Tuesday, March 21, 2017

You can wait before suing on a patent

Latches is an equitable doctrine that says you can't know about a claim you could bring and then wait years before bringing a lawsuit.  The idea is that after a while, people should be able to rely on the fact that you haven't sued to indicate that you won't.  Last year SCOTUS found that latches doesn't apply to copyright cases.  Today they extended that holding to patent cases.  https://www.supremecourt.gov/opinions/16pdf/15-927_6j37.pdf

This is a rare pro-inventor win at the Supreme Court, and maybe (hopefully) an indication that the court is starting to feel it has dealt enough damage to the patent system.  Maybe.

But the bottom line is this:  If you invent a new device (say, a nanobot that monitors health) and you patent it, if another company copies your design and produces the device for 6 years, gaining dominant market position, you can sue them for the 6 years of back damages (the max the statute allows) and for an injunction and damages going forward.  They cannot say "he knew about it from day 1, allowed us to become big for 6 years, and then sued" as a defense.

This does not change the rule that if the infringer knows about the patent and still infringes, intentional infringement damages are available.

So the inventor's knowledge about infringement does not impair the ability to sue; the infringer's knowledge about infringement does harm the infringer's position in litigation.

Friday, February 24, 2017

Who is running the USPTO?

Since Donald Trump's inauguration, there has been confusion about who is running the USPTO.  The USPTO's site says it is Michelle Lee, but the Department of Commerce's site (which is in charge of the USPTO) says the position is vacant.

Because of a quirk in federal law -- requiring that plaintiffs sue the director of an agency and not the agency itself -- there is a real urgency to finding out who the director is.  Inventors have a right to ask the federal courts to review certain agency decisions -- but it is unclear whether that right can be exercised if you don't know who to name in the suit.

Because of the importance of the question, I wrote up a Freedom of Information Act request and submitted it on January 26, 2017.  The response was due today, but instead of a response I got a notice saying they were taking an extra ten days to respond.

This is, at best, bizarre behavior from a federal agency.  The public has a right to know who is running the government.  In my opinion, the two most plausible explanations are both bizarre and scary.  (1) The agency itself does not know who is running the agency; or (2) The agency is keeping the identity of its director or acting director secret for as long as possible.  Both explanations reveal deep dysfunction.

I have produced today's agency response below:

Tuesday, December 6, 2016

Another one bites the dust (design patent valuations expected to drop)

It never made sense to me that design patents -- patents that protect an ornamental design instead of a functional aspect of a device -- used a formula for determining damages that made them far more valuable than utility patents.  District courts have traditionally awarded damages equal to essentially all of the profits generated by the infringing item.  Such was the case in the Apple v. Samsung matter.

In that case, the design patent was literally for the ornamental design of rounded edges on a smartphone.  When Samsung made a phone with rounded edges, Apple sued seeing damages equal to all of Samsung's profits on the device.  While Samsung has had its own problems lately, and certainly wouldn't have a whole lot of profit to pay out on the Note 7, it did get hit with a huge verdict of $399 million.

The primary argument was that the "article of manufacture" that is used to measure damages was the end product -- the phone -- rather than simply the phone's integral case.  The Supreme Court half punted.  They first held that this was too narrow a read of the term "article of manufacture":

But, for the reasons given above, the term “article of manufacture”
is broad enough to embrace both a product sold
to a consumer and a component of that product, whether
sold separately or not. Thus, reading “article of manufacture”
in §289 to cover only an end product sold to a consumer
gives too narrow a meaning to the phrase.
However, rather than coming up with a proper test or formula to determine how damages should be calculated, the Supreme Court sent the case back to the lower courts with instructions for them to figure it out.  While it is complete speculation, it is possible that the Supreme Court agreed that the existing test was defective, but was split 4-4 on the appropriate replacement test.  By sending it back to the lower courts, the Supreme Court gives the senate (even more) time to do its job and get a ninth justice confirmed.  At that point, if the Supreme Court is unhappy with the lower court's implementation of its decision, it can take the case again on appeal (the lower in the lower court is pretty certain to appeal) and decide the proper test without having a 4-4 deadlock.

As a side note, I think Samsung's lawyers may have missed their strongest argument:  A beveled edge is not an ornamental design.  Rather, it is a functional design, reducing the risk of chipping the glass at the edges, reducing the amount of raw material required, reducing the phone's weight, and making the phone easier to grasp.  I would have argued that it was patent-ineligible as a design patent.  Regardless, Samsung's lawyers found a different path to victory, unless the lower courts pull the rug out from under them.

In the meantime, design patents continue to get favored treatment in several ways, including patent term calculation (14 years from issuance instead of 20 years from filing) and filing fees.

Case link is here https://www.supremecourt.gov/opinions/16pdf/15-777_7lho.pdf

Update:  Janice Mueller, who is the author of a fantastic book on patent law, has written an excellent article about the decision.  It is available at https://chisum-patent-academy.com/wp-content/uploads/SSRN-id2882765.pdf

Wednesday, October 19, 2016

A brief post about USPTO events

The United States Patent and Trademark Office regularly holds events targeted all the various stakeholders it serves -- inventors, startups, big companies, attorneys, trademark owners, etc.  The events are all listed on the USPTO website, at https://www.uspto.gov/about-us/events.

One event that all inventors should absolutely consider attending is a regional roundtable related to patent subject matter eligibility.  Among the patent community, this is sometimes referenced as "101", "Alice", "Mayo", and sometimes "Bilski".  The bottom line, though, is that the Supreme Court has issued a series of decisions that created a gigantic gray area in patent law -- and that gray area is the answer to this question:  "Even if my invention is novel, useful, and not obvious, is it eligible for a patent?"

The impact on patents has been profound.  When combined with the new post-grant review procedures that make it easier to challenge a patent and much more expensive to defend a patent (in large part by allowing administrative review that does not use the presumption of validity that courts apply), we are left with a situation that can be illustrated using a housing analogy.  Imagine that I have a fantastic house listed for sale.  However, the fine print says "there is no longer a presumption that the deed to this house is valid; the deed can be challenged at any time by anybody, and it will cost you at least $300,000 to defend; no title insurance is available; you are purchasing this as-is."

There are reports that patent values are down as much as 90% to 95% in certain art areas, and a lot of anecdotal experience showing that patents are far more difficult to license or sell than the used to be.

While subject matter eligibility is just a piece of the problem, it is an important piece.  I strong recommend attending one of the roundtables and letting your voice be heard as to what should be patentable.  If you apply by November 14, 2016, you can ask to speak at the event.

Thursday, September 29, 2016

First Amendment v. Limits on Trademarks: On to the Supreme Court

In 2015, the Federal Circuit held that "the disparagement provision of [trademark law is] unconstitutional....  We recognize that invalidating this provision may lead to the wider registration of marks that offend vulnerable communities....  But much the same can be (and has been) said of many decisions upholding First Amendment protection of speech that is hurtful or worse."

The Supreme Court just agreed to review the case.  The filings are available for public review at http://www.scotusblog.com/case-files/cases/lee-v-tam/.

The mark at issue is one that Simon Tam, "an Asian-American musician, lecturer, and political activist," uses for his band "The Slants".  According to the prospective registrant's filings, the band was "intended ... to be a vehicle for expressing his views on discrimination against Asian-Americans."  His position, which prevailed in the Federal Circuit, is that denying his trademark application for "The Slants" on the grounds that it is offensive to Asians, is a violation of his First Amendment rights.

The argument in favor of refusing offensive or disparaging marks revolves around several points, but ultimately boils down to this:  "Denial or cancellation of a trademark registration does not trigger civil or criminal penalties, and the PTO's denial of registration here left respondent free to use "THE SLANTS" as the name of his band and in any promotional materials he wished to disseminate."

We should know by summer whether content-based discrimination by a government agency is permitted under the First Amendment.  You can follow the briefs (and the nearly certain avalanche of "amicus", or friend of the court, briefs) here.

Thursday, September 22, 2016

Original US Government Works and Other Free-to-use Materials

Original US Government works are not subject to copyright.  The law is about as clear as it can be:
Copyright protection under this title is not available for any work of the United States Government, but the United States Government is not precluded from receiving and holding copyrights transferred to it by assignment, bequest, or otherwise. [17 U.S. Code § 105]
While there is a lot of room for confusion and accidental infringement (for example, state and local governments can copyright their works and US government sites may include copyrights they have licensed or been given), a fantastic place to obtain content for free is US government websites.

So how do you find these free works?  The answer is to use the advanced search operators that Google (or other search engines) make available.

Let's imagine that you want a picture of a syringe for a blog post about vaccinations.  If you use Google image search, unmodified, you get this:

Nice, but these images repreesnt a hodgepodge of copyright states (note that these screen shots fall into a category for another blog post, fair use).  The first image is from Wikipedia under a Creative Commons license; the second image is from bandageer.info and is of unknown source (therefore you need to assume it is copyright under a non-public license); the third image is from an online retailer and is also of unknown copyright status, etc.  In other words, the majority of images are unlikely to be useful to you without running a lot of risk of being sued for infringement.

Going to the advanced search options in Google, I picked "Labeled for reuse with modification" (other options are non-commercial use and reuse without modification).

Google has very much improved their license search capability, so the results are far more likely to be available for use.  However, there remain two big risks:  First, I could upload a copyrighted image to wikimedia, label it as free to use, and trick Google that way.  Since so many people misunderstand copyright, there is a real risk that images can show up as "free to use" that are not.  Second, an improved algorithm does not mean it is a perfect algorithm.  It returned the following image from Flickr:

Seems great!  Except when you click through to the Flickr page, you may notice this text under the image (I say "may" because if you are in a hurry and aren't copyright-savvy, you might just swipe the image without looking):

"Some rights reserved".  When you click on that, you see that you can share, adapt or remix the image except as follows:

Whoops!  If you copied the image and pasted it on your site, and the site says at the bottom "(c) 2016 all rights reserved", or you don't credit and link back to the Flickr page, you are using the image in violation of copyright law and can be sued.

Here is where the advanced search operators help.  My new search is for "syringe site:.gov":

Much better!  Sort of.  The first and third images are from nih.gov and are actually found on a page intended for public reuse.  However, the second is from azdeq.gov -- a state government site.  There is no copyright notice but that doesn't mean you can use it.  You would need to research whether Arizona asserts copyright to its own works (and with both state and federal sites, you'll want to make sure the images are original works of the government and not licensed by the government for use).

Once again, advanced search operators to the rescue.  We only want federal works, so we need to pick some federal websites likely to host the images we want.  For a syringe, we can pick cdc.gov, hhs.gov and nih.gov.  Our query is now syringe (site:cdc.gov OR site:nih.gov OR site:hhs.gov).

Wow, that's much better.  Now we know we only have images from official US Government sites.  You can use them however you want -- so long as you make sure they are actual US Government creations and not something the government licensed from a third party. You can never really be positive -- after all, even if you called the CDC and they said it was a photograph their employee took in the course and scope of her job, there is a slim chance that she just copied the image from elsewhere and claimed it was her own (even Getty Images has confused sourcing of images in its catalog). This is the same risk you run when buying images from stock photography companies and cannot be fully eliminated unless you take the photograph yourself.   You can at least reduce your risk (particularly for images that are licensed by the copyright holder to the government for its own use) by visiting the page hosting the image, which often clarifies sourcing.

We're now in pretty good shape.  The first image is from the NIH and looks very much like it is intended for use by third parties.  It would be super-misleading for the NIH to put an image they licensed from a third party on a page like this.

But let's be even more paranoid (and at the same time introduce a tool that works to reduce the risk that the image came from a source you were unaware of).  Right click the image of the syringe and from the pop-up menu, select "Search Google for image" (you should do this in Google Chrome if you want to search from the context/right-click menu; other browsers can do this too, but aren't quite as straightforward).  The results are thumbs-up awesome.  While Google's image recognition got it wrong (it looks like it thought the syringe was a cross and called it a religious symbol -- oops), but the important line is "No other sizes of this image found", so it doesn't look like the image was resized from another source.  Similarly, if you scroll down to "Pages that include matching images", you'll see the only other pages with the matching image are hosted at nih.gov (plus a bunch of golf club pages, so we again see the limits of Google's image recognition).  If you're super-careful, you can also use TinEye to do a second search.

I encourage you to play around with this, using very popular images (such as this official one of the President).

There are some images that can *only* have been taken by the US government, and some of those are fantastic.  For example, images from the Hubble Space Telescope.

The bottom line is that caution is important in using other people's images.  The penalties for copyright infringement are pretty steep.  It is a fairly quick job for an IP lawyer to make sure you're on solid ground, and in my opinion a cheap insurance policy.

Tuesday, September 20, 2016

The America Invents Act Turns Five -- What Inventors Need to Know

The America Invents Act ("AIA") turned five years old last week.

At the time of its adoption, independent inventors were hyper-focused on the switch from "First to Invent" to "First to File".  For example, NPR did a piece where they interviewed a very experienced patent lawyer who explained it as follows:
The biggest change will be in the first to file. Currently, if you are an inventor, you can take up to a year after you publish your invention to actually file your application and not risk losing it. And then you can, if there is somebody else who has also developed the invention, you end up in what's called an interference, where you debate which of you was first to invent.  The new law will streamline that process, and basically it will be the person who was first to file, and you will eliminate all of these issues about who was first to invent.
Other articles listed "First to File" as a primary item in their coverage, such as PCWorld, Patently-O, American University, Fast Company, Arstechnica, USA Today, and many others.

In practice, First to File changed a lot of things for independent inventors, but it was not the most important change in the law.  Amongst all of the angst about forcing inventors to file multiple provisional patent applications as they developed their invention, front-loading costs for start-ups, and the inherent big business tilt of requiring lawyer involvement even before the invention is complete, the post-grant review provisions got little attention.  They turned out to be far more important than the First to File switch.

For the sake of simplicity, this post will address the two major changes that the AIA brought about.

First Inventor To File:

The First Inventor to File rule is fairly simple, and brings the US in line with the rest of the world's approach to the matter.

Savvy inventors know that their "inventor's notebooks" carry little to no weight in determining the "priority date" (the date after which inventions of others are considered to post-date, and therefore not impact, the patentability of the invention).  However, they are also aware that filing a series of provisional patent applications during the year they are developing their invention will protect the priority date for whatever content is enabled in each provisional application.

A provisional patent application (in fact any patent application) that does not go through a patent lawyer carries inherent risk.  There are certain "magic words" that can kill a patent.  For example, if years of research rendered something obvious to you, but to nobody else, carelessly writing "it was obvious to combine A, B, and C to create D" will make a patent for that combination almost impossible to get.  Similarly, a patent claim using the term "composing" instead of "comprising" holds a significantly narrower scope.

The bottom line is that there is a real urgency to get a patent on file as rapidly as possible.  I use the "casual observer" test:  If I write a sentence about the problem, and somebody looks over my shoulder and reads it, can they figure out the invention?  In an extreme example, imagine the discovery of the wing.  If Orville Wright left out a simple line drawing of a plane and a note saying "wow, I can't believe this shape can fly", it would have been easy for anybody to see that, copy the design, and file for a patent.  Under the First Inventor to File rules (and assuming he can't provide that the design was copied from him), he would not have received his patent for a "Flying Machine".

It is important to note that the switch to "First Inventor to File" simply built on what independent inventors had long known:  If you aren't first to file, you will have an uphill battle to show you were first to invent.  By getting rid of the ability to rely on a notebook to prove invention date, the AIA also got rid of the risk that the first to invent didn't rush to file, and only to find later that proving invention date is a lot harder than it might seem.  Best practice before the AIA was to file provisionals after each important invention during the development of a product.  The AIA got rid of an excuse not to do so.

Bottom line:  As hard as it is to come up with money to pay lawyers before you've even completed your invention development, that is what the AIA forces you to do.  If money is an issue, write up as much of the provisional yourself, but do it in concert with (and following the instructions of) a patent lawyer.

Post-Grant Review:

The AIA created a set of new administrative procedures that companies can use to attack the validity of a patent.  These procedures take place in front of the Patent Trial and Appeal Board -- an Article I court, meaning that it is comprised of administrative judges that ultimately answer to the President.  The PTAB has an enormously high invalidation rate, striking down a supermajority of the claims it has reviewed -- so much so that Randall Rader, former Chief Judge of the Federal Circuit Court of Appeals, has called them "death quads killing property rights" and a "death squad" for patents.  He went on to observe that "We have an enterprise (i.e., the USPTO) that has 8,000 employees creating a product (i.e., patents) and has 300 employees destroying the same product in contested proceedings."

Chief Judge Rader is hardly alone.  Many pro-invention commentators have decried the AIA, calling it "an Unmitigated Disaster and the Destruction of American Innovation", "undermining confidence in our patent system, chilling innovation at its roots", and a "benefit [to] those who want to use patented technology without paying for it".  It has given rise to a concept called "efficient infringement":

Recently, various commentators have examined the licensing behaviors of IT firms under the currently prevailing regime of weakened patent rights.2 These commentators note that in this environment of weakened patent rights, firms are making a different rational ignorance decision—namely, they are opting to ignore licensing requests from patent holders, relying on the view that most patent holders will not resort to litigation and that those claims resulting in litigation can generally be dispatched inexpensively either via AIA trials or through motion practice in district courts. Commentators label this form of rationally ignorant behavior "Efficient Infringement."
Before we delve into the three kinds of post-grant review that the AIA created, it is worth noting the sea change that efficient infringement has brought about.  In the years prior to the AIA, patent rights were assumed to be valid, allowing cheap and easy resolution of at least some disputes -- the inventor contacts the infringer and they work out a deal (with many exceptions).  Now -- particularly for start-ups and independent inventors -- the typical response of an infringer is to either ignore the patent or trigger a post-grant review.  Post-grant reviews normally fall into a cost range of $300,000 to $500,000 to defend, meaning that an inventor who does not already have a war chest can have a very solid patent but find herself unable to approach infringers for fear of being unable to defend a post-grant review.

It is fairly well accepted among independent inventors that the combination of the AIA and recent Supreme Court decisions have dramatically reduced the value of patents.  In informal discussions with five different patent brokers, estimates of the decline in patent valuation between 2000 and 2016 ranged from 80% to 95%.  Several empirical studies also show a steep decline.  The editor of Intellectual Asset Management has also noted that "It's been tough in the patent transactions market for several years now."

Turning to the three types of post-grant review available under the AIA, I first note that the USPTO has put out a helpful chart linked here.  I also note that there is one form of post-grant review that is literally called "Post Grant Review", so while all three forms take place after the patent grant, and are descriptively post grant review, knowing this is useful in avoiding confusion on the subject.

Elements common to all forms of post-grant review:
- Patents can be invalidated without judicial review by an Article III court;
- While the Supreme Court case on the standard of review involved IPR, it is very likely that all forms of post-grant review will give the patent claims the "Broadest Reasonable Interpretation" ("BRI").  BRI means that if there is a reasonable way to read the claim that renders it obvious or not novel, the claim is invalid.  By contrast, Article III courts give the claim language terms "their ordinary and customary meaning."  BRI makes invalidation much more likely.
- There is no presumption of validity in post grant reviews.  By contrast, Article III courts require clear and convincing evidence of invalidity.
- The defense of the patent's validity is up to the patent owner.
- The patent owner cannot seek post grant review of their own patent.
- A showing that a patent claim is not novel will invalidate the claim under Section 102.
- A showing that a patent claim is obvious will invalidate the claim under Section 103.
- The cost of defending a review is measured in the hundreds of thousands of dollars.
- The procedure must be completed within a year from the PTAB's decision to institute the review, although a six month extension is possible.
- Post grant review may be repeatedly sought against the same patent by a parade of challengers.  Just because a patent survives IPR does not mean that a new IPR will not be filed against it, for example.
- District Court judges have a lot of latitude to manage their caseload, so it is not uncommon for judges to stay (or put on hold) litigation over a patent while they await a decision from the PTAB.

(1) Inter Parties Review (IPR):  This is the most frequently discussed form of post-grant review.  A petition is filed seeking IPR.  After the petition is filed, the PTAB determines whether there is a reasonable likelihood that the claim is invalid.  If the answer is yes, the PTAB institutes IPR.  By law, IPR must be completed within a year (and the PTAB has been pretty good about meeting that deadline).  Anybody other than the patent owner can seek IPR as long as they have not sued to invalidate the patent or been served with an infringement complaint more than a year prior to filing for IPR.

IPR is like a mini-litigation.  The parties make motions, engage in discovery, and generally do the very expensive things that parties to litigation hire lawyers to do.

(2) Covered Business Method ("CBM"):   This is available only for a non-technological invention (whatever that means), and can only be brought by a party sued or charged with infringement.  It is instituted if it is more likely than not that the claim is invalid or if it presents a novel or unsettled legal question with implications beyond the patent at issue.

CBM is not available in cases where the patent at issue does not claim "management of a financial product or service" or "activities that are financial in nature", and where the specification does not "indicate or suggest" that the patent claims are directed at financial activity.  In the interest of full disclosure, I am the inventor of the patent that led to this holding.

(3) Post Grant Review ("PGR"): PGR is the only one of the post-grant proceedings to allow a challenge based on subject matter eligibility (Section 101), as well as problems arising from the specification (Section 112).  Because the AIA predated the aggressive Supreme Court cases limiting patent eligibility under Section 101, this difference is much more important now that it was at the time the AIA was adopted.  PGR is instituted if it is more likely than not that the claim is invalid or if it presents a novel or unsettled legal question with implications beyond the patent at issue.

Anybody other than the inventor may file a PGR, but it must be sought within 9 months from patent grant.  This raises a strategic question for the inventor:  Do you assert a patent immediately, or wait until the 9 month period has passed?  By waiting to assert, a District Court will be the only forum to look at Section 101 eligibility, and there are significant differences between the districts and between judges as to how they approach eligibility.  By the same token, the USPTO's guidance on subject matter eligibility leaves a lot of things open to interpretation.  Because of the speed with which Section 101 jurisprudence is evolving, this is a discussion that the inventor should have with her patent lawyer.