Promote the Progress

I've done a lot of thinking about the potential policy implications of the Supreme Court's recent decision in KSR v. Teleflex. Needless to say, I think the decision puts us at a pivot point (pun intended) in the continuing development of our patent law.

Here's my list of the top ten policy implications of the case, presented in no particular order. I'll address each of these topics over the coming weeks here on Promote the Progress. The alternate title listed for each topic should give you an idea of where I'm going...

1. Patent protection is no longer available for incremental - or ordinary - inventions (or "Death - and the potential for rebirth - in Detroit")

2. Legislation and regulations directed at patent reform should immediately be placed on hold (or "now's not the time for silly games")

3. The Patent Office responds (or "383 U.S. 1: Learn it, know it, live it")

4. Patent lawyers respond (or "You've got to know when to hold 'em, know when to fold 'em, know when to walk away and know when to run")

5. In-house counsel and business folks reformulate the file/don't file calculus (or "Did you do something extraordinary today?")

6. Premiums paid for key - read 'extraordinary' - inventive personnel will increase (or "did you hear? Company X is hiring...")

7. Look for industry specific caselaw pronouncements of technologies that constitute mere 'ordinary innovation' (or "Silly rabbit, these tricks are for kids")

8. Patent maintenance fees increase dramatically as grant and maintenance rates drop just as dramatically (or "Hey buddy, can you spare a couple grand?")

9. The backlog disappears (or "Hey...wait just a minute here")

10. The Federal Circuit gets a chance to restablish itself as the court that brings uniformity to our patent laws (or "Let's get going")

Posted by J Matthew Buchanan at 09:58 AM | Permalink

Yesterday, I had the opportunity to participate on a panel discussion about KSR v. Teleflex on the Lawyer 2 Lawyer podcast. Bob Ambrogi and J. Craig Williams - two of the great pioneers in law blogging and podcasting - hosted a discussion between Matthew Kreeger of Morrison & Foerster, Professor Joshua Sarnoff from American University, and myself.

We had a great discussion on all things KSR, touching on everything from nuances of the opinion to its practical effects. We even had a mention of Sarbanes-Oxley. Ouch! As always, Bob and Craig's team did a wonderful production job - you can barely tell I was sitting in a rental car in the Hertz lot at Denver International Airport while taping the show!

It's a quick listen - about half an hour. I definitely recommend it as you look for materials to help you digest the KSR decision.

Listen to the podcast here.

Posted by J Matthew Buchanan at 08:20 AM | Permalink | Comments (3)

My review of the KSR v. Teleflex opinion is now available on FedCirc.us. I've reproduced the summary below.

In KSR v. Teleflex, a unanimous Supreme Court reminded the Court of Appeals for the Federal Circuit that Graham v. John Deere controls the obviousness inquiry and warned that a rigid application of the teaching / suggestion / motivation test as a litmus test for obviousness is inconsistent with the Graham framework. Stopping short of rejecting the TSM test outright, the Supreme Court slapped the test into submission, leaving it gutless and wanting for a purpose. Simply put, the TSM shortcut for an obviousness analysis is no longer available. The Court's decision immediately focuses the obviousness spotlight back onto the framework that has controlled the issue for more than forty years, forcing everyone who has grown comfortable with the TSM litmus test shortcut – including the Federal Circuit, the Patent and Trademark Office, and the patent bar – to return to full and proper Graham analyses when assessing the obviousness of patent claims. Importantly, the Court's opinion touches on several other issues, including the roles of 'hindsight bias' and common sense in an obviousness inquiry, a question about the rationale for affording a presumption of validity to the patent-in-suit – which avoided a Graham analysis during prosecution, and a rejection of the rigid rule that 'obvious to try' is per se insufficient to show obviousness. KSR v. Teleflex is, without doubt, a case of enormous importance that will likely be viewed as a pivot point in United States patent law in years to come.

Posted by J Matthew Buchanan at 01:24 PM | Permalink

I'm finishing my review of the KSR v. Teleflex decision and will post it on FedCirc.us later today. I'm not leaving Promote the Progress out, though. Soon I'll start a multi-part series of posts on the policy impacts of the decision. Stay tuned.

Posted by J Matthew Buchanan at 08:56 AM | Permalink

For those convinced that the so-called patent-trolls are here to stay and that an Act of Congress is required to make them go away, I encourage you to take a "hmmmm...that's interesting" look at Eon-Net v. Flagstar Bancorp.

In that case, the Federal Circuit recently refused to stay a sanctions judgment entered against a patentee and its counsel for various "troll-like" practices that occurred during the underlying patent litigation (which resulted in summary judgment of noninfringement). The district court entered a sanctions judgment against the attorney and his firm in the amount of $141,984.70 for failure to conduct an adequate prefiling investigation and for filing a baseless claim (F.R.C.P. 11).

While the Federal Circuit was only considering the stay and not the merits of the sanctions judgment (that will come later), the motions panel cleverly detailed various findings made by the district court regarding the troll-like practices of the patentee while it omitted any significant discussion of the movant's arguments in favor of the stay. The non-precedential order reads like an instruction booklet for patent troll litigation strategies:

"Eon-Net's complaint was virtually identical to numerous other complaints filed against parties with greatly disparate business operations;"

"Eon-Net followed service of the complaint with a cheap offer of settlement;"

"After Flagstar showed Eon-Net that its software was from a licensee to Eon-Net's patent, and after Flagstar moved for summary judgment of noninfringement, Eon-Net identified other allegedly infringing software that was not identified in its complaint;"

"Eon-Net based its infringement allegation on an investigation of Flagstar's website but that counsel did not obtain copies of the allegedly infringing software, was unable to determine how the web page worked, and did not evaluate the code;"

"Eon-Net presented no evidence or argument to support its [new infringement] position;"

"not only did Eon-Net fail to obtain or inspect copies of the software, it failed to even identify the software;"

"Eon-Net did not explain how it concluded that the '697 Patent could be construed to cover web-based forms;"

"indicia of extortion are present in this case;"

"Eon-Net offers a nuisance settlement at the outset to avoid a hard look at the merits of its infringement claims."

(internal quotations omitted)

Why is this non-precedential opinion so significant? Simple....it will likely have significant impact on the willingness of law firms to engage in these common 'troll-like litigation practices'. The true trolls, if there are such beasts, might just find themselves without representation.

It's also important to note that the Court seemed to assign little, if any, weight to counsel's argument that "his relatively small law firm will endure significant financial hardships if the imposition of monetary sanctions is not stayed pending appeal." Why is this important? Anecdotally, most infringement suits that follow the 'strategies' employed in this case are brought by smaller law firms that, presumably, don't have deep pockets.

Stay tuned...the Court's consideration of the merits of the sanctions judgment might be even more interesting.

For a detailed review, read the FedCirc.us analysis of the Eon-Net v. Flagstar Bancorp opinion.

Posted by J Matthew Buchanan at 02:26 PM | Permalink | Comments (3)

The Court of Appeals for the Federal Circuit recently considered whether arguments made during prosecution of a parent application operated as a disclaimer against a relatively broad claim scope in a subsequently filed continuation application. Judge Newman authored the Court's opinion that, in essence, trimmed claim scope from the continuation claims based on the parent.

While the ability to file the continuation application was not squarely at issue, Judge Newman addressed it with a single sentence that includes some very interesting language:

"Hakim had the right to refile the application and attempt to broaden the claims." (emphasis added)

Characterizing the ability to refile an application to seek broadened claim scope as a right is certainly interesting, considering that the legal status of the Patent Office's proposed rules that would limit the ability to do so remains in limbo and the subject of rumors.

Read the FedCirc.us analysis of the Federal Circuit's opinion in Hakim v. Cannon Avent Group for more detail on the case and opinion.

Posted by J Matthew Buchanan at 06:39 AM | Permalink | Comments (3)

The FedCirc.us Reader is our quarterly magazine designed to help patent professionals digest and appreciate the latest caselaw developments.

The magazine provides an affordable alternative to case digest products costing thousands of dollars...and delivers greater value by including more than simple digests.

Each issue includes a concise digest of every patent opinion issued by the Federal Circuit and the Supreme Court during the prior quarter. Digests include live hyperlinks to the complete FedCirc.us analysis of the opinion and are presented both in alphabetical and reverse-chronological listings. The last issue of every calendar year includes a summary of every opinion issued throughout the prior year, perfect for archiving in both electronic and print formats.

In addition to the case digests, each issue includes many other informative and useful features, including:

• a 'Trend Spotting' article that examines developing trends we have identified through our reviews of the latest opinions;
• a featured detailed review of an opinion of particular significance;
• prosecution- and litigation-focused advisories that distill important caselaw developments into put-it-to-use today format; and
• a fun "Quotables" section that includes some of our favorite quotes from opinions issued during last quarter

We release a free preview issue, which we affectionately call The Resolution, each January.  Download the 2007 edition here to preview The FedCirc.us Reader.

Each issue is delivered to subscribers by e-mail as a fully searchable and printable .pdf document.  Hard copies can be mailed by request.

Site licenses and multiple-subscription discounts are available - send an inquiry by e-mail if you're interested.

Price: $249.00/yr. Available in the FedCirc.us store.

Posted by J Matthew Buchanan at 09:38 AM | Permalink

Posting at Promote the Progress has been a bit light lately.  There's good reason for that....we've been working hard over the last several months to put the finishing touches on FedCirc.us, the patent caselaw portal.

And today, FedCirc.us goes live.  Visit it at http://www.fedcirc.us (http://www.fedcircus.com will work, too).

Currently, FedCirc.us is a website that allows patent professionals and other patent stakeholders to access, digest and manage patent caselaw information.  The site is built on a foundation of timely, accurate, and considered reviews of patent decisions from the Supreme Court of the United States and the Court of Appeals for the Federal Circuit.

Check out some of these great features:

GimmeTen! - Get concise summaries of the last ten case reviews written...all on one page.  Bookmark it at http://10.fedcirc.us.

Read the Latest Review - Hit this button in the left menu to immediately get the full monty on the last case review written.

Case Data - Check out the Case Data box that appears in every case review.  There's a bunch of goodness in that box, including citation information and a link to download a .pdf of the opinion.

Case Flags - Red flags.  Big red flags.  Believe us, you'll known 'em when you see 'em.

Tags - Navigate the site by keywords.  Conduct legal research with your head in the tag cloud.

Practice Alerts - We issue specific practice alerts when we detect something important.  Sign up to receive these alerts, free!

Feature article - We're working to put together a team of authors that will publish timely and insightful analyses of the latest developments.  We'll provide more details on this soon.

E-mail and RSS subscriptions - A lot of the FedCirc.us content is available without even visiting the website.  Go ahead and subscribe.



We're extremely excited about this project, mostly because the website is just the beginning.  FedCirc.us is merely the leading edge of the most ambitious and significant RTIP LLC project yet.  We've got a slate of informational products and services - all built around the FedCirc.us foundation of case reviews - that we'll be announcing over the next several months. Stay tuned.

Posted by J Matthew Buchanan at 09:56 AM | Permalink | Comments (2)

As the Supreme Court considers the propriety of the teaching suggestion motivation test for determining whether a combination of references is proper in an obviousness analysis, the Federal Circuit has issued a pair of decisions that, taken together, highlight the confusion and lack of clarity that many see as the fundamental problem with the test.

An ironic result, indeed, considering that the first decision – penned by Chief Judge Michel – was clearly written as a resounding defense of the TSM test.

One hand polishes the test…..

As described by Justice Scalia during the KSR oral argument, the Federal Circuit tried to “polish up” the TSM test in Dystar Textilfarben v. C.H. Patrick.  The Dystar panel saw an opportunity, in essence, to write an amicus brief for consideration by the Supreme Court in KSR.  Writing for a unanimous panel, Chief Judge Michel penned a detailed defense of the TSM test and explained that, despite being misunderstood by many, the test is quite flexible and does not require an explicit motivation.

…while the other tarnishes it…

Oddly, six weeks after the decision in Dystar and less than two weeks before oral argument in KSR, a completely different panel of the Federal Circuit summarily dismissed a question of whether a motivation to combine existed in Optivus Technology v. Loma Linda University Medical Center.  The panel gave its motivation analysis in a single sentence:

“Here, there is no question that the CDR establishes that a person having a working familiarity with particle beam technology as it relates to cancer treatment, motivated by the need for more effective and efficient proton therapy facilities, would have been led to combine the University of Washington's neutron therapy facility with the proton beam therapy design outlined in the CDR.”

That’s it.  There is no question.  Now go away.

This substantial omission of an analysis of the motivation issue highlights the arbitrary nature of the test and certainly bolsters the argument for its demise.  The timing of the decision in Optivus Technology in relation to Dystar only magnifies its message.

It’s hard to imagine how these two decisions, taken together, could bode well for maintaining the test in its current form.

Posted by J Matthew Buchanan at 11:03 PM | Permalink | Comments (1)

The San Jose Mercury News is running an interesting editorial that strongly criticizes the current patent system. It's one of the first I've seen that places significant blame for the current situation on the Court of Appeals for the Federal Circuit. Sure, plenty have criticized the Court before, but none have used such strong language.

Clearly timed for the KSR v. Teleflex debate, the piece is chok full of money quotes. Here's two:

"The Court of Appeals for the Federal Circuit, which handles all patent appeals, has contributed mightily to the madness by laying down a set of rigid rules that make it too easy to get a patent, virtually impossible to overturn one after it's granted -- and prohibitively expensive to even try."

"To help decide this, the high court and Congress have, over many decades, issued guidelines that take into account prior inventions and the knowledge that an ordinary person working in the field would have. Unfortunately, the appeals court has concocted a three-part test for obviousness that sets an unreasonably high barrier for anyone seeking to invalidate a patent that simply combines old, established ideas into a new one. (During oral arguments this week, Justice Antonin Scalia, not exactly a dimwit, noted the test amounted to ``gobbledygook.'') Inventors need a more clear and, yes, obvious, standard of obviousness."

Posted by J Matthew Buchanan at 06:51 AM | Permalink | Comments (1)

And now we wait. Yesterday, the much-anticipated oral argument was held in KSR v. Teleflex, the Supreme Court case that questions the propriety of the Federal Circuit's teaching-suggestion-motivation (TSM) test for obviousness. The Court could issue an opinion that amounts to the single biggest patent policy decision in decades. Or not.

And now we wait.

No matter the disposition of the case at hand, the opinion will likely show the frustration the Justices have with the Federal Circuit's TSM test. Based on questions posed of both sides, and the resulting discussions, it is clear that the Justices struggle to understand the basic purpose of the test and its workings. At one point, Justice Scalia referred to the test as "gobbledygook" that is "irrational." Justice Breyer confessed "I just don't understand what is meant by the term 'motivation.'"

Justice Scalia even joked about his inability to understand the test:

Respondent's counsel: "I think you can't understand what motivation means and what the whole test that the Federal Circuit is employing means --"
Justice Scalia: "You're right about that."
Respondent's counsel: "-- without --"
(Laughter.)
Respondent's counsel: "-- without starting from the statute itself."

But frustration with the TSM test isn't the end of the story. The Justices even revealed a bit of contempt for the Federal Circuit and it's recent attempt to explain the TSM test in Dystar Textilfarben v. C.H. Patrick. It's clear that the Justices view that decision simply as an attempt by the Federal Circuit to dress-up the TSM test prior to the Supreme Court's review of KSR.

Respondent's counsel: "There is nothing fundamentally not functional about how the Federal Circuit is approaching this question."
Justice Breyer: "And it so quickly modified itself."
Justice Scalia: "And in the last year or so, after we granted cert in this case after these decades of thinking about it, it suddenly decides to polish it up." (a reference to Dystar)
Respondent's counsel: "Justice Scalia, if you actually believe that, then you just don't believe the judges in the Federal Circuit because in each of these opinions they say quite explicitly we are not changing it."

And now we wait. Perhaps a major shift in patent policy is forthcoming. Perhaps not. No matter the disposition and the holding on the issue, its probably safe to expect a strongly worded opinion that shows both the frustration the Justices have with the TSM test and their contempt for the Federal Circuit and its recent attempts to put a luster on the test.

You can view and/or download the transcript of yesterday's oral argument at the Supreme Court's website.

For more on the case, see Crouch's excellent review and collection of all things KSR at Patently-O.

Posted by J Matthew Buchanan at 06:49 AM | Permalink

Looking for some reading material for the weekend? The November/December issue of the Boston Bar Journal includes a great article by Howard Susser and Jerry Cohen on eBay v. MercExchange and its impact on patent law. The article presents a brief review of the background of the case and a thorough analysis of the majority and concurring opinions. A very provocative listing of "issues left to be resolved in the wake of eBay" is worth the time investment alone.

And I promise I would recommend the article even if the authors hadn't referred to Promote the Progress as "an excellent weblog...directed to patent reform and policy...."

Enjoy.

Posted by J Matthew Buchanan at 06:45 AM | Permalink

Yesterday, NTP filed a patent infringement suit against Palm. Ho hum, another patent infringement suit, right? Wrong. This one deserves attention. Why? Well, for one, NTP is probably the most recognized of the so-called 'patent trolls.' Remember that NTP is the intellectual property holding company that achieved a $612 million settlement with RIM over the BlackBerry devices.

But that was before the Supreme Court tweaked injunctive relief law in eBay v. MercExchange (right before it, actually).

This current lawsuit comes in the wake of the eBay decision. So now, the most famous troll of all is testing the eBay-inspired injunctive relief law. Now that's interesting.

Scoop goes to the Patent Prospector.

Posted by J Matthew Buchanan at 06:51 AM | Permalink | Comments (2)

Figueroa v. United States - the fee diversion case - revealed Judge Newman's sympathetic ear for the current patent application backlog, its potential effects on innovation, and the need for increased funding levels. She focused on these issues during oral argument as she pressed the government to show the extreme nature of its position that the preamble of the Patent Clause does not limit congressional authority to establish patent fees:

Judge Newman: “Is the government's position that...Congress could appropriate the entire income [of the Patent and Trademark Office]...and allow the backlog to continue to increase in the...Office if, in fact, [that's] what Congress decided to do?”

Government counsel: “Yes, your Honor. It's our position that Congress' legislation is not limited by the preamble's promotion language on which the Appellant relies.”

Posted by J Matthew Buchanan at 07:07 AM | Permalink

The appropriators scored a major victory last week when the Court of Appeals for the Federal Circuit ruled that the practive of diverting patent fees to non-patent purposes (e.g., homeland security and other programs) survives constitutional scrutiny.

In Figueroa v. United States [.pdf], a patent applicant challenged the constitutionality of excessive fees (fees that exceed the cost of Patent and Trademark Office operations) and their diversion. Importantly, the Court ruled that the patent applicant did, in fact, have standing to challenge the fees.

On the issue at hand, the government argued that the Patent Clause preamble does not limit congressional authority to charge patent fees at all. That is, the government argued that the patent fees do not need to be related to the promotion of progress in science and the useful arts in any way. The Court assumed that a 'limit' exists, but declined to decide this issue.

Following the direction of the Supreme Court in Eldred v. Ashcroft (537 U.S. 186 (2003)), the Court analyzed the statutory fee structure for a "rational relationship between the present level of patent fees and Congress's legitimate objectives under the Patent Clause." The Court rejects the notion that the actual reason for enacting the legislation is at issue, indicating that "[t]he question, rather, is whether there is a rational basis on which Congress could conclude that the level of fees served legitimate congressional objectives."

Oddly, the Court then offers three separate and sufficient reasons for the legislation: funding the overall patent system, keeping pace with future costs of administering the PTO and the system, and deterring "the filing and prosecution of certain types of patent applications."

Regarding this last point, the Court stated:

"Congress could rationally seek to discourage applications for patents that would later likely be found invalid....applications for inventions where the patent is sought only for the sake of personal recognition...and applications from inventors who seek the patent only as a means of inhibiting innovation by competitors.

Did the Court include these comments in the opinion to underscore the breadth of the deference it will give Congress on patent fees? It's almost as if the Court is saying "the rational relationship test is so weak that Congress could base patent fee legislation on an anti-patent objective."

So fee diversion is legal...and the appropriators now have a Federal Circuit decision in their back pocket. The practice is likely here to stay unless Congress feels enough political pressure to end it.

Crouch: CAFC OK's Fee-based Regulation at PTO.

Posted by J Matthew Buchanan at 08:50 AM | Permalink

In Dystar Textilfarben v. C.H. Patrick, the Court of Appeals for the Federal Circuit recently issued a sternly worded defense of its motivation/suggestion to combine test for determining when references can properly be combined to render a claimed invention obvious. The Court, clearly speaking to the Supremes as they prepare to consider the propriety of the motivation/suggestion test in KSR v. Teleflex, highlighted the flexibility of the test and explained the relationship between the test and the Graham factors.

In defending the test, the Court clearly expressed its frustration with the prevailing belief that the prior art must include an express motivation to combine in order for obviousness to be found. The Court specifically referenced the Federal Trade Commission and National Academies of Sciences reports as examples of inaccurate interpretations of the Court's decisions that have created "much confusion about the law." These reports, you'll remember, are considered to be two of the primary catalysts underlying the patent reform movement.

The Court repeatedly stressed the flexibility of the test, noting that an express suggestion to combine is not required and that the motivation/suggestion to combine can come from several sources, including the prior art references, general knowledge, and the nature of the problem to be solved.

While the Court didn't change the test in any way, its restatement of sorts might just change obviousness law for evermore.

View the PatentFizz display of United States Patent No. 5,586,992.

For more detail on the decision, read Crouch's review of the case.

Posted by J Matthew Buchanan at 07:02 AM | Permalink

Late last week, the Court of Appeals for the Federal Circuit made it clear that, under current law and judicial interpretation, a patent holder has no Fifth Amendment remedy against the United States government for unauthorized use of a patented invention.  By denying a petition for rehearing en banc in Zoltek v. United States [.pdf], the Court quietly let everyone know that it believes the Fifth Amendment has no place in patent law.  A dissent by Judge Newman and a concurrence by Judges Dyk and Gajarsa helpfully document the issue and, as Crouch points out, possibly help frame it for consideration by the Supreme Court.

With Zoltek as backdrop, these tough questions seem like great food for thought on a Friday morning:

If there is no Fifth Amendment property interest in an issued patent, can there be one in an application for patent?

Can the Patent and Trademark Office commit a Fifth Amendment regulatory taking by finalizing the proposed rule on continuation and RCE limits that essentially eliminates the ability to claim, through continuation practice, properly disclosed inventions in currently pending applications?

While patent holders still have 28 U.S.C. s.1498 as a remedy against the government for unauthorized use of a patented invention, what remedy, other than the Fifth Amendment, does a patent applicant have against the government for arbitrarily limiting his ability to seek protection on his properly disclosed invention?

Is the Patent and Trademark Office celebrating in the wake of Zoltek?

Should we clarify the property interest issue before we finalize the proposed rule?

Posted by J Matthew Buchanan at 07:31 AM | Permalink | Comments (1)

Yesterday, the Supreme Court delivered its long-awaited decision on the writ of certiorari in the KSR v. Teleflex case. There was little drama in the answer, as the Solicitor General had recently recommended that the Court hear the case and, usually, those recommendations are followed. There's plenty of drama ahead, though. Expect oral arguments in the fall with a decision in Spring of next year.

With the granting of certiorari, the Supreme Court, for the second time, has agreed to hear a case that touches directly on patent reform. The case deals with the motivation/suggestion/teaching test developed by the Federal Circuit for dealing with questions of obviousness. While a change to the obviousness standard has yet to be included in any legislative proposal for patent reform, one of the two catalytic reports underlying the reform movement recommended a tightening of the standard and many groups have called for such a reform.

So, once again, patent reform has left the Capitol and walked across First Street to the Supreme Court.

Dennis Crouch already has a fantastic collection of documents from the case thus far.

Visit the KSR v. Teleflex archives for more.

Posted by J Matthew Buchanan at 07:25 AM | Permalink | Comments (3)

We held the "Bloggers' Corner" event earlier this week at the Spring meeting of the Intellectual Property Section of the American Bar Association. The Corner was a tremendous success by any measure, and a lot of fun to boot. As a follow-up post for people who weren't at the meeting or just didn't get a chance to step into the Corner, I thought I'd present a summary of some of the more interesting questions people asked me, along with the answers I gave.

What do you consider to be the most interesting issue in patent policy today?

I can't pick just one. I really think we are in the midst of an historical time in patent law and policy, and several interesting issues are developing. I think it's fascinating that all three branches of our government are currently working on various aspects of "patent reform." As for the "most interesting issues," though, I'd leave Congress out of it for now considering the current stalemate on legislative change. I'd rank the Supreme Court's decision in eBay v. MercExchange at the top for several reasons. The case opens the door for the development of varied district court law on the controversial injunctive relief issue (which we've just seen the beginning of with the z4 decision). Also, I believe it throws down a gauntlet for Congress on the same issue...does Congress intend a patent to carry an absolute right to exclude? Lastly, it ensures that patent trolls will stay in the limelight for the foreseeable future.

I'd rank the PTO's proposed rules as the second most interesting issue. Not so much for the substance of the rules per se (although the substance is pretty darn interesting), but more for the symbolic nature of the rules. The Office is undergoing a significant shift in culture, becoming more aggressive in its control over the patent process. It has become very clear over the last several months that the current administration is willing and able to test the bounds of its authority to regulate its own house. It's admirable that the Office wants to do what it can to add efficiencies to the patent process. I worry, though, as many others do, that this newly aggressive approach will damage the environment of cooperation that has developed between the Office and the bar over the last several years.

Is Patent Reform dead?

Yes...and no. We won't see a change come from this Congress. From a purely logistical standpoint, we're at the point where it's nearly impossible for this Congress to pass anything meaningful. I do think it's a real possibility that something relatively small could get lobbed into an appropriations bill or another suitable vehicle that has some momentum and/or pressure behind it. Representative Issa's bill to develop patent expertise in district court judges seems a likely candidate. Overall, though, I'd say that patent reform in the broad sense is dead in this Congress.

That said, you can bet it will show up in the next Congress, and the next, and the next. Patent legislation often takes many years to develop. So, in that sense, it's not dead..it's just entering the next stage of life.

Patent reform is also "not dead" because it has moved beyond Congress and into other venues, including the Supreme Court and the Patent and Trademark Office. All three branches of government are now looking quite closely at the patent system and considering various "reform" issues. This aspect of "reform" is likely to continue for some time as, for example, KSR v. Teleflex looms at the Supreme Court and the Office's proposed rules hang in the balance.

What's the legacy of eBay going to be?

I see two potential "legacies" of this landmark case. The first is Congressional action. I think eBay is a gauntlet, thrown down by the Court as a challenge to Congress. Congress needs to re-read the Constitution and think about the way in which it has exercised the Patent Power. Is the status quo acceptable or is a rethinking warranted? We know that Representative Berman believes the Court got the issue right, but we do not yet know how any other Members feel about the case. Time will tell if Congress accepts or ignores the challenge.

The second potential legacy depends on the first. If Congress does nothing...eBay will live on...and pockets of district court law will develop around the issue of the proper circumstances for awarding injunctive relief. Who is entitled to it? Who isn't? When? In this scenario, the concurring opinion of Justice Kennedy will become quite significant as district court judges use its permissive language to deny injunctive relief in all types of scenarios. If this legacy develops, the wise patent stakeholder will watch it closely...and leverage it, whether they are a patent owner or otherwise.

Is fee diversion here to stay?

I've been asked this question many times, and my answer is always the same. "Looks that way." I'm encouraged by the action of the House Appropriations Committee this week, but am concerned about the apparent unwillingness to adopt a permanent end to diversion. The current approach of temporary fixes is better than nothing, but it does continue the current environment that makes it difficult for the Office to effectively budget and plan for the future.

So who wins...Software/High-Tech or Biotech/Pharma?

I don't know who "wins" or even that a "battle" is at hand, per se. But, I do think the software and high-technology industries are using the patent quality and application pendency issues very effectively to advance their agenda.

What's the legacy of the 109th Congress relating to patent law and policy?

This Congress has done a wonderful job at documenting various viewpoints on our patent system and on several proposed reforms. The House conducted an amazing number of hearings and has established a decent record for going forward. I think it will have a legacy of laying foundation, and not one of implementing change.

I do note, however, that it's still not too late for this Congress to enact meaningful reform on PTO funding issues (i.e., fee diversion). It's unlikely, but possible. There are a couple of proposals with vastly different approaches that are looming in Congress. Perhaps they'll see some action during the appropriations process, perhaps not.

Do I need to worry about patent reform?

No less than four different people asked me this question (in one form or another). I didn't know how to answer it then, and I don't know how to answer it now. I guess the only thing to say is that you need to assess your individual situation and consider patent reform in all of its glory (which, today, includes all three branches of government). Change is coming, be sure of that. Hopefully, the goal of improving the patent system will remain the focus of the various reform efforts.

Why do you blog?

This one's easy...Passion. See the 'Why?' section in the 'About' page.

What are you doing with an Oklahoma-based firm?

There's a short answer and a long answer to this one. Here's the short answer - Family brought me home from Chicago and a similar mindset regarding the business of law took me to Oklahoma.

Want the long answer? Ask me in person sometime.

Posted by J Matthew Buchanan at 08:22 AM | Permalink

Yesterday, the House Subcommittee on Courts, the Internet and Intellectual Property held a patent oversight hearing, dubbed "Patent Trolls: Fact or Fiction." Perhaps not surprisingly, the Subcommittee essentially ignored the "fact or fiction" question and focused its efforts on patent reform in the broader sense, including considerable attention to the recent Supreme Court decision in eBay v. MercExchange.

The hearing revealed the true divisive nature of the eBay decision. Ranking member Berman, long a proponent of injunctive relief reform, flatly stated that eBay brings a "return to the standard originally intended" and that "it is not necessary to further legislate on the issue of injunctions." If it wasn't clear before yesterday's hearing, it certainly is now - Representative Berman believes the Supreme Court got it right in eBay and that the law of injunctive relief is now in good order. It is safe to assume that he believes injunctive relief reform is officially off the table.

Rep. Berman clearly believes the Supreme Court got it right and that further injunctive relief reform is not neededDean Kamen, professional inventor and self-professed patent troll, views eBay a bit differently, though. Indeed, it's fairly clear that he believes Congress should accept the challenge and pick up the Supreme Court's eBay gauntlet. Mr. Kamen is in the business of inventing and makes his living by licensing inventions to big companies that, he believes, are better able to produce, deliver and support the products. The eBay decision clearly changes his business environment. He summarized his post-eBay world quite succinctly: "I can't do business with big companies if the injunction provision includes a 'sometimes' modifier."

Patent reform, in Mr. Kamen's eyes, now includes a legislative response to the eBay decision. He shrewdly suggested that he might be willing "to accept a higher standard for patentability in exchange for the certainty I had in the past" (referring to a tightening of the nonobviousness standard balanced against a strengthening of the injunctive relief provision post-eBay).

Mr. Kamen may be signaling the post-eBay shift of patent reform efforts predicted here earlier - the losing side in eBay might be beginning to focus its legislative resources on changing the law of injunctive relief as it stands after eBay. It's very interesting to see the gauntlet used as a bargaining chip.

So what does 'patent reform" mean in Congress now? It's perhaps as muddied as it's ever been. A response to eBay may be involved, but it's still not clear if any Subcommittee member is willing to pick up the eBay gauntlet. Changing the obviousness standard might be involved. We may learn more about this in a proposed oversight hearing that promises to bring us full circle by reviewing the catalytic reports underlying the reform movement, one of which recommends a tightening of the standard. Remember, though, the Supreme Court may steal the spotlight on this issue as well if it grants certiorari in the KSR v. Teleflex case.

What about the troll issue? The definition of the term 'patent troll' was given a bit of lip service in the hearing and everyone assured Mr. Kamen that they wouldn't sign on to a definition that categorizes him as a troll, despite his reaffirmation of his famous "I am a patent troll" pledge and repeated assertions that he meets most of the proposed definitions. Are patent trolls "fact or fiction"? That question was completely ignored.

Several peripheral and very interesting issues were touched upon....more to come on these in future posts.

Posted by J Matthew Buchanan at 10:14 AM | Permalink

Dennis Crouch has a detailed analysis of what appears to be the first denial of injunctive relief under the guidance of eBay v. MercExchange. Approximately one month after the Supreme Court issued it's decision, Judge Leonard Davis of the Eastern District of Texas issued an order denying a permanent injunction following a finding of infringement and survival of a validity challenge. Quite appropriately, Microsoft is the benefactor of eBay's first progeny.

Posted by J Matthew Buchanan at 09:04 AM | Permalink

A couple of weeks ago, I had the opportunity to speak at the annual CLE conference of the Oklahoma Bar Association's IP section. I presented a broad view of patent reform, discussing pending legislation, the eBay decision and other Supreme Court activity, as well as PTO efforts to implement change.

Doug had the smarts to catch the presentation on video.  Thanks to the seemingly endless capacity of Google's video servers, you can watch the video as a stream by operating the controls in Doug's post on PHOSITA.  If you're so inclined, you can go straight to Google Video to download your own copy of the file.

A .pdf of the slides that accompanied the talk are available here.

Despite the suggestion of the image above, I didn't dress hip-hop style for the presentation. I'll save that for a future talk.

Posted by J Matthew Buchanan at 05:36 PM | Permalink

Did the Supreme Court throw down the gauntlet, i.e., issue a challenge, to Congress in its eBay v. MercExchange decision?  Did the Court, in essence, challenge Congress to clarify its exercise of the Patent Power?

I think it did.

Consider the following --

The Constitution, in the enumerated legislative powers section (Article 1, Section 8), states that "The Congress shall have Power To...promote the Progress of Science and useful Arts, by securing for limited Times to...Inventors...the exclusive Right to their respective...Discoveries." (emphasis added)

...the exclusive right...

Congress, of course, has exercised this "Patent Power" by enacting the Patent Act, which indicates that courts "may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable."  (35 U.S.C § 283) (emphasis added)

The eBay Court focused on this language of the Act when it rejected the Federal Circuit's rule that resulted in the nearly automatic issuance of an injunction:

"Nothing in the Patent Act indicates that Congress intended such a departure [from the long tradition of equity practice]. To the contrary, the Patent Act expressly provides that injunctions "may" issue "in accordance with the principles of equity." (emphasis added)

The Constitutional grant of the Patent Power to Congress says nothing about "may" or the "principles of equity."  Nothing.  The eBay Court seems to indicate that Congress, through the injunctive relief provision of the Patent Act, has chosen to exercise less than the full power granted to it by the Constitution; that Congress gave us a diluted version of an "exclusive Right;" and that Congress must indicate whether it wishes to exercise a broader version of the Patent Power.

So there's the gauntlet.  The challenge. Does Congress wish to continue with the current diluted version of its Patent Power, or does it wish to exercise a broader version of that Power?

Answering the challenge, of course, requires consideration of fundamental questions about the purpose of the patent system and its effects on our society at large. The eBay case, in my mind, strikes at the core of the patent policy issue. A responsible Congress would accept the challenge and evaluate its exercise of the Patent Power.  Maybe use of the full power is warranted and desirable.  Perhaps the diluted version serves us better.  Maybe something in between would serve us best.  Maybe there are many, many questions that need to be asked and answered (note, for example, that the Constitutional grant of the Power seems to indicate that the "exclusive Right" is reserved for Inventors).

The challenge has been made.  Questions need to be asked....and answered.

(picture is cover art for the Clint Eastwood film, The Gauntlet)

Posted by J Matthew Buchanan at 10:42 AM | Permalink

The timing of the Supreme Court's decision to hear the eBay v. MercExchange case is somewhat eerie, considering the controversy surrounding the injunctive relief issue in Congress. Now it appears the Court is set to steal the patent reform spotlight from Congress again.

Remember the proposal to reform the obviousness standard for patentability? Don't feel bad if you don't. Many people have forgotten that this reform was once on the table. The Federal Trade Commission recommended a tightening of the standard in its catalytic report, To Promote Innovation, the Proper Balance of Competition and Patent Law and Policy. Congress, so far, hasn't taken that bait, electing to leave a change to the obviousness standard out of even the most comprehensive approach to patent reform, the Patent Act of 2005.

In another example of amazing (and somewhat eerie) timing, the Supreme Court is set to decide soon on a petition for certiorari in KSR v. Teleflex. The issue? A challenge to the Federal Circuit's long-standing "teaching-suggestion-motivation" test for obviousness.

The Solicitor General recently recommended granting certiorari. Dennis Crouch cites some very interesting historical statistics that suggest that the Supremes will follow that recommendation....meaning that patent reform is set, once again, to leave the Capitol and walk across First Street to the Supreme Court.

Posted by J Matthew Buchanan at 10:12 AM | Permalink

The Supreme Court fundamentally altered patent law yesterday with its decision in eBay v. MercExchange. The Court refocused the injunctive relief analysis on the traditional four-factor test, leading many commentators to wonder about who the winners and losers are in the post-eBay patent world. Some even claim that eBay, who won the case, stands to be the biggest loser as it may yet face a properly awarded permanent injunction. Who gets my vote for the biggest loser? Easy....Research in Motion (RIM), which recently settled the lenghty BlackBerry patent dispute with NTP, a licensing firm that looks very much like the type that Justices Kennedy, Stevens, Souter, and Breyer described as potentially undeserving of injunctive relief in their concurring opinion. "We wrote a $600M check for what?"

Posted by J Matthew Buchanan at 02:26 PM | Permalink

Yesterday, the Supreme Court announced its decision in eBay v. MercExchange, which addressed the controversial issue of when injunctive relief is proper in patent litigation suits.  The eBay decision was viewed by many as the most important patent law decision in recent years, and it certainly did not disappoint.  In a brief opinion of a unanimous Court, accompanied by two brief concurring opinions, the Court elegantly disguised a major shift in patent law as a refocusing of sorts.

the Court elegantly disguised a major shift in patent law as a refocusing of sortsThe Court indicated that injunctive relief under the Patent Act, as currently written, is no different than injunctive relief in other areas of law and flatly rejected categorical rules that nearly automatically award or deny such relief.  In slapping the collective wrist of the Court of Appeals for the Federal Circuit, the Supreme Court expressly empowered district courts by reminding everyone that "[t]he decision to grant or deny permanent injunctive relief is an act of equitable discretion by the district court, reviewable on appeal for abuse of discretion."

Specifically, the Court held that "the decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts, and that such discretion must be exercised consistent with the traditional principles of equity, in patent disputes no less than in other cases governed by such standards."

In essence, the Court announced a refocusing of the injunctive relief standard in patent law...a shift away from the spurious general rule established by the Federal Circuit and a refocusing on the traditional four-factor test that is common to many areas of law.

So now what? After all the hype...where do we go from here?

First -- we go to the individual district courts.

By rejecting the general rule of the Federal Circuit that "courts will issue permanent injunctions against patent infringement absent exceptional circumstances," the Supreme Court has removed individual district court judges out from under the thumb of the Federal Circuit and its seemingly oppressive general rule.  Trial court judges are now free, and indeed empowered, to fully consider the traditional four-factor test for awarding injunctive relief...a test with which these judges are familiar from other areas of law.

What will the district courts do with the four-factor test?  On this question, the concurring opinions in eBay are certainly the most interesting.  There is a divide in the Supreme Court relating to the role of history - specifically, the long-standing history of awarding injunctive relief in the vast majority of patent suits upon a finding of infringement.  Chief Justice Roberts, with whom Justices Scalia and Ginsburg agree, believes that this history should play a role in the application of the four-factor test, noting that "a page of history is worth a volume of logic."  Justice Kennedy, with whom Justices Stevens, Souter, and Breyer agree, sees a different, more limited role for this history, noting that "[t]he lesson of the historical practice...is most helpful and instructive when the circumstances of a case bear substantial parallels to litigation the courts have confronted before."  (emphasis added)

the concurring opinions reveal a split on the role of history in the four-factor testImportantly, Justice Kennedy and his comrades note that the four-factor test might not be satisfied with certain types of patents and/or certain types of patent holders, such as business method patents, patents covering "a small component of the product the [infringer] seeks to produce," and firms that use patents "not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees."  These Justices seem to believe that the long-standing history of awarding injunctive relief in patent infringement suits should play a limited role, if any role at all, in certain modern patent scenarios.

We may one day see the Kennedy concurrence as a beginning of an end. The patent trolls may be set to die a slow death as district court law develops on the application of the traditional four-factor test, particularly in the areas of business method and component patents. The most egregious trolls - those that buy patents and seek only to license them - backed by the threat of an injunction - may have a terribly difficult road ahead.

Second -- we go to Congress. Maybe.

In determining whether the traditional four-factor test is proper in patent law, the Court noted that "nothing in the Patent Act indicates that Congress intended such a departure [from the long tradition of equity practice]" and that such a major departure "should not be lightly implied."  Congress certainly has the power to force a departure from the four-factor test, such as by injecting specific factors that must be considered during an analysis by a district court judge (e.g., the "extent to which the patentee makes use of the technology claimed by the patent," which has been included in versions of Representative Berman's patent reform bill introduced in prior sessions of Congress).

Will the software/high-technology sector try to advance an explicit reworking of the Patent Act in Congress or instead choose to focus on developing a favorable body of district court law?  The more likely outcome is a strategy that pursues both avenues concurrently.

So what does eBay mean from a patent policy perspective?

eBay is a hollow-victory for patent holders who seek only to license their patentsSome view eBay as a victory for the patent trolls, focusing on the language of Justice Thomas noting that some patent holders that opt not to "bring their works to market themselves....may be able to satisfy the traditional four-factor test."  Yes...this is a victory for all patent holders who themselves do not commercialize their inventions.  The Supreme Court has recognized that they can be deserving of injunctive relief and that a categorical rule denying them such relief cannot stand under the Patent Act as currently written.

I see this as a hollow victory, however.  With the discretion being placed in the hands of the individual district courts, the victory brings major questions for non-commercializing patent holders, particularly the most egregious of the so-called patent trolls.  Many district court judges may find the language of the Kennedy concurrence as opportunity to deny equitable relief to such patent owners. It's important to note that the "abuse of discretion" standard of review in this area certainly grants a wide swath of latitude in applying the test.

So the battle over the standard for awarding injunctive relief in patent cases has shifted once again.  It has shifted to the district courts for sure, and may have shifted back to Congress, too.






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Posted by J Matthew Buchanan at 11:19 AM | Permalink

Reuters is reporting that the Supreme Court today issued a unanimous opinion in the eBay v. MercExchange case setting aside a decision of the Court of Appeals for the Federal Circuit that injunctive relief must generally be issued once a patent has been determined valid and infringed.

The decision appears to carry two huge suprises -- a unanimous decision and an apparent major shift in patent law.

Did the software industry accomplish its mission? How does this change patent policy efforts in Congress?

A detailed analysis is forthcoming.

UPDATE: My detailed analysis is available here.

Posted by J Matthew Buchanan at 10:25 AM | Permalink

Last week, Sandoz (a Novartis company) scored a major victory in federal court against the Food and Drug Administration that could mark the beginning of a significant change in the biotech drug industry.  The decision highlights the need for clarification on the issue of generic biotech approvals and should remind pioneer biotech companies of the importance of strong patent protection.

Currently, the regulatory landscape for the approval of generic biotech drugs is about as clear as a contaminated cell culture.  FDA openly struggles with such applications and often  is urged to refuse approval by the pioneer, which typically cites the complex nature of the drug and the difficulties associated with reproducing the sensitive manufacturing environment.  Frustration continues to mount among would-be generic manufacturers as more and more pioneer biotechnology drugs go "off patent."  The end result is, in effect, non-patent market exclusivity for pioneer biotech drug manufacturers reminiscent of the de facto patent term extensions for traditional drugs that provided one of the driving forces behind enactment of the Hatch-Waxman amendments in 1984.

Clarifying the path to regulatory approval for generic biotechnology drugs is a massive effort that will likely take years to accomplish. The decision of the United States District Court for the District of Columbia in Sandoz v. Leavitt (2006 U.S. Dist. LEXIS 17549; April 10, 2006) provides an early step in the direction of change and may have interesting patent implications in the future.

Sandoz had filed an application with the FDA to market a generic version of Pfizer's Genotropin, an approved biotechnology drug (its a human growth hormone) that has been ok'd for marketing since 1995.  Months passed and nothing happened.  Eventually, Sandoz grew impatient and ultimately filed suit against FDA and Health and Human Services officials, claiming that the agency failed to meet its statutory obligation to act on the Abbreviated New Drug Application (ANDA) within 180 days of the filing of the application.

Last week, the court issued a strongly-worded opinion holding that the agency had failed to meet the deadline imposed by the Federal Food Drug and Cosmetic Act (FDCA; 21 U.S.C. 355(c)) and instructed it to end this "marathon round of keep-away"  (citation omitted).

While the practical effect of the decision on the Sandoz NDA may be minimal (under the FDCA, the agency isn't required to make a final decision on the application within 180 days; it can also satisfy its obligation by giving the applicant notice of an opportunity for a hearing on the question of whether the application is approvable), the case is interesting for several reasons:

First, it highlights the difficulty the FDA is having with applications for generic biotechnology drugs and the growing impatience of the generic biotechnology industry.  The regulatory pathway to approval of generic biotechnology drugs is not crystal clear and many believe that the agency freezes like a deer in the headlights when faced with a generic biotech application.  Sandoz harnessed the growing frustration of the industry and sought the judicial interpretation of the deadline that seemed necessary before a clear pathway could be established.  The Court stated, in no uncertain terms, that the deadline is in fact a real one, and that the agency should treat it accordingly.

Second, it may ultimately impact the non-patent exclusivity enjoyed by many pioneer biotechnology manufacturers created by the FDA's inability to efficiently handle generic applications.  Remember, no one can market a generic version of a drug, including biotechnology drugs, in the United States until the FDA approves it.  Once patent protection expires, market exclusivity may still exist for the pioneer if the FDA has yet to approve a generic.  Sandoz makes it clear that the FDA must act on biotech (and all) drug applications promptly, which, with all things being equal, may ultimately lead to a faster path to market for generic biotechnology drugs.  If such non-patent exclusivity is reduced or eliminated, strong patent protection for biotechnology drugs becomes even more important.

Third, the case may prompt Congressional action on the subject.  The de facto patent term extension described above was one of the driving forces behind the Hatch-Waxman amendments in 1984 that dealt with the same situation as applied to traditional drugs.  As the first generation of biotech drugs continues to go off patent, more attention will be paid to the de facto extension enjoyed by pioneer biotech drugs and the murky regulatory pathway for generic versions of these drugs.  With the court stressing the agency's statutory obligation to act on generic applications in a timely manner, there may be opportunity to clarify the path to approval by legislative and/or regulatory action.

If history is a guide, a thriving generic biotechnology industry may be just around the corner.  The Sandoz decision is a victory for generics that may ultimately be a victory for the entire population.  In the meantime, it should serve as a not-so-subtle reminder to pioneer companies that change is likely inevitable and that strong patent protection is critically important.

Posted by J Matthew Buchanan at 03:18 PM | Permalink

Everyone's favorite court watcher, Hal Wegner, has distributed the most recent copy of his "Top Ten List" of Supreme Court patent cases (it's a telling sign of the times that Hal has a list these days that is focused exclusively on the Supreme Court).

In the latest version of The List, Hal predicts that eBay v. MercExchange will be decided by a 6-3 (or possibly a 7-2) margin in favor of confirming the availability of injunctive relief for "non-working" patentees.  He expects negative votes from Associate Justices Breyer and Stevens.  His prediction is based on hearing the oral arguments and extensive study of the pleadings.

Since the days of the oral arguments, I've seen many predictions on the forthcoming decision in eBay.  I know Hal, and I know the effort he puts in to studying the cases he watches.  His is the only prediction I'm paying attention to.

Posted by J Matthew Buchanan at 09:00 AM | Permalink