MWZB - Millen, White, Zelano & Branigan, P.C.

What You Need to Know About the Changes to US Patent Law

What You Need to Know About the Changes to US Patent Law By now, you have no doubt been bombarded by numerous notifications that the United States has passed a sweeping new patent law which changes many aspects of practice in the U.S. We suspect that, as you have read these notifications, you have asked yourselves the questions "how does this affect what I do daily," and "what do I need to know now"?

In the weeks since the new law has passed, we at MWZB have been studying the new statute with the goal of providing to you a concise explanation of what we think you need to know about the changes, providing some insights that might not be apparent from the initial read and indicating how the changes may affect your practice and our practice.

Two important things you should know are: 1) the most significant changes in the new law are not immediately effective (see noted effective dates); and, 2) the USPTO will have to pass many new rules in the coming months to provide the necessary structure to implement many of the changes. The USPTO Director has indicated that there will be about 10 notices of rulemaking coming out in the next 6 months on rules to implement the statute. Of course, we will keep you informed of these new rules. Further, the USPTO has encouraged comment on implementing the law. If you have any comments you would like us to provide, please let us know. The USPTO has established a specific webpage (AIA microsite) dedicated to the implementation of the new law, which will provide additional information on these rules as they are written: http://www.uspto.gov/aia_implementation/

We hope you find our summary to be readable and useful. Of course, we stand ready to answer any further questions you may have, or to provide more detailed explanation of any areas you desire.

Most Significant Provisions
Section 3 of AIA: First Inventor to File

EFFECTIVE DATE: March 16, 2013, i.e., applies to a claimed invention having an effective filing date on or after this date.

After many years of resistance, the US has finally gone to a first to file system with regards to applications having an effective filing date after March 13, 2011. For purposes of the new law, the effective filing date of an application will be the earlier of (a) the actual filing date of the application, or (b) the earliest filing date the application is entitled to under §119, §365(a), §365(b) (Paris Convention, US Provisional, PCT), or (c) the earliest filing date the application is entitled to under §120, §121, §365(c) (prior US Application, PCT).

Under the new 35 U.S.C. §102, prior art is defined as disclosures (patents, printed publications, in public use, on sale, or otherwise being publically available) before the effective filing date of the invention, without restriction on location, or (like the previous 102(e)) in a US patent (by another) or published US application (by another) having an "effective filing date" before the effective filing date of the inventor(s)' application. Regarding the latter, the common ownership exception will remain.

The new law also eliminates the so-called Hilmer doctrine. Thus, a US patent or published US application that is entitled to claim priority of a foreign or international patent application, pursuant to §119 or §365 (Paris Convention, PCT), will have a prior art date as of the filing date of the foreign or international patent application.

There is still a grace period under the law with respect to disclosures by the inventor(s). Disclosures made by the inventor or joint inventor (or others who obtained the subject matter from the inventor or joint inventor) within 1 year or less of the effective filing date will not constitute prior art. Notably, if the inventor or joint inventor (or others who obtained the subject matter from the inventor or joint inventor) makes such a disclosure within the 1 year period, a subsequent disclosure of the subject matter, even by another, before the effective filing date will not constitute prior art. The disclosure acts, in effect, like a priority date in the sense that references (even those by others) having dates between your disclosure date and your filing date (if within a year) cannot be used against you.

There are exceptions related to disclosures derived from others. While interferences will eventually be eliminated, they still will be around for some time since pending applications filed before the effective date can still go into interference. Also, the USPTO will set up a new proceeding to make determinations where there are disputes about the derivation of the invention.

Section 4 of AIA: Inventor's oath or declaration

EFFECTIVE DATE: September 16, 2012, i.e., applying to applications filed on or after that date.

Amendments are made to simplify allowing the assignee or person to whom there is an obligation to assign to file the application and to have the patent issued in the name of the assignee rather than the inventor. Also, there are technical amendments to the requirements for the oath/declaration which will require changes in the forms that are used. These mostly simplify the procedures for obtaining signatures (e.g., allowing the oath or declaration to be included in the assignment document, and thus not requiring separate signatures; eliminating the need for stating the citizenship of the inventors, and for apostille procedures for signatures executed in foreign countries). Also, the time for filing the oath/declaration has been moved to prior to issuance of a notice of allowance.

Section 5 of AIA: Defense to infringement based on prior commercial use.

EFFECTIVE DATE: On Enactment, September 16, 2011.

The prior commercial use defense to infringement is no longer limited to business method patents. The commercial use has to occur in the US more than 1 year prior to the earlier of the effective filing date of the application or public disclosure. The scope of "commercial use" is very broad, including premarketing regulatory review and work in a non-profit research lab. The defense is not transferable to another and does not protect an expansion of the extent of prior use. Further, the defense cannot be used against a university. This may change the strategy regarding an invention which is difficult to reverse engineer, i.e., whether to patent it or attempt to maintain it as a trade secret.

Section 6 of AIA: Post-Grant Review

EFFECTIVE DATE: September 16, 2012, i.e., applies to any patent issued before, on, or after the effective date, by which date the Director will issue regulations to conduct the post-grant review procedure.

A petition for post-grant review can be filed by any person, other than the patentee, not later than the date that is 9 months after the date of grant. In the post-grant review, the petitioner can request that one or more claims be canceled as unpatentable under any basis, i.e., under 35 U.S.C. §§101, 102 or 103 (not limited to patents/publications), 112, etc.. The patentee will have the opportunity to respond. The standard for the USPTO to initiate the review is raised from the previous reexamination standard which merely needed to "raise a substantial new question of patentability." The post-grant review procedure will be conducted by the newly formed Patent Trial and Appeal Board (in contrast to existing re-examination done by the Examining Corps). The procedure allows for some discovery, such as expert declarations and deposition of experts. The law requires completion of the review process within one year of the time the request for review is granted (but with a possible 6 month extension). Post-grant review has severe estoppel effects against the petitioner, both within the Patent Office and in civil actions. This includes estoppel for issues that could have been raised, which means estoppel against almost all issues because almost any issue can be raised in post-grant review. Based on comments by the USPTO Director, it is expected that the fees for the new post-grant and inter-partes review procedures may be quite high.

Section 7 of AIA: Inter Partes Review

EFFECTIVE DATE: September 16, 2012, i.e., applies to any patent issued before, on, or after the effective date, by which date the Director will issue regulations to conduct the post-grant review procedure.

A petition for inter-partes review can be filed by any person, other than the patentee. The petition shall be filed by the latter of: (a) 9 months after the grant of the patent, or (b) if a post-grant review was initiated (by anyone), the date of the termination of the post-grant review. In the inter-partes review, validity may be challenged only under 35 U.S.C. §§102 or 103, and only on the basis of patents or printed publications. The patentee will have the opportunity to respond. As with the post-grant review, the standard for initiating review is whether it is more likely than not that at least one claim is unpatentable and the review will be conducted by the Patent Trial and Appeal Board. Once the review is initiated, the standard for a challenger to prevail is that it is "more likely than not that at least one claim is unpatentable." This contrasts to the standard in litigation for a challenger to provide clear and convincing evidence of invalidity. The procedure allows for some discovery, such as expert declarations and deposition of experts. The law requires completion of the review process within one year of the time the request for review is granted (but with a possible 6 month extension). The inter-partes review process will carry with it estoppel effects against the petitioner, both within the Patent Office and in civil actions. While the estoppel applies to issues that could have been raised, it is more limited than the estoppel for post-grant review because the issues that can be raised are more limited.

Section 8 of AIA: Pre-Issuance Submissions

EFFECTIVE DATE: September 16, 2012

Any third party may now submit for consideration in an application any issued patent, published application, or any other printed document of relevance (e.g., from Court proceedings). Submission must be before allowance, and before the later of (i) the first office action or (ii) 6 months from publication. In a change from previous law, it allows for (even requires) that the submission include a concise description of the relevance of the document. The submission need not identify real party in interest, so it can be submitted through another party to maintain anonymity.

Section 12 of AIA: Supplemental Examination

EFFECTIVE DATE: September 16, 2012, i.e., applies to all patents issued before, on or after that date.

A patent holder can apply to the USPTO to "consider, reconsider or correct information believed to be relevant" to an issued patent. The specific requirements for entering Supplemental Examination (such as content of the Request and filing deadline) have not yet been established.

Within three months of filing a Request for Supplemental Examination, the USPTO will examine the Request and issue a certificate that the information disclosed therein does or does not raise "a substantial new question of patentability." If it does, then the "Director" will order a Reexamination of the patent (although the patentee will not be allowed to file a statement under Section 304).

The procedure provides a mechanism for patentees to correct deficiencies that might otherwise provide a basis for allegations of inequitable conduct. The procedure specifically provides that the patent shall not be held unenforceable with respect to information considered, reconsidered or corrected during a Supplemental Examination. Also, the law states that the mere filing of a Request for Supplemental Examination shall not be relevant to enforceability.

The new law does impose certain limitations on the filing of a Request for Supplemental Examination. For example, the Request can not be filed based on allegations pled with particularity in a civil proceedings before the filing of the Request.

Some commentators have noted that motivation for this provision was largely vitiated by the holding in Therasense, Inc. v. Becton, Dickenson & Co. (Fed. Cir. 2011). Commentators also have noted that the open ended subject matter of reexamination proceedings ordered pursuant to Supplemental Examination makes the procedure an avenue to ex parte reexamination to resolve issues pertaining to, for instance potential "on sale" or "public use" bars under 35 USC 102 or enablement, written description, best mode and definiteness issues under 35 USC 112, among others.

Section 15 of AIA: Best Mode

EFFECTIVE DATE: On enactment, September 16, 2011.

Eliminates the "best mode" requirement, under 35 U.S.C. §112, first paragraph, as a defense under Section 282 of the Patent Act. The best mode requirement can no longer be a basis to cancel, invalidate or render unenforceable any claim. Likewise, eliminates the best mode requirement from the Patent Act in (a) Section 119(e)(1), which in turn incorporates a provisional application under Section 111(b) and an international application under Section 363, and (b) in Section 120 for claiming priority of an earlier-filed application. The Act does not eliminate the specific best mode requirement from 35 U.S.C. §112, but appears to limit the effect of that requirement in various Sections of Title 35. The effect of its retention in 35 U.S.C. §112 is not clear and will require monitoring. However, the USPTO Director has indicated that they do not expect to stress enforcement of the best mode by examiners either.

Section 11 of AIA: Certain Fee Provisions

Penalty for Not Filing Applications Electronically: Effective Nov. 15, 2011, a $400 penalty additional fee for applications not filed electronically via EFS (we file all applications via EFS).

15% Fee Increase: As indicated in our previous notice, effective Sept. 26, 2011, most patent fees increased by 15%.

Prioritized Examination: Effective Sept. 26, 2011, a $4,800 additional fee (i.e., in addition to the normal filing fees) can be paid for an application to prioritize examination of the application so it is fast-tracked for examination within a one year period (on average). Until the USPTO sets any further restrictions/requirements for such requests, such applications must have or be amended to have no more than 4 independent claims and 30 total claims. Further, the USPTO is limited to allowing 10,000 such applications per fiscal year; thus, it is possible this ability may run out towards the end of a fiscal year. The AIA microsite has a page showing the current number of prioritized filings: (http://www.uspto.gov/aia_implementation/patents.jsp#heading-5).

Section 10 of AIA: USPTO Granted Fee Setting Authority

EFFECTIVE DATE: On Enactment, September 16, 2011.

PTO given authority to set patent and trademark fees (making it easier for USPTO to adjust fees, when needed) but fees can be set "only to recover the aggregate estimated costs to the Office for processing, activities, services, and materials relating to patents (in the case of patent fees) and trademarks (in the case of trademark fees)." A review panel and procedure including public comment will be created to review new fees or fee changes. It is expected that the USPTO will use these fees to hire thousands of new examiners and to greatly expand the new Patent Trial and Appeal Board to handle the new post-grant review procedures and lower pendency.

New "micro entity" status made in addition to small entity status. The fee reduction is 75% for micro entity and (as before) 50% for small entity. Effective date for smaller payment under micro entity status is not clear because USPTO has to use their authority first to actually set this fee. The USPTO Director has indicated this may not come into effect until Sept. 16, 2012. A micro entity must qualify as a small entity and additionally not include inventor(s) who: 1) are named inventors on 5 or more other patent applications, 2) have an income over a certain level (about $150k); or 3) have assigned the application to a company with income over that level. Alternatively, can qualify as micro entity if all inventors have the majority of their income from a certified institute of higher learning (university) or the application is assigned to such a university.

Section 17 of AIA: Advice of Counsel

EFFECTIVE DATE: On enactment, September 16, 2011.

The statute now provides that failure to obtain or produce a non-infringement opinion can not be used to prove willful infringement. This is intended to eliminate the need to waive attorney client privileged communications (and the threat of expansion of the waiver to other communications) in defending against allegations of willful infringement.

Section 20 of AIA: Technical Amendments

EFFECTIVE DATE: September 16, 2012

Makes a number of grammatical, technical, and conforming amendments to title 35. Takes effect one year after enactment of AIA. Perhaps most significantly, these amendments remove the "without deceptive intent" language from sections 116 & 256 (correcting inventorship), 184-185 (foreign filing licenses), 251 (reissues), 253 (disclaimers) and 288 (suit for infringement); thus, apparently considering whether there was deceptive intent is not an issue when taking these actions.

Other Provisions
Section 9 of AIA: Venue

EFFECTIVE DATE: November 16, 2012 Venue for District Court actions appealing disciplinary matters, USPTO Board of Appeals decisions, USPTO Board of Interferences decisions, and PTA determinations shifted from the District Court for the District of Columbia to the District Court for the Eastern District of Virginia.

Section 14 of AIA: Tax Strategy Patents Nullified

EFFECTIVE DATE: On enactment, September 16, 2011.

Effectively nullifies any patent directed to a tax strategy for reducing, avoiding or deferring a tax liability whether under any Federal, State, local or foreign law. This section, applies to any pending application or any patent issued on or thereafter. Such inventions will be assumed to be within the prior art. This section does not include an invention directed solely to preparing a tax or information return or solely to financial management to the extent it is severable from a tax strategy.

Section 16 of AIA: Patent Marking and Qui Tam actions

EFFECTIVE DATE: On enactment, September 16, 2011.

Eliminates "qui tam" provision of the patent marking requirement (which allowed private individuals who assist in a prosecution to receive all or part of any penalty imposed). This is in response to the surge in lawsuits (over 130) brought by plaintiffs who were not harmed in any way. The statute is changed so that only the US or "a person who has suffered a competitive injury" has standing for a false marking claim. Further amended to provide flexibility in marking a patented article, i.e., allowing the product to be marked with a web address where the patents which cover the product are identified. Also, a section has been added to exclude from "false marking" violations those instances where a product is marked and covered with an expired patent.

Section 18 of AIA: Transitional Program for Business Method Patents

EFFECTIVE DATE: At least by September 16, 2012, once the USPTO provides rules for such proceedings. The program terminates 8 years after it starts.

Being referred to by some as the Banking Bailout provision, section 18 establishes a transitional post-grant review proceeding for patents directed to business method patents for financial products or services. The proceeding can apply to patents issued prior to AIA enactment. But the proceeding can only be used by a defendant who is actually sued or charged with infringement of the business method patent.

Section 19 of AIA: Jurisdication and Procedure

EFFECTIVE DATE: On enactment, September 16, 2011

The CAFC has jurisdiction over appeals involving compulsory patent counterclaims. This section also limits joinder of accused infringers, for example, accused infringers may not be joined based solely on allegations they each infringed the patent.

Section 22 of AIA: USPTO Funding

EFFECTIVE DATE: On enactment, September 16, 2011

Makes the USPTO budget subject to the annual appropriations process and ensures that any excess fees collected are retained for USPTO use in a reserve fund at the U.S. Treasury. USPTO will keep all of the revenue it raises while still allowing Congressional appropriators to maintain oversight of the agency. Furthermore, authorizes the USPTO Director to adjust fees when needed but such authority would sunset after seven years.

Sections 23 & 24 of AIA: Satellite Offices

Requires the Director to establish three or more satellite offices within three years, including one in Detroit, Michigan.

Section 25 of AIA: Priority examination for important technologies

USPTO given authority to prioritize examination of applications for products, processes, or technologies that are important to the national economy or national competitiveness without recovering the aggregate extra cost of providing such prioritization, notwithstanding any other provision of law.

Section 28 of AIA: Patent Ombudsman Program for Small Entities

PTO will set up ombudsman staff to provide support and services relating to patent filings by small business concerns and independent inventors.

Sections 26-27 & 29-34 of AIA: USPTO Studies

The statute mandates that the USPTO conduct or, in some cases, jointly conduct with others a number of studies related to patents, for example: regarding the impact of gene patents on genetic diagnostic test activity, diversity of patent applicants, patent protection internationally for small businesses, misconduct before the USPTO, pro bono activity, and the economic effect of patent litigation by non-practicing entities (patent trolls).

Federal Circuit Court Issues Decision Changing Standard for Duty of Disclosure and Requirements for a Finding of Inequitable Conduct; USPTO Proposes Rule Change to Implement Decision

By Harry Shubin

Articulating a new "but for" materiality standard in Therasense, Inc. v. Becton, Dickinson & Co., the Federal Circuit has said that its decision should reduce the overuse of the defense of inequitable conduct in litigation (which the court termed the "atomic bomb" of patent law), and reduce the strain on PTO resources from submission of huge volumes of material in order to comply with the former standard. The standard previously employed by the court was a combination of the PTO's rule requiring evidence inconsistent with a position an applicant takes in prosecution and that of other, prior court decisions requiring submission of material a "reasonable examiner" would find "important." The new standard as defined by the court finds information to be material (and thus required to be submitted) "if the PTO would not have allowed a claim had it been aware of the undisclosed prior art." For a finding of inequitable conduct, the court stated that a district court "must determine" whether the claim at issue would have been granted if the PTO was aware of the reference, using the preponderance of the evidence burden and giving the claims their "broadest reasonable construction," as would have occurred during ex parte prosecution. The Court further sets forth an exception to these principles in cases of "affirmative egregious conduct", i.e., intentional withholding of a reference in order to obtain a patent.

Moreover, with respect to a finding of inequitable conduct, the Court held that an accused infringer "must prove that the patentee acted with the specific intent to deceive the PTO," Specifically, a finding of negligence, gross negligence, or the application of a "should have known" standard "does not satisfy this intent requirement," according to the court. Rather, there must be clear and convincing evidence that an applicant "made a deliberate decision to withhold a known material reference," (emphasis in the opinion). According to the Court, "the accused infringer must prove by clear and convincing evidence that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it."

Subsequent to the Therasense decision, the PTO has proposed new rules for how it will apply the Court's newly articulated standard of materiality. With a stated goal of reducing "the incentive to submit information disclosure statements containing marginally relevant information and enabling applicants to be more forthcoming and helpful to the Office", the Office has proposed modifications to "Rule 56" (37 C.F.R. §1.56) to reflect the "but for" standard of materiality, while also recognizing that affirmative, egregious misconduct" will still result in a violation of the duty of disclosure. Specifically, the proposed rule defines information as material to patentability (and thus must be cited) if:

• (1) The Office would not allow a claim if it were aware of the information, applying the preponderance of the evidence standard and giving the claim its broadest reasonable construction; or


• (2) The applicant engages in affirmative egregious misconduct before the Office as to the information.

At the present time, it is not known whether the Federal Circuit's decision in Therasense will be appealed, nor whether the U.S. Supreme Court will hear such an appeal. The PTO, in its proposed rule, indicates that if an appeal is taken up by the Supreme Court, the Office will consider delay of any final rule until the Supreme Court has issued a decision.

Since the proposed rule is not yet in effect, the current standard of materiality remains in effect under PTO rules, if not in the courts. As a result, we do not at the present time advise any changes in current practices respecting gathering of information for compliance with the duty of disclosure.

Applications to be Accepted for New Internet Top-Level Domain Names

By Adam Mandell

On June 20, the Internet Corporation for Assigned Names and Numbers (ICANN) approved the launch of new generic top-level domain names (gTLDs). Examples of currently available gTLDs are .com, .net, and .org. New gTLDs could include brand-type extensions (e.g., .coke). Potentially limitless extensions present new opportunities for trademark infringement and consumer confusion and jeopardize the security and stability of the domain-name system. Applications for new gTLDs will be accepted from January 12, 2012 to April 12, 2012.

What concerns should your business have about the introduction of new gTLDs as a trademark owner? What are some best practices that your business should implement to protect itself with the introduction of new gTLDs?

History of New gTLDs

ICANN has posted a series of drafts of its Applicant Guidebook. The Guidebook is a comprehensive guide for applicants of new gTLDs describing the program's requirements and evaluation process. On May 30, ICANN posted its latest version of the Guidebook. This version of the Guidebook has not yet been approved.

Concerns for Trademark Owners

There are currently 21 gTLDs (sunrise registration for the newest gTLD, .xxx, will launch in September 2011). Internet activity is dominated by a small number of registries: .com has more than 95 million registered domains while .net has roughly14 million. Conversely, .museum has less than 500 registrations.

The addition of new gTLDs may harm consumer welfare by creating confusion among consumers and imposing costs on trademark holders by necessitating inefficient "defensive" registration of domain names on new gTLDs. Further, new gTLDs will create new opportunities for others to infringe, phish, and engage in other deceptive practices. Monitoring for abuse will now have to be extended to a much wider universe. As a result, brand owners and consumers will be net losers.

Trademark owners already have to register the actual trademark, alternative spellings, misspellings and other variations (e.g., dashes), all in different generic and country-code TLDs. The potential for unlimited new extensions means these defensive efforts will multiply.

Should Your Business Apply for a New gTLD?

Buying a new gTLD will be expensive. Notable costs include an initial evaluation fee of $185,000 and annual fees of $25,000 with long-term contracts. Other potential costs include legal fees for potential challenges and complying with business, operational, and technical requirements. Further, new gTLDs will have limited benefits, particularly in the short run. We live in a .com world, where your business's consumers are trained to navigate the tried and true existing top-level domain names. New gTLDs are slow to catch on. Consider these questions:

• Does your business own any domain names outside of .com, .net, or .org? If so, were they acquired for marketing purposes or as defensive registrations?
• Are your consumers ready to locate your business by using the extension .trademark?

To take full advantage of a brand-type gTLD, your business may have to undertake significant training and education efforts. As the internet-using public becomes more comfortable with new gTLDs, brand-type gTLDs will become feasible for businesses, but this may take years.

Best Practices for Businesses

It is not too early to develop your business's top- and second-level domain-name strategy. Timing of applications for, or opposition against, new gTLDs will be critical.

Top-Level Domain Names

ICANN will post portions of applications within two weeks of the close of the application submission period. This will begin a comment period, allowing time for the community to review and submit comments on posted application materials. Comments received within a 60-day period from the posting of the application materials will be available to the ICANN evaluation panels performing the initial review.

The objection filing period will begin after ICANN posts the list of complete applications and will last for approximately seven months. Dispute-resolution proceedings are expected to be completed for all applications within a five-month timeframe.

Dispute-resolution filing fees are expected to range from $1,000 to $5,000 per party per proceeding, depending on the dispute-resolution services provider. However, this does not include the costs of the proceeding which are estimated by ICANN to be as high as $122,000 or more.

Second-Level Domain Names

Your business should participate in the rights-protection mechanisms expected to be available under the new gTLD program.

1. Submit your trademark to the Trademark Clearinghouse. This is a central repository that authenticates and validates trademarks and serves as a database to provide information to new gTLD registries. One submission is sufficient to cover all new gTLDs. New gTLD operators are required to give registrants notice of your rights and alert you when someone else registers a domain name using your trademark.
2. Participate in sunrise registration periods. A sunrise is an exclusive registration period prior to general registration when trademark owners may register desired second-level domains within new gTLDs, thereby preventing cybersquatters from registering the domains. Taking advantage of this prelaunch protection measure would be particularly useful in relevant gTLDs, e.g., sony.music. Submission to the Trademarks Clearinghouse is a prerequisite to participating in sunrise registration periods.
3. If you learn of an infringing second-level domain name, consider filing a proceeding under the Uniform Rapid Suspension System (URS), intended to be a quicker and cheaper alternative to the Uniform Domain Name Dispute Resolution Policy (UDRP) currently available for existing gTLDs. The URS would be limited to situations involving a clearly abusive domain-name registration, and the sole remedy is suspension of the domain name.

The introduction of new gTLDs has the potential to drastically change the internet in negative ways. The time is now for your business to consider how these new gTLDs will help or harm it.

Supreme Court Upholds Purpose of Bayh-Dole Act in Stanford v. Roche

By Al Branigan

The Bayh-Dole Act (1980) was intended to give government contractors incentive to commercialize government-funded inventions by permitting the contractor to retain title, so long as the contractor paid for the patents and the government got a paid-up license (with march-in rights if the contractor ceased commercialization). An issue in Stanford v. Roche was whether the contractor still had to obtain patent rights from the inventor or whether Bayh-Dole gave patent rights directly to the contractor.

"In the article "Assignment of Inventions and the Bayh-Dole Statute," we reported that the U.S. Court of Appeals for the Federal Circuit (CAFC) held that an inventor's prior assignment of an invention acted to deprive a government contractor of title to an invention where the inventor had merely "agreed to assign" to the government contractor, but, before fulfilling that agreement, actually assigned to another.

In a seven to two decision, the U.S. Supreme Court upheld the principle that original rights to an invention belong to the inventor and the Bayh-Dole Act did not change that.

As outlined in the case, Holodniy, one of four inventors, was working with both Stanford University and Cetus (later purchased by Roche). Holodniy was a Stanford University employee whose employment agreement required him to assign inventions to Stanford (at some future date). When Holodniy began to work with, but not for, Cetus, he actually assigned his patent rights to Cetus (now Roche) about six years before he belatedly, but ineffectually, attempted to assign the same rights to Stanford.

The result was that Stanford University, pursuant to Bayh-Dole, owned the rights from only three of the inventors. Because of Holodniy's prior assignment, Roche owned Holodniy's patent rights. Hence, the patent had split ownership between Stanford and Roche. Black-letter law says both had to be joined in any suit to enforce the patents in order for either to have standing. Roche, not interested in suing itself, deprived Stanford of standing. That was the bottom-line holding of the Federal Circuit Court.

The U.S. Supreme Court rejected Stanford's argument that mere employment is sufficient to vest title to an employee's invention in the employer.

Chief Justice Roberts, writing for the majority wrote: "The Bayh-Dole Act does not confer title to federally funded inventions on contractors or authorize contractors unilaterally to take title to those inventions; it simply assures contractors that they may keep title to whatever it is they already have."

The basic purpose of Bayh-Dole is being fulfilled because the invention is still being commercialized. The government is still immune from suit because Stanford cannot join Roche in a suit against the government, which has a royalty-free license from Stanford; Stanford and Roche can still join to sue any other infringers. The purpose of Bayh-Dole was not defeated, as Stanford argued and as seminar promoters suggest.

Supreme Court Adopts Willful Blindness Standard for Inducement to Infringe Patents in Global-Tech Appliances, Inc. v. SEB, S.A.

By Mike Culver

In 1952, the U.S. Patent Act, relying on case law, recognized the statutory forms of infringement known as inducement and contributory infringement under Sections 271(b) and 271(c), respectively. In 1964, the U.S. Supreme Court, in a "badly fractured decision" applying § 271(c), determined that an infringer must know that its product when used would infringe a patent. In 1999, SEB, holder of a patent for a cool-touch deep fryer for home use, initiated an infringement action against various U.S. retailers and Global-Tech Appliances, a Hong Kong-based manufacturer held to infringe. The May 31, 2011 decision of the U.S. Supreme Court (the Court) held Global-Tech liable under § 271(b) for inducing the retailers to infringe SEB's patent.

Section 271(b) states, "Whoever actively induces infringement of a patent shall be liable as an infringer." The Court found this statement to be "short, simple, and ... inconclusive" as to the knowledge of the inducer; that is, did the inducer sell a product that just happened to infringe, or did the inducer know that its product infringed a patent? The Court in Global-Tech referred to case law spanning over a century and determined that it was split and inconclusive on this issue. This same issue of the defendant's knowledge with respect to contributory infringement under § 271(c) had lead to the fractured decision that vexed the Court in 1964, but that decision had not been overruled and thus stood as a guidepost pointing towards a similar result for § 271(b).

The Court held "that induced infringement under § 271(b) requires knowledge that the induced acts constitute patent infringement" and further that the doctrine of willful blindness may be applied to determine the inducer's requisite knowledge. The Court borrowed the doctrine of willful blindness from criminal law. Patent law, unlike trademark and copyright law, has no provisions for criminal violations. Per the Court, willful blindness has two basic requirements: "(1) the defendant must subjectively believe that there is a high probability that a fact exists and (2) the defendant must take deliberate actions to avoid learning of that fact."

Global-Tech's case came to the Court after the Federal Circuit had affirmed a finding of inducement, but did so by adopting a standard of "deliberate indifference" to satisfy the element of Global-Tech's knowledge. It was undisputed that Global-Tech did not have actual knowledge of the patent until April 1998 after one of its U.S. customers was sued by SEB. The Court rejected "deliberate indifference" as an appropriate standard: "First, it permits a finding of knowledge when there is merely a 'known risk' that the induced acts are infringing. Second, in demanding only 'deliberate indifference' to that risk, the Federal Circuit's test does not require active efforts by an inducer to avoid knowing about the infringing nature of the activities."

Nevertheless, the Court affirmed the lower judgment by applying the standard of willful blindness to the facts. Here, the Court was essentially acting as a super jury, since the original trial jury was never instructed as to the newly adopted standard of willful blindness. The Court used the same facts as the Federal Circuit had examined to find deliberate indifference, but those facts now satisfied the higher standard of willful blindness.

SEB's product, the deep fryer, was an innovative commercial success, and Global-Tech obtained the fryer in Hong Kong and copied all but the cosmetic features. SEB's overseas product lacked any marking of a U.S. patent, but Global-Tech knew it was producing its copy for U.S. consumption. After copying, Global-Tech obtained a favorable right-to-use opinion from a U.S. patent attorney, but did not inform the attorney of the copying. The attorney's search failed to disclose SEB's patent. Global-Tech's president, Kwong Ho Sham, held 29 U.S. patents.

One additional fact noted by the Federal Circuit was that Global-Tech had worked before with SEB to make a patented product. The Court concluded: "On the facts of this case, we cannot fathom what motive Sham could have for withholding this information [from the attorney] other than to manufacture a claim of plausible deniability in the event that his company was later accused of patent infringement."

What is the takeaway here? One obvious point is not to withhold information from your patent attorney when seeking an opinion. The adoption of willful blindness should have immediate application to contributory infringement under § 271(c). More broadly, there has been frequent cross fertilization among patent, trademark, and copyright cases in the area of contributory infringement, so willful blindness may grow outside of the patent field, particularly since contributory infringement is not, unlike patent law, part of the statutes for trademarks and copyrights. Willful blindness may perhaps have application to other areas of patent law wherein knowledge is a requisite element; for example, the areas of inequitable conduct and joint infringement, but the backdrop for those areas is not the same as the long history that preceded recognition and development of inducement. Finally, for those patent litigators with a Sherlock Holmes flair, this decision opens the door to investigating criminal law, well cited by the Court, for analogous cases in trying to frame in that defendant who induces others to infringe.

The Court's decision may have other ramifications in criminal law. The decision was eight to one with Justice Kennedy dissenting that it was inappropriate to mix the concepts of knowledge from criminal law into civil law. Justice Kennedy noted that the Court "received no briefing or argument from the criminal defense bar, which might have provided important counsel on this difficult issue."

After this decision, judges, attorneys, and commentators may engage in hair-splitting arguments on the different states of mind at hand. For the most part, those differences are resolved, as a practical matter, by the American jury system: the so-called "black box" of decision making that is a hallmark of American jurisprudence. The jury will now receive a correct instruction to look for "willful blindness" and its two above-noted requirements. Armed with little more than that instruction, and the facts at hand, the jury can now make a correct determination as to liability for inducing infringement.

U.S. Government Budget Cuts Cause Cutbacks at USPTO

By John Sopp

While the U.S. government avoided a shutdown over federal budget cuts, the budget agreement has had a negative effect on funding that the United States Patent and Trademark Office (USPTO) receives. Although the USPTO could cover all the funding it requires through the fees it charges, its fees go first to the central government which then decides how much the USPTO actually receives. The central government does not return to the USPTO the full amount of the fees collected. The patent community has unsuccessfully battled for years to change this process. As a result of the budget deal, the USPTO will receive even less. In response, the USPTO has announced the following cutbacks:

• "Track One" of the "Three-Track" program introduced in February 2011, intended to offer expedited patent examination for a fee and scheduled to take effect on May 4, 2011 is postponed;
• The opening of a planned satellite office in Detroit, as well as consideration of other possible satellite office locations, is postponed;
• Hiring, both for new positions and backfills, is frozen;
• IT projects will be scaled back;
• Funding for Patent Cooperation Treaty (PCT) outsourcing (mainly for searches) will be substantially reduced;
• Employee training will be reduced; and
• All overtime is suspended.

The overall outcome of these changes will be to increase pendency of U.S. patent applications. Searches for PCT applications filed with the United States as searching authority may be particularly slowed. Of course, the central government's budget negotiations continue and this situation may change as a result.

Developing Caselaw on Requirement for Claims Having to be Performed by a Single Party

By Csaba Henter

A claim directed to an electronic method of communication between healthcare providers and patients involving personalized web pages for doctors and their patients was at issue in McKesson Technologies Inc. v. Epic Systems Corp. The method requires that the users-in this case the patients-initiate communication by requesting information. The alleged infringer, on the theory of induced infringement, was the software-development company, which licensed the software to healthcare providers who in turn offered it to their patients.

For there to be induced infringement, there first must be direct infringement, which is present only when each step of a claimed method is performed by a single party or when one party exercises control or direction over the entire process such that every step is attributable to the controlling party. Such control or direction has been held to exist only when there is an agency relationship between the parties that perform the method steps or when one party is contractually obligated to the other to perform the steps. In view of precedent in this area, even providing instructions to perform a single step out of a method to another party to complete a patented method is not adequate for incurring liability for direct infringement of the method. In the present case, there could not be direct infringement because one of the method steps was attributed to patients, who are not agents of the healthcare provider and are not contractually obligated to perform the one method step.

Of the three-judge panel, one strongly dissented and another concurred in the correctness of the decision only in light of recent precedent, but noted that the correctness of those precedent rulings may warrant review by the en banc court when the appropriate case arises.

In a later development, the Federal Circuit announced it will rehear en banc Akamai Technologies, Inc. v. Limelight Networks, Inc., where the decision was based on the reasoning that joint infringement of a patent requires an agency relationship or contractual obligation. The parties were asked to file new briefs addressing the following issue: "If separate entities each perform separate steps of a method claim, under what circumstances would that claim be directly infringed and to what extent would each of the parties be liable?"

For now it remains important to pursue claims that can be performed by a single party to avoid a situation where a claim for all practical reasons cannot be infringed. In this particular case, a better approach would have been to have the claim require that the doctor receive an initiated communication, or, if possible, to completely eliminate this method step.

New gTLD Applicant Guidebook Discussion Draft Released, Open for Public Comment

By Adam Mandell

On April 15, 2011, the Internet Corporation for Assigned Names and Numbers (ICANN) posted its latest version of the guidebook for applicants for new generic top-level domain names (gTLDs)-new extensions that could include brand (".deloitte"), community (".arab"), generic (".bike") or geography (".melbourne"). The Guidebook is a comprehensive guide for applicants describing the program's requirements and evaluation process. Public comment on the latest draft of the Guidebook is open until May 15, 2011.

According to ICANN, changes incorporated into this version of the Guidebook are intended to address concerns with the new gTLD program raised by the Governmental Advisory Committee (GAC) in consultation with the ICANN Board of Directors. GAC provides advice to ICANN on issues of public policy and its participants include representatives of national governments.

In addition to the Guidebook, ICANN published six explanatory memoranda on various relevant issues identified as part of Board/GAC consultations, including a memorandum on trademark protections. This memorandum highlights the following enhancements in trademark protection:

• A requirement for gTLD registries to implement sunrise services and trademark claims services, rather than offering a choice of one or the other. A "sunrise" is an exclusive registration period prior to general registration when trademark owners may register desired second-level domains within new gTLDs, thereby preventing cybersquatters from registering the domains. "Trademark claims services" provide notice to trademark owners when someone else registers a second-level domain name using the trademark.
• Maintaining a requirement for a demonstration of a registration based on use to participate in prelaunch sunrise mechanisms (see above), Uniform Rapid Suspension System (a low-cost and rapid means for taking down infringing domain name registrations), and Post-Delegation Dispute Resolution Procedure (disputes between the trademark holder and the gTLD operator). According to the Board, requiring use is a pro-trademark approach. For example, it would prevent a third party from obtaining a trademark registration, without showing use, for the purpose of registering a second-level domain name during the sunrise period.

As of publication, there have been few comments on the latest version of the Guidebook and no comments on the aforementioned enhancements in trademark protection. ICANN plans to post a final version of the Guidebook on May 30, 2011, in time for consideration of the new gTLD implementation program at a meeting of the ICANN Board of Directors to be held on June 20, 2011, at the ICANN meeting in Singapore. Some estimate that applications for new generic top-level domain names could be accepted as soon as October, 2011. The U.S. House Subcommittee on Intellectual Property, Competition and the Internet will conduct a hearing on new gTLDs on May 4, 2011.

Adding One Dependent Claim Sufficient Grounds for Reissue

By Ryan Pool

Recently, the U.S. Court of Appeals for the Federal Circuit (the CAFC) held that adding dependent claims is valid grounds for receiving a reissue patent in In Re Tanaka, --- F.3d ----, 2011 WL 1437887, 98 U.S.P.Q.2d 1331 (Fed.Cir. Apr 15, 2011) (NO. 2010-1262).

U.S. Patent No. 6,093,991 was issued on July 25, 2000, with one independent claim and six dependent claims (2-7). The patent claims are directed to an alternator pulley that uses a one-way clutch to improve the power-generation efficiency of an automobile's alternator. Tanaka filed a reissue application for U.S. Patent No. 6,093,991, at first seeking to broaden the claims.

During reissue, Tanaka gave up his attempt to broaden the one independent claim and instead presented the original issued claims (1-7) unamended and one new dependent claim. The examiner rejected the claims because the original issued claims remained in the current reissue application unamended and Tanaka's declaration did not specify an error that broadened or narrowed the scope of the original issued claims. Without specifying an error, there was no basis for the reissue application, and therefore the broadest scope of the patent had not changed. The Board of Patent Appeals and Interferences affirmed this decision and interpreted the language of 35 U.S.C. § 251, holding that the statute "disallow[s] reissue applications that simply add narrow claims to the reissue patent when no assertion of inoperativeness or invalidity for the reasons set forth in § 251 can be made by the patentee ... " [See Ex parte Yasuhito Tanaka, 2009 WL 5819322 (Bd.Pat.App. & Interf. Dec 09, 2009) (NO. 6,093,991, APL 2009-000234, APP 10/201,948, TECHLOGY CENTER 2800). The board effectively rejected the application as a no-defect reissue.

At issue before the CAFC is whether merely adding a narrower dependent claim is sufficient grounds for a reissue application under § 251; the relevant section of §251 is as follows:

"Whenever any patent is, through error without any deceptive intention, deemed wholly or partly inoperative or invalid, by reason of a defective specification or drawing, or by reason of the patentee claiming more or less than he had a right to claim in the patent, the Director shall, on the surrender of such patent and the payment of the fee required by law, reissue the patent for the invention disclosed in the original patent, and in accordance with a new and amended application, for the unexpired part of the term of the original patent. No new matter shall be introduced into the application for reissue."

The CAFC reversed the Board's decision, holding that the omission of a narrower claim from a patent can render a patent partly inoperative by failing to protect the disclosed invention to the fullest extent allowed by law. Thus, the addition of narrower dependent claim is, by itself, valid grounds for seeking a reissue application and is not the same as a no-defect reissue. The court explained the reasoning behind its holding, saying:

"This court recognizes that the reissue statute 'was not enacted as a panacea for all patent prosecution problems, nor as a grant to the patentee of a second opportunity to prosecute De novo his original application.' In Re Serenkin, 479 F.3d 1359 at 1362, 81 U.S.P.Q.2d (Fed.Cir. 2007)(quoting In Re Weiler, 790 F.2d 1576, 1582 (Fed. Cir. 1986)). However, the narrow rule relating to the addition of dependent claims as a hedge against possible invalidity has been embraced as a reasonable interpretation of the reissue statute by this court and its predecessor for nearly fifty years without any obvious adverse consequences. To deviate from that longstanding interpretation would be contrary to the doctrine of Stare decisis and is unwarranted." In Re Tanaka, --- F.3d ----, at 11 2011 WL 1437887, 98 U.S.P.Q.2d 1331 (Fed.Cir. Apr 15, 2011) (NO. 2010-1262).

U.S. Patent Office Response to Government Closure

By MWZB

Near midnight on Friday, the U.S. Congress reached agreement on a one-week extension of funding for federal agencies, narrowly averting a shutdown. It is expected that this week a bill funding operations through next September will be put to a vote. There is, however, no guarantee that the bill will pass, although progress seems to have been made on resolving issues that prevented agreement on even a temporary funding measure last week. The PTO has indicated previously that it has sufficient funding from user fees to operate for approximately six business days should a shutdown in fact occur, and so we do not anticipate any disruption in operations in the short term. We continue to monitor the situation and will keep our clients and associates informed.

New Fast-Track Patent Program

By MWZB

Track 1, the fast-track:
The USPTO has set a goal of bringing Track 1 applications to allowance or final rejection in only 12 months which is about 3 times faster than current average patent prosecution time. Track 1 will be available beginning May 4, 2011.

To put an application on Track 1, the applicant must pay a $4,000 fee. This fee is in addition to the standard application fees and any extra claim fees. Track 1 is not limited to any particular technology area or foreign filing status, and does not require the applicant to submit detailed search reports with the filing.

There is currently no reduction in cost for small entities, but the USPTO has sent a proposal to the US Congress asking for approval for such a reduction. If the proposal passes, the Large Entity fee will be $4800 and the Small Entity fee will be $2400.

Only new applications are eligible for Track 1 and the application must be complete at filing, i.e., all parts of the application, fees and inventor declarations must be included at the time of filing. Track 1 is a pilot program and will be limited to the first 10,000 applications in the first year.

Please note that requesting extensions of time when responding to an office action will move the application off of Track 1 and onto Track 2.

Track 2, the standard-track:
Track 2 applications will be exactly the same as the current examination process. Applications that do not include a special request to be placed on Track 1 or Track 3 will be placed on Track 2.

Track 3, the delay-track:
Track 3 is still under consideration and may be modified before its implementation, which is expected to be September 30, 2011.
Track 3, as currently conceived, will allow the applicant to delay examination of the application for up to 30 months. Track 3 will only be available to non-continuing applications first filed with the USPTO.
No additional fees are required to place an application on Track 3; however, all standard fees must be paid at the time of filing along with a special request for the application to be put in Track 3.

If you have any questions or desire implementation of Track 1 in any of your applications to be filed, please do not hesitate to contact us.

The Perils of Appeal: Chippendales Denied Trademark Registration

By Mike Culver

The Chippendales company obtained a trademark registration in 2003 for its “Cuffs & Collar” apparel that had been worn by the male dancers since 1979. Based on huge commercial success, this apparel was deemed to have acquired distinctiveness and thus served as a trademark. But Chippendales applied for a second registration on the basis that the mark was inherently distinctive; that is, the design was so unique that it immediately conveyed to the consumer the unique source of the services; here, exotic dancing for women.

Chippendales submitted an impressive amount of evidence comprising numerous declarations by management, dancers, competitors, and even an expert report (something rarely done apart from survey evidence in a case between contesting parties) to the United States Patent and Trademark Office. The expert, Rachel Shteir, Ph.D. (a professor at DePaul University) discussed the history of striptease and the tuxedo, among other subjects, infused with a sociocultural analysis of the Chippendales phenomenon. Her report contained 12 exhibits, including an article by another author containing this sentence: “The collar and cuffs, like the bunny suit which inspired them, has become a trademark recognized, wherever women take their entertainment seriously, as a symbol of professional and classy sexy fun.”

That fragment was plucked from the hefty record and became the principal reason for the refusal of registration by the Trademark Trial and Appeal Board (TTAB). One proof that a design is not inherently distinctive is that it, or a variation thereof, is in common use.

Chippendales appealed the refusal to the U.S. Court of Appeals for the Federal Circuit who affirmed using the same test. In re Chippendales USA, Inc., No. 09-1370 (Fed. Cir. Oct. 1, 2010). The CAFC went further (perhaps realizing the skimpy evidence) and took judicial notice of the registrations issued to Playboy for the also well renowned costume of the Playboy bunny. The TTAB has long refused to take judicial notice of other registrations so this may force a change in TTAB practice.

In its decision refusing registration, the CAFC had to first tackle the question of its jurisdiction over the case; namely, could Chippendales be truly injured if denied a second registration based on inherent distinctiveness when it had an existing registration based on acquired distinctiveness? On appeal, Chippendales and the USPTO had simply agreed to jurisdiction and the issue received little attention. Alas for Chippendales, the CAFC determined that jurisdiction was proper because Chippendales was injured since “whether a particular mark is inherently distinctive may affect the scope of protection accorded in an infringement proceeding.” Ouch! Not only was Chippendales denied the new registration, its prior registration was now damaged goods that may receive a lesser scope of protection. Short of the copycat, every potential imitator now had a sentence from the appellate court from which to argue noninfringement.

At the TTAB, the evidence of the pre-existing Playboy bunny costume was scant. At oral argument, the TTAB unsuccessfully attempted to have Chippendales concede that the bunny costume included cuffs and a collar. On appeal, the CAFC reached out through judicial notice to bolster the record. You can judge for yourself if a just result was achieved here; the costumes of the Chippendales and the Playboy bunny are depicted below.

Proposed Modifications to Rules Governing Appeals Before the Board of Patent Appeals and Interferences Would Bring New Challenges to Appellants

By Harry Shubin

On November 15, 2010, the United States Patent and Trademark Office (USPTO) issued a Notice of Proposed Rule Making and request for comments, proposing modifications to the rules governing appeals before the Board of Patent Appeals and Interferences in Ex Parte Appeals. The proposed rules would rescind the stayed final appeals rules originally issued on June 10, 2008, slated to take effect later that year on December 10, but stayed indefinitely in a notice issued on that date.

The presently proposed rules appear to be an attempt to simplify the current rules, principally as regards the requirements for a compliant appeal brief. Although the proposed rules do eliminate some of the problematic sections currently required in an appeal brief, these rules do impose new and equally complex requirements upon appellants. For example, while the proposed rules eliminate the absolute requirement to identify the "real party in interest," appellants must still do so otherwise the office will assume that the named inventors are the real party in interest.

Similarly, while the proposed rules eliminate the requirement for an identification of related appeals and interferences, failing to list such related proceedings raises the default assumption that none exist. Thus, appellants will still have to review these issues to ensure accuracy, if not compliance. Where these sections are omitted, under the proposed rules, no Notice of Noncompliance will be issued but the above assumptions will apply. Neither the consequences of a failure to accurately provide this information, nor any ability of the appellant to rebut the resulting assumptions, are spelled out in the rules.

Moreover, while the proposed rules eliminate the necessity to provide a listing of the status of the claims, appellants must now provide a "statement of last entered amendment" identifying, by date of filing, the last entered amendment to the claims. If no amendment is identified, the office will assume that there are no amendments to the claims. As above, the assumption replacing the Notice of Non-Compliant Brief formerly received has unstated consequences if, in fact, the claims have been amended. Appellants would be well advised to pay particular attention to this portion of the rule, should it be adopted in this form, at least until it becomes known whether the assumption is rebuttable.

Perhaps most troubling in the proposed rule change is the modification of the requirement for a Summary of Claimed Subject Matter, with that of an "annotated copy of each rejected independent claim." The proposed rules state that the annotations would appear "after each limitation in dispute by Appellant and include a reference to the specification in the record showing support for the claimed language sufficient to allow the Board to understand the claim." Unfortunately, the proposed rule does not further define when a limitation is "in dispute", i.e., whether this term is intended to be broad enough to cover any claimed feature asserted to provide patentability, or merely the limitation whose scope is the subject of disagreement between the PTO and the appellant. Moreover, this requirement does not provide further explanation of how much support is "sufficient to allow the Board to understand the claim."

One positive aspect to the proposed rule is that it substantially broadens the situations which will be considered as a new ground of rejection, thus providing appellants opportunity to reopen prosecution. The rules state that any citation for the first time of a new reference, even if "cited to support the rejection in a minor capacity," will be designated as a new ground of rejection. Moreover, a "position or rationale new to the proceedings, even if based on evidence previously of record" may be sufficient to give rise to a new ground of rejection. The discussion of the proposed rules in the Federal Register indicates that changing the statutory basis of rejection, for example, from §103 to §102, would give rise to a new ground of rejection, as would reliance on a different portion of a reference of record beyond that previously relied on.

Comments on the proposed new rules are due on January 14, 2011.

U.S. Supreme Court Splits on Application of Copyright Act's First Sale Doctrine to Gray-Market Goods, Ninth Circuit's Decision In Favor of Copyright Owners Upheld

By Adam Mandell

On December 13, 2010, an equally divided U.S. Supreme Court upheld the Ninth Circuit's decision in Omega S.A. v. Costco Wholesale Corporation, without an opinion. The 4 to 4 split was caused by the recusal of Justice Kagan, who submitted a brief regarding the case on behalf of the government while serving as Solicitor General.

This case regards the application of the first sale doctrine to “gray-market” goods. Gray-market goods are genuine products protected by a trademark or copyright. They are typically manufactured abroad and purchased and imported into the United States by third parties, thereby bypassing the authorized U.S.-distribution channels. Retailers are able to sell these products at a discount because the gray market arbitrages international discrepancies in manufacturers' pricing systems.

In this case, Omega manufactured abroad watches displaying copyrighted logos and sold them to authorized distributors overseas. Through a series of middlemen, Costco purchased the watches and sold them to consumers in California at a significant discount relative to Omega's suggested retail prices. Although Omega authorized the initial foreign sale of the watches, it did not authorize their importation into the United States or the sales made by Costco. Omega sued Costco for infringement of Omega's exclusive distribution right under U.S. copyright law.

Costco's defense was based on the first sale doctrine, which generally provides that once a copyright owner consents to the sale of particular copies of his work, he may not thereafter exercise the distribution right with respect to those copies.

At issue in this case is the effect of the Supreme Court's unanimous decision in Quality King Distributors, Inc. v. L'anza Research International, Inc., 523 U.S. 135 (1998). In that case, a product with a U.S.-copyrighted label was manufactured inside the United States, exported to unidentified parties overseas, shipped back to the United States without the copyright owner's permission, and then sold in California by unauthorized retailers (a “round trip” importation). The Supreme Court determined that the first sale doctrine provided a defense to the seller.

Unlike Quality King, the manufacture in Omega v. Costco occurred abroad. It is because of this difference that the U.S. Court of Appeals for the Ninth Circuit refused to apply the first sale doctrine, while maintaining its position that, “the [Copyright] Act presumptively does not apply to conduct that occurs abroad even when that conduct produces harmful effects within the United States.”

The application of the first sale doctrine to “one-way” importation will have broad implications in international trade. For example, Costco's supporters, including e-commerce companies such as eBay, argued that limiting the first sale doctrine to works made in the United States might encourage U.S. copyright owners to outsource manufacturing of copies of their works overseas, and would result in higher prices on secondary goods for U.S. consumers. On the other hand, Omega's supporters, including the Intellectual Property Owners Association, argued that extending the first sale defense to an unauthorized importer would encourage copyright owners to only sell their works in countries in which the works could command a relatively high price, so as to avoid undercutting the market for their works elsewhere. This would result in decreased sales of works in countries that would otherwise justify a lower price, such as developing nations. Still others, such as the film and music industries, argued that overruling the Ninth Circuit's decision would diminish the ability to plan and control the timing and manner of release of their works, thereby preventing these industries from realizing the full value of their copyrights in the United States.

The Supreme Court's split decision in Omega v. Costco likely will encourage copyright owners and one-way importers to litigate this matter in the future.

A New Route to Obtaining a Fast Office Action

By Csaba Henter

The United States Patent and Trademark Office (USPTO) is providing a temporary program under which an application will be advanced out of turn for examination, i.e., accorded “special” status, upon the filing of a petition. This temporary program allows applicants having multiple applications co-pending before the USPTO to have greater control over the timing of the examination of their applications. In turn for according special status to an application, the program also provides for the stimulation of a reduction of the backlog of unexamined patent applications pending before the USPTO by requiring applicants to expressly abandon a co-pending application for each application for which a petition is filed for achieving special status. There is no fee for the filing of a petition under this program and the program is available for only the first 10,000 applications.

If an applicant has a relatively important application for which expeditious prosecution would be beneficial, and a relatively unimportant co-pending application that is no longer desired, the USPTO is willing to examine the important application out of turn for the express abandonment of the less important patent application.

The conditions for being accorded special status for examination are as follows:

1. The application for which special status is sought is a nonprovisional application that has an actual filing date earlier than October 1, 2009.
2. The applicant has another complete co-pending nonprovisional application that has an actual filing date earlier than October 1, 2009.
3. The applications under numbers one and two above must be either owned by the same party as of October 1, 2009, or name at least one inventor in common.
4. The applicant must file a letter of express abandonment for the application under number two above before it has been taken up for examination. The applicant must include the following statements with the letter of express abandonment:
1. The applicant has not and will not file an application that claims the benefit of the expressly abandoned application;
2. The applicant agrees not to request a refund of any fees paid in the expressly abandoned application;
3. A statement that the applicant has not and will not file a new application that claims the same invention claimed in the expressly abandoned application.
5. The applicant must file a petition for the application under number one above. The petition must:
1. Identify the expressly abandoned co-pending application as the basis for the petition;
2. Include copies of the letter of express abandonment and of the statements provided in number four above;
3. Identify the relationship between the applications that qualifies the application for special status, for example, name of a common inventor or owner;
4. Identify the application that is being expressly abandoned, for example, by providing its application number;
5. Provide a statement certifying that applicant has not filed petitions in more than 14 other applications requesting special status under this program;
6. Provide a statement that applicant agrees to make an election without traverse in a telephonic interview if the office determines that the claims of the application to be made special are directed to two or more independent and distinct inventions.

The predecessor of this program was available only to small entity applicants, but being a small entity is no longer a requirement. The program available to small entities only has provided a more than 70 percent rate of granted petitions.

Biosimilars Regulations Being Developed in Both Europe and the United States

By Diana Hamlet-Cox

The European Medicines Agency (EMA) issued draft guidelines for "similar biological medicinal products containing monoclonal antibodies" on November 26, 2010, requesting public comment by May 31, 2011.

The EMA has been ahead of the FDA on establishing regulations for biosimilars. Last month, the FDA held two days of hearings to get input from the public on the implementing regulations for the Biologics Price Competition and Innovation Act (BPCIA). These hearings related to establishing standards that the FDA will require for clinical testing of biosimilars.

Concerns highlighted at the FDA hearings included how strictly to interpret the 12 year data exclusivity provisions, product naming issues, and how to address product "drift" in post-market products, both for innovator products and their potential biosimilar competitors. The basic issues of what is biosimilar, and the related question of what is interchangeable, remain complex and will not be resolved soon.

Since it is believed that to some extent the United States' biosimilars regulations may be influenced by what the EMA does, interested parties may wish to provide input to the EMA, as well as to the FDA, as these guidelines evolve into governing regulations.

Drug Developers' Statements Not Available as Evidence of Obviousness

By Csaba Henter

The U.S. Court of Appeals for the Federal Circuit (CAFC) in Eli Lilly & Co. v. Teva Pharmaceuticals USA, Inc.(Fed. Cir. 2010) affirmed a permanent injunction against Teva barring manufacture of a generic version of the osteoporosis drug raloxifene until the expiration of certain patents of Lilly.

Throughout the development of the drug, various studies indicated that raloxifene had poor bioavailability. Despite such concerns, Lilly developed the drug for both the indications of breast cancer and postmenopausal osteoporosis. Teva alleged obviousness and lack of enablement among the various points of attacks.

Regarding obviousness, Teva relied on statements by Lilly's Bone Biology Group chairman and on actions of Lilly's scientists in pursuing the development of the drug as evidence that they had to have a reasonable basis for believing that the drug would work in humans, otherwise they would not have proceeded. The CAFC held that the chairman had more knowledge than one of ordinary skill in the art, and that Lilly's scientists had both knowledge and credentials superior to the ordinary artisan, thereby rendering these statements and actions not available as evidence of obviousness. Rather, a person of ordinary skill in the art would have been discouraged from using raloxifene in view of its known low bioavailability, and thereby the patents were not invalid for obviousness.

Regarding enablement, Teva argued that if the concerns about bioavailability did not render the claims obvious, then the disclosures of the patents at issue could not have been enabling because of the prevailing view that raloxifene would not work in humans. The CAFC held, however, that because the patent disclosures provided more information than the prior art, i.e., the results of a further study and the details–albeit no results–of an ongoing human clinical study, the disclosures are enabling. Regarding the description of the details of a human clinical study, reliance was based on the Manual of Patent Examining Procedure (MPEP), which supports that the initiation of a clinical trial has a significant impact on the utility inquiry. The MPEP states that:

Before a drug can enter human clinical trials, the sponsor, often the applicant, must provide a convincing rationale to those especially skilled in the art (e.g., the Food and Drug Administration) that the investigation may be successful. Such a rationale would provide a basis for the sponsor's expectation that the investigation may be successful … Thus, as a general rule, if an applicant has initiated human clinical trials for a therapeutic product or process, Office personnel should presume that the applicant has established that the subject matter of that trial is reasonably predictive of having the asserted therapeutic utility.

Daiichi Sankyo v. Matrix, Mylan

By Diana Hamlet-Cox

In another application of obviousness standards after the Supreme Court's holding in KSR v. Teleflex, and its subsequent interpretation by the U.S. Court of Appeals for the Federal Circuit (CAFC), the CAFC provided additional guidance on obviousness of compounds when structurally similar compounds were known to have more favorable characteristics.

Mylan Laboratories, in collaboration with Matrix ("Mylan"), filed multiple ANDAs with Paragraph IV certifications challenging Daiichi's patent 5,616,599 ('599) covering the chemical compound olmesartan medoxomil, which was approved by FDA and commercialized by Daiichi as the active ingredient in Benicar, Benicar HCT, and Azor. Mylan asserted that the '599 patent was invalid for obviousness over very structurally similar compounds disclosed in 5,137,902 ('902), in view of 5,138,069 ('069). Both the District Court and the CAFC disagreed.

The '902 patent discloses a compound which differs from olmesartan by a single oxygen atom, which changes a lipophilic alkyl group at position four to a hydrophilic hydroxyalkyl group. Mylan argued that the motivation to make the change was provided by '069, which disclosed the lipophilic alkyl group at position four on a related compound.

However, relying on both pre-and post-KSR precedent, the CAFC upheld the District Court's findings that Mylan had not met its burden of proving a prima facie case of obviousness. Mylan did not provide clear and convincing evidence that one skilled in the art would have chosen the structurally closest of the '902 compounds as lead compounds to modify, rather than other compounds disclosed in '902 which had greater potency.

Citing several previous decisions, including Takeda v. Alphapharm (Fed. Cir. 2007), Eli Lilly v. Zenith (Fed. Cir. 2006), and in view of KSR, the CAFC held that "it is the possession of promising useful properties in a lead compound that motivates a chemist to make structurally similar compounds. Yet the attribution of a compound as a lead compound after the fact must avoid hindsight bias; it must look at the state of the art at the time the invention was made to find a motivation to select and then modify a lead compound to arrive at the claimed invention. Ortho-McNeil Pharm v. Mylan (Fed. Cir. 2008). Accordingly, proving a reason to select a compound as a lead compound depends on more than just structural similarity, but also knowledge in the art of the functional properties and limitations of the prior art compounds." (Bold emphasis added; italics in original.)

This holding should provide further support for arguing that a prior art reference requires more than a simple disclosure of a structurally similar compound and a reference disclosing a related compound having the modification at the same location. The primary reference should also disclose that the structurally closest prior art compound is in fact a preferred or lead compound with desirable properties. However, the suggestion to make the change to the claimed compound need not be explicit. In this case, other compounds disclosed in '902 were shown to have better properties, e.g.: "Potent and promising activity in the prior art trumps mere structural relationships." The validity of Daiichi's '599 patent was thus upheld.

Practice tip: When reviewing a reference cited against your claims as demonstrating mere structural obviousness, look beyond the disclosure relating to the structurally closest compounds to see if the reference teaches a preference for different compounds, as that could be argued to teach the skilled worker away from choosing the structurally closest compounds as a lead compound to modify.

USPTO Obviousness Examination Guidelines Updated

By Diana Hamlet-Cox

On September 1, the United States Patent and Trademark Office (USPTO) published 2010 KSR Guidelines Update, an update on the guidelines for examination of patent applications for obviousness under 35 U.S.C. § 103. The guidelines were made available for public comment through mail and email. These guidelines are effective immediately and can be reviewed here.

The 2010 KSR Guidelines Update incorporates additional guidance and interpretation of the Supreme Court's 2007 KSR v. Teleflex decision, including several subsequent Court of Appeals for the Federal Circuit (CAFC) decisions interpreting KSR, for proper obviousness rejections. There is a detailed table at the end of the Guidelines providing "teaching points" based on 24 obviousness cases, detailing the fact patterns that were involved. These teaching points are divided into four types of fact patterns:

• Combining Prior Art Elements;
• Substituting One Known Element for Another;
• The Obvious To Try Rationale;
• Consideration of Evidence.

Interestingly, about half of the cases reviewed relate to the biotech or chemistry arts. All patent practitioners, including ex-United States counsel preparing applications which will be prosecuted in the United States would be well-served to review the updated Guidelines.

Law Could Provide Protection for Fashion Designs

By Adam Mandell

On August 5, 2010, Democratic Senator Charles Schumer and several notable cosponsors, including four Republicans, introduced a bill to extend intellectual property protection to fashion designs for a three-year term. The bill, "Innovative Design Protection and Piracy Prevention Act", S. 3728, currently applies to articles of clothing, handbags, and eyeglasses frames.

Federal law does not currently protect fashion designs–the design that geographically sets forth the shape, style, cut, and dimensions for converting fabric into a finished dress or other clothing garment. This is distinguished from the design that is imprinted on a fabric, which in the completed dress may appear repeatedly throughout the dress fabric–designs which are copyrightable. The lack of protection for fashion design is due to its status as a "useful article", in that fashion design is an article having an intrinsic utilitarian function that is not merely to portray the appearance of the article or to convey information.

In support of S. 3728, Republican Senator Orrin Hatch stated, " … [O]riginal designs are copied and the apparel is manufactured in countries with cheap labor …. [t]he garments are then shipped to the U.S. directly to compete with the garments of the original designer, sometimes before the originals have even hit the market. As a result, the U.S. apparel industry continues to lose billions of dollars to counterfeiting each year."

Supporters of the bill believe that, without protection for fashion design, fashion designers are not incentivized to create designs, because copyists will free-ride on their efforts, thereby stifling innovation. Opponents of the bill and commentators point out that, despite the lack of fashion design protection, competition, innovation, and investment are strong in the fashion design industry. They argue that copying does not deter innovation in the fashion industry because such copying is not very harmful to originators. Instead, it actually promotes innovation and benefits originators.

Similar measures have been introduced in Congress in the past, to no avail. In this instance, the existence of bipartisan support leaves its supporters hopeful.

Fashion designers are not without recourse under current law. For example, trademarks used as an indication of source by apparel and accessory firms are often used as a means to stop counterfeiters. Also, in certain limited instances, trade-dress protection is available. Please contact us for further information about how fashion designers can protect themselves both now and after the potential passage of S. 3728.

Federal Circuit Holds Infringement Liability Depends on Location of Sale

By Ryan Pool

In Transocean Offshore Deepwater Drilling, Inc. v. Maersk, the U.S. Court of Appeals for the Federal Circuit (CAFC) held that an offer to sell, deliver, or use a product made by a U.S. company within the United States to another U.S.-based company can constitute infringing conduct, even if the offer is made outside the United States.

The ruling overturned the District Court's decision, which held that, because the negotiations and execution took place outside of the United States, it was not an offer to sell within the United States under the statute.

The relevant statute is 35 U.S.C. 271(a), which contains the following definition of infringing conduct: "[W]hoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States … infringes the patent."

Maersk argued that, for there to be an offer to sell within the United States, the offer activities must occur within the United States. In Maersk, since the negotiations and execution were outside the United States, offer to sell liability was precluded.

The CAFC determined that the focus should not be on the location of the offer, but rather the location of the future sale that would occur pursuant to the offer. This is consistent with the holding in Lightcubes, LLC v. Northern Light Products, Inc., 523 F.3d 1353 (Fed. Cir. 2008), that a foreign company cannot avoid liability for a sale by delivering the product outside the United States to a U.S. customer for importation.

The CAFC addressed Maersk's argument directly stating: "[T]o adopt Maersk USA's position would have us read the statute as 'offers made within the United States to sell' or 'offers made within the United States to sell within the United States.' First, this is not the statutory language. Second, this interpretation would exalt form over substance by allowing a U.S. company to travel abroad to make offers to sell back into the U.S. without any liability for infringement."

Assignment of Inventions and The Bayh-Dole Statute

By Al Branigan

In Stanford University v. Roche, the Court of Appeals for the Federal Circuit (CAFC), held that a plaintiff lacked standing in a case related to the Bayh-Dole Statute, 583 F.3rd 832 (Fed. Cir. 2009).

In about 1963, NASA conducted a study to find that government-owned inventions were not being used much particularly in foreign countries where NASA (and other government agencies) was investing heavily in obtaining and maintaining patents. NASA began to let its foreign patents lapse and tried to get contractors to prepare applications for NASA. This ultimately gave rise to the Bayh-Dole Statute in 1980.

The Bayh-Dole Statute was intended to give contractors incentive to use patented, government-funded inventions by giving title to the contractor as long as the contractor paid for the patents and the government got a paid-up license (with "march-in" rights if the contractor ceased to commercialize).

Stanford University v. Roche is significant because it involved a biotech invention that was partially funded by the government. The invention was believed to have been owned by Stanford University, pursuant to Bayh-Dole, and Stanford sued Roche, who had worked with Stanford to develop the invention.

In reality, however, this case has little to do with the substance of Bayh-Dole. The inventions were being significantly commercialized–otherwise there would not have been the infringement suit.

Rather, the issue of standing was dispositive. The facts of the case are as follows: Holodniy, one of four inventors, was working with both Stanford University and Cetus (later purchased by Roche). Holodniy was a Stanford University employee whose employment agreement required him to assign inventions to Stanford (at some future date). When Holodniy began to work with, but not for, Cetus, he actually assigned his patent rights to Cetus (Roche) about six years before he assigned the same rights to Stanford. It does not appear that Holodniy was being duplicitous. He appears to have simply signed whatever was put in front of him.

The result was that Stanford University, pursuant to Bayh-Dole, owned the rights from three of the inventors and Roche, formerly Cetus, because of the prior assignment owned the rights of Holodniy. The patents had split ownership between Stanford and Roche. Black letter law says both had to be joined in any suit to enforce the patents in order for either to have standing. Roche, not being interested in suing itself, deprived Stanford of standing. That was the bottom-line holding of the CAFC.

As intended by Bayh-Dole, the patents are being commercialized. The government still has its royalty-free license, as Stanford could not join Roche in a suit against the government; and, Stanford and Roche can still join to sue any other infringers. The purpose of Bayh-Dole was not defeated, as seminar promoters suggest.

The lesson is that a contractor should get an actual assignment of future inventions at the time of employment, rather than a promise to assign. Had Stanford done that, it would have had standing. To avoid similar joinder problems, it is also best for the same party always to retain both ownership and the right to sue.

Federal Circuit Holds Mere Knowledge of False Marking Insufficient For Liability

By Al Branigan

In Peguignot v. Solo Cup Company, the Court of Appeals for the Federal Circuit (CAFC) held Solo Cup's knowledge of false marking was insufficient for liability under the false marking statute-intent to deceive is required.

Solo Cup manufactured drink-cup lids covered by two patents. One expired in 1988; the other expired in 2003. To comply with the marking statute (35 U.S.C. § 287) Solo Cup added the patent numbers to lid-mold cavities so that each lid had a suitable patent marking. The molds, however, lasted 15 to 20 years or longer. Hence, Solo Cup's lids were eventually marked with the numbers of expired patents.

In 2000, Solo Cup became aware that lids were still being marked for patents that had expired 12 years earlier.

Outside intellectual property counsel advised Solo Cup that wholesale replacement of mold cavities would be too costly and burdensome and old numbers did not have to be removed when a patent expires. Counsel also advised that liability hinges on "intent to deceive the public" so it is important for Solo Cup not to include any unintentional misleading information on product literature or elsewhere. Upon the advice of its counsel, Solo Cup adopted a policy that new molds would not include expired-patent marking and subsequently stated on its packaging:

"[T]his product may be covered by one or more U.S. or foreign pending or issued patents. For details contact www.solocup.com."

Pequignot sued Solo Cup in the Eastern District of Virginia for falsely marking at least 21,757,893,672 articles, claiming damages of approximately $10.8 trillion.

The "false marking" statute, 35 U.S.C. § 292, provides:

(a) " … [W]hoever marks … in connection with any unpatented article … for the purpose of deceiving the public … shall be fined not more than $500 for every such offense."

(b) " … [A]ny person may sue for the penalty, in which one-half shall go to the person suing and the other to the use of the United States."

In August 2009, Judge Leonie Brinkema entered summary judgment in favor of Solo Cup, finding no intent to deceive and hence no violation of law. Solo Cup's knowledge of its out-of-date markings merely created a rebuttable presumption of intent to deceive. The District Court also granted summary judgment for Solo Cup on the meaning of "offense." The District Court determined that Solo Cup committed at most three "offenses." Two, when it decided not immediately to stop marking each of the lids when their patents expired; and, one when it decided to add the "may be covered" language to its packaging. On this point, the District Court stated that "the marking of … different articles … in the course of single and continuous act" did not constitute multiple "distinct offenses," quoting London v. Dunbar, 179 F.506, 508 (1st Cir. 1910).

The CAFC held that the bar for proving deceptive intent is particularly high:

"Because the patent statute requires that the false marker act "for the purpose of deceiving the public" a purpose of deceit, rather than simply knowledge that a statement is false, is required."

Thus, mere knowledge that a marking is false is not sufficient to prove intent if Solo Cup could prove that it did not consciously desire the result that the public be deceived.

"Solo acted not for the purpose of deceiving the public, but in good faith reliance on the advice of counsel and out of a desire to reduce costs and business disruption … the required intent is not to perform an act, viz, falsely marking a product, but instead intent to deceive the public."

Of significance, the CAFC vacated the District Court's determination of the word, "offense". In Forest Group v. Bon Tool, Co., 590 F.3d 1295, The CAFC held that every falsely marked product constitutes an "offense" under Section 292 of the statute.

In Any Language, a Clear Victory for Google in Keywords Case

By Scott Major

The United States District Court for the Eastern District of Virginia, "the Rocket Docket," issued an order without explanation in April 2010 rejecting various claims brought by Rosetta Stone Ltd., the language-learning software firm, against Google relating to the latter's sale of trademarks as keywords in connection with its AdWords program. On August 3, the court issued its written opinion explaining the decision, and left no doubt that this was a resounding victory for Google.

A highlight is the court's granting of summary judgment in favor of Google on the trademark infringement and unfair competition claims. In order to prevail on such claims, Rosetta Stone needed to establish that Google's auctioning of its trademarks to third-party advertisers as keywords creates a likelihood of confusion among consumers as to the source of the plaintiff's goods and services. The court readily found that no reasonable judge or jury could find a likelihood of confusion in this instance. In so ruling, the court determined that Google did not intend to cause confusion among prospective purchasers; rejected as insignificant Rosetta Stone's alleged evidence of actual consumer confusion; and found that the sophistication of the plaintiff's customers-generally well-educated and willing to invest the considerable time and money required to learn a new language-mitigated the potential for confusion.

Interestingly, the court also held that Google's use of trademarked keywords as triggers for paid advertisements is functional. The court determined that such keywords have "an essential indexing function" in that they "enable Google to readily identify in its databases relevant information in response to a web user's query," and that preventing the use of Rosetta Stone's trademarks as keywords would unduly inhibit legitimate competition. This was an independent basis for the granting of summary judgment in favor of Google. Thus, even if Rosetta Stone had been successful in establishing likelihood of confusion, its trademark infringement and unfair competition claims still would have failed.

This decision is yet another blow to trademark owners in their efforts to challenge Google's policy of allowing AdWords advertisers to bid on trademarks as keywords. As the Rocket Docket tends to be influential in intellectual property matters, the court's strong support for the AdWords business model may signal that the end is near for these types of cases.

New Copyright Rule Exempts "Jailbreakers" From Anti-Circumvention Prohibitions

By Adam Mandell

On July 27, a new rule was issued, designating six classes of works as exempt from the copyright law's prohibition against anti-circumvention of access controls.

The relevant statutory provision is 17 U.S.C. § 1201(a)(2), which requires the Librarian of Congress to determine such "user exemptions" every three years. This determination is based on whether prohibition on circumvention of technological measures that control access to copyrighted works is causing or is likely to cause adverse effects on the ability of users of any particular classes of copyrighted works to make noninfringing uses of those works.

Notably, the Librarian's designation included, "[C]omputer programs that enable wireless telephone handsets to execute software applications, where circumvention is accomplished for the sole purpose of enabling interoperability of such applications, when they have been lawfully obtained, with computer programs on the telephone handset."

This user exemption applies to what is colloquially known as "jailbreaking:" The practice of circumventing encryption and authentication processes on devices, such as Apple's iPhone, to access its firmware to install and run third-party, unapproved software applications, or apps.

It is important to note that, although this designation exempts jailbreakers from liability under the anti-circumvention prohibitions, it does not exempt those that traffic in products, e.g., devices, or services that are designed for the purposes of circumventing access controls. Accordingly, persons that aid in the conduct of jailbreaking are not immune from liability. Also, the jailbreaking exemption does not affect the user's liability for copyright infringement of the underlying work, e.g., the Apple iPhone operating system. To this point, Apple has argued that modifying its operating system constituted the creation of an infringing derivative work.

Federal Court Declines to Consider Bilski Rejection of Method of Treatment Claims

By Diana Hamlet-Cox

The Court of Appeals for the Federal Circuit (CAFC) on August 2, 2010 issued its decision in King Pharmaceuticals, Inc. v. Eon Labs, Inc., (Fed. Cir. 2010)(Gajarsa, J.), affirming the summary judgment of invalidity of all claims directed to a method of administering a known drug to a patient, in conjunction with informing the patient to take the drug with food in order to increase bioavailability of the drug. However, the basis of invalidity for some of the claims was reversed.

The District Court had held that all of the claims of the two patents at issue were invalid, primarily as being anticipated by the prior art. In addition, the lower court held that claim 21 of 6,407,128 and claims 1, 6 and 8 of 6,583,102 were invalid under 35 U.S.C. § 101, "because the claim's 'informing' limitation did not 'transform the [drug] into a different state or thing,'" citing the CAFC's 2008 decision in In re Bilski.

The CAFC upheld the finding that the majority of the claims were invalid as being inherently anticipated by or obvious over the prior art teachings to take the drug with food, but also found the four claims which had been held invalid under § 101 by the lower court were instead invalid as anticipated by the prior art. The panel then said that this case "does not present the proper vehicle for determining whether claims covering medical treatment methods are eligible for patenting under § 101 because even if claim 21 recites patent eligible subject matter, that subject matter is anticipated for the reasons discussed below." The other claims previously rejected under § 101 were treated similarly, and rejected instead as being anticipated.

The CAFC said that the claims addressed the question of "whether an otherwise anticipated method claim becomes patentable because it includes a step of 'informing' someone about the existence of an inherent property of that method," and concluded that it does not: "The 'informing' limitation adds no novelty to the method, which is otherwise anticipated by the prior art."

Thus, the CAFC held the claims invalid, but for inherent anticipation, rather than for lack of including a transforming step. The CAFC's rationale included identifying that the District Court had not analyzed the claims as a whole in making the rejections under § 101, including the patent eligibility of the step of administering the drug. Moreover, the CAFC pointed to the Supreme Court's June 2010 holding in In re Bilski, in which the test for patentable-eligible subject matter in method claims was not limited to the machine-or-transformation test as being the sole test for processes under § 101, but rather an investigative tool, and stated that they "understood the Supreme Court to have rejected the exclusive nature of our [machine-or-transformation] test, but not necessarily the wisdom behind it."

Notably, the CAFC referenced the Prometheus v. Mayo case, in which the Supreme Court first granted, then vacated certification, and pointed out that the CAFC had previously (before the Supreme Court decision in Bilski) held that "medical treatment methods were patentable processes under § 101 because they fell squarely within the machine-or-transformation test applied in (the CAFC's earlier decision) In re Bilski." The CAFC then repeated the language from their holding in Prometheus, asserting that "we held that methods of treatment 'are always transformative when a defined group of drugs is administered to the body to ameliorate the effects of an undesired condition,' because such methods transform the human body."

Taken together with the CAFC's comments regarding the expansive nature of the Supreme Court's holding in Bilski, perhaps this is a preview of the outcomes we might expect in the Prometheus Laboratories, Inc. v. Mayo Collaborative Services and Classen Immunotherapies, Inc. v. Biogen Idec diagnostic method cases, which were remanded back to the CAFC by the Supreme Court after the decision in Bilski was issued in June.

Drafting note:

It appears that including a simple "informing" step (informing either the patient or the doctor of test results) to steps performed by a clinical lab, in order to avoid joint infringement, may not confer patentability on a claim where the novelty of the earlier steps is in doubt.

United States Patent and Trademark Office Issues Interim Guidance on Machine or Transformation Test

By John Sopp

In the last issue of the MWZB Newsletter, we reported on the Bilski v. Kappos decision of the U.S. Supreme Court. On July 27, 2010 the United States Patent and Trademark Office (USPTO) published interim guidance to its examiners for determining eligible subject matter under 35 U.S.C. § 101 in light of the decision. The guidance is intended to supplement and supersede their previous guidance which followed the Court of Appeals for the Federal Circuit's (CAFC) decision in Bilski that the machine or transformation test (MOT) is the sole test for patent-eligible subject matter under 35 U.S.C. §101. As interim guidance, the USPTO is seeking public comment on this issue until September 27.

The USPTO is particularly interested in the public providing examples of claims that appear to:

1. Not meet the MOT but are patent eligible because they do not claim an abstract idea;
2. Meet the MOT but are not patent eligible because they do claim an abstract idea.

Since Bilski held that the MOT is not the sole test, the USPTO is researching what instances occur where applying the MOT does not arrive at the proper conclusion.

The USPTO's guidance further instructs examiners that a claim may still be rejected under 35 U.S.C. § 101, even if it meets the MOT if it is drawn to an abstract idea. It notes that "abstractness" can be indicated by an absence of any limitation on the mechanisms for performing the process steps. Further, mere field-of-use limitations or insignificant post-solution activities (such as mere data gathering) do not make the claim patent eligible.

The following factors should be considered when determining patent eligibility of method claims under 35 U.S.C. § 101:

Whether the method involves or is executed by a particular machine or apparatus (which tends to support patent eligibility). A recitation of "any" machine is not "particular" and the more detail provided regarding the machine used enhances the eligibility of the claim. If the machine implements the steps, rather than merely being the subject on which the method operates, this weighs in favor of eligibility.

Whether the method results in or involves a transformation of an article (which tends to support patent eligibility). The more specificity in the transformation and in the article being transformed, the more weight given. The more significant the transformation, the more weight given towards eligibility. The "article" being transformed does not necessarily have to be a physical article but, if it is, that weighs more towards eligibility.

Whether the method involves application of a law of nature. Coverage of application of a law of nature across many fields of endeavor factors against eligibility. If the application of the law of nature involves only subjective determinations, this factors against eligibility.

Whether execution of the method steps involves only a general concept, principle, theory, plan or scheme. For example:

• If it preempts use of the concept in many fields, this factors against eligibility;
• If it covers many as yet unknown uses of the concept, this factors against eligibility;
• If it can be practiced merely by mental steps, this factors against eligibility;
• If it is drawn to all possible solutions to a problem, i.e., it identifies merely a problem rather than a defined solution, this factors against eligibility;
• If the process is observable and verifiable, rather than subjective and not perceptible, this supports eligibility.

The following examples of general concepts to watch for were given:

• Economic practices;
• Legal theories;
• Mathematical concepts;
• Mental activities;
• Interpersonal actions;
• Teaching;
• Human behavior;
• Conducting business.

The guidance stressed that examiners must also consider all other patentability determinations, e.g., 35 U.S.C. § 112, 102 and 103, and should still examine the claim on these grounds even if making a 35 U.S.C. § 101 rejection (see the preceding article "Federal Court Declines to Consider Bilski Rejection of Method of Treatment Claims"). It points out that in Bilski, the Court stated that business-method patents may "raise special problems in terms of vagueness and suspect patentability."

An interesting note to those in the chem/bio areas: The guidance mentions nothing particular to this field, despite the activity in the Prometheus and Classen cases. This would be seen as a good thing, i.e., no express direction for examiners to apply 35 U.S.C. § 101 in these areas.

Additional Disclosure of Use Revokes Patent Validity

By Csaba Henter

In Sun Pharmaceutical Industries v. Eli Lilly and Co., the Court of Appeals for the Federal Circuit (CAFC) ruled U.S. Patent No. 5,464,826 (US '826) invalid for obviousness-type double patenting over U.S. Patent No. 4,808,614 (US '614). US '826 would have expired two-and-a-half years after the expiration of US '614.

US '614 contains claims directed to products and methods of use for treating viral infections. This patent resulted from a continuation-in-part (CIP) application where the description regarding the uses for the treatment of cancer was added when the CIP was filed. The disclosure of the parent application of US '614 did not contain disclosure related to the treatment of cancer.

US '826 resulted from an application filed on the same day as the CIP from which U.S. '614 resulted. U.S. '826 discloses and claims a method for treating cancer.

The CAFC followed its precedents holding that a claim to a method of using a product in a patent is not patentably distinct from a claim to the product in another patent in which other patent the same use is disclosed. The obviousness-type double patenting analysis for a claimed product extends to any use that is disclosed in the specification for that product. The CAFC further held that the specification that must be considered is that of the issued patent, and not the earlier application that was modified when the CIP was filed.

As such, the addition of the disclosure of uses for the treatment of cancer in the CIP, which uses were not claimed in that application, led to the invalidity of the patent providing patent protection for the method of treatment of cancer.

Patentability of Business Method Patents Addressed by Supreme Court in Bilski v. Kappos

By Diana Hamlet-Cox

In a decision narrowly crafted to the claims at issue, e.g., a method of hedging risk in commodities trading, the U.S. Supreme Court unanimously rejected the patent-eligibility of claims under 35 U.S.C. § 101 because the claims were directed to "an abstract idea." Bilski v. Kappos. The Court provided a multiply-split set of reasons for rendering its decision and, thus, an unclear picture.

In the decision, the Court did not exclude the possibility of business-method patents being patentable. Also, the Court rejected the "machine-or-transformation" test stated by the Federal Circuit decision below as the sole test for determining whether a claim recites patentable subject matter, thus leaving the door open to business method and other patents not specifically tied to a machine or transformation. But, the Court did not define what is patentable subject matter, as well as what other tests could be applied.

Affect of Bilski decision on Pharmaceuticals and Biotech Arts

Following the ruling, the Court issued further orders regarding two pending cases specifically related to pharmaceutical, biotech arts, and medical diagnostics: Prometheus Laboratories, Inc. v. Mayo Collaborative Services and Classen Immunotherapies, Inc. v. Biogen Idec. In Prometheus, the claims were directed to "A method for optimizing therapeutic efficacy for treatment of [a disease], comprising (a) administering [a drug] and (b) determining the level of [the drug or its metabolites]." The Federal Circuit held that the administering and determining steps were transformative. In contrast, in Classen, the claims were directed to "[a] method of determining whether an immunization schedule affects a ... disorder in [treated mammals] relative to [control mammals], comprising immunizing ... according to said immunization schedule, and comparing ... [characteristics of] the disorder ... [in the treated vs. control group]." In this case, the Federal Circuit–despite the immunizing step being arguably transformative–held that the two-step method was merely "data-gathering" and thus the claim as a whole was patent-ineligible.

The Supreme Court's further orders granted certiorari in Prometheus and Classen, vacated the Federal Circuit's decisions, and remanded the cases to the Federal Circuit to reconsider in view of the Bilski decision. These two cases, in which the Federal Circuit held that the facially similar diagnostic method claims covered patentable subject matter in one case and did not in the other, will be observed to see how the Federal Circuit implements the Supreme Court's guidance in Bilski in relation to the pharmaceutical and biotech arts.

Drafting Note.

When drafting diagnostic method claims in view of Bilski that meet the machine or transformation of matter test, careful consideration must be given to who might be liable for infringement of the claim. Requiring steps performed by different entities in one claim could present additional complexities.

Gene Patents Held Invalid

By Csaba Henter

Another notable biotech case to watch is Molecular Pathology v. USPTO, where the district court held that a breast cancer risk diagnostic method was invalid because it did not meet the "machine or transformation test," and gene per se claims were unpatentable.

In Molecular Pathology, contrary to established positions held by both the Federal Circuit and the U.S. Patent and Trademark Office, Myriad Genetics' patents claiming isolated gene sequences and diagnostic methods using the sequences to assess a patient's breast cancer risk were held invalid. The rationale was that isolated gene sequences and diagnostic methods using such gene sequences are not patentable subject matter because they do not constitute statutory subject matter under 35 U.S.C. § 101.

The claimed isolated DNA was held to be merely a purified product of nature which, without more, was not patentable. The method steps of analyzing and comparing DNA from a biological sample were held to be merely mental processes that fail to meet the "machine or transformation" test.

This decision is now on appeal at the Federal Circuit.

Changes at the U.S. Patent and Trademark Office

By John Sopp

In September 2009, David Kappos was appointed as the new director of the U.S. Patent and Trademark Office (USPTO). Kappos, former vice president and assistant general counsel for intellectual property at IBM, has been active in patent law for over 20 years.

Notably, Kappos has withdrawn the USPTO's controversial proposed rules to limit the number of claims and continuation applications an applicant would be permitted to file. This ended pending litigation over the proposed rules. These actions are a step toward improved relations between applicants and patent practitioners, who were generally opposed to the proposed rules.

Kappos has instituted new processes for docketing requests for continued examinations (RCEs) that are intended to expedite substantive examination and foster allowance of applications.

New Procedures for Docketing RCEs

Effective November 15, 2009, the USPTO began placing RCEs on the examiner's "special new" application docket. The "special new" application docket includes divisional applications and continuation applications. Previously, the USPTO placed RCEs on the examiner's amended docket and examiners had two months to issue a new action. Under the new system, RCEs are docketed the same as continuation and divisional applications. RCEs are still considered "special" under the new system and may be expedited to some degree, but the timing will be less predictable and will depend on an individual examiner's caseload and, apparently the status of an application.

An accompanying change has been made to the way RCEs are credited to examiners' production goals in the USPTO contract with the examiners' union. Under the new system, there is no requirement or incentive for an examiner acting expeditiously, as examiners will earn less credit for acting on an RCE than before, thereby reducing the number of unnecessary RCEs filed.

Ideally, the changes will result in a faster prosecution process and timely indication of allowable subject matter. The USPTO's notice of the new procedure states that when an applicant believes that an RCE puts the application in condition for allowance, an interview with the examiner may be requested and examiners should fairly consider such requests. While the notice is encouraging in this regard, it does not require examiners to grant such interviews.

How an RCE will be handled is highly dependent on each individual examiner. RCEs are still useful tools for continuing prosecution, but action after filing an RCE in certain cases may take more time than before. As a result, it is worth considering early interviews with examiners, soliciting examiner input on allowable subject matter, and accomplishing as much as possible early in prosecution without filing an RCE.

Federal Circuit Finds There is a Separate Written Description Requirement

By Csaba Henter

In an en banc decision, the Federal Circuit confirmed a long line of precedents holding that there is a separate written description requirement in the first paragraph of Section 112. Ariad Pharmaceuticals v. Eli Lilly. Specifically, the court held that there are two separate description requirements in the first paragraph of Section 112: [1] a written description of the invention; and [2] of the manner and process of making and using the invention.

Irrespective of whether the description is in the specification or in the original claims, an adequate written description of the claimed genus requires more than a generic statement of an invention's boundaries, e.g., by a representative number of species falling within the scope of the genus, or structural features common to the members of the genus so that one of skill in the art can "visualize or recognize" the members of the genus. "Whatever the specific articulation, the test requires an objective inquiry into the four corners of the specification from the perspective of a person of ordinary skill in the art" and, based on that inquiry, "the specification must describe an invention understandable to that skilled artisan and show that the inventor actually invented the invention claimed."

Specifically addressed were the chemical and biotechnology arts, stating that the "written description requirement also ensures that when a patent claims a genus by its function or result, the specification recites sufficient materials to accomplish that function." The following simple example was brought up as illustrative of the usefulness of a separate written description requirement apart from that of enablement in the chemical arts: A propyl or butyl compound may be made by a process analogous to a disclosed methyl compound, but, in the absence of a statement that the inventor invented propyl and butyl compounds, such compounds have not been described and are not entitled to a patent.

In the case at hand, the claims were method claims comprising the single step of reducing a newly discovered biological function NF-kB activity. The disclosure hypothesized three classes of molecules potentially capable of reducing NF-kB activity: specific inhibitors, dominantly interfering molecules, and decoy molecules. The only detailed description of the molecules involved proposed example structures for decoy molecules. However, the court found that there was no descriptive link between the proposed decoy molecules and reducing NF-kB activity. This was inadequate since the state of the art at the time of filing was primitive and uncertain, leaving applicant with insufficient prior art knowledge with which to fill the gaping holes in the disclosure. The Federal Circuit held that "whatever thin thread of support a jury might find in the decoy-molecule hypothetical simply cannot bear the weight of the vast scope of these generic claims."

Supreme Court Copyright Case

By Scott Major

Section 411(a) of the Copyright Act generally provides that no civil action for infringement of the copyright in any United States work shall be instituted until the plaintiff has preregistered or registered the pertinent work with the United States Copyright Office. In Reed Elsevier Inc. v. Muchnick, the U.S. Supreme Court held that a plaintiff's lack of a copyright registration for an allegedly infringed work does not deprive a federal court of subject-matter jurisdiction. In so holding, the Court characterized the registration mandate of Section 411(a) as merely a "claims processing rule" rather than a jurisdictional requirement.

The Court did not address the question of whether a copyright plaintiff may sue while an application for registration of the pertinent work is pending. However, with the elimination of the subject-matter jurisdiction issue, there is a sense that more federal courts may be willing to allow a copyright infringement suit to proceed under such circumstances.

What U.S. Litigants Should Consider When Selecting a Survey Method

By Jeff Cohen

When dealing with trademark litigation, utilizing likelihood of confusion surveys can either strengthen or weaken your case. Two predominant formats acceptable in U.S. courts are the Eveready and Squirt tests. Find out what each test includes and when they are appropriate to use.

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In re Kubin argued before the Federal Circuit

On January 7, the Federal Circuit heard oral argument in In re Kubin, a case expected to have significant impact in the area of biotechnology patents. Kubin represents the PTO's post-KSR return to a stance previously rejected by the Federal Circuit in the landmark decision of In re Deuel.

In Deuel, the court rejected the PTO position that the existence in the prior art of a purified protein, combined with routine cloning methods, renders obvious a claim to a nucleic acid encoding the protein.

Harry Shubin profiled in Forbes.

Harry Shubin and Brion Heaney will teach Chemical Patent Practice at George Mason University School of Law for the fifth straight year this spring semester.

Scott Major and MWZB secure a victory for Florists' Transworld Delivery, Inc. (FTD) in a proceeding under the Uniform Domain Name Dispute Resolution Policy to transfer the domain name ftdblog.com. See the decision here.