Tuesday, June 5, 2018

Even the Federal Circuit Court of Appeals Judges, USPTO head Can't Figure Out Patent Eligibility Rules


President Trump's new head of the United States Patent and Trademark Office, Andrei Iancu, recently noted that uncertainty about what kinds of innovation are patent-eligible is weakening investment, growth, and jobs in high tech industries:
 I do worry that the current state of Section 101 in patentable subject matter weakens the robustness of our IP system in the affected areas.  And if industry cannot predict in a relatively reliable way whether their investments will be protected from an intellectual property point of view I think that will result in less investment, less growth, fewer jobs created in the affected industries.  So I do think it is critically important for our economy.  And again whatever industry we’re talking about and whatever industry we want to grow it’s critically important to have a strong reliable and predictable intellectual property system.
Yesterday, two well respected and long-serving judges on the Federal Circuit Court of Appeals (the court designated to handle all patent appeals), Judges Lourie and Newman (with 66 years of experience hearing patent appeals on the Federal Circuit between them), echoed Director Iancu's concerns.  In a concurring opinion, they wrote separately to say that Congress needs to clarify the kinds of inventions that are patentable:
I concur in the court’s declining to rehear this case en
banc. There is plausibility to the panel holding that there
are fact issues potentially involved in this case concerning
the abstract idea exception to patent eligibility. And the
panel, and the court, are bound to follow the script that
the Supreme Court has written for us in § 101 cases.
However, I believe the law needs clarification by
higher authority, perhaps by Congress, to work its way
out of what so many in the innovation field consider are
§ 101 problems. Individual cases, whether heard by this
court or the Supreme Court, are imperfect vehicles for
enunciating broad principles because they are limited to
the facts presented. Section 101 issues certainly require
attention beyond the power of this court.
Director Iancu further indicated that the Trump Administration is interested in strengthening the patent system:
Still, we are at an inflection point with respect to the patent system. As a nation, we cannot continue down the same path if we want to maintain our global economic leadership. And we will not continue down the same path. This administration has a mission to create sustained economic growth, and innovation and IP protection are key goals in support of that mission.
Well respected commentators have been even more explicit in laying the blame for the weakened United States patent system at the feet of the Supreme Court

As an inventor, I have frequently spoken on the subject of innovation.  One point I have repeatedly made is that it would be far better to have bad rules than to be unsure of what the rules are.  Given the current state of confusion about which inventions are patent-eligible, it would be hard for even the most dysfunctional Congress to worsen the situation. The alarming uncertainty in the U.S. patent system seems to finally be getting the attention it badly needs.

While we await Congressional action that may or may not come, it is all the more critical that inventors turn to experienced patent lawyers capable of laying out the pros, cons, and unknowns about inventions.

Wednesday, May 30, 2018

US Patent Number 10,000,000 is set to issue in June, 2018


Inventors keep filing for patents, despite a fairly hostile judicial atmosphere for patents (such as declaring patents are no longer private property, adding new limitations on where patentees can bring suit against infringers, weakening the standard for invalidating patents in administrative proceedings, and of course the various decisions adding restrictions to what is patentable, most recently a decision holding that the magnitude, level of inventiveness and importance of an invention are irrelevant to whether it is patentable).

I've commented before on the staggering rate of invention, and it comes as no surprise that since that article, I've personally been granted 53 patents, for a total of 203 issued US patents.  It does come as a bit of a surprise that my first issued patent was number 6,756,879 -- meaning that approximately one-third of all issued US patents issued in the 14 years between my first issued patent (6,756,879 issued June 29, 2004) and today.

There are some strong indications that this rate of innovation is slowing under the weight of legislative and judicial changes substantially weakening patent protection in the United States.  Fewer lawsuits are being filed claiming infringement (though the way to count litigation "campaigns" -- where a single patent is asserted against many defendants -- can be manipulated to make the numbers go up or down).  International patent filings are slowing (the United States is such a huge market that a weakening system in the United States may well change the economics of getting patent protection as compared to keeping things as a trade secret).  US patent filings are slowing significantly more than international filings (compare the previous link with page 12 of the USPTO's filing here).

Perhaps most salient is that the U.S. patent system fell to the 12th ranked system in the world this year.  The United States was ranked #1 every year until 2017 when it dropped to #10.  This year, it is behind Singapore, France, Germany, Ireland, Japan, the Netherlands, South Korea, Spain, Sweden, Switzerland, and the United Kingdom (and tied with Italy).  This raises serious questions about whether the United States will continue to be viewed as a viable place to file for patent protection.

I can speak to my own experience filing for patents.  With each new Supreme Court decision, and with each year passing without a change to the post-grant review procedures, I have filed fewer patent applications. The economics of them have simply become harder to justify. However, I have adopted a new procedure that does support continued filing, so I expect my filings to return to their previous levels.  The procedure is:

(1) File a provisional application in the United States Patent and Trademark Office.  This costs very little and gives me a year to develop the invention.
(2) Before the year expires, file a "Patent Cooperation Treaty" ("PCT") application.  Like a provisional, a PCT filing will never issue as an enforceable patent -- it just keeps the door open to filing internationally.
(3) At or near the deadline for entering the national phase of various countries, examine their patent system and determine the cost/benefit of filing in that country.  China's system has strengthened and is positioned to become a premier forum for IP protection in the 21st Century.  India is diligently working on their system. Germany, Canada, Australia, and the UK all represent large markets and have mature patent systems.  So even if US patent law is too unpredictable or hostile to a given invention, it may still be worth pursuing in nations that are more innovation-friendly.

Patent 10,000,000 is indeed something to celebrate.  It is a testament to the millions of inventors who have made the United States the world's foundry for good ideas. The future of the patent system in the United States is uncertain, but we should all take pride in the system, decisions, and innovations that brought us to where we are.

Wednesday, May 23, 2018

Central Valley Profiled as a Great Place for VCs to Invest


The Central Valley is not just the agricultural center of California (and the country), and a great place to live and raise a family.  It is starting to become a center for tech.  It was recently highlighted as a place for VCs to consider investing in “Why You Should Invest in Fresno and the Central Valley” in Venture Beat.  Check it out at https://venturebeat.com/2018/05/19/why-you-should-invest-in-fresno-and-the-central-valley/

Saturday, April 28, 2018

Monkey Makes Monkeys out of PETA at Ninth Circuit

A Crested Macaque named Naruto was just doing his thing on the island of Sulawesi, Indonesia in 2011 when he came across an unattended camera.  Though he was only six or seven years old at the time, he decided to do his best Millenial impression and takes some selfies.

Shortly thereafter, the wildlife photographer who left the camera unattended, David Slater, retrieved his camera.  While reviewing the contents, he found the selfies.  Three years later, he published the selfies in a self-published book printed through the Blurb website.  The book had a copyright notice stating that the copyright was held by Slater and Wildlife Personalities.

People for the Ethical Treatment of Animals ("PETA") and an individual sued on behalf of Naruto.  Through PETA, Naruto claimed that he held the copyright in the images he took, and Slater violated his copyright by selling a book with his selfies in it.

The United States District Court for the Northern District of California, Judge Orrick presiding, held that the Copyright Act does not confer standing upon animals like Naruto, and dismissed the case.  Thankfully, this dismissal avoided raising even more complex questions.  For example, if Naruto was found to own the copyright, did he also have rights under the Equal Protection Clause of the Fourteenth Amendment that were violated by the Copyright Act's scheme that granted protection for 70 years after the death of the author.  As Macaques have an expected lifespan of 20 years, Macaques cannot enjoy the same copyright term as a similarly aged human -- giving rise to a potential Equal Protection violation.

Judge Orrick found that "Naruto is not an 'author' within the meaning of the Copyright Act and dismissed the case. Naruto appealed this dismissal to the Ninth Circuit Court of Appeals.  While the appeal was pending, PETA and Slater settled the case, with Slater agreeing to donate 25 percent of future revenue from the photos to groups that protect crested macaques in Indonesia.  Although PETA and Slater both asked the Court to dismiss the appeal, the Court refused.

On April 23, 2018, the Ninth Circuit handed down its opinion.  The Court held that "the monkey's claim has standing under Article III of the United States Constitution.  Nonetheless, [they] conclude[d] that this monkey -- and all animals, since they are not human -- lacks statutory standing under the Copyright Act."  In other words, if Congress had phrased the Copyright Act as saying "Copyright protection subsists, in accordance with this title, in original works of authorship by any mammal fixed in any tangible medium of expression", Naruto would have been able to proceed to a copyright infringement trial on the merits.

The Ninth Circuit first focused on the concept of "Next Friend" -- a doctrine that allows somebody to run litigation on behalf of somebody not able to manage their own litigation.  PETA initially brought the suit as Naruto's "Next Friend".  PETA realized at the oral argument phase that it would almost certainly lose the case. Rather than take the loss, they agreed to settle for pennies on the dollar. The Ninth Circuit went out of its way to slap down PETA:  "We feel compelled to note that PETA's deficiencies [as Naruto's Next Friend] go far beyond its failure to plead a significant relationship with Naruto.  Indeed, if any such relationship exists, PETA appears to have failed to live up to the title of 'friend.'"  PETA offered to settle the case directly with Slater, leaving Naruto "not a party to the settlement".  

The Ninth Circuit wasn't done yet:  "now, in the wake of PETA's proposed dismissal, Naruto is left without an advocate, his supposed 'friend' having abandoned Naruto's substantive claims in what appears to be an effort to prevent th4 publication off a decision adverse to PETA's institutional interests.  Were he capable of recognizing this abandonment, we wonder whether Naruto might initiate an action for breach of confidential relationship against his (former) next friend, PETA, for its failure to pursue his interests before its own."

It is unclear to the reader whether the Ninth Circuit was actually inviting somebody to sue PETA as Naruto's new "Next Friend", but given the holding that Naruto had standing to sue Slater, it may only be a matter of time before PETA is sued in the manner that the Ninth Circuit described.  Ironically, such a suit would vindicate one of PETA's goals in the original suit:  A ruling where an animal recovers damages from a human or human organization.  The Court did recognize that express statutory permission is required for "Next Friend" standing, and that was not provided in the Copyright Act.  The hurdle to be cleared if Naruto is to bring suit against PETA is whether a suit in federal or state court would allow somebody Next Friend standing (although there is a question about whether PETA could remove a case filed in state court to federal court on the grounds that Naruto is not a resident of the same state as PETA).  Of course, once suit is commenced, Federal Rule of Civil Procedure 17 obligates the court to consider whether he is adequately protected, even where there is no 'next friend' -- so somebody bringing suit against PETA on Naruto's behalf may find themselves kicked out of court as Naruto's next friend while leaving Naruto's claims against PETA to be adjudicated.

The Court then noted a crucial rule about "Next Friend" standing:  "lack of a next friend does not destroy [Naruto's] standing to sue, as having a 'case or controversy' under Article III of the Constitution."  The Court went on to substantively analyze whether Naruto qualifies as an author of a copyrighted work.

The Court makes quick work of this analysis:  "if an Act of Congress plainly states that animals have statutory standing, then animals have statutory standing.  If the statute does not so plainly state, then animals do not have statutory standing.  The Copyright Act does not expressly authorize animals to file copyright infringement suits under the statute."

As a final slap to PETA -- perhaps in response to the footnote about PETA failing to act as Naruto's "friend" -- the Court ordered PETA to pay the photographer's attorneys' fees on appeal.

This case may appear more comedy than precedent (and to be fair, I had fun writing this article), but it does establish an important rule about copyright as well as animal rights.

Until this case, the only works in which copyright can never arise were original United States Government works.  After this case, photographs taken by animals are not enforceable (even if the animal were to hold the copyright).  With the miniaturization of imaging technology, we have seen a significant rise in animal-borne cameras, whether for law enforcement and military use or for fun with a Go-Pro.  While there is a weak argument that the creative decision to mount the camera created some copyright rights in the human, this case seems to indicate that images taken by an animal-mounted camera are likely to fall outside of the realm of enforceable copyrights -- the only difference between the hypothetical case and Naruto's case is that Naruto actuated the shutter.  It seems unlikely that a court would find an automatically actuated shutter on a dog-mounted camera as giving rise to a copyright more enforceable than one where the animal actuates the shutter.

The next logical case to bring after this one is one challenging whether images automatically taken by machines (such as the satellite imagery used in Google Earth or dash-cam video from a car) are subject to copyright protection.  While Congress has set copyright terms to last so long that no work created today will ever reach public domain status in my lifetime, animal-created and AI/machine-created images may help fill some of the void that now exists for free-to-use works.  Of course, the key word is "may".  Don't use any images that "may" be free without direct legal advice saying that they are, in fact, free.



Tuesday, April 24, 2018

Patents Aren't Private Property Anymore

Today the Supreme Court handed down its decision in Oil States Energy Services, Inc. v. Greene's Energy Group, LLC.  The Court determined that patents are "public rights" subject to evisceration by political appointees.

The importance of the decision to innovators is described in the first paragraph of Justice Gorsuch's dissent (joined by Chief Justice Roberts):


As readers of this blog as aware, getting a patent issued is an expensive, ponderous and risky journey.  In the previous worst case scenario, you spend tens of thousands of dollars -- or more -- only to see your patent application published, your trade secrets passed to the public domain, and no patent issues.  The Supreme Court has far more than doubled the risk.

Now the worst case scenario is that you spend tens of thousands of dollars getting the patent issued, you spend hundreds of thousands (or millions) of dollars investing building your now-patented product, and just as you're hitting the market, an infringer (or want-to-be infringer) files an application for "Inter-Parties Review" ("IPR") by the same patent office that you just spent years in front of getting the patent in the first place.  Your patent is essentially unenforceable during this process (most Federal Courts will stay patent litigation while the patent is in IPR).  Defending an IPR typically costs between $250,000 and $500,000 (though some estimates are $1 million including a Federal Circuit appeal).  In the end, the patent office's politically appointed "administrative law judges" on a "PTAB" panel decide the IPR -- and if the USPTO director doesn't like the result, he can just appoint a few additional judges or even join the appeals panel himself to tilt the outcome.  Former Chief Judge of the Federal Circuit Randall Rader called the USPTO's administrative appeals board "death squads killing patent rights" given the likelihood of invalidating patent claims (83% of claims challenged were invalidated, and 95% of claims challenged and reviewed were invalidated at the time of Judge Rader's quote; the statistics have slightly improved since then).

This is an awesome result if you are a patent infringer.  Despite all of the concern about China stealing US intellectual property rights, the Supreme Court just handed Chinese companies all the ammunition they need to produce products that steal US technology without worrying about patent suits.  A quick trip to the PTAB and the patent that protects the technology that company would like to infringe can disappear without any of the due process protections American inventors have come to expect from review by an actual Senate-confirmed Article III judge.  No judge, no jury.  Just a group of political appointees running roughshod over patents.

The Court found solace in the right to appeal a PTAB decision to the Federal Circuit Court of Appeals.  However, the Federal Circuit is already so overwhelmed with such appeals that it has taken to issuing summary affirmances of the PTAB decisions (in fact, Oil States itself was an appeal of a single word decision by the Federal Circuit:  "Affirmed").  So while there is a route for judicial appeal, it comes after the property right has already been stripped by the administrative agency.  A good analogy would be a house.  Imagine that you purchase a house, make the mortgage payments for a few years, and suddenly find that a group of political appointees says you never owned the house in the first place.  This is now the status quo for inventions.

The Supreme Court first found that patent rights are different than other property rights.  Unlike houses, patent rights are now considered to "fall[] squarely within the public-rights doctrine".  Because patents are a matter between the federal government and an individual or company, and not between two individuals or companies, they are considered "public rights" and as such susceptible to revocation by the government.  This decision comes in a context where the Supreme Court is considering whether to decide if state governments can simply seize property they suspect was used to store or transport illegal drugs.  If the Court was looking for a way to allow the government to seize patents but still protect the right of citizens to due process before the seizure of private property, the public/private rights distinction provides a roadmap.  Without that context, it is difficult to imagine how the Court would have required a real court to review seizures of property while allowing political appointees to review seizures of patents.

The Court's holding is ultimately summarized by a pithy quote from the case:

Curiously, the Court also recognizes that "inter parties review involves the same interests as the determination to grant a patent in the first instance" but does not address how repeated IPR challenges can keep a patentee from ever effectively enforcing the patent.  Because Article III courts can, and regularly do, stay litigation over infringement while an IPR request is pending, a sufficiently funded infringer can keep a patent in legal limbo essentially for the life of the patent.*  Presumably this is something that a functioning legislative branch would want to fix, particularly given the concern over Chinese theft of US patent rights.

Perhaps the worst aspect of the decision was a doubling down of the uncertainty involved in patent ownership:  "We do not address whether other patent matters, such as infringement actions, can be heard in a non-Article III forum."  In theory, this opens the door for the taking the patent system entirely out of the courts.  While that case was not before the Court, the curious need to mention that limiting infringement actions to administrative proceedings before the patent office might be constitutional is yet another piece removed in the Jenga game that the patent system has become.  At some point, having this level of uncertainty is going to tip companies entirely out of the patent system and into a trade secret system (which now has a federal statute protecting it).

The Court does leave several options open for additional challenges:

The split of judges on the Court is interesting.  Justices Breyer, Ginsburg and Sotomayor (two Clinton appointees and an Obama appointee) go out of their way to clarify, in a concurring opinion, that "the Court's opinion should not be read to say that matters involving private rights may never be adjudicated ... by agencies."  In other words, there are three votes that are open to an argument allowing private property rights such as ownership of real estate to be adjudicated by political appointees and not by a jury.  The Chief Justice and Justice Gorsuch (Bush 43 and Trump appointees respectively) dissented from the decision.  We can conclude there are three justices willing to extend Oil States to additional private property and two justices who back Article III protections for private property (since they backed it for patents).  It would take only half of the four justices who did not opine on Article III applicability to private property rights to agree with Breyer, Ginsburg and Sotomayor, and jury trials for taking certain private property may disappear.  In my opinion, the likelihood of such an outcome is vanishingly small, as it would render the Seventh Amendment toothless.

The rapidity of change in patent law is a good reason (if you needed another one) to use an experienced patent lawyer.  A properly written and prosecuted patent application will weather the rise in uncertainty better than one poorly written and prosecuted.
___

* Technically the same party cannot raise the same issue at the PTAB and in court, and parties are not supposed to collude to prevent this "estoppel" from attaching.  As a practical matter, however, it is not uncommon to see a one entity being sued while another entity puts the patent in litigation into IPR.  This can be done through entities (Unified Patents, for example) or by the first company doing favors for other companies by putting patents into IPR in hopes (which usually are realized) that the other company will put patents the first company is being sued for into IPR as a way of returning the favor.  Congress could easily eliminate the risk of such abuse by adopting simple legislation, such as "a patent may not be invalidated in court or administrative proceedings based on issues raised in any previous administrative proceeding."  This would greatly level the playing field, as currently, every patent defendant can raise the identical issue in every court.  Such legislation might be challenged on due process grounds, claiming that there is a constitutional right to defend against infringement suits on the same grounds as another defendant previously raised and lost.  The Oil States court's heavy emphasis on the deference to be granted Congressional rules on review of patents make such a challenge more difficult.

Friday, April 20, 2018

Very Quick Look: Another Reason You Need to Use a Patent Lawyer

There are plenty of "gotchas" that inventors face.  We will list some of these in a future post, but this alone should be enough:  Simply leaving out a line in the patent application wiped out a patent that E*Trade was allegedly infringing.  There will never be a trial on the merits because the lawyers made one mistake that invalidated the patent.

The Federal Circuit opinion quoted the language actually used in the application and that doomed it:

The present application is a continuation of allowed U.S. patent application Ser. No. 10/720,728, entitled “SYSTEM AND METHOD FOR DELIVERING REMOTELY STORED APPLICATIONS AND INFORMATION” filed on Nov. 24, 2003 now U.S. Pat. No. 7,502,838, the di[s]closure of which is hereby incorporated by reference in its entirety. CROSS REFERENCE TO RELATED DOCUMENTS Priority is herewith claimed under 35 U.S.C.§ 119(e) from copending Provisional Patent Application No. 60/153,917, filed Sep. 14, 1999, entitled “METHOD AND SYSTEM FOR DELIVERING APPLICATIONS IN CLIENT/SERVER ENVIRONMENT,” by Louis M. Franco et al. The disclosure of this Provisional Patent Application is incorporated by reference herein in its entirety.
Dennis Crouch's Patently-O helpfully gives an example of the language that would have worked:

The present application is a continuation of allowed U.S. patent application Ser. No. 10/720,728, filed on Nov. 24, 2003 which has issued as U.S. Pat. No. 7,502,838, which is a continuation application U.S. application Ser. No. 09/599,382 filed Jun. 22, 2000, which has issued as U.S. Pat. No. 6,687,745 on Feb. 3, 2004, and which claims the benefit of Provisional Patent Application No. 60/153,917, filed Sep. 14, 1999.
Professor Crouch notes that just reading the statute and regulations would lead one to believe that the priority claim should have been valid, but that the courts have interpreted the statute and regulations in a non-obvious way.

If you can't look at the two different priority claims above and know why one works and one doesn't, you need a patent lawyer.

This is far from the first time that companies using lawyers get caught in "gotchas" -- for example, Roche's predecessor left language out of an assignment agreement that cost it a patent worth tens or hundreds of millions of dollars.  However, when an inventor uses a lawyer, there are two outs:  First, pick a good lawyer and the mistakes are far less likely to happen.  Second, part of the legal fee should cover malpractice insurance premiums, so as long as you confirm that your lawyer has appropriate coverage, if they get it wrong you aren't left high and dry (although it is important to note that few malpractice policies are going to cover very high dollar amount patent malpractice claims).

As long as you know what you're doing, there is no reason you can't draft your own specification, draft your own claims, even draft the whole application.  However, whether you know what you're doing or not, there is a reason to have a good patent lawyer take a look at what you've drafted to make sure it threads all of the needles that patent applications need to thread.

Tuesday, April 17, 2018

California Law That Forbade Posting of Actors’ Ages Struck Down by Federal Court

A federal district court judge has struck down California’s AB 1687, a law which forbade a popular film industry website from publishing certain truthful age-related information about actors, finding it in violation of the First Amendment.

In 2016, IMDb.com, Inc. sued the State of California to challenge the constitutionality of the law.  The Screen Actors Guild-American Federation of Television and Radio Artists intervened as a defendant in the suit.  The defendants maintained that the law was necessary to combat rampant age discrimination in the Hollywood film industry.  In its order granting IMDb.com, Inc.’s motion for summary judgment, the court held that while curbing age discrimination is certainly a compelling interest, “regulation of speech must be a last resort.”

One of the defendants’ contentions was that the publication of facts about ages of people in the entertainment industry can be banned because these facts “facilitate” age discrimination.  The court rejected this, noting that such an argument, if successful, “would enable states to forbid publication of virtually any fact.”  Moreover, the United States Supreme Court has said on multiple occasions that the fact that a third party could misuse truthful information is almost never sufficient to justify suppression of that information. 

The court also held that AB 1687 cannot survive strict scrutiny.  While the State certainly has a compelling interest to combat age discrimination, the law was not narrowly tailored to achieve that interest.  For one, the law was uncerinclusive because it bans only one kind of speaker from disseminating age-related information, leaving all other sources of that information untouched.  The law was also overinclusive because it requires IMDb not to publish age-information of all those who request that their information not be published, including those who are not protected by age discrimination laws.

This case serves as a reminder that courts cannot and will not protect Americans from the truth; truthful statements are constitutionally protected.  Furthermore, the court’s ruling implies that the publication of truthful information on a platform that employers can access is not unlawful, even if an employer uses the information to discriminate. 

Authored by Brandon Hamparzoomian