rulemaking authority given the statute leaves a gap on the claim construction standard. Given nearly all patent owners cannot enter successfully amend claims in IPR, it's shaky to say IPR is closer to prosecution than litigation, but this is the law today. Further, this Supreme Court decision maintains the status quo where US patents have become more open to invalidity attacks since passage of the America Invents Act.

Copyright © 2016 Robert Moll. All rights reserved.

Federal Circuit - HTC v. Immersion - Upholds Filing Continuations on Issue Date

In Immersion Corp. v. HTC Corp., the Federal Circuit upheld the USPTO's longstanding interpretation that 35 USC § 120 permits filing a continuation as late as the issue date of the parent.

The decision observed although 35 USC § 120 literally requires a continuation be filed "before patenting" (the issue date), the USPTO has interpreted this language for at least 50 years as only requiring a continuation be filed no later than the issue date.

This decision is estimated to save the validity of up to 13,500 U.S. patents. But given the USPTO's electronic filing system (EFS) is not always available and the Supreme Court could revisit this issue and see things differently, it does not seem entirely safe to rely on this decision.

Copyright © 2016 Robert Moll. All rights reserved.

USPTO - Corrected Web-ADS and Enhanced Initial Web-ADS

Today, USPTO notified of a better way to correct an application data sheet (ADS). The old ADS form in PDF was difficult to read, but the worse feature was it did not permit underlining the data to show changes forcing applicants to get out a pen and underline the added language.

Here is the USPTO notice:

"In December 2015, the USPTO implemented the Corrected Web-ADS and Enhanced Initial Web-ADS in EFS-Web in response to customer feedback. Since then, EFS-Web has received over 8,000 ADS submissions using the Enhanced Web-ADS and over 5,000 Corrected ADS submissions using the Corrected/Updated Web-ADS.

For information about these features, please see the Quick Start Guides linked below. (1) Corrected Web-based Application Data Sheet (Corrected Web ADS) -- Registered eFilers may use this option to provide a Corrected/Updated ADS per 37 CFR 1.76(c)(2), where changes will be identified with underlining for insertions and strike-through for deletions. EFS-Web will generate and attach the Corrected ADS PDF, which will be reviewed and processed by the Office of Patent Application Processing (OPAP). See the EFS-Web Corrected Application Data Sheet Quick Start Guide. (2) Enhanced Initial Web-based Application Data Sheet (Web ADS)-- EFS-Web eFilers have the option to import Inventor information, Domestic Benefit/National Stage data, and/or Foreign Priority data from a parent application(s) when completing their Web ADS submission.

Data may be retrieved for eFilers who either have power of attorney in the parent application or if the parent application is made available to the public, i.e., published or patented.  See the EFS-Web Web-based Application Data Sheet Quick Start Guide.

If you have any questions or suggestions for improvement, please contact the Electronic Business Center at 1-866-217-9197 or at ebc@uspto.gov."

Copyright © 2016 Robert Moll. All rights reserved.

Stanford Technology Law Review - Patent Trolls: Moral Panics, Motions in Limine, and Patent Reform

If you are skeptical of articles applying the label "patent troll" to yet another patent owner, you may not be crazy. See Edward Lee, Patent Trolls: Moral Panics, Motions in Limine, and Patent Reform in the Stanford Technology Law Review.

From the abstract: "This Article provides the first empirical study of the use of the term "patent troll" by U.S. media-specifically, examining leading newspapers and online publications. The study offers several key findings: (1) First, starting in 2006, the U.S. media surveyed used "patent troll" far more than any other term, despite the efforts of scholars to devise alternative, more neutral-sounding terms. The tipping point was the combination of the controversial Blackberry and eBay patent cases in 2006—prior to that time, "patent holding company" was the most popular term. (2) Second, the media more often portrayed such patent entities in a one-sided, negative light with very little analysis or empirical support. For example, few works provided statistics or discussion of any studies to support their negative portrayal. Practically no articles mentioned the lack of a working requirement in U.S. patent law, which permits all patentees not to practice their inventions. These findings provide support for the recent judicial decisions that have barred, at trial, the use of the term "patent troll" as unfairly prejudicial."

Copyright © 2016 Robert Moll. All rights reserved.

Federal Circuit - Enfish v. Microsoft - 35 USC 101 - Software Patent Eligibility

In Enfish, LLC v. Microsoft Corp., (2016) the Federal Circuit recently held that a claim directed to database software was patent eligible under 35 U.S.C. §101, because it was not directed to an abstract idea. This decision is worth discussing because Enfish clarifies whether a claim is an abstract idea.

In Alice Corp. v. CLS Bank Int’l (2014), the Supreme Court set forth a two-part test under 35 U.S.C. §101 to determine if a claim to a software-related invention is patent eligible. The test asks: (1) is the claim directed to an abstract idea; and (2) if so, does the claim recite "significantly more" (an "inventive concept") than the abstract idea?

The Supreme Court did not establish a definitive rule to determine what constitutes an "abstract idea." Instead, the Supreme Court found it sufficient to compare a claim to claims found to be directed to an abstract idea in previous cases.  For example, fundamental economic and conventional business practices are often held to be an abstract idea, but comparing a claim to a claim directed to a process for curing rubber or hedging a risk only takes one so far.

Thus, it's understandable why many have found it tricky to decide what constitutes an abstract idea. Some say the abstract ideas is the preamble while others say it's some or all of the body of the claim. Some even assert the abstract idea is the entire body of the claim except the "processor" and "memory." Who knows? This shifting definition of the abstract idea defeats all inventions from being patented. Yet Alice itself noted we should tread carefully in construing this exclusionary principle of abstract ideas lest it swallow all of patent law. See Alice, 134 S. Ct. at 2354. Compare to Diamond v. Diehr, 450 U.S. 175, at 189 (1981) (cautioning that overgeneralizing claims, "if carried to its extreme, make[s] all inventions unpatentable because all inventions can be reduced to underlying principles of nature which, once known, make their implementation obvious").

Given these kind of difficulties, the Federal Circuit in Enfish  cautions it is not enough to ask whether a claim involves a patent-ineligible concept. For all inventions at some level embody, use, reflect, rest upon, or apply ... abstract ideas. Rather, the directed to inquiry applies a stage-one filter to claims, considered in light of the specification, based on whether 'their character as a whole is directed to excluded subject matter.

The Supreme Court stated claims that improve the functioning of the computer itself or improve an existing technological process might not succumb to the abstract idea exception. See Alice, 134 S. Ct. at 2358-2359. The Supreme Court in Bilski noted improvement not defined by reference to "physical" components do not doom the claims and to hold otherwise risks resurrecting a bright-line machine-or-transformation test or a categorical ban on software patent Bilski v. Kappos, 561 U.S. 593, at 603-604 (2010).

It is one thing to say you have added "a processor" and "a memory" to a fundamental economic practice such as Bilski or Alice or mathematical equation. It is quite another to say the claim is patent ineligible when it is directed to a specific implementation that improves the functioning of the computer itself or improves an existing technological process.

The Federal Circuit gets this in Enfish and says the claims were not directed to an abstract idea under step one of the Alice analysis, thus didn't need to proceed to step two. Even if we proceed to step two, the Supreme Court has stated whether the additional elements recite "significantly more" than an abstract idea is a search for an "inventive concept."  Thus, if the claim is not disclosed, suggested, or made obvious by the prior art, it should be understood the claim recites "significantly more" or "an inventive concept." Otherwise, we maintain an illogical position that claim is novel (35 U.S.C. §102) and non-obvious (35 U.S.C. §103) yet somehow doesn't recite an inventive concept. Surely, the meeting all of the requirements of 35 U.S.C. § 102 and §103 indicates that the claims encompass an inventive concept. The Supreme Court has imported the novelty requirement of 35 USC 102 into 35 USC 101, and hopefully won't take a further step "off the cliff" by judicially constructing an inventive concept hurdle that exceeds the novelty requirements of 35 USC 102 and obviousness requirement of 35 USC 103.

See the recent USPTO Memo Recent Subject Matter Eligibility Decisions (Enfish, LLC v. Microsoft Corp. and TLI Communications LLC v. A.V. Automotive, LLC).

Washington Post - Google Beats Oracle on Copyright, Defeating $9 Billion Claim

Today, Washington Post reports Google Beats Oracle on Copyright, Defeating $9 Billion Claim based on a jury verdict that Google made only fair use of Oracle's APIs in the Android operating system.

Congress states four factors determine if the fair use defense exists. The jury must consider: (1) the purpose and character of the accused use; (2) the nature of the copyrighted work; (3) the amount or substantiality of the part used in relation to the copyright work as a whole; and (4) the effect of the accused use on the potential market or value of the copyrighted work.

The Supreme Court has stated elsewhere that factor (4) is "undoubtedly the single most important element of fair use." Thus, a jury verdict for fair use which appears to impact the potential market for Java in mobile devices is a bit surprising. Perhaps the $9B damages Oracle sought worked against the jury's sensibilities.

Copyright © 2016 Robert Moll. All rights reserved.

Congress - Defend Trade Secrets Act of 2016 (DTSA)

Trade secret is now governed by Federal law rather than state law. This is a major shift in trade secret law. Further, compared to changes we have seen in U.S. patent law, the Defend Trade Secrets Act of 2016 (DTSA), signed by President Obama on May 12, 2016, passed with little controversy.

See Professor Dennis Crouch's [Updated] Defend Trade Secrets Act of 2016: Markup and Commentary for a marked up version and series of articles on DTSA.

Copyright © 2016 Robert Moll. All rights reserved.

US Supreme Court - Standards for Ordering Attorney Fees in Intellectual Property Cases

Professor Ronald Mann of Columbia Law has an interesting article on the US Supreme Court's effort to clarify when attorney fees should be granted in intellectual property cases. The Court will hear the parties arguments next week.

See Professor Mann's article in the SCOTUS blog: Argument preview: “The first thing we do, let’s pay all the lawyers!” – Justices return, again, to standards for ordering attorney’s fees in IP cases.

Copyright © 2016 Robert Moll. All rights reserved.

US Supreme Court - Cuozzo Speed Technologies, LLC v. Lee

The U.S. Supreme Court's case Cuozzo Speed Technologies, LLC v. Lee is getting lots of attention. One indicator is the numerous amicus briefs filed in support of either party (see above link to the SCOTUS blog). Here are the legal issues being considered by the Court:

(1) Whether the court of appeals erred in holding that, in inter partes review (IPR) proceedings, the Patent Trial and Appeal Board may construe claims in an issued patent according to their broadest reasonable interpretation rather than their plain and ordinary meaning; and (2) whether the court of appeals erred in holding that, even if the Board exceeds its statutory authority in instituting an IPR proceeding, the Board’s decision whether to institute an IPR proceeding is judicially unreviewable.

The legal issues are technical, but how they are resolved will impact the value of US patents. If you don't want to "step into the jungle" of reading the conflicting amicus briefs, I recommend reading Professor Ronald Mann of Columbia Law's recent article on SCOTUS blog, which is concise, explains why we have the issues, and gives a balanced view of the controversy.

Updated April 26: Professor Mann has another interesting article on the SCOTUS blog: Argument analysis: Justices struggle to read “tea leaves” in Congress’s slipshod drafting of Patent Act provisions for inter partes review.

Copyright © 2016 Robert Moll. All rights reserved.

Professor Mark Lemley - Rethinking Assignor Estoppel - A Comment

In Rethinking Assignor Estoppel, Professor Mark Lemley argues assignor estoppel interferes with invalidating bad patents and employee mobility. I don't completely agree with Professor Lemley, but think this article is definitely worth reading.

Assignor estoppel bars an inventor who has assigned a patent from challenging its validity in a patent infringement suit. It is an issue an employee may face after filing a patent application(s) at a company and leaving for a competitor. The article argues that assignor estoppel should be granted less often in patent infringement cases.

As stated in the abstract, assignor estoppel may not make complete sense: "The Supreme Court and the Federal Circuit have repeatedly emphasized the public interest in testing the validity of patents, weeding out patents that should not have been issued. But there is one important group of people the law systematically prevents from challenging bad patents. Curiously, it is the very group patent law is supposed to support: inventors themselves. The century-old doctrine of assignor estoppel precludes inventors who file patent applications from later challenging the validity or enforceability of the patents they receive. The stated rationale for assignor estoppel is that it would be unfair to allow the inventor to benefit from obtaining a patent and later change her tune and attack the patent when it benefits her to do so. The Supreme Court has traditionally disfavored the doctrine, reading it narrowly. But the Federal Circuit has expanded the doctrine in a variety of dimensions, and applied it even when the benefit to the inventor is illusory. Further, the doctrine misunderstands the role of inventor-employees in the modern world. 

More important, the expansive modern form of assignor estoppel interferes substantially with employee mobility. Inventors as a class are put under burdens that we apply to no other employee. If they start a company, or even go to work for an existing company in the same field, they will not be able to defend a patent suit from their old employer. The result is a sort of partial noncompete clause, one imposed without even the fiction of agreement and one that binds anyone the inventor comes in contact with after leaving the job. Abundant evidence suggests that noncompetes in general retard innovation and economic growth, and several states prohibit them outright, while all others limit them. But assignor estoppel is a federal law doctrine that overrides those state choices.

It is time to rethink the doctrine of assignor estoppel. I describe the doctrine, its rationale, and how it has expanded dramatically in the past 25 years. I argue that the doctrine is out of touch with the realities of both modern inventing and modern patent law, and that it interferes with both the invalidation of bad patents and the goal of employee mobility. Should the Supreme Court take up the doctrine, it is unlikely to survive in its current form. Rather, it should – and will – return to its much more limited roots."

Yes, assignor estoppel may give an overly generous shield against a challenge to patent validity. and why bar a challenge to patent validity when an inventor's awareness of the prior art is many times incomplete when signing the inventor declaration? However, the argument that assignor estoppel substantially interferes with employee mobility seems like a real stretch.

Copyright © 2016 Robert Moll. All rights reserved.

PTAB - Final Rules for Rules of Procedure for AIA Trials

Today, the USPTO published changes to the Rules of Procedure for America Invents Act (AIA) trials before the Patent Trial and Appeal Board (PTAB).

As stated in the Federal Register: "This final rule amends the existing consolidated set of rules relating to the United States Patent and Trademark Office (Office or USPTO) trial practice for inter partes review (“IPR”), post-grant review (“PGR”), the transitional program for covered business method patents (“CBM”), and derivation proceedings that implemented provisions of the Leahy-Smith America Invents Act (“AIA”) providing for trials before the Office."

Specifically, PTAB rules address claim construction, permit a patent owner to submit testimony evidence in the preliminary response on whether to institute an inter partes review, establish Rule 11 certification and sanctions for violations of the duty of candor, and replace the 60-page limit on a petition with a 14,000 word limit. A key change is how Board should interpret patent claims in AIA trials. The final rule state a party may request a narrow district court standard for claim construction if the patent is expected to expire within 18 months from the filing date of the petition challenging its validity. The logic is claims cannot be amended in an expired patent. The final rules state if a US patent is not expired it can be amended (so they say!) so should be given the broadest reasonable interpretation (BRI) which tends to result in invalidity.

In the meantime, in Cuozzo Speed Technologies, LLC v. Michelle Lee, Director of USPTO, the Supreme Court is considering claim construction in AIA trials. See the SCOTUS blog for details.

Also see the PTAB blog for other details on the final rules.

Copyright © 2016 Robert Moll. All rights reserved.