Circuit judges continue to differ regarding the test for patent subject-matter eligibility under 35 U.S.C. § 101. The en banc decision in CLS Bank v. Alice Corporation produced five, six, or seven opinions, depending on one’s counting. The breakdown of the various opinions authored in connection with the court’s ruling is as follows:
- Per curiam opinion.
- Judge Lourie authored a concurring opinion joined by Judges Dyk, Prost, Reyna, and Wallach.
- Chief Judge Rader concurred and dissented, both in part, joined by Judges Linn, Moore, and O’Malley, except as to part VI, joined only by the Chief Judge and Judge Moore.
- Judge Moore wrote an opinion dissenting in part, joined by the Chief Judge and Judges Linn and O’Malley.
- Judge Newman concurred and dissented, both in part. No judge joined that opinion.
- Judge Linn dissented, and was joined by Judge O’Malley.
- Chief Judge Rader, authored “additional reflections.”
Thus, depending on whether “additional reflections” are considered an opinion, and whether the one-paragraph per curiam opinion is considered an opinion, this case produced five, six, or seven opinions. The per curiam opinions reads as follows:
Upon consideration en banc, a majority of the court affirms the district court’s holding that the asserted method and computer-readable media claims are not directed to eligible subject matter under 35 U.S.C. § 101. An equally divided court affirms the district court’s holding that the asserted system claims are not directed to eligible subject matter under that statute.
The judges sparred not only over the § 101 inquiry, but also regarding the precedential weight that should be afforded to any or all of the signed opinions that accompanied the ruling. Judge Lourie wrote that although
no single opinion issued today commands a majority, seven of the ten members, a majority, of this en banc court have agreed that the method and computer-readable medium claims before us fail to recite patent-eligible subject matter. In addition, eight judges, a majority, have concluded that the particular method, medium, and system claims at issue in this case should rise or fall together in the § 101 analysis.
Assuming that Marks applies to circuit courts, there may be rules of law to distill from the various opinions. See Marks v. United States, 430 U.S. 188, 193 (1977). Judge Rader’s opinion, however, suggests otherwise, noting that
[n]o portion of any opinion issued today other than our Per Curiam Judgment garners a majority. The court is evenly split on the patent eligibility of the system claims. Although a majority of the judges on the court agree that the method claims do not recite patent eligible subject matter, no majority of those judges agrees as to the legal rationale for that conclusion. Accordingly, though much is published today discussing the proper approach to the patent eligibility inquiry, nothing said today beyond our judgment has the weight of precedent.
So, not only is there disagreement regarding the proper test under § 101 (covered nicely at Patently-O here), the various opinions show a meta-disagreement, regarding weather any rule of law emerges from the court’s en banc determination. Stay tuned.
The remedy of lost profits has always seemed to me to be, conceptually, the simplest of the various damages remedies. You calculate how many infringing sales the infringer made; estimate how many of these infringing sales the patentee would have made, but for the infringement (a number which could range from “zero” to “all”); and you calculate the profit the patentee would have earned on those lost sales. To be sure, there are both underlying policy issues and difficult practical issues surrounding this simple concept. From a policy perspective, a recovery of lost profits (coupled with a reasonable royalty on infringing sales the patentee would not have made, but for the infringement) is intended to render the patentee no worse off as a result of the infringement, and therefore to preserve the patent incentive. I generally think this is a sound policy, though reasonable minds may differ–for example, see Ted Sichelman’s interesting paper in a forthcoming issue of the Texas Law Review (to which I will be contributing a response in the review’s online supplement), or Norman Siebrasse’s thoughtful argument that deterrence sometimes should play a greater, or at least somewhat different, role than my work advocates (a point to which I hope to respond in a forthcoming post). And there certainly are a number of practical difficulties, as there are with any damages remedy; there are inevitably tradeoffs between accuracy and administrative efficiency. One of these difficulties involves the accurate calculation of the number of sales the patentee would have made, but for the infringement. This requires one to determine, among other things, what the infringer would have done if it had not infringed. Resolving this issue, in turn, requires an inquiry into the next-best noninfringing alternative. Suppose, for example, that the infringer made 100 sales with the use of patented invention A; and that it could have substituted nonpatented invention B for patented invention A, but in doing so would have lost 10 sales to the patentee. In other words, 90 consumers were indifferent between A and B, but the 10 who preferred A to B would have purchased from the patentee, but for the infringement. The patentee should recover its lost sales on the 10 and a reasonable royalty on the other 90.
This is hardly cutting-edge economic reasoning, and it’s been part of U.S. law for a long time. One can also find application of this reasoning in French case law and, more recently, in cases from Canada. As I discuss in my book, however, the U.K. still follows an outdated nineteenth century precedent holding that courts may not take noninfringing alternatives into account in calculating lost profits (or in awarding defendant’s profits). And Japanese courts have denied the patentee the opportunity to recover both lost profits on sales it lost to the infringer and a reasonable royalty on infringing sales it would not have made. Under these precedents, the patentee must choose one remedy over the other, even though this necessarily renders the patentee worse off than it would have been, but for the infringement.
Two recent U.S. opinions (from the Federal Circuit), both authored by Chief Judge Rader, on the topic of lost profits also raise some questions, at least in my mind. The first, Presidio Components, Inc. v. American Tech. Ceramics Corp., 702 F.3d 1351 (Fed. Cir. 2012), was a case in which the patentee apparently thought it was selling a product that embodied its patent, but (as it turned out) it wasn’t: it was selling a product that was not covered by the patent in suit. The defendant’s infringing product competed with the patentee’s unpatented product, and the defendant’s infringing sales caused the patentee to lose sales on its unpatented product. The court affirmed an award of lost profits on those lost sales. The principle that the patentee can recover lost profits on sales of unpatented goods that compete with infringing goods was established in Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538 (Fed. Cir. 1995) (en banc). As I discuss in my book, I think the principle is probably correct, if the goal is to restore the patentee to the position it would have occupied, but for the infringement. In Rite-Hite, however, there was (according to the majority) evidence that the “unpatented” Rite-Hite products actually were covered by other patents not in suit, and thus were not noninfringing alternatives available to Kelly. In Presidio, there is nothing in the Federal Circuit opinion that indicates whether Presidio’s unpatented products were covered by some other patents or other IP rights. If not, then it seems to me that those products themselves may have incorporated noninfringing alternative technology that the defendant could have used, and thus that a lost profits recovery may not have been appropriate. Perhaps there was good reason not to consider the unpatented products as an adequate substitute technology, but I think the court should have said something about this issue.
The other, more recent opinion, is Versata Software, Inc. v. SAP America, Inc., Nos. 2012-1029, -1049 (Fed. Cir. May 1, 2013). The court wound up affirming a lost profits award of $260 million (and a reasonable royalty award of $85 million). For all I know, these numbers may be the right ones, but there are two aspects of the opinion that I find perplexing. First, the court says (slip op. pp. 14-15) that it won’t consider defendant SAP’s arguments relating to the expert’s methodology because those arguments should be resolved under Daubert (U.S. case law relating to the conditions for the the admissibility of expert testimony), and SAP didn’t appeal the Daubert ruling. But SAP did appeal from the final judgment, which should have preserved SAP’s objection to the expert’s testimony. So does the court mean to say that SAP didn’t object to the expert’s methodology at trial and therefore is precluded from raising this argument on appeal, or is there some fine point of civil procedure that I am missing here? Second, the court affirms a reasonable royalty award, even though “the district court precluded Versata’s expert from presenting a reasonable royalty analysis, and the only evidence for a royalty award came from SAP’s expert.” But Versata, the plaintiff, had the burden of proof, so why is there any reasonable royalty award at all if it failed to carry its burden? At least, I think Judge Posner would wonder about that, as evidenced by his opinion last June in Apple v. Motorola . . .
Last week a divided Eighth Circuit panel affirmed a district court’s conclusion that a TTAB decision would not be given preclusive effect in B&B Hardware, Inc. v. Hargis Industries, Inc. The court reasoned that preclusion was inappropriate because the TTAB decided different likelihood-of-confusion issues that those that were before the district court.
The dissenting judge disagreed that the TTAB’s likelihood-of-confusion analysis was truly different from the district court’s analysis, writing that “[m]odest differences in analytical approach to the same ultimate issue, however, do not justify dispensing with collateral estoppel.”
Some commentators have suggested there is now a circuit split regarding the preclusive effect of TTAB decisions. Perhaps there is, but the opinion was careful to avoid holding that TTAB decisions could never be preclusive. Consider these excerpts:
- “The element at issue in this case is the second one—whether the issue sought to be precluded is the same as the issue involved in the prior action. It was not here, and thus the district court properly declined to apply issue preclusion in these circumstances.”
- “[A]pplication of issue preclusion in this case is not appropriate, as the TTAB in denying registration did not decide the same likelihood-of-confusion issues presented to the district court in this infringement action.”
- “Because the Trademark Trial and Appeal Board previously decided the same question about likelihood of confusion that was at issue in the trial of this case, Hargis Industries should not have been permitted to relitigate that point.” (Colloton, J. dissenting)
[Note: The following post can also be found on my new blog, "Comparative Patent Remedies", at comparativepatentremedies.blogspot.com. I intend to continue blogging on IntellectualIP on other IP-related topics, and to cross-post on IntellectualIP material from Comparative Patent Remedies that I think would be of interest to IntellectualIP's readership.]
Professor Daniel Sokol’s Antitrust and Competition Policy Blog is hosting an online symposium on my book Comparative Patent Remedies: A Legal and Economic Analysis (Oxford University Press 2013), with commentary by Professors Norman Siebrasse, Marketa Trimble, and Peter Yu. Links to the reviews are here:
Many thanks to Professor Sokol for putting this together!
Late last week Judge James Robart issued his long-awaiting findings and fact and conclusions of law on the issue of RAND royalties in Microsoft Corp. v. Motorola, Inc. For those of you who haven’t had time to plow through the 207-page opinion, there are good summaries available by Professor Jorge Contreras at Patently-o (http://www.patentlyo.com/patent/2013/04/so-thats-what-rand-means-a-brief-report-on-the-findings-of-fact-and-conclusions-of-law-in-microsoft-v-motorola.html); by Florian Mueller at Foss Patents (http://www.fosspatents.com/2013/04/a-closer-look-at-207-page-landmark.html); and by Jay Jurata, Matthew Poppe, and David Smith at http://reaction.orrick.com/rs/vm.ashx?ct=24F76C1AD3E60AEDC1D180A9D329951CD4BE7BB3D38714DD4CF371647BF8D90DDD78038. Rather than repeat what can be found elsewhere, this essay sets forth a few initial reactions I had as I read the opinion, and that I have not yet seen discussed anywhere else.
By way of background, many standard setting organizations (SSOs) require their members to license their standard-essential patents (SEPs) on “reasonable and nondiscriminatory” (RAND) terms. (The alternative term “FRAND,” meaning “fair, reasonable, and nondiscriminatory,” is synonymous with RAND.) SSOs rarely if ever define the term RAND in advance, however; rather, the RAND commitment serves as a backdrop against which SEP owners and potential licensees negotiate. Of course, when negotiation fails, either party or both parties may resort to litigation. Many of the civil actions in the “Smart Phone Wars” that have been raging across the globe for the last two or three years have involved SEPs; most of these cases are patent infringement actions filed by SEP owners. One issue that can arise in such cases is whether an SEP owner that prevails at an infringement trial should be able to obtain a permanent injunction (or, in the ITC, an exclusion order). Until Judge Robart’s opinion, however, no reported decision had addressed the difficult issue of to calculate a RAND royalty.
Given this backdrop, Microsoft v. Motorola is in some ways a bit of an oddity in that it is not a patent infringement action, but rather an action for breach of contract. In 2010, Motorola offered to license two portfolios of purportedly standard-essential patents to Microsoft. Believing that the asking price of 2.25% per unit was too high, Microsoft filed suit, requesting among other things a declaratory judgment (1) that Microsoft was a third-beneficiary of Motorola’s RAND commitment to the IEEE and ETSI, and (2) that Motorola had breached that contract. Last year, Judge Robart held that Microsoft was indeed a third-party beneficiary of an enforceable contract. The opinion from last week sets forth the judge’s views as to what a RAND royalty for the patents at issue would be, as well as the possible range of what a RAND royalty could be (which may be relevant to determining whether Motorola’s offer was in good faith). Later this year, a jury will determine whether Motorola breached the contract and, if so, whether Microsoft is entitled to damages for any collateral harms it has suffered.
Briefly, Judge Robart concluded that the amount of a RAND royalty should be determined through application of a modified version of the Georgia-Pacific factors that are used to determine reasonable royalties in patent infringement litigation. Among the notable features of his opinion are: (1) the conclusion, correct as an economic matter, that a patent royalty should reflect the value of the patented invention only, and not the “hold-up” value that may result from trying to extract a better deal after a standard incorporating the patent has been chosen; (2) that in industries in which many patents are likely incorporated into a device, courts should avoid “royalty stacking” that would result in aggregate royalties exceeding the value of the device; (3) the recognition that incremental value, i.e., the value of the patented invention over the next-best alternative, is the theoretically correct measure of patent value, though one that may be difficult to estimate in practice; (4) the importance of carefully considering which purportedly comparable licenses are, in fact, comparable to the hypothetical license between the patent owner and the user; and (5) the importance of considering how important (or unimportant) the patent is to the user. Although I cannot comment intelligently on the factual evidence before the judge, his legal and economic analysis is, for the most part, sound. Without repeating what others have already said about the opinion, I’d like to note the following matters that struck me as I read the opinion and that I haven’t seen any discussion of anywhere else.
First, there is a sense in which Judge Robart actually made an additional, and appropriate, modification to Georgia-Pacific that he didn’t explicitly call attention to. Specifically, Georgia-Pacific factor fifteen recites the overarching “willing licensor-willing licensee” framework:
The amount that a licensor (such as the patentee) and a licensee (such as the infringer) would have agreed upon (at the time the infringement began) if both had been reasonably and voluntarily trying to reach an agreement; that is, the amount which a prudent licensee–who desired, as a business proposition, to obtain a license to manufacture and sell a particular article embodying the patented invention–would have been willing to pay as a royalty and yet be able to make a reasonable profit and which amount would have been acceptable by a prudent patentee who was willing to grant a license.
Judge Robart’s analysis arguably departs from a literal application of this factor to the extent he is trying to reconstruct the hypothetical deal the parties would have negotiated before the standard was adopted, rather than at the time Microsoft may have begun using the patents in suit—though he alludes to this matter most clearly in connection with factor 9, “the utility and advantages of the patent property over old modes or devices” (p.38), and he elsewhere states that “RAND licenses can be negotiated after an SSO adopts a standard” (p.29; see also p.159). I have argued elsewhere that such a modification of the relevant time frame is necessary, in the context of SEPs subject to RAND commitments and even in actions alleging patent infringement as opposed to breach of contract, because if the focus is instead on the time (post-standard adoption) that the alleged infringement began, the royalty to be calculated may reflect the patent’s holdup value rather than its incremental contribution to the art. See Thomas F. Cotter, Reining in Patent Remedies: Three (Increasingly Immodest) Proposals, 29 Santa Clara Comp. & High Tech. L.J. __, __ n.43 (forthcoming 2013), available at http://ssrn.com/abstract=2235769.
Second, under the willing licensor-willing licensee analysis that applies in patent infringement actions, the premise is that the licensor and licensee both knew that the patent was valid and infringed. See, e.g., Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301, 1325 (Fed. Cir. 2009). Though counterintuitive, this assumption makes economic sense in the context of an infringement trial. To illustrate, suppose that (at the time infringement began) the user would have agreed to pay the patentee $1 million, discounted by an 80% probability of infringement and an independent 70% probability of invalidity; the royalty would have been $560,000 (i.e., $1 million x 0.7 x. 0.8). If the patentee could recover only $560,000 in damages if the case went to trial, however, her expected recovery prior to filing the complaint would be only $560,000 x 0.7 x 0.8 = $313,000. The unrealistic-sounding assumption that the parties would have negotiated on the understanding that the patent was valid and infringed means that the patentee should recover $1 million if she prevails at trial (something she has a 56% chance of doing), and thus avoids the double discounting problem. See Stephen Kalos & Jonathan D. Putnam, On the Incomparability of “Comparable”: An Economic Interpretation of “Infringer’s Royalties,” 9 J. Proprietary Rts. 2, 4-5 (1997). In a breach of contract action such as Microsoft, however, there has been no determination that any of the patents at issue are valid or infringed. Using the preceding example, the uncertainty over the patent’s validity and infringement means that the appropriate royalty would be $560,000, not $1 million. Thus in Microsoft, Judge Robart correctly took into account the possibility that Microsoft was not using some of the Motorola patents at all. See, e.g., pp. 92, 93, 105-06, 121. Notice, however, that this means that a RAND royalty calculated in a breach of contract action ought to be lower than a RAND royalty awarded for the very same patent or patents at the conclusion of an infringement action—a counterintuitive, but I think economically correct, result.
Third, in some instances Judge Robart was convinced by neither side’s conclusions regarding valuation and simply proceeded on his own. See, e.g., pp. 112, 116. Contrast this approach with that of Judge Posner last year in Apple v. Motorola, who when convinced that neither side’s damages experts had tendered admissible opinions dismissed the action altogether, on the ground that there is no right to proceed to trial for a judgment of nominal damages. In such cases, should the trier of fact attempt to reach a reasonable result notwithstanding flaws in the evidence—and if so, on what basis—or is dismissal the proper option? Should it matter whether the relevant portion of the trial is to a jury or to a judge? Should it matter whether the party with the burden of proof is the patentee (as in Apple) or the user (as was the case, presumably, in Microsoft)?
Fourth, while I find most of Judge Robart’s analysis persuasive (subject to the caveat that I have not reviewed the underlying evidence), I think the judge made some math errors in his lengthy footnote at page 171 (specifically, paragraph 526 n.23), where he tries to derive the lower end of the RAND range by means of a comparison with the royalty that Motorola firm would have earned from its patents had it been a member of the relevant patent pool for the technology in question. Specifically, Judge Robart presented an algebraic analysis of how the value of a patent pool royalty would relate to the value of a royalty calculated outside the pool. Judge Robart proposes that the value to a firm of participating in a pool could be described as
VP = P+ + IP + E – P- - OC,
where P+ is the licensing revenue the firm earns from being in the pool; IP is the value to the firm of having access to the pooled patents; E is the “external value the company derived from adding its patents to the pool, such as promoting participation in the pool and thereby encouraging widespread adoption of the standard”; P- is the licensing revenue the firm pays to the pool; and OC is the opportunity cost of joining the pool. (Judge Robart actually says that OC is “the opportunity cost of using the patents in a different way, such as abstaining from the patent pool and licensing patents outside the pool,” but I think he means “the opportunity cost of not using the patents in a different way . . . .” More on this below.). Similarly, the value to the firm of abstaining from the pool is
VA = A+ + IP – A- - OC,
where A+ is the revenue the firm would derive from licensing its patents outside the pool (the RAND royalty); A- is the revenue the firm would pay to obtain access to others’ patents; and OC is “the opportunity cost of not joining the pool.” (Apparently the assumption is that, except for the firm that is deciding whether to join the pool, all other firms with relevant patents are in the pool; otherwise there should be a A- term, though perhaps of lesser magnitude, in the first equation, shouldn’t there?) Comparing the two, Judge Robart concluded that, because Motorola’s patents contributed relatively little to the standards at issue, it was fair to assume that VP = VA (and hence that the opportunity costs “cancel out,” as does the IP term if we assume both firms benefit equally from having access to the other relevant SEPs). Moreover, he assumed that P+ = E, based on the inference that “the external value of joining the pool is equivalent to the royalty deficit Microsoft incurs through pool membership”; that 2P+ = P-, based on evidence that Microsoft paid twice as much in royalties to the pool as it received in licensing revenue from the pool (and the assumption that Motorola would have fared no better); and that A- = 1.5P- = 3P+, on the assumption that non-pool royalties would be about 1 ½ times greater than pool royalties (“higher than the pool rate, but not twice as high because some, if not all, of the companies holding SEPs would be subject to the RAND commitment”). Substituting values, we get A+ = 3P+, meaning that the RAND royalty is three times the pool royalty.
I think there are some errors here. First, it seems to me that the opportunity cost of not joining the pool is VP, and that the opportunity cost of joining is VA (right?), though ultimately this factor does not wind up mattering to the judge’s analysis and (I think) shouldn’t matter in terms of comparing the value of joining the firm versus the value of abstaining. Second, and more significantly, I’m not sure why we should assume that VA = VP, even if there is reason to think that Motorola’s patents are relatively low in value. Motorola itself apparently though that VA ≥ VP or it would have joined the pool (though to be fair, the judge is using this analysis to calculate the low end of the range). Third, I think that the judge errs when he states that E “is equivalent to the royalty deficit Microsoft incurs through pool membership,” that is that E = P+. He’s conflating E with IP + E. From his earlier analysis, all we can say is that, for VP to be positive, P+ + IP + E > P-. Thus, at best, even if the assumption that A- = 3P+ is correct, I think all we can infer is that A+ ≥ 2P+ + E. So the RAND royalty is at least twice what the pool royalty would be, plus some increment for the intangible value of being a pool member. It seems to me that the low end of the RAND range therefore would be just twice the RAND rate, not three times; in theory, E could be as low as zero. If anything, though, the error works in favor of Motorola, but I don’t think Microsoft will make much of it since the overall thrust of the opinion strongly favors Microsoft’s position. (And, to reiterate, my analysis is preliminary and it’s possible that I have overlooked something important; a 207 page opinion is a lot to digest, even over the course of a week).
 For a contrary view, however, see Dennis Carlton & Allan L. Shampine, An Economic Interpretation of FRAND, at p.13, available at http://ssrn.com/abstract=2256007 (arguing that, in the context of FRAND royalties, a firm that succeeds in proving infringement of its SEP should not be able to recover more than the pre-litigation FRAND rate).
Baseball Bats, Chocolate Chip Cookies, and Warp Drives: the Supreme Court Hears Oral Argument in Myriad Genetics
On Monday, April 15, 2013, the United States Supreme Court heard oral argument in Association of Molecular Pathology vs. Myriad Genetics. As has been amply discussed, this case involves the patent eligibility under 35 U.S.C. 101 of certain isolated DNA molecules encoding a mutation that is associated with an increased risk of breast cancer in women.
The American Intellectual Property Law Association (AIPLA), in its amicus brief in support of neither party, provides an excellent framework that could, and should, be used by the Justices in deciding this case. As AIPLA points out, this case is not about patentability, but about patent eligibility:
“To be sure, ‘human genes’ as they exist in the body are not ‘patent eligible’ under 35 USC 101; they also are not patentable under other provisions of patent law. For instance, human genes are not ‘new’ and therefore a claim to a human gene would be anticipated by naturally occurring human genes in contravention of 35 U.S.C. 102. ‘Patentability,’ however, is not at issue in this case. ‘Patentability’ refers to compliance with all statutory provisions that govern whether a patent is valid and enforceable, including those directed to, inter alia, obviousness, anticipation, enablement, and written description. The focus of this appeal is solely on 35 U.S.C. 101, the gatekeeper provision that determines what subject matter is eligible for patent protection.” AIPLA Amicus Brief, p. 3.
Rather than following the Supreme Court’s own precedent in earlier cases that addressed the patentability of “products of nature” (such as Diamond v. Chakrabarty, 447 U.S. 303 (1980) and Funk Brothers Seed Co. v. Kalo Inoculant Co., 333 U.S. 127 (1948)), some of the Justices seem to focus on the difficulty of the invention. The Court’s own holding in Chakrabarty is that whether a composition of matter passes the eligibility threshold of 35 U.S.C. 101 depends on whether the claimed composition is “a product of human ingenuity ‘having a distinctive name, character, and use” from naturally occurring starting materials.” 447 U.S. at 309-10. However, some of the Justices seem to be focusing more on the level of human ingenuity involved than on the characteristics of the claimed composition. Not only so, but they appear to be turning the degree of difficulty on its head.
For example, some of Chief Justice Roberts’ questions to the attorney for Myriad Genetics focus on the difficulty of making a baseball bat from a tree branch as opposed to “simply” cutting the claimed DNA molecules out of a human gene.
“CHIEF JUSTICE ROBERTS: My understanding -my understanding is that here, what’s involved, obviously through scientific processes, but we’re not talking about process. Here, what’s involved is snipping. You’ve got the thing there and you snip -snip off the top and you snip off the bottom and there you’ve got it.
The baseball bat is quite different. You don’t look at a tree and say, well, I’ve cut the branch here and cut it here and all of a sudden I’ve got a baseball bat. You have to invent it, if you will. You don’t have to invent the particular segment of the — of the strand; you just have to cut it off.”
According to Roberts’ remark, the former would be patent eligible but the latter is questionable.
In an even more absurd analogy, Justice Sonia Sotomayor compared the nucletotide sequence of isolated DNA to the natural ingredients in chocolate chip cookies such as eggs and flour.
“JUSTICE SOTOMAYOR: I can bake a chocolate chip cookie using natural ingredients — salt, flour, eggs, butter — and I create my chocolate chip cookie. And if I combust those in some new way, I can get a patent on that. But I can’t imagine getting a patent simply on the basic items of salt, flour and eggs, simply because I’ve created a new use or a new product from those ingredients.”
With all due respect to Justice Roberts’ ability as a carpenter and Justice Sotomayor’s talents as a chef, these remarks signal the Court’s fundamental mis-characterization of the biological molecules involved in the case and the difficulty of obtaining them. The Supreme Court should uphold the Federal Circuit in finding the claimed isolated DNAs as patent eligible under 35 U.S.C. 101.
If these simplistic analogies were to win the day, might it not be possible (purely on the basis of 35 USC 101) to allow a patent for a new baseball bat and deny one for the Star Trek Warp Drive? Is there not something wrong with a jurisprudence that even entertains such questions? If the “person on the street” were asked “Which invention is more worthy of a patent: a new baseball bat or a warp drive?” can anyone credibly believe that the person would choose the former? Which advances the frontiers of science more?
The problem suggested by these simplistic analogies seems to be one of finding “laws of nature” (and thus ineligibility under 35 USC 101) the further that science goes towards the microscopic but not finding such “laws of nature” at the macroscopic level. Hence, such arguments as those above and in those presented earlier at the Federal Circuit (which Judge Lourie capably defeated).
One way of understanding the scientific and philosophical implications of this case is presented in my earlier article “Myriad Genetics: Laws of Nature and the Philosophy of Science” http://intellectualip.com/2012/10/12/myriad-genetic…phy-of-science/
On March 16, 2013, a fundamental change to United States patent law occurred. The America Invents Act (AIA) first-inventor-to-file (FITF) provisions went into effect. Since that date, any new patent application will be examined under the FITF provisions instead of the previous first-to-invent (FTI) provisions. What does this mean to you or your client as a United States inventor? This alert summarizes five reasons why it is important to file a United States patent application as soon as possible after the invention and before any public disclosure.
Reason #1: Another inventor who files a US patent application first may get the patent that you want. Under the AIA, the first inventor to file (not the first to invent) is presumed to be entitled to a patent.
Reason #2: Even if another inventor who files a US patent application first does not get a US patent, publication of that patent application may be “prior art” that would prevent your patent from issuing. Under the AIA, US patent application publications are prior art as of the date that they are “effectively filed” (which may include a foreign or domestic priority date). The US Patent and Trademark Office (USPTO) can use such application publications to reject your US patent application that was filed between the effective filing date of the other patent application and that patent application’s publication date (generally 18 months after the filing date).
Reason #3: The AIA, unlike the previous patent law, does not provide a way for you to “swear behind” a publicly available document or patent publication to prove that your invention preceded this prior art. This is the result of the change of the law from FTI to FITF.
Reason #4: Your or another’s public disclosure of the same or similar invention may be prior art that would prevent your patent from issuing unless you file a patent application claiming that invention within one year of such public disclosure. The AIA provides a one year “grace period” for your own public disclosure, but you might forget to file a patent application within one year. The AIA does not provide a one year grace period to you for another’s public disclosure, unless the other person obtained the subject matter of the invention directly or indirectly from the inventor or a joint inventor (or unless you first publicly disclosed the subject matter of the invention within the one year grace period).
Reason #5: Your or another’s public disclosure, even if you file a US patent application within one year, may prevent your patent issuing in another country, which does not have the one year grace period that the AIA provides for US patent applications. However, a US patent application filed before public disclosure of the invention is honored by most countries.
This is only a summary of the AIA FITF provisions. There are many other sections of the AIA and the sections have a great deal of interaction. You should contact a registered patent attorney for further information.
The Internet Corporation for Assigned Names and Numbers (“ICANN”) has launched its Trademark Clearinghouse (“TMCH”) effective March 26, 2013. ICANN touts the TMCH as an effective tool for combating infringement and other feared abuses relating to ICANN’s new generic top level domain program (“gTLD”). For an annual fee between $95 and $150 per trademark, brand owners can file their trademarks with the TMCH centralized database before and during the launch of the new gTLDs. Registration will afford the brand owner two purported benefits: 1) priority registration for gTLDs matching their trademark during the ”sunrise” period (the period before the names are available to the general public); and 2) notification if anyone registers a gTLD matching their trademark.
ICANN’s gTLD program provides companies the opportunity to forego standard domain extensions such as “.com” and “.org” and register domain extensions incorporating their trademark such as “.pepsi” or “.google.” The program has received heavy criticism, including claims the program is primarily intended to increase revenues (the application fee for a gTLD is $185,000 with an ongoing annual fee of $25,000.) Others are concerned gTLDs will have an anticompetitive effect by allowing large players such as Google to monopolize descriptive domain extensions such as “.blog.” The founding chairperson of ICANN, Esther Dyson, is on record as claiming the gTLD system will create jobs for lawyers, marketers, search-engine optimization experts, registries, and registrars but add little actual value or benefit to brand owners or internet users.
The TMCH has received similar criticism. According to some commentators, the TMCH is less effective than readily available commercial watch services routinely utilized by brand owners. Such critics note that the TMCH will apparently only screen for exact matches – failing to flag minor variations from the subject mark. For example, an application for the gTLD “.googled” would apparently not get flagged for the registered trademark “google.” For an equivalent cost, most commercial watch services catch all minor variations of the subject mark. Additional information and details concerning ICANN’s TMCH can be found at http://trademark-clearinghouse.com
Last week saw a string of interesting or important IP developments. One commenter called it “Shark Week for copyright lawyers.” (h/t Booth Sweet LLP)
Kirtsaeng v. John Wiley & Sons, Inc.—The U.S. Supreme Court held that the “first sale” doctrine applies to copyrighted works lawfully made abroad. So, Kirtsaeng’s textbook-arbitrage practice (having textbooks purchased abroad cheaply so that he could sell them in the U.S.) is lawful. SCOTUSBlog has good coverage here.
The ISOHunt case, Columbia Pictures Industries v. Fung—The Ninth Circuit affirmed a summary judgment ruling holding that under Metro-Goldwyn-Mayer Studios, Inc. v. Grokster Ltd., 545 U.S. 913 (2005), the defendants were liable for inducing copyright infringement through BitTorrent. ISOHunt’s actions didn’t fall under any of the safe harbor provisions of the DMCA. Importantly though, the panel refused to hold that inducement liability is inherently incompatible with protection under the safe harbors. “[W]e are not clairvoyant enough to be sure that there are no instances in which a defendant otherwise liable for contributory copyright infringement could meet the prerequisites for one or more of the DMCA safe harbors.” Bloomberg has a write-up here.
Speaking of BitTorrent, the Prenda copyright cases and the fraud-on-the-court investigation continues. American Lawyer has an overview here. The Prenda firm has been involved in a series of high-profile copyright-infringement suits against alleged BitTorrent downloaders of pornographic works; ArsTechnica reports that Judge Otis Wright in the Central District of California has scheduled a hearing for April 2 to determine “why they should not be sanctioned for defrauding the Court.” The Star Tribune explains the Minnesota connection to these lawsuits here. Ken at Popehat has in-detail coverage here. [Full disclosure: I previously represented a defendant in one of these cases.]
Maria A. Pallante the Register of Copyrights testified before Congress regarding the need for revisions to the copyright act in light of technological developments. The Register said that “if one needs an army of lawyers to understand the basic precepts of the law, then it is time for a new law.” She identified a non-exclusive list of issues:
clarifying the scope of exclusive rights, revising exceptions and limitations for libraries and archives, addressing orphan works, accommodating persons who have print disabilities, providing guidance to educational institutions, exempting incidental copies in appropriate instances, updating enforcement provisions, providing guidance on statutory damages, reviewing the efficacy of the DMCA, assisting with small copyright claims, reforming the music marketplace, updating the framework for cable and satellite transmissions, encouraging new licensing regimes, and improving the systems of copyright registration and recordation.
In other news the Associated Press won its suit against news-aggregator Meltwater. AP v. Meltwater. Judge Cote in S.D.N.Y. rejected Meltwater’s fair-use defense to AP’s allegations. Meltwater has vowed to appeal.