"Patent Marking" Case Against Solo Cup Dismissed in ED Va.

Matther A. Pequignot v. Solo Cup Co., No. 1:07-cv-897 (E.D. Va., July 2, 2009, order) (L. Brinkema)

Washington DC patent attorney Matthew Pequignot filed at least two lawsuits against Solo Cup and Gillette (P&G) alleging that the defendants were engaging in "false marking" of their products.

Under 35 U.S.C. 292, marking an unpatented product as “patented” or marking a product as “patent pending” when no patent is pending can be punishable by “not more than $500 for every such offense.” The false marking activities are only actionable if done “for the purpose of deceiving the public.” As a qui tam right, a private citizen could sue, and if successful, split half of the damages with the government.

Pequignot alleged that Solo Cup marks its paper products with patents that had expired more than ten years ago. Previously, the district court denied Solo's motion to dismiss at an earlier stage in the litigation. More recently, Solo Cup moved for Summary Judgment arguing, in part, that Solo could not have acted with "the purpose of deceiving the public."

The judge agreed with Solo and dismissed the case:

For the reasons stated in open court, to be fully explained in a memorandum opinion, defendant's Motion for Summary Judgment is GRANTED, plaintiff's Motion for Partial Summary Judgment is DENIED, and it is hereby ORDERED that the jury trial scheduled to begin on July 27, 2009 be and is cancelled.

Download a copy of the order here (link)

See AP: "Judge closes door on legal quirk in patent law" (link)

Appeals "Skyrocket" at the USPTO

Law.com issued an article today confirming what most practitioners have known for a while - patent examination has become a stingier process, resulting in more appeals at the BPAI. Over the past year, the PTO reports that appeals have spiked 70 percent. From October through May, 10,870 patent appeals were filed, which is a sharp increase from 6,385 from the previous year.

While the number of appeals increase, the levels of success have not - in fiscal year 2008, the BPAI allowed 44 percent of patents that came before it, which is down from 66 percent five years ago, and 71 percent at the start of the decade.

According to the article,

PTO spokeswoman Jennifer Rankin Byrne said in a statement that a "significant increase" in the ranks of patent examiners has led to more examinations and "more final rejections which could result in an appeal." Examiners will have less time to process applications and hand down rejections, at least in the short term. The PTO suspended overtime pay from June 21 through at least the end of the fiscal year.

* * *

Byrne of the PTO denied that the PTO's current philosophy is to reduce the number of issued patents. "There is not an agency policy to have examiners reject claims without merit," Byrne said. "The examination of applications is constrained by controlling case law. It is this controlling case law that examiners use as guidance in making rejections."

One interesting part of the article deals with the notion that the level of appeals is "boosting back-end work for lawyers at the agency's appeals board" (never mind that in May, Law.com wrote an article on "the trend of companies abandoning patent applications that have already been filed"). According to one attorney interviewed for the article,

Complex appeals cost tens of thousands of dollars . . . [some firms allege to be] charging $6,000 or $7,000 to $20,000 to prepare an appeal brief . . . rates [can typically] run at an average of $600 per page, which adds up to $18,000 for a 30-page appeal brief.

Read the article in its entirety here (link)

Fed. Circuit Grants En Banc Review in Tafas v. Doll

The Federal Circuit has granted Tafas & GSK’s petition for a rehearing en banc, which opens the door on the PTO having the ability to restrict the number of continuation applications and claims used in an application. Appellant’s briefs should come due around August 6, and the opposing briefs around August 26.

According to the order, "[t]his appeal will be heard en banc on the basis of the briefs already on file and additional briefs discussing the issues addressed in the panel opinions." Additionally, "briefs of amici curiae will be entertained in accordance with Federal Rules."

- Read the CAFC's order here (link)

- See Wall Street Journal: "US Appeals Court To Reconsider Challenge To New Patent Rules " (link)

- BLT: "Federal Circuit to rehear Tafas Case" (link)

USPTO News Shorts

USPTO published final rules on PCT procedure - The USPTO has revised the rules of practice in 37 CFR 1.485 on how applicants may make amendments to the claims in an international application. Under the current PCT Regulations, applicants are required to submit replacement pages for only those pages which contain changes, where under the revised PCT Regulations applicants will be required to submit a complete set of the claims when amending any of the claims. This rule went into effect on July 1, 2009.

Read the notice here (link)

e-Office Action Program Delayed - from the PTO "The e-Office Action Program production launch, scheduled for June 29th, has been delayed. It is currently expected to occur in July. Applicants can still participate in the e-Office Action Pilot Program before the launch by sending an e-mail to the PAIR team at PAIR@USPTO.gov and start taking advantage of the many benefits it offers."

For more information on the e-Office Action Program, see here (link) and here (link).

ED Tex: Attorney Does Not Have to "Do the PTO's Job For Them" To Negate Inequitable Conduct

Tyco Healthcare Group LP v. Applied Medical Resources Corp., No. 9:06-CV-151 (E.D. Tex., June 26, 2009 Order) (Giblin, K.)

Tyco sued Applied Medical for patent infringement. One of the asserted patents was previously subjected to an interference (when the patent was at an application stage), where Tyco argued that the other patent was invalid over a prior art reference ("Yoon"). After the argument was made of record, the BPAI ultimately entered a judgment that there was no interference-in-fact, based on the agreement of the parties. In a footnote, the BPAI directed the Examiner to consider the prior art in connection with the application.

The examiner did not consider the prior art "Yoon" patent, and the applicant did not submit the reference independently. As the district court noted, "with the exception of the interference proceeding, the Yoon patent is not mentioned anywhere in the file history of the[] patent, nor was it disclosed during prosecution of the [related] patents."

Naturally, Applied Medical alleged inequitable conduct, and moved for such a finding on summary judgment.

While the court found numerous disputed issues of material fact, the court had some interesting things to say under these circumstances on the "intent to deceive" prong of the inequitable conduct test:

Applied suggests that [prosecuting counsel] “gamed” the system by using the Yoon patent to his advantage before the BPAI during the interference proceeding, while simultaneously hiding the reference from the Examiner during prosecution of the ‘854 patent application – in effect, that [counsel's] strategy was to hope the PTO’s left hand – the Examiner – did not know what its right hand – the BPAI – was doing.

Applied is correct that because the Examiner and the BPAI are different units within the PTO, identifying the Yoon reference to the BPAI is not the same thing as identifying it to the Examiner. See, e.g., A.B. Dick Co. v. Burroughs Co., 798 F.2d 1392, 1399 n.7 (Fed. Cir. 1986) (noting that the district court pointed out that “the PTO cannot realistically be thought of as the equivalent (say) of a small law office, in which notice to one person may fairly be deemed notice to all. It is not necessarily true that the PTO Examining Division will have access to proofs filed in the course of an interference.”). However, the problem with Applied’s argument – and the distinction from A.B. Dick Co. – is that in this case, the APJ, in an order adopted by the BPAI, specifically directed the Examiner to consider a number of references referred to in the parties’ motion papers, including the Yoon patent.

Applied argued that, at a minimum, the prosecuting counsel should have realized that something was wrong when the Examiner did not cite the Yoon patent as a reference that was considered and presupposes that the counsel believed the reference to be material. The district court found this to be weak:

Even assuming that a reasonable attorney in [counsel's] position would or should have thought something was wrong when the Yoon reference was not cited, Applied cites to no statute, regulation, or case that requires a patent attorney to do the PTO’s job for them . . . [counsel] has a duty of candor and good faith to the PTO, but Applied has not cited any rule that imposes on counsel an obligation to point out to the Examiner the ways in which he or she thinks the Examiner might be wrong . . . Applied is entitled to second-guess the Examiner’s allowance of the ‘854 patent’s claims under an invalidity theory, but the court is unaware of any authority that requires [counsel] to either analyze the examination process for flaws and inform the Examiner of his mistakes, or be charged with inequitable conduct.

There is little, if any, evidence before the court of intent to deceive with respect to the ‘854 patent. However, because the overall determination of inequitable conduct is a sliding scale, where more evidence of materiality means that less evidence of intent to deceive is permissible, the court finds that granting summary judgment in favor of Tyco is inappropriate at this time.

Read/download the opinion here (link)

USPTO Posts Selected Material on Bilski

The PTO recently announced that "in view of the high level of interest sparked by the case, the USPTO is posting selected court documents from Bilski v. Doll on this Web site."

Currently the site only contains PTO material related to the Federal Circuit Panel Proceedings, Federal Circuit En Banc Proceedings, and Supreme Court Briefs.

To visit the page, click here (link)

Thomson Reuters Publishes "Innovation Hot Spots"

Today, the IP Solutions business of Thomson Reuters published a research paper, titled "Innovation Hot Spots: Mining Patent Data for Tomorrow's Breakthroughs," which tracks unique inventions published in patent applications and granted patents from 2003, 2008 and 2009 to identify technology areas showing the sharpest growth over the last five years.

The study identified three general areas as "hotbeds of inventive activity over the last 5 years: biofuels, telecom and bio-related nanotechnology.

Not surprisingly patenting activity in biofuels has exploded. In 2003, global patents on biofuels numbered only 341, and the patents were predominantly filed by Japanese companies (70% patented by Japanese companies in top 13 patenting companies; 31% of patents were filed in Japan). By 2008, patenting activity had risen by 550% to 1,878 patents. In the latest period (January 2008 to April 2009) the number of biofuel patents was 2,466. China has moved in significantly (31% of patents were filed in China); China shared top position with Japan (three companies) in the Top 10 patenting companies.

For telecom, the hot area is patents related to convergence (mobile/Internet computing and communication). In 2003, there were a total of 8,705 patents focused on the convergence between telecoms and computing, e.g. mobile phones with common Internet access features that enable the use of both cellular and wireless access networks via gateways and the like. By
2008, that number increased 290% to 25,283 patents. Within that category, cell phone
data/wireless network roaming is showing particularly strong growth.

One of the more exciting areas is the fusion of nanotechnology with genetic engineering to develop lab-on-a-chip systems. These devices integrate one or several lab functions on a single chip of only millimeters in size. Innovation in bio-related nanotechnology in 2003, as represented by global patenting activity was a small but well-established area (4,611 patents) led by US companies (70% patented by US companies in top 10 patenting companies; 48% of patents were filed in the US). In 2008, patenting activity had risen by 160% to 7,399 patents. In the latest period (January 2008 to April 2009) the number of bio-related nanotechnology patents was 9,842. China has not moved into the space significantly (only one Chinese company, listed 20th in top assignee list) but it is clearly seen as an important country to seek patent protection in (16% of patents were filed in China).

In addition to tracking the growth of patenting activity in each field, the report also identifies the companies who are most active in these spaces and the countries which they are seeking patent protection.

Read/download the report here (link)

NPEs Speak at the IP Business Congress 2009

On Tuesday at the IP Business Congress 2009, a breakout session was conducted on NPE's titled "Meeting the NPE Challenge" where NPE business models were discussed. On the plaintiff side, members of Acacia Technologies and Altitude Capital Partners presented their views on the NPE debate, and on the defendant side was RPX Corp. and Allied Security Trust.

For Acacia/Altitude, their business model is based on patent aggregation and is rooted in tapping revenue distribution from licensing - despite the fact that 60% of existing patents are owned by small entities, only 1% of licensing revenue flows to them. Since most small entities are unable (or unwilling) to license and enforce patented technologies, the end result is that 60% of patented R&D in the U.S. is sitting in disaggregated IP. This in turn creates inefficiency and waste in the market. This is where the patent aggregators look to fill the gap. To date, NPE's have raised over $6B in private capital to acquire patents for licensing and enforcement.

Both Acacia and Altitude pride themselves on diligence - each commented that enforcing weak patents "makes no rational business sense." Thus every patent gets reviewed by patent engineers, attorneys, and licensing executives to establish value and enforceability prior to any licensing efforts. As a result, many of the litigated patents are upheld in court (or at least survive summary judgment). And while NPEs continue to be disparaged, Acacia commented that operating companies have become "much more serious" and more open with them during negotiations.

On the other side was Allied Security Trust (AST) and RPX, both of which are self-described "defensive patent aggregators." In AST's case, their goal is to reduce patent assertion risks by diminishing the exposure of patents on the market. Similar to Acacia and Altitude, AST has a network of subject matter experts to analyze patents to determine their strength. When a particular patent is deemed of sufficient quality and value, they purchase the patent and offer licenses to interested parties. After holding the patent for 12 months, they turn around and sell the patent, subject to the license(s). AST has reviewed about 1200 patent portfolios totaling about 20,000 patents, but has only placed bids on 20-30 patents. According to AST, they win about 80% of the bids that they make. AST solicits members having annual revenues of $1B or greater, where, in addition to licensing costs, members share in the annual cost of administration (roughly $200k).

RPX works along the same lines as AST, but differs in two relatively minor ways: (1) unlike AST, RPX is run by outside investors (Kleiner Perkins Caufield & Byers and Charles River Ventures); and (2) RPX is also a subscription-based service. Membership fees range from $35K - $4.5M, depending on the size of the company, and any member will have access to the entire portfolio. So far, RPX claims to have acquired 350 patent assets totaling $90M in value. This action has led to 4 resolutions of active litigation, 3 resolutions of asserted patents, and 6 open-market purchases of patents that would have otherwise been asserted.

During the session, it was interesting to see that the room was mostly respectful - even mildly deferential - towards Acacia/Altitude (notwithstanding the fact that a fair number of attendees were in the IP buying/selling business). When Acacia was asked what they thought of the defensive aggregators, they responded that these recently-formed defensive models "validate what we have been doing for years" on the offensive side. Previously, large companies "wouldn't dream of talking to you" when non-litigious licensing attempts were made. According to Acacia, there now appears to be a growing recognition that reflexively dismissing a properly-vetted patent is not good business strategy. Interestingly, during Q&A, some corporate members in the audience even asked questions to the NPEs on how communication could be improved to facilitate negotiation of "legitimate" and "potentially valuable" patents.

It was a very engaging session, which left some serious questions needing answers. Specifically, the public perception of NPE's has currently been couched in terms of "bad" patents being asserted to extract "illegitimate" licensing fees. No doubt this practice exists and is a horrific drain on resources (even Acacia/Altitude disparaged such opportunistic litigation, claiming it "makes little business sense", but commented that it is a "dwindling" practice). However, what about the "good" patents? Suppose a particular NPE patent is independently reviewed by scientists and lawyers and is objectively determined to have innovative merit. What then?


(as a side note, Ralph Eckardt, from 3LP Advisors, and co-author of "The Invisible Edge: Taking Your Strategy to the Next Level Using Intellectual Property" was at the conference, but spoke at a different session. He had a good line about NPEs, which I will paraphrase: "People talk about working the invention as a prerequisite for IP protection, but does that make any sense? Do we deny protection for a composer because he doesn't perform the music? Do we deny an inventor protection on a windshield wiper because he can't start his own auto company? Do we deny protection to an architect because he doesn't build the building?")

USPTO Bailout Bill Introduced

From National Journal's "Tech Daily Dose":

Senate Judiciary Chairman Patrick Leahy and ranking member Jeff Sessions came to the rescue of the Patent and Trademark Office on Wednesday night when they introduced a bill that will allow the agency to use funds designated for its trademark portfolio to be used to address its growing backlog of patent applications. The trademark budget, which is statutorily untouchable, has a $60 million-$70 million surplus. CongressDaily reported this week that Commerce Department and PTO officials had been making the rounds on Capitol Hill to let key lawmakers know how the office was struggling in the recession and offering up legislative ideas like the loan plan.

The PTO, which is funded through fees collected from its users, suspended overtime pay for patent examiners effective Sunday and earlier this year instituted a hiring freeze amid a slump in the number of patent applications filed. Under the bill, the PTO can make use of the money "to support the processing of patents and other activities, services, and materials relating to patents" if the office's director certifies to Congress the use of funds "is reasonably necessary to avoid furloughs or a reduction-in-force." The borrowed money would have to be put back in the trademark basket no later than Sept. 30, 2011.

Read"Leahy Offers Patent Office Bailout Bill" (link)

See also "U.S. patent office shortfall worsens"(link)

Report From IP Business Conference 2009

Today, IAM kicked off the IP Business Congress at the Four Seasons Hotel in Chicago. This morning’s sessions were quite packed, with an estimated 370+ people from various sectors of technology gathering to talk about IP valuation, prosecution and enforcement.

One of the plenary sessions involved the “state of play” in global IP. Specifically, the session covered 5 key jurisdictions (China, EU, India, Japan and the U.S.) to see what the “IP climate” was, and what resultant opportunities/obstacles existed. The following briefly summarizes the presenters and their views:

China – Speaker: Ian Harvey, Chairman, Intellectual Property Institute. According to Ian, Chinese IP laws continue to develop and are becoming among the best in the world. The quality of patents were described as “particularly good,” even for applications filed by foreign firms. CIPO recognizes that more examiners are needed, and is in the process of instituting a massive training program to get examiners specialized in examining patents in their technical fields. Costs for prosecution is reasonable, but not cheap. Currently, China is aiming to become one of the top 5 patentees in the world by 2015.

On the enforcement side, very sophisticated judgments have emerged from Chinese courts, but most judges do not have significant training in IP. Again, the Chinese government is stepping in to help judges with more training. Litigation is quick – most cases last between 12-14 months, and costs around $120-150K. While outsiders do not view China as a litigation powerhouse, Ian stressed that there is more patent litigation in China than anywhere else in the world, including the United States. So far, most of the litigation is between Chinese firms. Even more surprising was Ian’s assertion that the current level of patentee litigation success in China is 2 ½ times higher than in the U.S. (37%).

EU – Speaker: Ciarán McGinley, Head of the Controlling Office, EPO. Ciarán’s presentation focused mostly on application pendency. Ciarán pointed out that the pending stock of applications in the trilateral offices is nearing 2 million applications. Currently, there are more pending applications than there are actively maintained patents. Ciarán hypothesized that one of the primary reasons for this is the was patent offices are financed – currently, they are run like “a pyramid scheme.”

Typically patent office cash reserves comprise of prepaid fees for work that has not been performed yet. Of course, these reserves quickly become very vulnerable to government “diversion” which has led to financial shortfalls. While there are numerous ways that patent offices can deal with fee diversion, the bottom line is that a patent system funded by low upfront fees (e.g., filing, examination, etc.) set off by large back end fees (e.g., issue, maintenance fees) “is not workable.” According to Ciarán, this situation creates “perverse” incentives for the patent office – as you increase quality and work faster, the office earns less. At the same time, applicants keep pushing more and more work on the offices that they themselves don’t want to do.

India – Speaker: Shamnad Basheer, Professor, National University of Judicial Sciences. After taking advantage of weak IP laws for 30 years, efforts to enforce IP in India has been met with great resistance. The current political culture is not supportive of IP rights. Pre-grant opposition, post-grant opposition and invalidation provisions provide many areas for challenging patents, and people are not shy to use any and all mechanisms to dispose of threatening patents. Coupled with compulsory licensing, the IP regime in India is weaker than it should be. Local working law also suggests that if you don’t manufacture in India, you subject yourself to compulsory license laws.

Japan – Speaker: Philip Parker, President & CEO PJ parker & Co. Domestic patent system very insular – only about 10% of issued patents are granted to non-resident applicants. Japan has started to develop a very active technology transfer programs, mostly in early stage R&D. Currently, there is almost no trading/selling of IP between Japanese companies except in a M&A situation. Due to an intense competitive environment, selling IP to competitors is seen as giving an unwarranted advantage. While licensing is common, only specific technologies get licenced, and it is rare to see extensive cross-licenses.

Hi-tech and auto industry dominate foreign filing; not a single pharma company or material science company ever appears as a “top patent filer.” Interest in selling IP has risen sharply, but interest in buying is much more limited. No Japanese auto manufacturer or major supplier will sell patents at this time.

United States – Speaker: Todd Dickinson, Executive Director AIPLA. Broadly praised Kappos nomination, and discussed issues related to patent reform (opposition, damages apportionment, etc.). Despite legislative efforts, lots of reform has already come from the courts, and many of the previous issues are no longer as pressing. Getting through the backlog with be the greatest challenge for the USPTO; reviewing the “count” system for examiners may be necessary. Lots of polarization exists between stakeholders and PTO, and working through differences will be important for the future. Again, PTO work-sharing will be key – other offices (JPO) have already identified this issue as a top priority. End the potential for fee diversion. While it doesn’t get much attention, the Intellectual Property “Czar” position will be significant. Health care and “Green” technologies may receive special attention from the USPTO. While programs like the “peer-to-patent” program received some positive feedback, the PTO has no plans on renewing the program in the near future.