1 town meeting on patent reform the federal trade commission the national academies’ board on...

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Town Meetingon

Patent Reform

The Federal Trade Commission

The National Academies’ Board on Science, Technology, and Economic

Policy

The American Intellectual Property Law Association

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Town Meetingon

Patent Reform

Essential Foundation for Reform



Policy


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Recommendation 4: Provide Adequate Funding for the PTO.

FTC Recommendation 4: Provide Adequate Funding for the PTO.

“Participants in the Hearings unanimously expressed the view that the PTO lacks the

funding necessary to address issues of patent quality….The FTC strongly recommends that the PTO receive funds sufficient to enable it to ensure quality patent review.”

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STRENGTHEN USPTO CAPABILITIES

“The U.S. Patent and Trademark Office is in a double bind. The quality of its output is often questioned and its decisions are widely considered to take too

much time….We believe that more resources are clearly required….We cannot precisely estimate the additional resources required to implement our recommendations, but we can order both the budget increases and the budget savings…”

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BOX 4-1 NAS Committee Recommendations Implications for USPTO Resource Requirements

Recommendation Savings Additional Cost

Open Review procedure Significant Eliminate 3rd-party reexam Small to moderate Eliminate interferences Small to moderate Expand examiner corps Substantial Create robust analytical capability SmallImplement EFS Moderate

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NAS Report (cont.)

“…It is clear that the current budget of the

USPTO does not suffice to accomplish these

objectives….The patent system serves the broad

public purpose of stimulating technological

innovation. Its budget should be determined on

the basis of what resources are needed to

perform the function well….”

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AIPLA Response:

“AIPLA supports providing additional funding…to support the 21st Century Strategic Plan…and… the pending fee legislation….[P]atent application pendency will soon be at the highest level in more than twenty years unless the PTO receives funding for its Strategic Plan….Cost effectiveness of PTO has been compromised because the PTO has had to forego critically-needed investments in e-filing to focus on current workload….”

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Department of Commerce (In millions of dollars) 2004 Estimate Actual 2005 2006 Spending

Discretionary Budget Authority: Departmental Management: Salaries and Expenses .................................................................................. 49 47 54Emergency Guaranteed Loan Program accounts................................ 52 — 50Headquarters Renovation............................................................................. — — 30Office of the Inspector General................................................................... 21 21 23Subtotal, Departmental Management ........................................................... 122 68 57Economic Development Administration........................................................ 308 284 27Economic Development Challenge................................................................ — — 3,710Bureau of the Census ......................................................................................... 609 745 877Economic and Statistics Administration ....................................................... 73 79 85International Trade Administration.................................................................. 336 398 396Bureau of Industry and Security ..................................................................... 67 67 77Minority Business Development Agency...................................................... 29 30 31National Oceanic and Atmospheric Administration (NOAA): Operations, Research and Facilities ......................................................... 2,697 2,852 2,608Procurement, Acquisition and Construction........................................... 961 1,038 965Other accounts.................................................................................................. 11 18 11Subtotal, NOAA ..................................................................................................... 3,669 3,908 3,584

Patent and Trademark Office (PTO):

Program Level .............1,221 1,555 1,703Offsetting Collections....1,321 1,563 1,703Subtotal, PTO............ 100 8 0

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Public Law No: 108-447 Consolidated Appropriations Act, 2005

United States Patent and Trademark Office

For necessary expenses of the United States Patent and Trademark Office … $1,336,000,000 … Provided further, That not less than 526 full-time equivalents … shall be for the examination of trademark applications; and not less than 5,057 full-time equivalents … shall be for the examination and searching of patent applications: Provided further, That not more than 244 full-time equivalents … shall be for the Office of the General Counsel….

In addition, fees authorized by title VIII of this Act may be collected and credited to this account as offsetting collections: Provided, That not to exceed $218,754,000 … shall be available … Provided further, That not less than 58 full-time equivalents … shall be for the examination of trademark applications; and not less than 378 full-time equivalents … shall be for the examination and searching of patent applications: Provided further, That not more than 20 full-time equivalents … shall be for the Office of the General Counsel….

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CONCLUSION:

Important reforms to the patent system cannot

be implemented until adequate, stable funding of

the PTO is guaranteed.

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Town Meetingon

Patent Reform



Policy


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Town Meetingon

Patent Reform

“Best Practices”Including

First-Inventor-to-File



Policy


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“Best Practices” – A Common View Among FTC, NAS and AIPLA?

• FTC Report– PTO efficiency and effectiveness: 18-month

publication, post-grant review, PTO financing.

• NAS Report– All that and “harmonizing” reforms (“first-inventor-

to-file”), and eliminating “subjective elements” from patent litigation.

• AIPLA Response– Broad support for incorporating all the above as

“best practices” in achieving patent reform.

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Who else is interested in the same basket of reforms?

• American Bar Association– ABA supports “first-inventor-to-file” reforms.– IPL Section endorses other “harmonizing”

changes through international agreement.

• Other groups have endorsed the same basket of harmonizing changes as AIPLA:– National Association of Manufacturers,

Intellectual Property Owners Association, and Biotechnology Industry Organization.

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What are “best practices”?What do they seek to achieve?

· Predictability in assessments of what inventions will be validly patentable.

· Simplicity in the legal principles and concepts that underlie the system.

· Reliability of U.S. Patent and Trademark Office determinations once made.

· Stability in legal doctrines defining patent validity and enforceability.

· Economy in the patent procurement and enforcement processes. · Promptness in final determinations of patentability and validity. · Fairness to all categories of inventors, whether individual

inventors or inventors affiliated with either small or large entities. · Balance between providing strong protection for patentable

innovations and preserving unfettered freedom to use unpatentable and unpatented subject matter.

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How will we know when our patent law is entirely “best practices”?

A person of ordinary skill in the art with sufficient training in the patent law will be able to —

(1) pick up a patent or published application for patent,

(2) read through it and its prosecution history,

(3) compare the claims to readily accessible prior art, and

(4) make a complete and certain determination of the validity of the claims.

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How do patent law principles need to change to achieve this goal?

Inquiries totally removed from patent validity:– What the inventor knew and when he knew it. – What the inventor contemplated and when those

thoughts occurred. – What the inventor did to create the invention and

when the inventor did it.

Validity inquiries remaining in the patent law:– What the public knew and when the knowledge

became public.– What the patent teaches and how broadly the

teachings can be applied.

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All pending patent applications would be published at 18 months—• Special exceptions

contained in the American Inventors Protection Act of 1999 would be removed.

• Publication at 18-months would occur unless the application is abandoned or already patented.

• Prompt and complete determination of all prior art.

• Early identification of “theft” of an invention.

• Eliminates existing traps for the unwary.

• “First-inventor-to-file” rule moots concerns over premature disclosure.

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The “first-inventor-to-file” rule: a consensus “best practice”?

• Endorsed as “best practice” by—– American Bar Association– American Intellectual Property Law Association– National Academy of Sciences– National Association of Manufacturers– Intellectual Property Owners Association– Biotechnology Industry Organization– Federal Circuit Bar Association and– “Independent inventor” testimony dating back to 1967

proposals to eliminate the first-to-invent rule.

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Why a “first-inventor-to-file” principle for awarding patents?

• Current law is unfair to the first to invent.– The first to invent who is first to file can still be denied

a patent because of the costs, documentation requirements, complexities, and technicalities of patent interferences.

• Current law is unfair to “small entities.”– Recent studies report small entities would gain

patents under a first-inventor-to-file rule, while shedding the burdens of interferences.

• Current law is unfair to the public.– When “priority of invention” is contested, the public

must wait for years to determine who will own the patent and who might be excluded under it.

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What do independent inventors say about the “first-to-invent” rule?“Our information is that costs average $5000 per applicant per

interference, and that one case in four is won by the second-to-file. These are not very good odds. One inventor would have to conduct not four but eight cases for one victory he would not have won under a first-to-file system. At $40,000, this is too dear a victory.

“But there is another, more subtle economic factor. This is the cost of world-wide patenting when the rest of the world uses a first-to-file system. If it can be shown that a first-to-file principle in the United States would reduce the cost of typical worldwide coverage—presently on the order of $1000 per country for fees and translations only, or from $5,000 to $30,000 for reasonable worldwide coverage—then we have an additional reason for adopting first-to-file. On this combination of grounds, we endorse a first-to-file rule. We also encourage any other steps taken, not necessarily toward a universal patent, but at least toward a universal patent application, advisory assistance from the Department of Commerce, and other means of reduction in the cost of worldwide patent protection.”

• Burke E. Wilford, National Director, the American Society of Inventors, Exhibit D, Hearings before the Subcommittee on Patents, Copyrights and Trademarks of the Committee on the Judiciary, United States Senate, 90th Congress, May 17-18, 1967, p.291.

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How much does first-to-invent cost independent inventors?

Between 1983 and 2000, 98 independent inventors who were not the first inventor to file for a patent were able to use patent interferences to establish the right to patent, while 115 independent inventors that were the first to file for a patent had their rights to patent defeated in patent interferences. Thus, as a group, independent inventor invested multi-millions of dollars in the patent interference system to incur a net loss of 17 patents.

• Gerald J. Mossinghoff, The First-to-Invent System Has Provided No Advantage to Small Entities, 88 J. Pat & Trademark Off. Soc’y 425 (2002).

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Do “large entities” target “small entities” in interferences?“[I]nterference proceedings are more often used

by large entities to challenge the priority of small entities, not the reverse. This evidence further supports Mossinghoff’s conclusion that the first to invent system is not working to the benefit of small entities. If anything, small entities are getting bogged down in interference proceedings initiated by larger companies. This makes some intuitive sense. Large, sophisticated entities are more likely to understand the patent system, including the rather arcane interference process, and use it to their advantage.”

• Mark A. Lemley and Colleen V. Chien, Are U.S. Patent Priority Rules Really Necessary?, 54 Hastings Law Journal 1299, 1323 (July 2003).

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Does first-inventor-to-file mean inventors lose a “grace period”?

First-inventor-to-file1

• 1-year grace period.• no “self-collision.”• no “absolute novelty;”

disclosure must be publicly accessible to be prior art.

• no 1-year forfeiture for “offer for sale” or “on sale.”

• Personal knowledge cannot be prior art.

First-to-invent (currently):• 1-year grace period.• no “self-collision”• “secret” prior art,

i.e., prior invention of another, can defeat right to patent.

• patent right forfeited 1-year after an “offer for sale.”

• Inventor’s knowledge can be prior art.

1As endorsed by AIPLA, ABA IPL Section, IPO, NAM, BIO and others

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“Best practices” would limit prior art to what is “publicly accessible”—

• If subject matter becomes publicly accessible before the inventor sought a patent, the subject matter is prior art.– Disclosures directly or indirectly from the

inventor during a one-year “grace period” would not, however, qualify as prior art.

– Earlier-filed patent applications would be deemed publicly accessible (if later published), except for certain commonly assigned applications.

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“Public accessibility” would be based on established principles:

• PUBLIC ACCESSIBILITY: “The statutory language, ‘known or used …’ (35 U.S.C. §102(a)), means knowledge or use which is accessible to the public.” See Carella v. Starlight Archery, 804 F2d 135 (Fed. Cir. 1986).

• REASONABLE ACCESSIBILITY: “[A] proponent of a microfilm as a ‘printed publication’ under the statute should produce sufficient proof of its dissemination or that it has otherwise been made available and [1] accessible to persons concerned with the art to which the document relates and thus most likely to avail themselves of its contents. He should be able to make a satisfactory showing that a person interested in and [2] ordinarily skilled in the art [3] can locate it, and [4] understand the essentials of the claimed invention [5] without further research or experimentation.” in Philips Electronic and Pharmaceutical Industries Corp. v. Thermal and Electronics Industries, Inc. 450 F2d 1164 (3rd Cir. 1971).

• EFFECTIVE ACCESSIBILITY: “[I]f the publication [asserted to be prior art] were illegible, whether ‘printed’ or handwritten, no one would argue that it would constitute a statutory bar” i.e., a basis for denying a patent for an invention. See In re Tenney, 254 F.2d 619 (C.C.P.A. 1958)

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What would “best practices” remove from patent validity law?

• “Loss of right to patent” provisions:– “in public use or on sale” unless the sale/use

renders the invention publicly accessible.– “abandonment” by the inventor.– “premature foreign patenting.”– inventor’s actual knowledge of related subject

matter deemed prior art as a “derivation.”

• “Prior inventions of another” as prior art.• “Prior invention” used to antedate prior art.

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What would remain in the law of patent validity?

“Sec. 102. Conditions for patentability; novelty“(a) [Novelty; prior art.]–A patent for a claimed invention in an application for patent may not be obtained if:“(1) the claimed invention was patented or described in a printed publication or otherwise known–“(A) before the effective filing date of the claimed invention, other than through disclosures made by the inventor or by a joint inventor or by others who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor, or“(B) more than one year prior to the effective filing date of the claimed invention, or“(2) the claimed invention was described in a patent issued under section 151, or in an application for patent published under section 122(b), in which the application or the patent names another inventor and was effectively filed before the effective filing date of the claimed invention.

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“(2) [Reasonable and effective accessibility requirement.]–Subject matter is known for the purposes of subsection (a)(1) only when it becomes reasonably and effectively accessible, either through its use or through its disclosure by other means. Reasonable accessibility requires that the subject matter can be accessed by persons of ordinary skill in the art to which the subject matter pertains without resort to undue efforts. Effective accessibility requires that its content can be comprehended by persons of ordinary skill in the art to which the subject matter pertains without resort to undue efforts.

“(b)(1) [Commonly assigned invention exception.]–Subject matter developed by a person other than the inventor that would have qualified as prior art under subsection (a)(2) but not under subsection (a)(1) shall not be prior art to a claimed invention where the subject matter and the claimed invention were, not later than the effective filing date of the claimed invention, owned by the same person or subject to an obligation of assignment to the same person.

The earlier filing of a published patent

application does not create prior art to a commonly owned, later-filed patent

application

“Public accessibility” is based upon long-

established common law principles of both

reasonable and effective accessibility.

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“(3) [Effective filing date of a claimed invention.]–The effective filing date of a claimed invention is— “(A) the filing date of the patent or the application for patent containing the claim or “(B) if the patent or application for patent is entitled to a right of priority from any other application under section 119 or 365(a) or to the benefit of an earlier filing date in the United States under section 120, 121, or 365(c) based upon one or more prior filed applications for patent, the filing date of the earliest such application that contains an adequate disclosure of the claimed invention under the criteria set out in section 112. “(4) [Patents and published applications effectively filed.]–A patent or application for patent is effectively filed under subsection (a)(2) with respect to any subject matter described in the patent or application— “(A) as of the filing date of the patent or the application for patent or “(B) if the patent or application for patent is entitled to a right of priority of any other application under section 119 or 365(a) or to the benefit of an earlier filing date in the United States under section 120, 121, or 365(c) based upon one or more prior filed applications for patent, as of the filing date of the earliest such application that contains an adequate disclosure of the subject matter under the criteria set out in section 112.”

The criteria for determining when

a patent application has been effectively

filed is unchanged, except for removal

of a technical requirement for when an earlier-

filed patent application can

constitute prior art (In re Wertheim).

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True inventors would be categorically protected from theft:

“Sec. 101. Right to patent; subject matter eligible for patenting

“The inventor of any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, has the right to apply for and to obtain a patent for the invention, subject to the conditions and requirements of this title.”

• Patent law amended to give inventor the exclusive right to seek and obtain patents.

• True inventor has right to recover patent application filed based upon theft of an invention, in whole or in part.

• The inventor’s assignee may protect the inventor’s interests in the invention by seeking a patent naming the inventor.

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Backup Slides-Legislative Proposal

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RIGHT OF THE FIRST INVENTOR TO FILE.

(a) Section 100(a), Title 35, is amended to add the following sentences after the first sentence: “The term ‘inventor’ means the individual (if a sole invention) or the individuals

collectively (if a joint invention) who themselves invented the subject matter of the invention. The term ‘joint inventor’ or ‘coinventor’ refers to one of the individuals making a joint invention.

(b) Sections 102, Title 35, is amended to read as follows: [See previous slides for text.]

(c) (1) Section 103(b) and section 103(c) are repealed and section 103(a) is redesignated as section 103; in redesignated section 103, the words “was made” are removed and the words “time the” is replaced with the phrase “effective filing date of the claimed”.

(2) Section 104 and section 157 are repealed and reserved;

(3) Section 120, Title 35, the phrase “is filed by an inventor or inventors” is amended to read “names an inventor or joint inventor”;

(4) Section 172, Title 35, the phrase “and the time specified in section 102(d)” is deleted;

(5) Section 363, Title 35, as amended to remove the phrase “except as otherwise provided in section 102(e) of this title”;

(6) Section 374, Title 35, is amended to change the phrase “except as provided in sections 102(e) and 154(d) of this title” to read “except as provided in section 154(d) of this title”; and

(7) Section 375, Title 35, is amended the change the phrase “Subject to section 102(e) of this title, such” to the word “Such”.

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RIGHT OF THE FIRST INVENTOR TO FILE (continued).

(d) (1) Section 291, Title 35, is repealed, and

(2) Section 135(a), Title 35, is amended to read as follows: “(a) Whenever patents or applications for patent naming different individuals as the

inventor are deemed by the Director to interfere because of a dispute over inventorship under section 101, the Director shall institute an interference for the purpose of determining the right to patent. The Board of Patent Appeals and Interferences shall determine the question of the right to patent and, in appropriate circumstances, may correct the naming of the inventor in any involved application or patent. After taking account of the correction, if any, in the naming of the inventor, a final decision on the right to patent shall be rendered. The final decision, if adverse to the claim of an applicant, shall constitute the final refusal by the Patent and Trademark Office of the claims involved. The Director may issue a patent to an applicant who is adjudged to have the right to patent. The final decision, if adverse to a patentee, from which no appeal or other review has been or can be taken or had shall constitute cancellation of the claims involved in the patent, and notice of such cancellation shall be endorsed on copies of the patent distributed after such cancellation by the Patent and Trademark Office.”

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RIGHT OF THE INVENTOR TO SEEK A PATENT

(a) Section 101, Title 35, is amended to read as follows:

“Sec. 101. Right to patent; subject matter eligible for patenting“The inventor of any new and useful process, machine, manufacture, or

composition of matter, or any new and useful improvement thereof, has the right to apply for and to obtain a patent for the invention, subject to the conditions and requirements of this title.”

(b) Section 115, Title 35, is amended to read as follows:

“Sec. 115. Oath of applicant“The Director may require an oath of the applicant setting forth particulars relating

to the inventor and the invention.”

(c) Section 118, Title 35, is amended to read as follows:

“Sec. 118. Filing by other than inventor“A person to whom the inventor has assigned or is under an obligation to assign

the invention may make the application for patent. A person who otherwise shows sufficient proprietary interest in the matter may make application for patent on behalf of and as agent for the inventor on proof of the pertinent facts and a showing that such action is appropriate to preserve the rights of the parties. If the Director grants a patent on an application filed by other than the inventor pursuant to this section, the patent shall be granted to the real party in interest and upon such notice to the inventor as the Director deems sufficient.

(d) Section 112, Title 35, is amended by removing the words “and shall set forth the best mode contemplated by the inventor of carrying out his invention” and by amending the phrase “applicant regards as his invention” to read “inventor or a joint inventor regards as the invention.”

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Town Meetingon

Patent Reform



Policy


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Town Meetingon

Patent Reform

Post-Grant Review



Policy


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Post-Grant Review – A Common View Among FTC, NAS and AIPLA?• FTC Report

– recommends legislation to create a new administrative procedure to allow Post-Grant Review of and opposition to patents.

• NAS Report– recommends the institution of an Open Review

procedure.

• AIPLA Response– supports the conclusion that an effective post-

grant opposition system needs to be instituted.

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What’s the problem?

• Rapid growth in patent applications leading to– Large increase in patent office workload– Higher grant rates in the US? - compare grant rates for US

priority patent equivalents at EPO and USPTO (OECD study)• USPTO versus EPO grant rate differential has grown from 12% to

30% during the past 20 years

• Suggests a decline in the standard of patentability

• Increase in patent litigation and litigation costs – Doubled in 20 years– Rate per patent increased slightly

• Near consensus that the standard being applied during the past decade is too low– especially in newer technology areas

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Possible causes

• overburdened patent office

• lack of expertise in the relevant areas

• lack of prior art databases

• weakening of the non-obviousness test, partly through court decisions

• Some of these problems already addressed by USPTO– Hiring changes (computer scientists)

– Second exam for 705 patents

– Increased prior art availability; better searching methods

– Etc….

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More is not necessarily better

• Trivial patents confer market power without consumer benefit

• Can slow advance in cumulative technologies – increases level of fragmentation of rights – Some areas of research avoided by small and new firms

• More patents => more litigation – Investment in innovation and commercialization slowed by

uncertainty over patent validity

• Clogs the process at the USPTO, especially as others increase patenting in response – An arms race in some sectors

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Post-grant patent reviews – expected benefits

• Who is most likely to be able to demonstrate obviousness using non-published prior art?– Competitors who are familiar with the area

• Fast feedback to current patent examination• Second pair of eyes improves quality

– ensures that PTO spends more time on valuable patents

• Revoked patents cannot cause litigation => large welfare gains

• Dampening effect on aggressive patent portfolio strategies

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Post-grant patent reviews – expected drawbacks

• Too costly? – additional financial burden for patent holders

• Too lengthy?– delays enforcement of patent rights (but so does litigation)– general delay of uncertainty resolution?

• Is the USPTO capable of running such a process?– Not without additional resources

• Independent inventors and small entities could be disdavantaged in such a process– But no evidence that they are more subject to either US re-

exam or European opposition– And process costs less than litigation and should be faster

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Cost-benefit computation

• inter partes post-grant patent review in US would imply– Increased cost from higher take-up– Benefit from avoided litigation

• Rejection means higher validity probability• Patent revocation

– Avoided litigation or collusive settlement cost of $2M

• Patent amendment– Lesser avoided litigation or settlement cost

– Assume decision correct (no negative incentive effects)

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Range of scenarios

• Best: benefit-cost ratio = 10– Costs $100K– Outcome probabilities same as EPO (1/3 revoked,

1/3 amended)– avoided cost is $2M for revocation; $300K for

amendment• Worst: benefit-cost ratio = 0.3

– Costs $500K– outcome probabilities same as re-exam (unlikely) – avoided cost is $2M for revocation; nothing for

amendment– additional cost of $200K if opposition rejected

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Backup slides follow

• Aggregate US patent applications and grants 1965-2003

• Further data on grant differences at EPO between US priority and non-US priority

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The problem?

USPTO Utility Patents 1965-2004

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

1965 1970 1975 1980 1985 1990 1995 2000 2005

Year

Num

ber

Patent applications

Patent grants laggedtwo years

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Difference in Grant Probabilities at the EPOfor US and non-US Priority Patents

All Technologies

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

1979 1981 1983 1985 1987 1989 1991 1993 1995

Year of patent application

% g

rant

ed (

non-

US

- U

S)

non-USpriority date

US prioritydate

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A look at the European experienceOutcomes of EPO examination – by technical field

TechnicalField

Non-US Grant Rate*

US Grant Rate** Difference

Electrical 69.7% 57.8% 11.9%

Instruments 67.0% 60.1% 6.9%

Chemicals 68.4% 56.7% 11.7%

Processes 68.4% 61.7% 6.7%

Mechanical 70.4% 61.7% 8.7%

Construction 62.9% 51.6% 11.3%

All Fields 68.3% 58.4% 9.9%Application years 1990 and earlier. Grants include grants after appeal.* Grant rate for EPO applications with non-US priority** Grant rate for EPO applications with US priority

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Town Meetingon

Patent Reform



Policy


51

AIPLA Proposal ForAIPLA Proposal For Post-Grant Opposition Post-Grant Opposition

Proceedings In Proceedings In The United StatesThe United States

AIPLA Proposal ForAIPLA Proposal For Post-Grant Opposition Post-Grant Opposition

Proceedings In Proceedings In The United StatesThe United States

Town Meeting on Patent ReformSan Jose, CaliforniaFebruary 18, 2005

Presented by

Don Martens

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Broad Support for Post Grant Opposition

• FTC

• NAS

• USPTO

• AIPLA

• ABA/IPL

• IPO

• BIO

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AIPLA Proposal

• Delicate balance

• Encourage opposition of questionable patents

• Avoid harassment of patent owners

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AIPLA Proposal

• Early filing of opposition

– within nine month after issuance

• Prompt test of questionable patents

• Quiet title early

• Avoid harassment

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AIPLA Proposal

• Front loading of evidence• All opposer’s evidence filed with opposition

request• All patentee’s evidence filed with response• Documents• Declarations

– fact witnesses– expert witnesses

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AIPLA Proposal

• Real party-in-interest confidential unless--

– relies on declarations

– other good cause, such as litigation

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AIPLA Proposal

• Grounds for opposition substantially broader than reexamination grounds

• Include nearly all grounds available in litigation

• Front loading of evidence inherently limits to information known to Opposer

• Exclude state of mind issues

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AIPLA Proposal

• Right to amend claims once

– no broadening amendments

– intervening rights

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AIPLA Proposal

• Discovery limited to cross-examination of declarants

• Requester has burden by preponderance of evidence

• Decided by panel of three Administrative Patent Judges (“APJ”)

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AIPLA Proposal

• Fully Inter Partes

• All parties may:

– file briefs

– appear at oral hearing

– appeal to, and appear at, Federal Circuit

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AIPLA Proposal

• Prompt completion

– one year, start to finish

– extendable to 18 months in exceptional cases

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AIPLA Proposal

• Estoppel limited to issues actually decided

• Exception for new evidence that could not have been discovered earlier

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AIPLA Proposal

• Balance

• Encourage filing where appropriate

• Reduce harassment

• Prompt

• Reasonable cost

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Caveats• Will require adequate PTO funding

• Will require PTO commitment to quality

• Can PTO handle within time limits?

• Not a full term substitute for litigation

• Supplement to examination

• “Walk before we run”

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Town Meetingon

Patent Reform

Litigation Reform: Subjective Issues



Policy


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Litigation: General Issues

• Patent litigation is expensive– Discovery accounts for most of the cost

• Patent litigation is unpredictable– Juries (Postgrant Review will reduce issues)

• Expense and unpredictability affect transactions

• Subjective factors affect scope of discovery and trial

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Willfulness

• Enhanced damage award intended to deter infringement

• But “willfulness” is defined broadly to include any knowledge of the patent

• Willfulness claims are asserted in almost every case

• Exposure: up to 3x damage award, and attorney fees

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Costs of Willfulness

• Exculpatory legal opinions costing up to $100K

• Discovery more complex and expensive

• Deliberate failure to read patents, in some industries

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Are we overdeterring?

• Option: eliminate enhanced damages/willfulness

• Option: narrow the standard to require written notice of infringement; provide safe harbor

• Knorr-Bremse decision arguably fails to resolve most problems

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Inequitable Conduct

• Material misstatement or omission with intent to defraud

• Most common: failure to cite important prior art

• Other examples: concealing early offers for sale or public uses

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Inequitable Conduct (2)

• Unlike willfulness, this issue is decided by the judge, not jury

• Unenforceable patent infects the entire patent “family”, leads to antitrust claims

• Complicates discovery process and risks waiving attorney client privilege

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Options for Inequitable Conduct

• Eliminate the doctrine

• Allow claim only after patent is held invalid due to misrepresented fact

• Have the issue (including sanctions) resolved by the PTO

• Award fees to successful patentee

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Best Mode

• 35 USC 112: must disclose best mode known to the inventor

• Requirement is unique to the U.S.

• Often presents a difficult issue at time of application

• Increases cost of discovery

• Best mode seen as least costly of the three subjective issues

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Town Meetingon

Patent Reform



Policy


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Town Meetingon

Patent Reform

Shields to Patent Infringement Liability



Policy


76

“Shields to Infringement Liability: Prior User Rights and Experimental Use Exception”

“Prior User Rights”

Gary L. Griswold

77

FTC Recommendation 8

“Enact Legislation to Create Intervening or Prior User Rights to Protect Parties from Infringement Allegations that Rely on Certain Patent Claims First Introduced in a Continuing or Other Similar Application.”

78

“After publication of its patent application, an applicant may continue to amend its claims. Through this claim amendment process, a patent that states broader claims than those published at 18 months can still emerge. If the applicant uses procedures such as continuing applications to extend the period of patent prosecution, the potential for anticompetitive hold up increases. Indeed, several panelists asserted that some applicants keep continuing applications pending for extended periods, monitor developments in the relevant market, and then modify their claims to ensnare competitors’ products after those competitors have sunk significant costs in their products. Patent reform efforts have long focused on how to remedy opportunistic broadening of claims to capture competitors’ products.

“Legitimate reasons exist to amend claims and use continuing applications. Any proposed remedy for the opportunistic broadening of claims should also protect such legitimate uses. Creating intervening or prior use rights would most directly achieve this balance; it would cure potential competitive problems without interfering with legitimate needs for continuations. Such rights should shelter inventors and users that infringe a patent only because of claim amendments following a continuation or other similar application, provided that the sheltered products or processes are developed or used (or the subject of substantial preparation for use) before the amended claims are published.”

79

Existing U.S. Prior User Right(35 U.S.C. 273)

1. “Commercially used” in the U.S. before effective filing date.

2. “Method of doing or conducting business.”

3. Reduced to practice at least one year before effective filing date.

4. Can’t derive from patentee.

5. Extends to “variations in quantity or volume” and to “improvements” “that do not infringe additional specifically claimed subject matter.”

6. Burden of proof – “clear and convincing.”

80

Existing U.S. Prior User Right(35 U.S.C. 273) Cont’d.

7. Assign as “part of a good faith assignment or transfer for other reasons of the entire enterprise or line of business to which the defense relates.”

8. Pay attorney fees if unsuccessful in asserting the defense and can’t “demonstrate reasonable basis for asserting.”

81

Rationale

1. WIN/WIN

2. Support domestic business (48% of U.S. patents owned OUS)

3. Other countries have them (85% of OUS GNP)

4. Remove an incentive for off-shoring

5. Trade secrets coexist with patents (Kewanee Oil Co. vs. Bicron Corp.)

6. The Advisory Commission on Patent Law Reform (August 1992)

82

AIPLA Position

1. Do not support intervening rights re continuation applications

2. Support amending present prior use statute (35 USC 273) to

a. not be limited to methods

b. delete requirement that the prior use be reduced to practice one year prior to the effective filing date

c. include “substantial preparation” as an act of prior use (commercial use)

83

Rationale

1. Legitimate Reasons

2. When do you have infringement “only because of claim amendments”?

3. Unintended Consequences

4. 18-month publication of patent applications (FTC 7)

5. 20-year patent term

6. Prosecution Laches

84

FTC Recommendation 7

“Enact Legislation to Require Publication of All Patent Applications 18 Months After Filing.”

85

Prior User Right Articles

The Advisory Commission on Patent Law Review, A Report to the Secretary of Commerce, p. 48-53 (1992)

Gary L. Griswold & F. Andrew Ubel, Prior User Rights—A Necessary Part of a First-to-file System, 26 J. Marshall L. Rev. 567 (1993)

F. Andrew Ubel, Who’s on First?—The Trade Secret Prior User or a Subsequent Patentee, 76 J. Pat. & Trademark Off. Soc’y 401, (1994)

Gary L. Griswold, Eric D. Levinson, & F. Andrew Ubel, Letters to the Editor, Prior User Rights: Neither a Rose Nor a Thorn, 2 U of Baltimore IP L. J. (1994)

86

Town Meetingon

Patent Reform

Shields to Patent Infringement Liability



Policy


87

Shields to Patent Infringement Liability:

The Experimental Use

Exemption

Janice M. MuellerProfessor, University of Pittsburgh School of Law

NAS STEP/AIPLA/FTC Town Hall Meeting on Patent Reform

San Jose, CaliforniaFebruary 18, 2005

88

Introduction

• Disclosure function of patents – facilitates study, validation, improvements, inventing around

• Experimental/research vs. commercial use

• Early recognition in U.S. case law, but never legislatively codified

• Protect access vs. maintain incentives

• Heightened concerns post-Madey and Integra

89

No General Statutory Exemption for Unlicensed

Experimental/Research Use of Patented Inventions in U.S.

35 U.S.C. § 271. Infringement of patent

(a) Except as otherwise provided in this title [35 USCS §§ 1 et seq.], whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent. . . .

90

Early U.S. Common Law Recognition

of the Experimental Use Doctrine

Sawin v. Guild, 21 F. Cas. 554 (C.C.D. Mass. 1813) (Story, J.) (emphasis added):

“the making of a patented machine to be an offence within the purview of [the patent laws], must be the making with an intent to use for profit, and not for the mere purpose of philosophical experiment, or to ascertain the verity and exactness of the specification. . . . In other words, that the making must be with an intent to infringe the patent-right, and deprive the owner of the lawful rewards of his discovery.

91

Roche Prods. v. Bolar Pharm., 733 F.2d 858 (Fed. Cir. 1984)

(emphasis added):

“[W]e hold the experimental use exception to be truly narrow, and we will not expand it under the present circumstances. Bolar’s argument that the experimental use rule deserves a broad construction is not justified. . . . Bolar’s intended ‘experimental’ use is solely for business reasons and not for amusement, to satisfy idle curiosity, or for strictly philosophical inquiry. . . .”

92

Madey v. Duke Univ., 307 F.3d 1351 (Fed. Cir. 2002) (emphasis

added):“Our precedent clearly does not immunize use that is in any

way commercial in nature. Similarly, our precedent does not immunize any conduct that is in keeping with the alleged infringer's legitimate business, regardless of commercial implications. For example, major research universities, such as Duke, often sanction and fund research projects with arguably no commercial application whatsoever. However, these projects unmistakably further the institution's legitimate business objectives, including educating and enlightening students and faculty participating in these projects. These projects also serve, for example, to increase the status of the institution and lure lucrative research grants, students and faculty.”

93

Integra v. Merck KGaA, 331 F.3d 860 (Fed. Cir. 2003), cert. granted, 125

S.Ct. 823 (2005)

• Fed. Cir. majority (Rader, Prost) holds that (1) the common law exemption is not on appeal, and (2) the Merck-Scripps research was “general drug discovery,” too removed from/unrelated to FDA data gathering/submission to fall within the 271(e)(1) safe harbor. Thus, Merck infringes.

• Dissent (Newman): Majority improperly ignores the common law experimental use exemption. The basic research performed in this case by Scripps was within the common law research exemption, and the development shielded by 271(e)(1) took up where the research exemption left off. No infringement.

94

Integra v. Merck: Dissent’s View

Merck’s 1998 submission of

FDA investigatory

new drug application

“Development” immunized under

271(e)(1)

“Research” exempted under common law

experimental use doctrine

1994

95

Integra v. Merck: “Question Presented” in Cert. Petition

"To encourage development and expedite introduction of pharmaceuticals, Congress amended the patent laws in 1984 to insulate drug research from charges of infringement so long as the research is ‘reasonably related to the development and submission of information’ [under 35 USC § 271(e)(1)] to the Food and Drug Administration. Did the Federal Circuit err in concluding that this drug-research safe harbor does not protect animal studies of the sort that are essential to the development of new drugs, where the research will be presented to the FDA, and where barring the research until expiration of the patent could mean years of delay in the availability of life-saving new drugs?"

96

NAS STEP Report (2004)

- Heightened concerns post-Madey v. Duke (Fed. Cir. 2002) that scientific investigation at universities is no longer shielded

- International codification of experimental/research use exemption

- Recognition that even in basic research, some activity should not be shielded- eg, use of research tools whose development

depends on patent incentive

97

International Acceptance of Experimental Use Exemption

• German Patent Act of 16 Dec. 1980, § 11.2: “The effects of the patent shall not extend to . . . acts done for experimental purposes relating to the subject matter of the patented invention.”

• Japanese Patent Law (eff. 1998), § 69(1): “The effects of the patent right shall not extend to the working of the patent right for the purposes of experiment or research.”

98

Kastenmeier, H.R. 5598 (1990)Section 271 of title 35, United States Code, as amended by

section 302(a), is amended by adding at the end the following:

"(j) It shall not be an act of infringement to make or use a patented invention solely for research or experimentation purposes unless the patented invention has a primary purpose of research or experimentation. If the patented invention has a primary purpose of research or experimentation, it shall not be an act of infringement to manufacture or use such invention to study, evaluate, or characterize such invention or to create a product outside the scope of the patent covering such invention. This subsection does not apply to a patented invention to which [35 USC § 271](e)(1) applies".

99

NAS STEP Proposal

• Near-term administrative action needed because Congress is unlikely to act

• Shift potential infringement liability of federally-funded researchers to U.S. government

• Include explicit “authorization and consent” (28 USC 1498) clause in federal funding agreements for research

100

AIPLA ResolutionRESOLVED, that AIPLA supports, in principle, legislation to codify an

exemption from infringement under which uses of a claimed invention related to scientific, research, or experimental inquiries are exempted as acts of infringement, and

SPECIFICALLY, the Association supports legislation providing, inter alia¸ that acts of infringement shall not extend to making or using patented subject matter to discern or discover

(1) the validity of the patent and the scope of protection afforded under the patent;

(2) features, properties, inherent characteristics or advantages of the patented subject matter;

(3) methods of making or using the patented subject matter; and

(4) alternatives to the patented subject matter, improvements thereto or substitutes therefore.

101

AIPLA Proposed Statutory Language

“The rights granted to the patent owner under section 154 and acts of infringement described in section 271 shall not include making or using the patented subject matter for purposes related to scientific, research, or experimental inquiries, including to discern or discover

(1) the validity of the patent and the scope of protection afforded under the patent; (2) features, properties, inherent characteristics or advantages of the patented

subject matter; (3) methods of making or using the patented subject matter; and (4) alternatives to the patented subject matter, improvements thereto or substitutes

therefor.

In addition, the exemption under this subsection from the rights granted under section 154 and described in section 271 shall extend to making or using the patented subject matter in activities that are incidental to preparations for commercialization of a non-infringing alternative to the patented subject matter. Otherwise, except to the extent excluded as acts of infringement under this section or section 271(e)(1), making or using patented subject matter in connection with preparations for its use in commerce is encompassed by the rights granted under section 154 and the acts of infringement described in section 271.”

102

Conclusions

• Legislative action needed to codify/clarify the common law experimental use defense

• Reduce incentives for offshoring of R&D

• Promote international harmonization of patent laws

• Consider a more explicit research tool carve-out

103

Speaker Contact Information

Professor Janice M. Mueller

The University of Pittsburgh School of Law

3900 Forbes Ave.

Pittsburgh, PA 15206

Tel. 412.648.5300E-mail: [email protected]

104

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