The Doctrine of Equivalents Isn’t Very Important

Of every 100 findings of direct infringement by U.S. courts, only about 10 are findings of direct infringement under the doctrine of equivalents.1

This number sheds light on the importance of DOE claim scope relative to literal claim scope. Some applicants may spend a lot of time and energy on the DOE and the nuances of the Festo case and its progeny, or go to lengths to avoid amending claims in ways that could curb DOE protection. When that translates into giving short shrift to the literal language of claims, it’s the tail wagging the dog. Applicants should bear in mind that when a patent is found infringed, nine out of ten times it’s found literally infringed.

 

IPR Statistics Revisited: Yep, It’s A Patent Killing Field

Some view Inter Partes Review (IPR) as a patent killing field. Yet, the statistics published by the PTO seem to suggest that the patent kill rate in IPR is modest, and other commentators suggest that it’s roughly comparable to the kill rate in district court. The truth is closer to the killing field. Whether this will change under Trump remains to be seen, but there are reasons to believe it might.

There are four reasons why the killing field view is more accurate. First, the PTO’s reported numbers are somewhat misleading. When reporting IPR numbers, the PTO reports on petitions “completed to date.” This little fact, as others have noticed, makes the kill rate seem lower than it is.

Second, not only are the kill rates under 102 and 103 higher in IPR than in district court, but also those who suggest the kill rates are roughly comparable compare apples to oranges. In IPR, only printed publications can be used to attack patents. In district court, challengers can also attack with the other categories of prior art: prior public use or sale, public knowledge, derivation or incorrect inventorship, and invention by another. In district court, these other categories account for about 40% of kills under 102.

Third, although the institution rate has dropped since the early days of IPR, some of the drop is attributable not to a decrease in the Board’s willingness to institute any given claim but to an increase in the willingness of patentees to settle IPRs before the institution decision.

The fourth reason that the killing field view is more accurate concerns the rate at which parallel litigation is stayed, which does not speak to the kill rate but does speak to the overall power that IPR confers on patent challengers. Some commentators report a grant rate for stays that is misleadingly low because it’s based on all motions to stay filed on the ground of a co-pending IPR. It’s somewhat common for an accused infringer to file one motion before institution and one after and have the first fail and the second succeed. When calculated per motion filed, the grant rate is only around 50% to 60%. But when calculated per case, which is more meaningful, the grant rate is closer to 82%.

PTO Numbers Are Misleading

Below is a diagram from the PTO report on AIA Trial Statistics, current through 2016. It shows the disposition of IPR petitions completed to date. Take a quick look at the light blue hexagon at the top and the red and yellow hexagons at the bottom.

The light blue hexagon shows the total number of petitions filed from the inception of IPR through 2016. The red hexagon shows the number of trials in which all instituted claims were held unpatentable and also states it as percentage of total petitions filed. The yellow hexagon shows the number of trials in which some instituted claims were held unpatentable and likewise states it as a percentage of total petitions filed.

Add the 23% in the red hexagon to the 5% in the yellow hexagon and we get 28% as the percentage of petitions in which the Board invalidated at least one claim. In addition, as shown in two of the gray hexagons, patentees requested adverse judgment after institution in 191 IPRs and before institution in 26 IPRs, resulting in another 5% of kills, for a total kill rate of 33% (28% + 5%).

The real kill rate, however, exceeds 33%. The reason is that after a petition is filed it takes about 18 months to get to trial and decision. Accordingly, the trial numbers in the red and yellow hexagons relate to petitions filed 18 or more months prior to the last day of 2016. Yet, in calculating the percentages in the red and yellow hexagons, the PTO divided by the number of all petitions filed as of the last day of 2016, instead of by the number of petitions filed as of 18 or more months prior to the last day of 2016.1 Similarly, the requests for adverse judgment in the gray hexagons relate to petitions filed at various times prior to the end of 2016.

One study that accounts for the delay until final decision is the Report on Patent Trial and Appeal Board Contested Proceedings (2016), prepared by Fitzpatrick, Cella, Harper & Scinto. This study looked at a set of IPRs consisting of those denied institution for substantive reasons through 2014 plus those that reached final written decision or request for adverse judgment through 2015. Among this set of IPRs, 60% of claims challenged in petitions were killed either directly by the Board or by way of request for adverse judgment by the patentee.

The Fitzpatrick study states the kill rate as a percentage of claims rather than as a percentage of IPR petitions. Arguably, the latter is more meaningful because the broader and more valuable claims in a challenged patent are more likely to be killed. For example, suppose all 20 claims in a patent are challenged. The two broadest claims cover a swath of infringers, while the remaining 18 claims cover few or no infringers. The two broadest claims are killed; the other 18 survive. In substance, this largely or entirely amounts to a loss for the patentee, but if we look only at the percentage of claims killed, it appears to be a 90% victory for the patentee.

On the other hand, the numbers in the red and yellow hexagons above tell us that, when the Board holds claims unpatentable, it holds all of the instituted claims unpatentable 82% of the time (23% / 28%). Similarly, a study by Brian Love and Shawn Ambwani found, that among IPRs reaching final decision, 77% of all instituted claims are either held unpatentable or disclaimed.2 If the norm when killing instituted claims is to kill them all, then stating the kill rate as a percentage of claims falls only a bit short of stating it as a percentage of petitions.

In any event, other data in the PTO report on AIA Trial Statistics suggests that the kill rate for petitions is about four percentage points higher than the kill rate for claims. If we adjust by adding 4% to the 60% from the Fitzpatrick study, we get an estimated kill rate per petition of about 64%. That is, in about 64% of petitions, one or more of the claims will not survive.

Kill Rates in IPR Greatly Kill Rates in District Court

The Fitzpatrick study finds that, of challenged claims that reach a decision on the merits, 49.6% are invalidated under 103 and 41.1% under 102. (Note that some claims are invalidated under both.) The study notes further that, in district court cases in which validity is adjudicated, 27.8% of claims are invalidated under 103 and 31.1% under 102. (Again, some claims are invalidated under both.) According to these numbers, the potency of 103 is much greater in IPR than in district court, while the potency of 102 is modestly greater.

In IPR, however, the only category of prior art available is printed publications. In district court, available prior art also includes prior public use or sale under 102(b), public knowledge under 102(a), derivation or incorrect inventorship under 102(f), and (for pre-AIA patents) invention by another under 102(g).

It is remarkable that, although printed publications are the only type of art available in IPR, the kill rate under 102 is nonetheless about a third higher than in district court. In district court, printed publications account for about 60% of invalidations under 102; the other art categories account for the remaining 40%.3

If we take 60% of the 31.1% kill rate under 102 in district court, we get a kill rate under 102 printed publications in district court of only 18.7%. Now, we can compare apples to apples and see that the 18.7% kill rate for printed publications in district court is dwarfed by the 41.1% kill rate for printed publications in IPR. (Note that in IPR attack under 103 is likewise limited to printed publications, but this limitation is far less significant for 103 because the vast majority of 103 attacks have always been based on printed publications.)

The Drop in the Institution Rate Is Due in Part to Rise in Settlement

A patentee may request adverse judgment or settle by dismissing a co-pending infringement suit against the petitioner or by entering into a covenant not to sue. These measures occur in the shadow of what the patentee believes the Board would likely hold were it to rule on the challenged claims. When IPR first started, its institution and kill rates were very high and IPR quickly developed a reputation as a killing field.4

In what appears to be a reaction, patentees became more willing to settle. In 2014 there were more than five times as many settlements before institution as there were in 2013. In 2015 there were, compared to 2014, more than two and half times as many settlements before institution and 82% more after.5 Accordingly, some of the decrease in the institution rate is due not to a decrease in the Board’s propensity to institute any given claim but to an increase in the settlement rate.

The institution rate dropped in part because some of the IPRs the Board would have instituted settled before they could be instituted. According to the PTO’s AIA Trial Statistics, among IPRs that reached the institution decision, the Board instituted 86.5% of challenged claims in FY2013, 74.3% in FY2014, and 65.3% in FY2015. We can estimate the upper limit of the extent to which pre-institution settlement accounts for the decreases in institution across those years by (1) seeing what the institution rates would have been had all of the IPRs that settled pre-institution instead been instituted and by (2) comparing the changes in the counterfactual institution rates from year to year to the changes in the reported institution rates from year to year.

The counterfactual institution rates come out to 87.8% in FY2013, 77.5% in FY2014, and 71.6% in FY2015. When we compare these to the reported rates, it appears that pre-institution settlement accounts for only as much as one-sixth of the decrease in institution from FY2013 to FY2014. Pre-institution settlement, however, accounts for as much as two-thirds of the decrease in institution from FY2014 to FY2015. That is, the difference between the counterfactual rates for FY2014 and FY2015 is only one third as large as the difference between the reported rates for FY2014 and FY2015.

Patentees may settle to preserve the validity of the claims challenged in the IPR. In addition, when the IPR challenges fewer than all of the claims in the patent, the patentee may settle to minimize the effect on the unchallenged claims. The patentee may also settle to minimize the effect on related patents.

By settling before the patentee’s preliminary response, which comes due about three months before the institution decision, the patentee can avoid taking a position on the prior art or on claim construction. By settling before the institution decision, the patentee can avoid a decision by the Board to institute that suggests in and of itself, or that includes language that suggests, that the claims are invalid. The patentee can also avoid claim construction by the Board that could conflict with the construction the patentee may want to advance in a future infringement suit.

To be sure, however, settlement in view of the threat posed by IPR amounts to some degree of loss for the patentee. Although settling officially preserves the validity of the patent, the fact that the patentee chose to settle puts other infringers and licensees on notice that the patent is vulnerable. Furthermore, the IPR file, a public record, sets forth the prior art to attack it with. And of course when a patentee settles an IPR by dismissing a co-pending suit against the petitioner, the patentee foregoes some or all of what it would have gained had it maintained the suit.

Co-Pending Suits Are Usually Stayed

Some commentators report a grant rate for stays that is based on all stay motions filed before and after institution of a co-pending IPR. When based on all filed stay motions, the grant rate appears to be around 60% or so. Motions filed after institution, however, are more likely to succeed. When the grant rate is based on stay granted per case, which is more meaningful, the grant rate is higher.

According to Love and Ambwani, in 80% of instituted IPRs the challenged patent was being asserted in litigation between the patentee and the petitioner. Among the co-pending suits in which a motion(s) to stay was filed and ruled on, stay was granted 82% of the time. (About 10% of the motions were never ruled on because either the case first settled or it was stayed for some reason other than the IPR.)

Note, however, that there was variation across the district courts. Love and Ambwani found that the Eastern District of Texas granted stay in view of IPR in only 56% of cases. Another source reports that the E.D.Tex. grants stay in view of IPR in only 50% of cases.6

 

In the 13 years that inter partes reexamination was available, only 1,919 were ever filed. In contrast, in the four and a half years that IPR has been available, over 5,600 have been filed. The popularity of IPR with patent challengers is no surprise given the statistics above.

Can we expect changes under the Trump administration that tilt the scales back to patentees? After all, it can be argued that investment in technology may be diverted to countries more likely to uphold patents. One could point out, for example, that China recently embraced software patents and that in 2016 the Chinese patent office received nearly twice as many patent applications as the USPTO.7

Although Trump’s views on patents are unknown as of yet, a new report from Shearman & Sterling suggests that experiences with his own IP (at least in the context of branding) and the views of those who have his ear, many of whom are staunch supporters of patents, would tend to make him pro-patent.8 There is, however, no reason to believe that patents are a priority for Trump at this point in time.

Useful Patent Statistics

The arts of prosecuting, litigating, monetizing and teaching patents can progress only so far without benefit of empirical, quantitative data. To that end, we’re gathering up the most useful patent statistics available today. Most of them are little known, because they come from a wide variety of scattered sources where they are typically presented in raw form or in some other user unfriendly manner.

We’ll be expanding and updating our collection of patent statistics on a weekly basis. The section below, Featured Statistics, is a preview of things to come. As the collection grows, we will organize the statistics by topic and subtopic.

Featured Statistics

Invalidity

From 2005 to 2013, U.S. patents litigated to final decision were invalidated under the following grounds at the following rates:

  • 1.7% under § 102(a) earlier public knowledge or publication
  • 3.9% under § 102(b) time-bar publication or patent
  • 1.4% under § 102(b) public use
  • 1.7% under § 102(b) on sale
  • 1.0% under § 102(e) earlier-filed US patent of another
  • 0.5% under § 102(f) derivation or incorrect inventorship
  • 0.7% under § 102(g) prior invention by another (novelty)
  • 8.7% under § 103 obviousness
  • 2.6% under § 112(1) inadequate written description
  • 1.5% under § 112(1) lack of enablement
  • 0.5% under § 112(1) best mode (no longer a ground for invalidity)
  • 3.9% under § 112(2) claim indefiniteness
  • 0.2% for double patenting
  • 0.4% for improper broadening of reissue

Some comments about these numbers are in order.

First, the dataset on which they are based consists of 3316 case decisions from 2005 to 2013, which were coded as to rulings on 40 legal issues by the University of Houston Law Center. The dataset includes all Federal Circuit rulings (including summary affirmances under Rule 36) and all reported lower rulings from district courts and the ITC. See U.S. Patent Litigation Statistics, Institute for Intellectual Property and Information Law, University of Houston Law Center, at patstats.org (visited Jan. 2017)

Second, note that, under all parts of 102(b) combined, 7% of patents are invalidated under 102(b), which makes it four times more likely than 102(a) to invalidate a litigated patent.

Third, more patents are invalidated under 102 (10.9%, all 102 sections combined) than under 103 (8.7%), which belies the notion that non-obviousness is the primary gatekeeper of patent law.

Fourth, indefiniteness under 112(2) has become more important. At an invalidation rate of 3.9%, it now accounts for almost as many invalidations as written description and enablement combined (4.1% combined)! From 2005 to 2009, claims were invalidated under 112(2) in only about 9.4 cases per year; from 2010 to 2013 that number doubled to about 20.8 cases per year. In light of recent academic work and Supreme Court decisions expressing concern about indefiniteness, we suspect the importance of 112(2) has only grown since 2013.

Fifth, for cases from 2010-2013, the dataset identifies each case for which each ground of invalidity was decided. This data shows that, when enablement and written description are both adjudicated, they rise and fall together. That is, in the 23 cases from 2010-13 in which both enablement and written description were decided, the outcome for both was the same: either both requirements were found satisfied or both were found unsatisfied. This tends to corroborate Ariad’s position in Ariad Pharmaceuticals v. Eli Lilly, 598 F.3d 1336 (Fed. Cir. 2010) (en banc), in which Ariad argued there is no substantive difference between enablement and written description.

Defenses

The numbers below are based on the University of Houston’s dataset of 3316 cases decided 2005-2013, discussed above in the section on Invalidity.

Enforeeability

Inequitable Conduct. In 3.6% of the cases, the patent was held unenforceable due to inequitable conduct. When the issue was litigated to decision, the accused infringer won only about 26.5% of the time.

Note that the rate at which the issue was litigated to decision fell over the years. From 2005 to 2011, it was litigated to decision about 53 times per year on average. From 2012 to 2013, it was litigated to decision only about 35 times per year on average. We suspect the rate has fallen a bit since 2013.

Patent Misuse. Patent misuse was decided in 33 (or 1.0%) of the cases. Of the 33 cases, the accused infringer won only 1 (or 3.0%) on this ground.

Procedural Defenses

Laches. Laches was decided in 94 (or 2.8%) of the cases. Of the 94 cases, the accused infringer won 22 (or 23%) on this ground.

Equitable Estoppel. Equitable estoppel was decided in 61 (or 1.8%) of the cases. Of the 61 cases, the accused infringer won 17 (or 28%) on this ground.

Failure to Mark. Failure to mark was decided in 44 (or 1.3%) of the cases. Of the 44 cases, the accused infringer won 29 (or 66%) on this ground.

Infringement Defenses

Preexisting License. Whether the accused infringer had licensed the patent in question was decided in 54 (or 1.6%) of the cases. Of the 54 cases, the accused infringer won 28 (or 52%) on this ground.

Exhaustion. Whether first sales had exhausted the patentee rights was decided in 81 (or 2.4%) of the cases. Of the 54 cases, the accused infringer won 48 (or 59%) on this ground.

Exemption under 271(e). Whether the accused infringer was exempt under the FDA safe harbor provision of 271(e) was decided in 15 (0.45%) of the cases. Of the 15 cases, the accused infringer won 7 (or 47%) on this ground.

Exemption for Experimental Use. The common law defense of experimental use was not decided in any of the cases. It may therefore behoove patent law professors to remove experimental use from their syllabi.

Doctrine of Equivalents

Of every 100 findings of direct infringement by U.S. courts, only about 10 are findings of direct infringement under the doctrine of equivalents.

This number sheds light on the importance of DOE scope relative to literal scope. Some applicants may spend a lot of time and energy on the DOE and the nuances of the Festo case and its progeny, or go to lengths to avoid amending claims in ways that could curb DOE protection. When that translates into giving short shrift to the literal language of claims, it’s the tail wagging the dog. Applicants should bear in mind that when a patent is found infringed, nine out of ten times it’s found literally infringed.

Note also that findings of direct infringement likewise dominate findings of indirect infringement. For every 100 findings of infringement, 81 are findings of direct infringement (literal or DOE), whereas 19 are findings of indirect infringement (primarily inducement under 271b or contributory infringement under 271c). Whether the accused infringer induced infringement under 271(b) was litigated to decision in 222 (or 6.7%) of 3316 cases from 2005-2013. Of the 222 cases, the patentee won 95 (or 42.8%). Whether the accused infringer contributed to infringement under 271(c) was litigated to decision in 140 (or 4.2%) of the cases. Of the 140 cases, the patentee won 58 (or 41.4%).

The numbers above are based on the University of Houston dataset discussed above in the section on Invalidity.

Patent Litigation Win Rate by Venue

From 2000-2010, the national average rate at which patent cases settled was 75.5%. 15% of patent cases went to final judgment. The overall win rate for patentees was 32.5%. Win rate, however, varies dramatically by venue. For example, the patentee win rate in the Northern District of Texas (which decided 405 cases) was almost five times higher than it was in the Northern District of Georgia (which decided 457 cases)! Listed below are the venues with the six highest and six lowest patentee win rates.

Top Six Patentee Win Rates
  • N. District of Texas                   55.1%
  • M. District of Florida               46.3%
  • District of Nevada                    46.2%
  • District of Delaware                 45.3%
  • District of Oregon                     45.2%
  • E. District of Texas                   40.3%
Bottom Six Patentee Win Rates
  • W. District of Wisconsin          24.0%
  • District of New Jersey               21.0%
  • W. District of Washington       20.0%
  • E. District of New York              17.6%
  • E. District of Wisconsin              17.1%
  • N. District of Georgia                  11.5%

These numbers come from a study by Professor Mark Lemley, in which he examined a dataset of 21,667 patent cases decided between 2000 and 2010 and reported the win rates for all venues that decided 25 or more cases over that 10-year period. To see the complete list of win rates, See Mark A. Lemley, Where to File Your Patent Case, 38 AIPLA Quarterly Journal 1 (Fall 2010).

Lemley also reports the average times to trial. The two quickest venues were the Western District of Wisconsin (0.67 years) and the Eastern District of Virginia (0.96 years). The two slowest venues were the Eastern District of Michigan (3.41 years) and the Eastern District of Wisconsin (3.51 years).

The national average rate at which patent cases went to trial was 2.8%. The rate was highest in the District of Delaware (11.8%) and the Eastern District of Texas (8.0%). It was lowest in the Southern District of Ohio (0.5%) and the District of Columbia (0.0%).

Jury Trial vs. Bench Trial

Over the last 5 years, patentees won 73% of jury trials and 53% of bench trials. The median jury award was 16X higher than the median bench award! See the PWC study entitled 2016 Patent Litigation Study: Are we at an inflection point? (May 2016).

Given the numbers reported in this study and also in the study discussed below under Declaratory Judgment, we predict that the percentage of trials heard by juries (75% over the last 5 years) will grow even higher.

Declaratory Judgment

If a patent suit will be decided by a jury, the patentee greatly increases its odds of winning if it files suit first, i.e., before the accused infringer files for declaratory judgment. According to a study by then Professor Moore, in cases decided by juries, when patentees file suit they win 65% of the time, but when accused infringers file declaratory judgment actions patentees win only 42% of the time. See Kimberly A. Moore, Judges, Juries, and Patent Cases-An Empirical Peek Inside the Black Box, 99 Mich. L. Rev. 365 (2000).

The first thought that arises in response to this is that suits initiated by accused infringers must tend to differ on the merits from suits filed by patentees. But here’s the rub: in bench trials, win rates do not vary with who files first. According to the study, the win rate in bench trials (about 50% for patentees) remained the same regardless of who filed first. The reason for this surprising finding is unclear. Perhaps jurors tend to believe (somewhat incorrigibly) that whoever filed the suit is the deserving party.

Injunctions & Enhanced Damages

From 2005 to 2013, patentees obtained preliminary injunctions in about 4.1% of patent cases. This figure is not much changed from years past. One study of preliminary injunctions issued in 1990-91 showed that patentees obtain them in about 5% of cases.

Patentee requests for permanent injunction were ruled on in 253 cases from the date of eBay v. MercExchange 547 U.S. 388 (2006) through 2013. Patentees won 74.7% of those requests.

From 2005 to 2013, damages were enhanced for willfulness in only about 3.2% of cases. Patentees won attorneys fees in about 3.3% of cases; accused infringers won them in about 3.6% of cases.

The 5% figure for older preliminary injunction cases comes from Jean O. Lanjouw and Joshua Lerner, Preliminary Injunctive Relief: theory and evidence from patent litigation, NBER Working Paper No. 5689 (NBER 1996). The figure for permanent injunctions is based on a supplementary dataset reported by the University of Houston. The other figures are based on the University of Houston’s dataset of 3316 cases decided 2005-2013 , discussed above in the section on Invalidity.

Foreign Owners of U.S. Patents

Foreign owners of U.S. patents are about five times less likely than domestic owners of U.S. patents to sue for infringement of their U.S. patents. Original source: Jean O. Lanjouw and Mark Schankerman, Stylized Facts of Patent Litigation: value, scope and ownership, NBER Working Paper No. 6297 (NBER 1997); Chapter: Patent Litigation – Enforcement of Patent Rights in the United States, Patents in the Knowledge-Based Economy (Nat’l Academy of Sciences 2003).

These studies are based on old patent cases, namely, those from 1975 to 1991. But assuming it’s still true that foreign owners of U.S. patents are less likely to sue, the question remains as to why. The study authors suggest that it might be harder for foreign patentees to detect infringement and also that their costs of litigation might be higher. I would add that many foreign patentees face greater uncertainty about both the costs and the benefits of U.S. litigation. Also, they may simply be less inclined to litigate for cultural reasons – Japan comes to mind.

FY 2017-2019 Joint Strategic Plan on Intellectual Property Enforcement

On Monday, December 12, 2016, the White House’s Office of the Intellectual Property Enforcement Coordinator (IPEC) released a joint strategic plan for intellectual property enforcement, entitled “Supporting Innovation, Creativity, & Enterprise: Charting a Path Ahead.” The coordinated approach, mandated by Title III of the Prioritizing Resources and Organization for Intellectual Property Act of 2008 (PRO-IP Act), constitutes a three-year national plan on the enforcement of laws protecting copyright, patents, trademarks, trade secrets, and other forms of intellectual property. The plan is divided into four main sections, each highlighting one of the overarching goals to improve interagency IP policy enforcement. In particular, and as identified by IPEC Danny Marti in his White House statement, these goals include: (1) enhancing national understanding of the economic and social impacts flowing from misappropriation of trade secrets and the infringement of intellectual property rights, (2) promoting a safe and secure Internet by minimizing counterfeiting and IP-infringing activity online, (3) securing and facilitating lawful trade, and (4) enhancing domestic strategies and global collaboration in support of effective IP enforcement.

The Joint Strategic Plan was prepared by the U.S. Interagency Strategic Planning Committees on IP Enforcement, which is chaired by IPEC and comprised of various federal departments, including the Department of Justice, the Department of Homeland Security, the Department of Health and Human Services, the Department of Agriculture, the Office of Management and Budget, and the Copyright Office. As set forth in the PRO-IP Act, the Plan was also developed by consulting with “companies, industry associations, labor unions, and other interested groups” and “private sector experts in intellectual property enforcement.” The Plan emphasizes the need to identify “structural weaknesses,” “systematic flaws,” and other “impediments” to an effective and robust intellectual property regime. It “represents a ‘call for action’ for all nations- as well as international organizations, industry, educational institutions, and consumer protection and public interest groups- to provide forward-thinking leadership and a collaborative approach to combatting illicit IP-based activities.” Acknowledging that these threats are not limited domestically, to a single governmental agency, or commercial sector, the Plan underscores the importance of voluntary initiatives and global collaboration in an effort to combat these challenges.

The Joint Strategic Plan begins by providing an overview on how intellectual property serves as a driving force behind U.S. economic growth and development. According to the Department of Commerce, for instance, IP-intensive industries added $6.6 trillion in value, or more than 38% of the U.S. gross domestic product. Section 1 outlines the scope and magnitude of illicit exploitation of intellectual property in the global marketplace, analyzing how such activity undermines national interests. In particular, section 1 highlights the threats to principles of fair trade, consumer health and safety, the environment, and domestic and international security. Section 2 then discusses IP-infringing activity in the digital realm (online), focusing on practices and policies that disrupt illicit financing models, such as a “follow-the-money” approach. To that end, the Plan supports efforts to enhance voluntary payment processor initiatives that increase transparency in operation and “make appropriately generalized and anonymized data publicly available … to permit study and analysis of illicit activity intercepted on their networks.” Section 3 then discusses ways to improve domestic and international security for facilitating legitimate cross-border trade. The Plan recommends, for example, an “all-threats” approach to cargo screening, additional investment in shipment tracking and anti-counterfeiting technology, and a coordinated effort between public and private sectors. Lastly, section 4 examines opportunities to improve governmental frameworks and policies that are critical to promoting effective IP enforcement both domestically and abroad. The Plan calls for continued data collection, research, and review of both domestic and international stakeholders to identify the “precise nature and dimensions of the various challenges in IP enforcement.”

For those interested in patent-specific dialogue, section 4 is the most significant. A discussion of U.S. patent law begins on page 134 of the 163-page report, touting the importance of efficient and predictable patent protection for an innovative and competitive economy. This focus undoubtedly stems from the miasma of uncertainty cast over patent eligibility for software and business method inventions following the 2014 Supreme Court decision in Alice Corp. v. CLS Bank. It is also influenced by the creation of the Patent Trial and Appeal Board (PTAB), an administrative law body dedicated to reviewing post-issuance challenges to patentability. Notoriously dubbed the death squad for patents, the PTAB continues to introduce new uncertainty into otherwise established patent rights with its high rate of patent invalidation. The Plan acknowledges the need to further develop the rules and procedures of the PTAB to produce a “more effective and fair alternative to the costly and arduous litigation procedures of traditional courts.”  The Plan also sets forth a number of actions to improve predictability of patent rights. These actions vow to:

  • Action No. 4.7: Continue implementation of the Enhanced Patent Quality Initiative;
  • Action No. 4.8: Promote continued collaboration between right holders and the USPTO to benchmark post grant proceedings;
  • Action No. 4.9: Promote continued training and dialogue regarding emerging technologies on the patent system; and
  • Action No. 4.10: Provide expert technical assistance to Congress on any necessary patent reform efforts.

The Plan also recognizes the contribution of industrial design to a strong economy, attributing graphical user interfaces, icons, transition images, and animated images for the success of many consumer products. To that end, the Plan proposes to “monitor the use of the design patent system to protect designs embodied in or applied to technologies.”

Released just weeks before newly-elected President Donald Trump takes office, the Joint Strategic Plan will continue to guide national IP enforcement policy over the next three years despite the transition of political power. Federal departments are required to submit an annual report to Congress pursuant Section 404 of the PRO- IP Act, detailing the efforts of implementation during the previous fiscal year. To read the 2017-2019 US Joint Strategic Plan on Intellectual Property Enforcement in its entirety, click on the link provided here.

Patents for Humanity – The perfect blend of social consciousness, technology, and incentives to create

In 2012, the Patents for Humanity initiative was started to encourage innovations and solutions to the numerous challenges of global development such as infrastructure, energy, and medicine to name a few. Under the program a potential applicant can submit an application to the USPTO and upon approval the applicant may be given an acceleration certificate applicable for application processing at the USPTO. Furthermore, past applicants have been recognized in an awards ceremony conducted at the White House. Previous years winning technology zones have includes areas such as Medicine, Sanitation, Nutrition, Energy, Clean Technologies, Information Technologies, and Living Standards Technologies. Notable, winners have included; Gilead sciences for its contributions towards making HIV medicines available by generics manufacturers in Asia and Africa, The University of California, Berkeley for low cost production methods of producing anti-malarial compounds, Sproxil’s part in the development of IT systems to identify counterfeit drugs, and Nokero’s incredibly interesting developments concerning solar power light bulbs and mobile phone charging systems. These technologies are tremendously benefiting disadvantaged people around the globe faced with constrained resources who are living in challenging political and economic environments. The Patents for Humanity initiative aims to provide a higher standard of living responsibly by providing a creative solution. That solution relies on a mixture of social consciousness, technology, and incentives to create – an impressive combination of several of humanities best attributes.

Socially conscious entrepreneurship and innovation are some of the hallmarks of the American marketplace and our patent system. One of the greatest challenges facing our intellectual property system is how to transfer the benefits of research and development of modern technologies to other less fortunate individuals and societies. The importance of robust patenting incentives, increased patent quality, socially conscious and morally focused technologies can leave lasting impressions on what types of characteristics a truly remarkable twenty first century inventor should embody.

The most recent Patents for Humanity initiative was renewed Friday May 27th, 2016 with notable improvements. Previously, Patents for Humanity projects incentivized business participation by the award of an “expedited processing certificate” that could be used to expedite patent application processing at the USPTO. The certificate was not transferrable so smaller companies that saw successes were not able to package their successes for further negotiations, partnerships, and sales. The Patents for Humanity Program Improvement Act allows the acceleration certificate and awards to be transferrable to other entities thereby attracting more small businesses to the initiative and increasing the rewards of recognition by the program. We can thank Senator Patrick Leahy, a notable legislative contributor to the field of Intellectual Property, who recognizes that – “The innovations that are recognized by the patents for Humanity Award program help underserved people throughout the world.”

Previous winners have identified that the holder of the acceleration certificate may be unable to use the certificate and that by “making the certificate transferable, we can ensure that the certificate will be put to full use” – Stephen Katsaros, Chief Executive Officer of Nokero. Nokero is responsible for technological inventions concerning off grid technologies, solar power light bulbs, and mobile charging stations.

Through refinement and further legislative implementation the United States Patent System continues to thrive. Notably, this Legislation serves as a laudable benchmark of what our Patent System can be with the right incentives and social awareness.

Authored by: Timothy J. Maier and P. Marshall Ticer of Maier and Maier PLLC

Fed Circuit swings the pendulum towards eligibility and away from abstraction

In 2012 when Enfish sued Microsoft the District Court for the Central District of California found all claims invalid because they were directed to the abstract idea of “storing, organizing, and retrieving memory in a logical table” or “the concept of organizing information using tabular formats.” On appeal, Judge Todd Hughes of the United States Court of Appeals for the Federal Circuit found that the claims were NOT directed to an abstract idea and consequently avoided the second step of the Mayo & Alice analysis completely. Although, the court affirmed the summary judgment of non-infringement the opinion is a monumental step in the right direction as it serves as an excellent guide to patent owners and practitioners on how, when, and why the two step framework may be avoided altogether.

It is now virtually cliché to state the Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012), and Alice Corp. Pty. Ltd. v. CLS Bank Intern., 134 S. Ct. 2347 (2014) standards because they betray ones ability to portray an original thought. In any event, the muddled case law requires (1) a determination whether the claims at issue are “directed to” a patent-ineligible concept; and (2) a determination if the elements of each claim, both individually and as an ordered combination, transform the nature of the claim into a patent-eligible application.

Academics and practitioners alike spend considerable time discussing whether the bulk of the §101 analysis is performed in step one, step two, or some other peripheral hunt for an “inventive concept” that doesn’t “preempt” other technologies. In our view, step one is focused predominately on the simple questions i.e. “what is the invention” and “what novel technical improvements are claimed”. Step two seems to be more focused on the Supreme Court’s belief that some necessarily abstract technical disciplines require narrowly tailored claim language with meaningful concrete language in which the limitations amount to something substantial without unnecessarily preempting other fields and uses.

In Alice The Supreme Court suggested that claims improving “the function of the computer itself, or improving an existing technological process might not succumb to the abstract idea exception.” USPTO Examiners and District Courts have predominately performed this analysis at step two of the Mayo & Alice framework. In Enfish LLC v. Microsoft Judge Todd Hughes skillfully noted that step one necessarily includes an unnamed category of patent eligible subject matter. This unnamed yet necessary category was the logical foundation upon which an excellent opinion was formulated. Judge Hughes, found that software is not inherently abstract and that by viewing software improvements by a high level of abstraction as the District Court did would allow the exceptions to swallow the rule. Judge Hughes also explained that because The Supreme Court did not explicitly define the term “abstract idea” a finding would necessarily require a direct comparison of claims at issue to subject matter and claims that have been previously identified as abstract by The Supreme Court and the Federal Circuit.

 

Focus of the Opinion:

In our view the focus of the analysis of the opinion was on the quality of the specification and the well disclosed improvements the technology made to the field of software – specifically databases.  The Enfish patents were both focused on improvements that were made to “relational databases” used to store large quantities of information and how to draw inferences quickly and efficiently from that data. The patent establishes that a “self-referential” table structure is a preferential arrangement to the typically used tables, columns, cells, etc. of traditional relational databases because the “self-referential” table structure allows information that would normally appear in a multitude of relational tables to be consolidated and stored in a single table. (Emphasis added) Furthermore, the patents themselves explained that by using a single table a user could benefit from quicker searching and indexing in addition to an enhanced data structure and storage capabilities.

The Court plainly establishes that the claims must be read in light of the specification when determining if a claimed invention is subject to the second part of the Mayo & Alice framework. In the Courts own language:

“We thus see no reason to conclude that all claims directed to improvements in computer-related technology, including those directed to software, are abstract and necessarily analyzed at the second step of Alice, nor do we believe that Alice so directs.  Therefore, we find it relevant to ask whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea, even at the first step of the Alice analysis”

Practical Takeaways:

Practitioners should be counseling clients that creative draftsmanship of software patent applications should focus on the specific improvements the claimed subject matter is “directed to.” By focusing on improvements, and providing a comprehensive specification outlining those improvements to avoid the step one analysis as was the case in Enfish LLC v. Microsoft.  It is also important to establish that the claims should be carefully drafted with an eye on avoiding routine conventional language.

The uncertainty of the law indicates that the claims should also be given additional meaningful limitations. In DDR Holdings, LLC v. Hotels.com, L.P. Judge Chen relied heavily on the fact that when the claims were taken together as an ordered combination the claims recited meaningful limitations that were not merely routine or conventional and that they were “necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.”

In our opinion it is preferable to avoid a step two analysis by carefully drafting an improvement oriented specification per Enfish LLC v. Microsoft rather than clutching to the meaningful limitations of a claim per DDR Holdings, LLC v. Hotels.com, L.P.  However, a prudent practitioner would counsel clients that a hybrid approach utilizing the two is likely the smartest path towards the award of a blue-ribbon copy of an official patent.

In summary practitioners now have two cases to make an argument for patent eligibility. Importantly they each provide a roadmap to eligibility under different prongs of the existing two frame analysis. Enfish LLC v. Microsoft should stand for the proposition that a well drafted specification focusing on improvements may pass § 101 muster on its own while DDR Holdings, LLC v. Hotels.com, L.P should stand for the proposition that claims should be narrowly tailored with a background underpinning of a technical solution to a technical problem. Enfish also shows a clear example of how a “means for” functional style claim should always be present as at least one of the three independent claims in any software application. In our opinion an apparatus claim, method claim, and “means for” claim would allow a practitioner to run the gambit of claim style and draw upon concrete examples which have been recently upheld. Enfish LLC v. Microsoft serves as a practical reference why experienced practitioner’s that can draft excellent non-routine disclosures of improvements in a specification is a must. Additionally, well drafted specifications may satisfy the algorithm requirement that means for functional claim language requires.

By: Maier and Maier PLLC – P. Marshall Ticer and Timothy J. Maier

PTAB Designates Five Precedential Opinions aimed at establishing workable body of law

In a desperately needed release on Tuesday May 10th 2016 the USPTO designated five PTAB opinions as precedential in a laudable effort aimed at establishing a workable body of law for post grant proceedings. Per Standard Operating Procedure 2 (Revision 9) “a precedential opinion is binding authority in subsequent matters involving similar facts or issues.”

Since the launch of the AIA and the record speed creation of the PTAB many administrative patent judges and PTAB practitioners have relied on their own instincts and wit while navigating uncharted waters. The recently designated precedential opinions should guide practitioners on matters such as; additional discovery for IPR and CBM proceedings, when the one year time bar of 35 U.S.C. § 315(b) begins to toll, and guidance on a patent owners burden to show entitlement to substitute claims.

Garmin Int’l v. Cuozzo Speed Techs LLC discusses the factors considered in evaluating motions for additional discovery in IPR proceedings.

Bloomberg, Inc. v. Markets-Alert Pty, Ltd., the factors considered in evaluating motions for additional discovery in CBM proceedings.

Oracle Corp. v. Click-to-Call Techs, LP, pertains to interpretation of “served with a complaint” for purposes of triggering the one-year time bar set forth in 35 U.S.C. § 315(b).

MasterImage 3D, Inc. v. RealD Inc., provides guidance on patent owner’s burden to show entitlement to substitute claims.

Lumentum Holdings, Inc. v. Capella Photonics, Inc., interprets 35 U.S.C. § 312(a)(2).

The AIA stipulates that a decision to institute a post grant trial shall be final and non-appealable. There are good arguments for and against this proposition which won’t be discussed here but it is important to note that if the USPTO is going to serve the public interest they must emphatically embrace their role in designating precedential opinions because by statute they are the only body who can. Cuozzo Speed Technologies, LLC v. Lee was recently argued at The Supreme Court, has been watched closely for years, and is just now becoming precedential.

The issuance of an official statement blessing these opinions as precedential indicates that the USPTO is taking the notion that they are necessarily the defacto party to establish precedential opinions seriously. However, we should be asking ourselves what is taking so long? Why did the Board take so long to officially designate such an early case as precedential and what can the USPTO do to establish case law more quickly?

The Standard Operating Procedure 2 (Revision 9) of the USPTO indicates that any member of the board may nominate an opinion as precedential to the Chief Judge. The Chief Judge may then put the nomination to a vote for a stated time period (typically 10 days) in which all 270 or so Board Members may vote on an opinion they believe should be precedential. If a majority is reached the Chief Judge must then submit the findings in writing to the Director. Naturally, the Director has veto authority.

While it is easy to point fingers at the Office for untimely designation of precedential opinions it is important to note that perhaps we – as practitioners that is – also have a role to play. Notably, the Office makes clear that “the appellant, the patentee, a petitioner, or a third party member of the public may, within 60 days of issuance of the opinion, request in writing that an opinion be made precedential.” Perhaps the question we should be asking ourselves is not what the Office should do for us, but what we should do for the Office.

Termination of an OED Disciplinary Proceeding: How a SOL Defense may be Properly Construed

 

Steve Lipman – Guest Author of PatentAttorney.com

Steve Lipman has practiced for more than 40 years in intellectual property litigation, acquisition, and counseling in DC, VA, NY, and BOS.  Steve began in the Federal Government with the USPTO and then in private practice as an equity partner in four law firms. He has served many times as a legal expert witness, a prosecution and defense counsel, and a consultant, for more than 40 patent and trademark attorneys and practitioners in ethics, disbarment / disciplinary investigations and hearings, and registrations before the USPTO’s Office of Enrollment and Discipline (OED).

 

Introduction

Prior to the AIA’s 2012 amendment to 35 U.S.C. §32, disciplinary investigations from the Office of Enrollment and Discipline (OED) of the USPTO fell under the general Statute Of Limitations (SOL) provision stated in 28 U.S.C. §2462 (“[E]xcept as otherwise provided by Act of Congress, an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued …”). In enacting the AIA, Congress inserted the following language into 35 U.S.C. §32, i.e., the statute:

“A proceeding under this section shall be commenced not later than the earlier of either the date that is 10 years after the date on which the misconduct forming the basis for the proceeding occurred, or 1 year after the date on which the misconduct forming the basis for the proceeding is made known to an officer or employee of the Office as prescribed in the regulations established under the section 2(b)(2)(D).”

See generally “Implementation of Statute of Limitations Provisions for Office Disciplinary Proceedings”. (All emphases are added unless indicated otherwise). Thus, the USPTO through its OED could bring a Complaint against an attorney or practitioner within (a) 10-years after an alleged misconduct occurs, or (b) 1-year after an alleged misconduct is “made known to an officer or employee of the Office,” whichever of the two SOL sub-phrases (a) and (b) occurs earlier.

Eleven months after the AIA’s amended statute became effective, the USPTO then promulgated its own limiting regulation requiring that the 1-year SOL sub-phrase (b) does not start counting the 1-year until the OED Director “receives a grievance forming the basis of the [C]omplaint.” Federal Register Vol. 77, No. 147, July 31, 2012, at p. 45247 (effective Aug. 30, 2012); see also “Filing a Grievance”. The plain language of the amended statute above is broad: notice is accomplished when an alleged misconduct is made known to an “officer or employee” of the Office, i.e., a disjunctive construction. As such, the implication is clear that either an officer or an employee can satisfy the statute. The USPTO has contended that this statutory language somehow encompassed only the OED Director as per the regulation. In other words, the USPTO has read the statute that allows notice to an officer or employee to really mean only one officer, i.e., the OED Director himself. This is almost exactly the opposite of the statute’s actual wording, and would render the statute subservient to the regulation.

The article also describes the evidence how and what the USPTO already knew and understood the meaning of “made known to an officer or employee of the Office” and to be prior to the implementation of the regulation and provisions in the MPEP which requires certain conduct to be reported to OED by officers and employees – and such evidence as (i) blogs and non-commercially-based periodicals, and (ii) commercially-based periodicals and web services, like the well-known Law360. Certainly any referral evidence to OED by an officer or examiner prior to the OED Director himself becoming aware of an alleged misconduct would meet the four corners of the statute.

Stated clearly, the regulation cannot limit the statutory provisions of the AIA’s amended 35 U.S.C. §32. Again, it is the statute and not the regulation that can significantly strengthen a SOL Defense when supported by clear and convincing evidence “made known to an officer or employee of the Office” applied by the determinative legal arguments and conclusions discussed in the following SOL Decision reached at the Hearing stage of a OED Disciplinary Investigation.

Understanding and Appreciating a SOL Defense When Applied By the Determinative

Legal Arguments and Conclusions from a SOL Decision Reached

at the Hearing Stage of a OED Disciplinary Investigation   

The OED Director served a “Complaint and Notice of Proceedings under 35 U.S.C. §32” (37 C.F.R. §§11.32, 11.34) that the respondent stated affirmatively in the “Answer” with one of the following SOL “Special Matters of Defense” (§11.36(c)):

The OED Director is barred by the applicable Statute of Limitations set forth in 35 U.S.C. §32 (amended) to institute, conduct, or enforce this disciplinary proceeding against Respondent, or to have prepared and served the Complaint on and against Respondent because more than one year passed since Respondent’s alleged misconduct forming the basis for the proceeding [was] made known to an officer or employee of the Office as prescribed in regulations established under section 2(b)(2)(D).

As the Hearing stage of the OED disciplinary investigation had begun as a “contested case” (§11.38), the respondent filed a Motion to Dismiss based on the SOL “Special Matter of Defense” to the “Hearing Officer” (the “Judge”) appointed by the USPTO Director, that the Judge considered to be a Motion for Summary Judgment (“SJM”) (§§11.39(b),(c)). The Judge denied the SJM and, three days later, the respondent requested for a  reconsideration of the denial to which the Judge responded with an “Order on Respondent’s Motion for Reconsideration” (the “Hearing Order”). In between the SJM and the Hearing Order, the respondent also filed a Motion to (1) Compel the OED Director to comply with the Judge’s previous Discovery Order, and (2) Request an Order to the OED Director to have a substitute OED witness prepared and available to testify at the Hearing regarding respondent’s SOL Defense Discovery Requests.

The Hearing Order recognized the AIA’s amendment to 35 U.S.C. §32 to be of a significant concern and, prior to the amendment, that OED disciplinary cases fell under the general SOL provision stated in 28 U.S.C. §2462. In enacting the AIA, the Hearing Order also recognized that Congress inserted into 35 U.S.C. §32 the previously-cited language. Therefore, the Hearing Order stated that it considered the AIA amendment to be a dual Statute of Limitations as the USPTO may bring a Complaint within 10-years after a misconduct occurs, or one-year after the misconduct is made known to the USPTO, which is earlier. According to the Hearing Order, this consideration allowed the USPTO reasonable time to discover the alleged misconduct, but not so much time that evidence and memory of the misconduct had faded (Comments of Sen. Jon Kyl, Congressional Record S1372-73 (daily ed. March 8, 2011)).

The Hearing Order reflected further that the USPTO had moved to address regulatory questions. The initial “Notice of Proposed Rulemaking and Request for Comments (NPRM)” was published on Jan. 5, 2012. The final rule was issued on Jul. 31, 2012, with an effective date of Aug. 30, 2012. In the Supplementary Information section of the NPRM, the USPTO stated that the amended statute “directs the Office to establish regulations clarifying when misconduct forming the basis for a disciplinary proceeding is made known to the Office.” 77 Fed. Reg. 457 (Jan. 5, 2012). There were only five Comments of which only one Comment critically addressed the question of notice. Comment 3 contended that the USPTO’s proposed regulation was inconsistent with 35 U.S.C. §32 because it narrowed the acceptable notice recipient from any “officer or employee” of the Agency to “the OED Director.” In response to this comment, the USPTO cited legislative history from Sen. Kyl (R-AZ), who stated that “[a] section 32 proceeding must be initiated … within 1 year of when the misconduct is reported to that section of the PTO charged with conducting section 32 proceedings.” 72 Fed. Reg. 45247, 45249 (Jul. 31, 2012). The USPTO then adopted the final rule largely as proposed, and implemented it on Aug. 30, 2012 as §11.34(d). This did not resolve, however, the question of what SOL was operative between Sept. 16, 2011 (the date of the AIA’s amendment became effective) and Aug. 30, 2012 (when the regulation became effective). As the OED Director’s Opposition acknowledged, the Hearing Order considered that the statutory language to be ambiguous that the Judge “wrestles with here.”

In the absence of any operative regulation, the Hearing Order noted further that the USPTO contended there are “two reasonable interpretations of the ambiguity in §32.” First, the USPTO theorized that “there is no one-year provision until the USPTO establishes regulations. In other words, the 10-year repose was the only relevant time period until the August 30, 2012 effective date ….” The Hearing Order stated the amended statute cannot reasonably be read in this way as it is a fundamental canon of statutory interpretation that a statute should be construed “so as to avoid rendering superfluous” any statutory language. Astoria Fed. Sav. & Loan Ass’n v. Solimino, 501 U.S. 104, 112 (1991). The Hearing Order noted that the USPTO ignored the entire second half of 35 U.S.C. §32, simply wishing Congress’ words out of existence until it was ready to interpret them as there is nothing in the statute to suggest Congress would sanction such an action. In fact, the amended statute stated that it “shall apply in any case in which the time period for instituting a proceeding under section 32 of title 35, United States Code, had not lapsed before the date of the enactment of this Act.” Pub. Law 112-29, §3(k)(3). According to the Hearing Order, had Congress intended for the amendment to 35 U.S.C. §32 to become effective only upon interpretation by the USPTO, it would have said so in the “Effective Date” section of the statute, as it did elsewhere in the AIA. For example, the Hearing Order noted that the amendments to 35 U.S.C. §§ 6, 122, 301, and 303, among several others, all stated “[t]he amendments made by this subsection shall take effect upon the expiration of the 1-year period beginning on the date of the enactment of this Act ….” The Effective Date section amending 35 U.S.C. §41 stated that it became effective 10 days after the enactment of the AIA. The Hearing Order reflected that there is no such delaying language in reference to the 35 U.S.C. §32 amendment as this was evidence that Congress considered the various effective dates of its amendments and intended the SOL to be effective as of Sept. 16, 2011, subject to later revision by the USPTO.

The USPTO’s second theory was that “the one-year period begins to run when the OED Director receives a written grievance (i.e., exactly what established under 37 C.F.R. §§11.1 and 11.34).” OED Director’s Oppos’n. The Hearing Order believed to have determined that there was no merit to this argument as the USPTO merely twisted its own regulation around and imputed it back to the statute, thereby validating itself. The converse to the statutory canon described previously was applicable here. Not only must the reader give every word in a statute effect, one also cannot read words into the statute; particularly when doing so alters the statute’s meaning. Iselin v. United States, 270 U.S. 245, 250 (1926). The plain language of the AIA-amended statute is broad: notice is accomplished when the misconduct is made known to an “officer or employee” of the Office. The Hearing Order stated that this is a disjunctive construction. As such, the implication is clear that either an officer or an employee can satisfy the statute. The USPTO contended that this language somehow encompassed only the OED Director. (As discussed at length in an “Order on Cross SJM’s (vacated on other grounds), the Judge offered no opinion about the validity of the USPTO’s regulations. However, the USPTO attempted to claim that the statute itself limits notice to only the OED Director. The Hearing Order stated that this is “flatly incorrect.” Whether §§11.1 and 11.34(d) are reasonable interpretations of 35 U.S.C. §32 was considered a different question, but that is a question for another court at another time.). In other words, the USPTO reads a statute that allows notice to any officer or employee to really mean only one officer, the OED Director himself. The Hearing Order stated that this is almost exactly the opposite of the statute’s actual wording, and would render the statute subservient to the regulation. Indeed, the Hearing Order commented that allowing the USPTO to interpret the statute, then teleport that interpretation back onto the statute, would create precisely the sort of retroactive legislation the respondent complained of, and the OED Director tacitly acknowledged, is improper.

The USPTO contended further that both of these interpretations were reasonable, and thus warranted Chevron deference. Under Chevron and its progeny, an agency’s reasonable interpretation of a silent or ambiguous statute is given controlling weight. See Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984). However, the Hearing Order noted that Chevron is not applicable in this instance as the USPTO did not cite any interpretation of the statute other than §§11.1 and 11.34(d). In fact, in its SJM, the OED Director affirmatively stated that it is the USPTO’s interpretation of 35 U.S.C. §32 – as sets forth in §§11.1 and 11.34(d) – that the one-year limitations period commences when the OED Director (not a patent examiner or any other employee or officer of the USPTO) receives a written grievance. That interpretation is reasonable and entitled to substantial deference.

The Hearing Order seemed to determine that those regulations specify “who,” “how,” and “when” notice is achieved, now. But those regulations were not in effect at the time in question. The USPTO’s interpretations contained within them were therefore of no help in resolving the ambiguity at the time in question. The question here was: What limitations period controlled during the gap between Sept. 16, 2011, and the regulations’ effective date when there were no regulations? With regard to the regulatory gap, at best, USPTO’s position at bar was considered by the Hearing Order to be a litigation position which the Supreme Court has made clear deserves little deference, if any. Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 212-13 (1988). (“We have never applied [Chevron deference] to agency litigating positions that are wholly unsupported by regulations rulings, or administrative practice …. Deference to what appears to be nothing more than an agency’s convenient litigating position would be entirely inappropriate.”).

Given that neither of the USPTO’s proffered interpretations deserved deference, the Hearing Order stated that the Judge must weigh their persuasiveness against the language of the statute itself. The Hearing Order stated that the statute wins that contest easily. The Hearing Order stated further that the statute explains Congress’ intent to be in plain English, and can be easily understood without ignoring words or adding new words. The Judge therefore was understood to have found that, prior to the enactment of the regulations, i.e., §§11.1 and 11.34(d), the only operative SOL was the one expressed in the statute, i.e., 35 U.S.C. §32. Accordingly, the one-year statutory clock began when the misconduct was made known to a USPTO officer or employee of the Office. The Judge stated in the Hearing Order that this did not, however, automatically hand victory to the respondent as the respondent was believed to must still show that the misconduct was made known. [Emphasis in the original].

The respondent argued that a USPTO employee was aware of the circumstances giving rise to the original Complaint against the respondent. Moreover, the respondent claimed various USPTO personnel, including the OED Director, were made aware of the basis for disciplinary action due to ongoing public media coverage, a case involving the same family of patents at the heart of the disciplinary proceeding. The Hearing Order also noted that the USPTO contended, in essence, that 35 U.S.C. §32 cannot be read as broadly as the respondent suggested because it would render the notice requirement effectively unworkable. It is understood from the Hearing Order that the Judge considered there to be substantial meat to the arguments. That being said, the Hearing Order seemed to comment somewhat sardonically that those arguments could include that: (i) under a plain reading of the statute, an officer or employee would be expected to fish out pertinent information from any source at any time; (ii) an employee could click on a blog post at home, skim it offhandedly, and thus permanently frustrate the OED Director’s attempts at prosecution; and (iii) a person talking on the phone while waiting to catch a Washington D.C. metro train could trigger the statutory clock if, by happenstance, a USPTO employee was also on the platform. Then, the Hearing Order seemed to quickly confute its own arguments that they cannot be results that Congress intended.

The Hearing Order noted further that USPTO’s arguments must be weighed against the language of the statute, giving no deference to the USPTO as the notice arguments were merely made in a litigation posture. Here, a reading of “made known” is so broad as to encompass notice through publication would lead to an illogical result. The Judge was believed to have found that a reasonable interpretation of 35 U.S.C. §32 requires a written submission to an officer or employee. The Hearing Order also noted that this generalized attempt at communication is often little more than background noise, particularly in the Internet era where information is ever-present, whether or not is wished. The Hearing Order seemed that it was unconvinced that Congress intended USPTO officers or employees to be relentlessly vigilant in packing up chatter that is not directed at them.

The Hearing Order discussed further that, in reviewing a SJM, a review court must find “all ambiguities and draw all reasonable inferences in favor of the party defending against the motion.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986); Matsushita Elec. Indus. Corp. v. Zenith Radio Corp., 475 U.S. 574 (1985); see also Lujan v. National Wildlife Federation, 497 U.S. 871, 888 (1990) (“where the facts specifically averred by [the nonmoving] party contradict facts specifically averred by the movant, the motion must be denied”).

The Hearing Order remarked further that the respondent asserted that the SOL set forth by 35 U.S.C. §32 had run by the time the OED Director filed the original Complaint against the respondent. In support of respondent’s arguments, the respondent cited various events including a conversation between a USPTO employee and the respondent, and respondent’s disclosure of a filing of a USPTO document containing a copy of a pleading filed by a third party. The Hearing Order also remarked that the respondent seemed to have claimed that “the contents of that disclosure made abundantly clear any alleged misconduct which could have possibly given rise to the Complaint.” However, the Hearing Order noted that the OED Director claimed the original Complaint was timely filed because the misconduct was first “made known” to an officer or employee of the USPTO when the OED Director received a facsimile, from respondent, which included a letter and a copy of a district court’s decision.

The Hearing Order concluded that the parties raised sufficient issues of material fact to warrant a Hearing to determine when respondent’s alleged misconduct was actually “made known” to an officer or employee of the USPTO pursuant to 35 U.S.C. §32. Thus, the Hearing would afford the fact-finder the opportunity to assess the credibility of the witnesses and draw inferences from the facts. Further, as the parties were already prepared for the Hearing on the merits of the case, the Judge believed that he would entertain testimony on both the SOL issue and the disciplinary sanction sought by the OED Director. Thus, the Hearing Order determined that the Judge found issues of material fact existed as to when the misconduct forming the basis for the disciplinary proceeding was “made known” to an officer or employee of the Office.

On the same day the Judge entered and signed the Hearing Order, both the OED Director and the respondent signed-off on a “Proposed Settlement of Disciplinary Matter Pursuant to 37 C.F.R. §11.26” (the “Proposed Settlement Agreement”) to terminate the Hearing and the OED disciplinary proceeding. And, on the very next day the Proposed Settlement Agreement was presented to the USPTO Director who immediately signed the “Final Order” that same day terminating and settling the entire disciplinary proceeding, i.e., it took only two consecutive days from the entire submission of the sign-off of the Hearing Order, the Proposed Settlement Agreement, and the Final Order, which led shortly thereafter of the Final Order to the public on the OED’s electronic FOIA Reading Room designated as “Disciplinary Proceeding No. D2013-17”.

Thus, the Final Order jammed on the brakes of the respondent, the USPTO, and the OED within only two consecutive days after the Judge signed the Hearing Order. However, the “overnight” termination of the Hearing and the disciplinary proceeding left open whether and how the Hearing Order per se could be applied to a SOL Defense of another disciplinary proceeding even though the Hearing Order derived from a settled proceeding. Nevertheless, while it is believed that the determinative legal arguments and conclusions of the Hearing Order should be applied similarly in a SOL Defense of a different disciplinary proceeding, some of the following aspects of the Hearing Order can help find and prove what, when, and how an alleged misconduct could be “made known” successfully from an “officer or employee of the Office.”

Some of the Following Aspects of the Hearing Order That Can Help Find and Prove

What, When, and How an Alleged Misconduct Could be “Made Known”

Successfully from an “Officer or Employee of the Office”

Not surprisingly, the OED Director and others from OED engaged in concerted and aggressive efforts at the birth of the AIA amendments of 35 U.S.C. §32 to promote and deliver the new SOL and other OED investigative practices. Those efforts included public speeches, in-person presentations, slide shows, published articles, and other means of communication, externally and internally of the USPTO, so possible misconduct was made known to officers or employees of the Office through such following examples as “web searches,” “published decisions,” “news articles,” and “headlines” from blogs, and non-commercially-based and commercially-based periodicals:

  • The “Patent Corps, Trademark Corps, [and] Other[s],” as sources “[i]nternally within [the] USPTO,” “suggesting possible grounds for discipline” of practitioners, pursuant to the new compressed SOL of 35 U.S.C. §32 as amended by the AIA, “[o]ne year from when the misconduct was made known to the USPTO,” not made known only to the OED Director;

– “Professional Responsibility for IP Practitioners – OED’s Rules and Responsibilities in Handling Grievances and Disciplinary Matters Against Practitioners,” spoken and presented publicly by the OED Director at the Spring 2012 Annual Meeting of the American Intellectual Property Law Association;

  • “OED receives information that leads to grievances from outside the PTO — clients and colleagues of the attorney — and internally from [patent] examiners *** We also do our own investigations … and we do web searches [that] I am always surprised at the frequency of [the] headlines [outside of the USPTO] about patent attorneys;”

– “Patent Attorneys Can Take Steps To Avoid Grievances,” cited and reprinted in BNA’s Patent Trademark and Copyright Journal, Vol. 83, p. 180, Dec. 9, 2011, reprinted on Dec. 16, 2011 in BNA’s Life Sciences Law & Industry Report, and delivered publicly by the OED Director on Dec. 1, 2011;

  • Published Decisions [and] News Articles” also “suggesting possible grounds for discipline” of practitioners, pursuant to the AIA-amended SOL of 35 U.S.C. §32, “[o]ne year from when the misconduct was made known to the USPTO;”

– “Harmonization and Enforcement of USPTO Ethical Standards in the Post-AIA Era,” spoken and presented publicly by the OED Director through a slide-show on May 30, 2013; and

  • Web searches,” “published decisions,” “news articles,” and “headlines”:

– Blogs and non-commercially-based periodicals;

In such well-known, easily-provided electronic format as IPwatchdog, Patent Baristas, Patently-O, and many other randomly-listed examples from one of many Internet sites at the relevant time period, like “Most popular intellectual property and technology law blogs”; and

– Commercially-based periodicals and “web services;

In such well-known, easily-provided electronic format as Bloomberg’s “BNA Patent Trademark and Copyright Journal”, Portfolio Media’s “Law360”, and many others of such commercially-based periodicals and web services;

For example, two critical commercially-based periodicals of “published decisions” or “news articles” from Portfolio Media’s “Law360,” believed to be and still subscribed and received by the USPTO’s Office of the General Counsel (OGC) in which OED and its Staff Attorneys are a component of OGC, were published on the Internet at the relevant time period beyond the one-year period “suggesting possible grounds for discipline” for the Hearing Order (see “At Trial, HTC Says Intellect Wireless Patents Unenforceable” and “Favoring HTC, Judge Finds Wireless Patents Unenforceable”, in addition to other evidence in support of the SOL Defense beyond these two critical sources).

Indeed, it is believed that these latter two critical sources would have been significant in support of the Hearing Order, among other evidence, because the Order made clear that the parties raised sufficient issues of material fact to warrant the Hearing to determine when and what respondent’s alleged misconduct was actually “made known” to an “officer” or “employee” witness of the Office pursuant to 35 U.S.C. §32. Accordingly, the Hearing Order likely would have been applied at the Hearing as well for the fact-finder to assess the credibility of the employee/officer witnesses and to draw positive inferences from their testimony. Further, as the witnesses were already identified and teed-up for the Hearing on the merits, the Judge seemed in favor of a reasonable and limited number of concise, fact-based testimony, documents, and admissions at the Hearing. Those testimonial Hearing witnesses were also likely to have been at least the OED Director and one F.R.Civ.P. 30(b)(6) employee from inside of the OED pursuant to §11.52 (Discovery) and §11.51 (Depositions) through the following:

(a)     subpoenaed depositions duces tecum and ad testificandum for both SOL discovery and Hearing testimony (35 U.S.C. §24; 37 C.F.R. §§11.38, 11.43, 11.50, and 11.51(a)); and

(b)     minimal and concise written requests for SOL documents and admissions (§11.52).

In addition, the two aforementioned critical sources, among other evidence for the Hearing, could have been proffered and applied just as well through Office employees outside of the OED, such as a patent examiner. As known well, patent examiners are trained well and repeatedly from at least two periodic training programs through the “Office of Patent Training (OPT)”) supplemented with a multi-part “AIA First Inventor To File (FITF)” segment in large part from the Office’s “MPEP Staff”. The MPEP Staff ensures that revised policies and procedures of the Office are appropriately disseminated to USPTO personnel through MPEP revisions, the Federal Register or Official Gazette notices, or other official announcements. Thus, the MPEP contains instructions to patent examiners, as well as other substantive and procedural material in the nature of information and interpretation that outline the current Office procedures “which the patent examiners are required or authorized to follow in appropriate cases in the examination of a patent application.” Id.

On the “patent side” of OPT and FITF training, “officers” of the Office are also involved on that “side” as well. For example with “officers,” at times the Deputy Commissioner for Patent Examination Policy, believed to be an “officer” of the USPTO, is consulted through other appropriate Office “officers” to formulate recommendations to the Commissioner for Patents (another individual believed to be an “officer”) who may be necessary for others believed to be “officers” – such as the USPTO Director, General Counsel, Solicitor, Chief PTAB Judge, Commissioner for Patents, Deputy Commissioner for Patent Examination Policy, Deputy Commissioner for Patent Operations, and TC Directors. “Organizational Offices of the USPTO”. In addition, there are believed to be an Office “officer” within the three sections of the OGC – the Solicitor’s Office, the Office of General Law (OGL), and the OED. These and other Office “officers” review and discuss recommended guidance to enable the USPTO Director to decide how the Office should and will proceed. Ultimately, policy and other implications of other Office “officers” are officially incorporated into the MPEP and OPT resources from the “Office of Patent Legal Administration” (OPLA). To reflect changes in law, rules, procedures, and policies, OPLA recommends updates to the MPEP as well as forms used by the Patent Examining Corps and external Office customers delivered through training on specialized subjects, patent law, and procedure for OPT. Id.

Not surprisingly, therefore, the preceding extensive and substantive details learned and applied by the “employee[s] or … officer[s] of the Office” from their organized USPTO training (and day-to-day work) and from the MPEP have taught them to identify many variations of possible practitioner misconduct that should be communicated by them to OED. Those communications to OED can and might be developed into evidence for a formal allegation of misconduct – or for a SOL Defense. The following are just a few illustrations of possible misconduct to be communicated to OED:

– “… [PTAB] action may include a sanction in the interference or referral of a patent practitioner to the Office of Enrollment and Discipline;”

– “Office personnel (including the Patent Examining Corps) are instructed to: (1) not reply to or act upon any third-party inquiry or other submission in an application, except those in compliance with 37 CFR 1.290 or 37 CFR 1.291 … When refusing third-party telephone or oral discussions, examiners may call the party’s attention to the statutory prohibition on initiating protests, or 37 CFR 1.2 …  The Office may also refer third-party inquiries, or submissions not provided for in 37 CFR 1.290 or 37 CFR 1.291, by registered practitioners in applications to the Office of Enrollment and Discipline for appropriate action;”

– “An amendment signed by a practitioner who has been suspended or excluded from practice under the provisions of 37 CFR Part 11 is not entered. The file and unentered amendment are submitted to the Office of Enrollment and Discipline for appropriate action;”

– “Examiner Note: … Misuse of a Certificate of Mailing under 37 CFR 1.8 or improperly claiming the benefit of 37 CFR 1.10 which appears to be more than a one-time, inadvertent error should be brought to the attention of the Office of Enrollment and Discipline;” and

– “…Where the circumstances of an application or other proceeding warrant a determination of whether there has been a violation of 37 CFR 11.18(b), the file or the application or other proceeding will be forwarded to the Office of Enrollment and Discipline (OED) for a determination of whether there has been a violation of 37 CFR 11.18(b) ….

Conclusion

The regulation cannot limit the statutory provisions of the AIA’s amended 35 U.S.C. §32 and would render the statute subservient to the regulation. Again, it is the statute not the regulation that controls which can and should significantly strengthen a SOL Defense from an “officer or employee of the Office” who was “made known” of an alleged misconduct more than one-year prior to the OED’s filing of a Complaint when supported by clear and convincing evidence applied properly by the determinative legal arguments and conclusions of the Hearing Order.

USPTO Design Day 2016

On April 19, 2016, the United States Patent and Trademark Office (“USPTO”) hosted the 10th annual Design Day, a day-long seminar covering updates and developments in the design patent world.  The free event was well attended, drawing practitioners and designers from throughout the country and even internationally, in addition to a number of patent examiners from the design patent technology center, TC 2900.  The attendance speaks to the growing importance of design patents in the eyes of practitioners and inventors alike.

The day began with a presentation by Andrew Hirshfeld, Commissioner for Patents USPTO.  Mr. Hirshfeld noted the significant increases in design patent filings and the number of design patent examiners since he joined the office in 1987.  Historical data can be found here.  Notably, Mr. Hirshfeld mentioned that approximately 80 new design patent examiners have been added over the past three years, including 15 examiners in the Silicon Valley Regional Office.  On the international front, Mr. Hirshfeld mentioned that the USPTO will be issuing the first registration based on an International Application under the Hague System in the next week.

Next, Robert P. Olszewski, Director of TC 2900, discussed the make-up of TC 2900 and the statistical overview in more detail.  Specifically, Mr. Olszewski reported that TC 2900 currently includes 191 personnel: 1 Director, 12 supervisory examiners, 1 design practice specialist, 166 examiners, 1 technical support team lead, 9 technical support team members, and 1 office manager.  They expect to increase the number of examiners to approximately 195 by the end of 2016.  This growth is needed to overcome the current backlog of cases.  Mr. Olszewski stated that applications have increase by an average of 3% over the past three years.  They have closed the gap on matching the number of outgoing 1st actions with the number of incoming cases in 2015 and expect to begin reducing the current backlog of 41,055 cases with the increase in examiners. Mr. Olszewski also noted that there is currently an average of 13.7 months to 1st action, up from 8.5 in 2010, and an average of 19.7 months to issue, up from 14 in 2010.  In closing, Mr. Olszewski announced his planned retirement at the end of this year.

In his presentation, Mr. Olszewski took a moment to discuss an initiative to improve drawing quality in publications and issued patents.  There has been a degradation issue during reproduction due to a conversion from vector to raster graphics.  The process is being improved to avoid degradation and should take full effect by the end of the year.

David Gerk, Attorney-Advisor Office of Policy and International Affairs at the USPTO, took the podium next to speak about international developments.  He touched on the Industrial Design 5 (“ID5”) forum, the WIPO Standing Committee on Trademarks, and the Hague Agreement.  The ID5 forum included the 5 largest design offices and WIPO.  The ID5 make up for 90% of design filings in the world.  The forum covered a number of topics for harmonizing design law around the world.  Topics of note included priority document exchange and the implications of new technological designs.  Additionally, 40+ jurisdictions, including the ID5, have cooperated to create a centralized Design Search platform: DesignView.

Next, Gregoire Bisson from WIPO discussed the Hague System Implementation.  Mr. Bisson noted key aspects of protection through the Hague System, including the ability to file up to 100 different designs in a single application, the requirement for designated jurisdictions to issue any substantive refusals within 12 months of designation, and the 5 year renewal period. Mr. Bisson also highlighted differences between filing directly through WIPO and filing indirectly through the USPTO.  If filed directly through WIPO, an applicant is able to amend the filing electronically through WIPO’s online forms.  This is not possible for applications filed through the USPTO.  However, applications filed through the USPTO are automatically granted a foreign filing license, while those filed directly with WIPO are not.  Mr. Bisson reported that of the 256 US Hague filings, 114 have been filed directly to WIPO and 142 have been filed indirectly through the USPTO.  Mr. Bisson also noted that the USPTO turnaround time has improved from approximately 60 days in 2015 to around 10 days in 2016.  In closing, Mr. Bisson mentioned interesting statistics, including that the average US Hague application included 5 designs, 76% of indirect filings through the USPTO included a priority claim to a US application despite the automatic foreign filing license, and that the European Union was the most commonly designated jurisdiction at approximately 86%.

Bryce Rufener of Caterpillar Inc. followed Mr. Bisson with an update on recent MPEP changes and their implications.  He highlighted changes covering whether the title of a design application impacts the scope, the use of surface shading, and the acceptance of color drawings without meeting additional requirements.  Mr. Rufener pointed out several seemingly contradictory sections of the MPEP.  For example, section 1504.02 covering novelty states that the reference must be identical in all material respects to find anticipation, while also stating that the ordinary observer test is the sole test for anticipation.

Before lunch, a panel of examiners and practitioners discussed best practices.  The panel, which was moderated by Elizabeth Ferrill of Finnegan LLP, included Jeffrey Asch and Karen Kearney from the USPTO and practitioners Robert Katz of Baner & Witcoff Ltd and Margaret Polson of Polson IP Law.  The first topic of discussion was the use of generic titles.  All parties agreed that clear titles are helpful for examiner search purposes.  Robert Katz noted that there could be analogous art issues, 103 issues, and infringement issues caused by titles.  Next, the panel discussed elements of the specification, particularly broken line statements.  Ms. Ferrill mentioned the continually changing broken line statement requirements by examiners and how it is viewed by clients. From the audience, Perry Saidman expressed concern over the ability of examiners to amend the specification ex parte.  Mr. Saidman noted the potential litigation issues this can cause.  Mr. Ash commented that examiners are pressured to expedite examination, but only by changing non-substantive typographical and procedural miscues.  He noted that this could be a potential area for improvement.  Other topics included whether absolute language, such as “must,” should be used by examiners in office actions and the need for excessive Information Disclosure Statements.

The afternoon session started out with Brian Kelleghan, founder and owner of Bison Designs.  Mr. Kelleghan provided his personal experiences and observations as a designer and entrepreneur/business owner.

Daniel Martinage and Austen Angell of IDSA followed with an update from the Industrial Designers Society of America (“IDSA”).  Mr. Angell commented on recent trends in the design world.

After the IDSA update, Mesmin Pierre, Director of Copyright and Industrial Design Branch of the Canadian Intellectual Property Office, spoke on practice changes in Canada.  Of particular note, Mr. Pierre noted that Canada is joining 5 IP treaties and will implement the Hague System by 2018.

After a mid-afternoon break, Daniel Gajewski of Sterne Kessler Goldstein & Fox PLLC provided a look back at cases that have influenced design patent examination.  Mr. Gajewski covered cases concerning new matter, obviousness, and color.  With regard to new matter, Mr. Gajewski noted that In re Mann is often cited, but stressed that it is inapplicable for new matter rejections.  He contends that only experimental use was at issue in In re Mann, as noted in the opinion.  In re Salmon; however, remains applicable.  With regard to obviousness, Mr. Gajewski highlighted the famous In re Rosen case, which established the need for a “Rosen reference.”  Mr. Gajewski continued to point out two PTAB cases that provide non-precedential, but useful examples of how obviousness is applied.  These were Vitro Packaging v. Saverglass and Vanguard Identification Systems v. Bank of America.

Next, James Aquilina of Design IP PC discussed the much anticipated Apple v. Samsung case to be heard by the Supreme Court.  Mr. Aquilina discussed the issues to be considered, namely the award of Total Profits, the legislative history behind the Total Profits statute, and the arguments by each side.  Apple’s core argument will be directed to the plain language of the statute, which provides for total damages.  Samsung, on the other hand, will argue that an article of manufacture does not refer to the entire product.

Finally, William Seymour of Lando & Anastasi LLP concluded the day with a report on design patent litigation and case law over the past year.  His overview included key statistics and insight on the litigation landscape.  He noted 330 design patent cases were filed last year, which is down 3% from 2015, but up 21% since 2008, when the precedential Egyptian Goddess case was decided.  He noted the top venue for design patent litigation was the Central District of California, with 28% of the cases filed, and the top industry for design patent litigation was Apparel and Haberdashery with 10% of the cases.  Mr. Seymour also noted that, to his knowledge, Apple v. Samsung is currently the only case covering icons.  He reported that in 2016, 6 petitions for inter partes review were filed, 3 were instituted, and 1 final determination was made.  Mr. Seymour concluded with a brief summary of key cases over the past year spanning infringement, functionality and obviousness.

HOW CONGRESS MADE THE USPTO INFALLIBLE AND HOW THAT AGENCY SEIZED EVEN MORE POWER BY ITS “RULE MAKING AUTHORITY”

The Supreme Court of the United States is set to hear oral argument in Cuozzo Speed Technologies, LLC v. Lee on April 25, 2016. The landmark case is the first opportunity The Supreme Court will have to weigh in on the constitutionality of the non-appealable provisions of the America Invents Act and the USPTO’s use of the “Broadest Reasonable Interpretation” in administrative post-grant trial proceedings used for the sole purpose of invalidating patents. The case will likely have precedential implications for two major issues. The first, whether an Article I administrative decision to institute an administrative trial can be “non-reviewable” without violating the Due-Process clause of the Constitution. The second, whether an Article I administrative court and an Article III judicial court may permissibly use different methods of patent claim construction.

When Cuozzo Speed Technologies, LLC v. Lee was decided by The Court of Appeals for the Federal Circuit Judge Dyk held that the court lacked jurisdiction to review the USPTO’s decision to institute. Judge Dyk cited 35 U.S.C. § 314(d), explaining that the Court was prohibited from reviewing the decision to institute an IPR. Judge Dyk found additional support for the USPTO’s claim construction standard, citing 35 U.S.C. § 316(a)(2) which he believes gives authority to the USPTO to adopt standards and regulations.

The position of Judge Dyk was clear and the rule would have been easy to follow. So why did The Supreme Court grant review? It is a widely known fact that The Federal Circuit, the circuit from whom Cuozzo Speed Technologies appeals from, has the highest reversal rate of any judicial circuit in the United States. Equally as interesting is the belief, amongst many intellectual property attorneys, that The Federal Circuit is more competent than The Supreme Court in patent related matters.

 

THE NON-REVIEWABILITY PROVISION AND ITS IMPLICATIONS

The America Invents Act (“AIA”) stipulates that the USPTO’s decision regarding the institution of a post-grant trial proceeding shall be final and non-appealable. This seemingly straightforward pragmatic law aims to delegate authority to the USPTO over matters that it possesses expertise on and is arguably uniquely situated to determine.  However, the issues are more complex than meets the eye because constitutional concerns governing the reviewability of an Article I court by an Article III court are believed by many to be mandated by the Constitution. In short the argument follows that an Article I court, under the direction of the Executive branch, cannot usurp power from an Article III court, by way of Legislative action. Consider for a moment the following thought provoking questions:

  1. Is it constitutionally permissible for an Article I court, operated under the Executive Branch, to strip away patent property rights without the supposed constitutional guarantees of an Article III court’s oversight and that little elephant in the room called Due Process?
  2. Does Due Process merely guarantee a procedural mechanism, not necessarily an Article III mechanism?
  3. Is the presumption of reviewability of an Article I court validly rebuffed by the pragmatic desire for post-grant trial institutions to be final, non-appealable, and overseen by individuals of technical expertise?

If the “un-reviewability provision” were to be broadly accepted, where would it end? If Congress can make one agencies opinion infallible by the removal of judicial review the logical conclusion is that they can and would make other agencies insulated from judicial review.  Would Congress be able to delegate sweeping authority to the IRS to institute administrative trials for tax collection purposes and insulate the IRS from the checks and balances of Judicial Review? Would the EPA be able to broadly pass regulations, adjudicate those regulations, and go entirely unchecked just because Congress said so? Many would emphatically cringe as these scenarios are stupefyingly horrific.

 

THE DIFFERING CLAIM INTERPRETATION METHODS

The USPTO uses a claim interpretation standard known as the “Broadest Reasonable Interpretation” during administrative trials. This method, while similar to that used at District Courts is notably more expansive – meaning it has the ability to infuse additional ambiguity into claim language and the potential to invalidate more patents than the “ordinary meaning” standard used by the District Court.

Property rights are affected by the negative implication of the USPTO’s usage of the BRI standard. The co-existence of two different interpretive standards has lead and will continue lead to forum shopping because one venue is patent owner friendly while the other venue is friendlier to the patent opposition camp. The flip flopped approach should make anyone pause in concerned reflection and consider the following questions:

  1. Should an administrative agency be allowed to use a different interpretive standard than that which is mandated at a Federal Court?
  2. If so, will it create one-sided outcomes further compounding existing forum shopping?
  3. When a patent is issued is it fair to say that it has created reliance interests?

When a patent issues it becomes a full-blown property right. Many would argue that it makes complete sense for the organization that granted that right to oversee any unforeseen required corrections. However, once a patent has issued others would argue that it has left, or at least partially left, the jurisdiction of the agency that created it. Many would argue that issued patents create reliance interests that deserve deference they are not currently afforded at the USPTO. After all deference to reliance interests is the very reason that a “patent is presumed valid” by an Article III court.  Again, it is for that very reason that Congress clearly stated that a patent is “presumed valid” in 35 U.S.C. § 282.

Congress intended for the USPTO’s Patent Trial and Appeals Board to provide parallel routes for District Court litigation concerning patent validity in order to ease judicial burden and have patent validity matters overseen by persons of technical expertise. One cannot help but question the underlying rationale of the USPTO’s usage of the BRI standard because the BRI standard, when used in relation to issued patents, is facially at odds with congressional intent that a patent be “presumed valid.” Many are left wondering how an alternate standard of review can be held to be simultaneously “parallel” by any normative understanding.

 

THE CUMULATIVE EFFECTS

The unforeseen consequences of the problems associated with the office’s use of the BRI standard adversely affect the pragmatic arguments in support of the non-reviewable provision of 35 U.S.C. § 314(d) in the first place. Hypothetically setting the constitutional concerns aside and focusing purely on pragmatism it would seem that if the USPTO used the same interpretive standard as the District Court they could be viewed as “partners” within the grander intellectual property scheme. Under the prevailing system they are distinct islands separated by miles of disputed territory.

While these two issues are problematic in their own right it is important to consider the combined cumulative effect they are having on property rights and innovation within this country. The question of whether judicial review exists for decisions of initiating post-grant proceedings is extremely important because the USPTO, an Article I court, may go wholly unchecked in its decisions and establish its own rules that are facially defiant of the plain and ordinary meaning of congressional statutes. To elaborate, the USPTO is currently riding the unstoppable wave of its very own preferred interpretations of petition requirements while citing its rule making authority as justification. The problematic tenure of this position is that the USPTO currently has unreviewable discretion to institute proceedings, and is the sole arbiter of what satisfies the procedural requirements of an institution in the first place. Currently, the agency is free to determine the interpretive standards and qualifications of prior art, affidavits, declarations, and expert opinions a petitioner and owner may rely on.

The full extent of this issue came to light most recently when the USPTO promulgated its latest rules on April 1st. The rules established that in instances of “disputed material facts” such as testimonial evidence or prior art the evidence will be construed in the light most favorable to the petitioner. This indicates that competing evidence will not be fully analyzed and the benefit of any doubt will virtually automatically be given to the petitioner. Here it is clear the USPTO does not want to have “trials within trials” but this decision appears to be mostly self-serving by easing institutional work load.

While problematic for Inter Partes Reviews and Post Grant Reviews alike we must not forget that the institution standard for a Post Grant Review is greater than that of an Inter Partes Review. The plain language of the statutory requirements to institute a PGR require that it is “more likely than not” that at least one claim in the petition is invalid. The troubling conclusion one can quickly reach is that when two parties submit competing evidence and the evidence is automatically presumed to favor one party over the other there simply cannot have been a showing that something is “more likely than not” because a full analysis was never performed. This glaring oversight showcases exactly why Article III court reviewability of an Article I court may be necessary. Consider the hypothetical situation where a petitioner puts forth a prior art reference from a lab journal or advertisement. That publication does not have a clear “time-stamp” and the petitioner attached sworn testimony swearing to a specific date. Likewise, the owner provides a prior art reference showing that they were in possession of the inventive concept but that prior art reference also lacks a clear “time-stamp.” Importantly, the owner swears behind the date of the reference and antedates the petitioner’s prior art reference. This scenario would lead to the institution of an administrative trial because the presumption favors petitioners and disfavors patent owners. On the other hand, the District Court would reach the exact opposite conclusion because there is a presumption favoring validity and anyone challenging validity has the burden to prove invalidity by “clear and convincing” evidence. Granted we are only referring to the institution of a trial rather than the final disposition this situation highlights how these nuances could play out.

Article III reviewability of the USPTO’s decisions, although timely and problematic in its own way, is the best mechanism we have to preserve concepts of “checks and balances” and “separation of powers” principles embodied in the Constitution and spirit of American Innovation.  It seems that the USPTO is deviating from the authority granted it by Congress and is going it alone so to speak.

The Supreme Court is the final arbiter of the metes and bounds of the meaning of the Constitution and they therefore are the only governmental branch that can determine the interplay of the numerous competing concerns. If the past is any indication of the future The Federal Circuit will likely be overruled on at least one of the two issues. Rarely, if ever, does The Supreme Court formulate a completely orthogonal opinion but it is of course possible and has happened in technical patent related cases recently. It is possible that The Supreme Court will hold that the non-reviewability provision of the decision to institute an administrative hearing at the USPTO is unconstitutional and that the usage of the BRI standard stands in stark contrast to the “uniformity and predictability” policy goals they frequently enunciate.

By: Maier and Maier PLLC – Timothy J. Maier and P. Marshall Ticer

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