IP Law Alert : Intellectual Property Lawyers & Attorneys : Gibbons Law Firm : Copyrights, Patent Infringement, Unfair Competition

Also, as of November 2011, the SIPO of the PRC and the United States Patent and Trademark Office (“USPTO”) extended the Patent Prosecution Highway Pilot Program between the two nations. Under the Patent Prosecution Highway, “an applicant receiving a written opinion or an international preliminary examination report from either the SIPO or the USPTO that at least one claim in a PCT application has novelty, inventive step, and industrial applicability may request that the other office fast track or expedite examination of corresponding claims in corresponding applications.”

Moreover, China amended the Patent Law of the PRC in 2009 to revamp the Chinese national patent system. The impact of the amendment to the Patent Law is two-fold. First, it enhances China’s position to meet the goals highlighted above. Second, it attempts to align Chinese patent practice with much of the rest of the world. For example, in the recent amendment, China has retained a utility model patent, which is available in many countries worldwide with the United States being one exception. The utility model patent provides protection for a product’s shape or structure or combination thereof with a 10-year term from its filing date. Utility model applications are favorable to establishing rapid patent rights because they are cost effective, there is no substantive application examination, and rights are normally granted within one year from the filing date. The 2009 amendment to the Patent Law also provides rules and regulations for exploiting these utility model patents both alone and in conjunction with a more traditional invention patent. While traditionally not exploited by foreign filers, the utility model is utilized by many Chinese entities. For example, a Chinese patent infringement case based on a utility model patent granted to Chint Group resulted in a 335 million yuan ($45 million) verdict in a court of first instance against rival Schneider Electric of France. Thus, a foreign corporation considering entry into China should take into account the advantages of a utility model patent, especially for important products.

In addition, many changes were made to the Patent Law to assuage the fears of foreign corporations in conducting technology focused business with China. For example, China is a first to file system, and a recent amendment changed its patent law to one of absolute novelty. Thus, often feared patent hijacking, whereby a third-party could theoretically seek patent protection in China for another’s invention first disclosed outside China is now illegal under Chinese law. Overall, the 2009 amendments to the Patent Law have augmented China’s position as a trade partner and provide a basis to encourage foreign investment in technology and innovation in China.

In sum, China is driving its intellectual property system to grow at an astounding rate. While this presents great opportunity, the relative newness, complexity, and evolving nature of Chinese intellectual property laws, rules and regulations may create certain risks. In the next 10 to 20 years the Chinese intellectual property system will likely undergo substantial development and change. Thus, when evaluating whether to invest its technology and intellectual property in the Chinese market, a foreign entity should not only consider the current state of China’s intellectual property laws, rules and regulations, but should also take into account likely future evolution of the Chinese intellectual property system. The challenge is to help clients become competitive and successful in doing business in China by developing a solid intellectual property strategy that assists navigation of the Chinese legal, regulatory and business environment.

John J. Cahill is an Associate in the Gibbons Intellectual Property Department. William A. Hector, an Associate in the Gibbons Intellectual Property Department, co-authored this post.

The issue before the district court hinged on standing to sue under 35 U.S.C. § 271(e)(2)(A), i.e., whether a cause of action was made out with respect to Defendants’ proposed uses relative to the patents’ claims. The relevant language of 35 U.S.C. § 271(e)(2)(A) is:

2) It shall be an act of infringement to submit -

(A) an application under section 505(j) of the Federal Food, Drug, and Cosmetic Act or described in section 505(b)(2) of such Act for a drug claimed in a patent or the use of which is claimed in a patent.

Before the Delaware District Court, Defendants moved to dismiss for lack of subject matter jurisdiction, arguing that the Hatch-Waxman Act created an infringement claim only if the generic manufacturer sought approval for the specific methods of treatment claimed by the patent. According to Defendants, Plaintiffs case under 35 U.S.C. § 271(e)(2)(A) lacked merit because of the generics’ non-infringing uses. The district court agreed with Defendants and Plaintiffs appealed.

In oral arguments before the Federal Circuit in November, Plaintiffs argued that the mere filing of an ANDA for rosuvastatin calcium tablets was an act of infringement under the Hatch Waxman Act even though the ANDA was for non-infringing uses of the drug. Plaintiffs also urged that there was enough evidence in the generic manufacturer’s proposed labeling and elsewhere to support the likelihood of induced infringement.

Chief Justice Rader and Justice Moore pointed out several times during oral arguments that in order for 35 U.S.C. § 271(e)(2)(A) to apply, it requires that the ANDA seek approval for the use of a drug which is claimed in a patent. In this case, the ANDA does not seek approval for a patented use. The Justices cited the Warner-Lambert Co. v. Apotex Corp. decision, which held that “where a product has substantial non-infringing uses, intent to induce infringement cannot be inferred even when the [alleged inducer] has actual knowledge that some users of its product may be infringing the patent.” Warner-Lambert Co. v. Apotex Corp., 316 F.3d 1348, 1365 (Fed. Cir. 2003). “[I]nducement requires that the alleged infringer knowingly induced infringement and possessed specific intent to encourage another’s infringement.” DSU Med. Corp. v. JMS Co., 471 F.3d 1293, 1306 (Fed. Cir. 2006) (en banc in relevant part). Plaintiffs argued that Warner Lambert did not apply to the facts at hand.

Chief Justice Rader also indicated to Defendants’ counsel that due to the limited uses in the ANDA, there was a substantial likelihood the generics would induce infringement. He raised the question as to whether the generic companies could win an inducement to infringement suit.

A decision for AstraZeneca would strengthen method of treatment patents for prescription drugs and expand the reach of Hatch-Waxman. Gibbons P.C. will stay tuned to this development.

Charles A. Gaglia, Jr. is Counsel to the Gibbons Intellectual Property Department.

Comment

Consider whether there might not be a different result if the Examiner in In re Klein had rejected the claims based on a reference, such as Greenspan, disclosing a vessel having a stationary, water-tight partition intended to separate water from a solid in combination of another reference, such as Roberts, teaching a vessel having movable partitions intended to separate material retained therein. The Examiner’s argument could be that it would be obvious to modify the vessel of the primary reference (e.g., Greenspan) to make the partition movable if it were desired to change the ratio of the two substances contained in the vessel prior to filling. This argument could possibly be compatible with the Supreme Court’s decision in KSR. KSR Int’l Co. v. Teleflex, Inc., 550 U.S. 398 (2007).

Non-analogous art? The Federal Circuit found the references non-analogous as discussed above. It is true that the vessel claimed by Mr. Klein is filled by a consumer who can change the ratio of sugar and water, where the vessel described, for example, in Greenspan is filled by a manufacturer. However, in both instances, the partition is moved prior to filling and neither vessel has the capacity to vary the concentration of the “ultimate” solution once it is filled. Thus, it is a close call whether the art is analogous.

The foregoing comments are intended as food for thought. Mr. Klein’s invention is certainly convenient for a user and he may well have other secondary considerations in his favor as were as noted by the Federal Circuit. Id. at 1352. Hence, he may well prevail at the end of the day.
 

R. Hain Swope is Counsel to the Gibbons Intellectual Property Department. Andrew P. MacArthur, an Associate in the Gibbons Intellectual Property Department, co-authored this post.

Hence, were there no other legal constraints on the exportation of the necessary patient samples from the U.S. and importation into another country, the method claims could be freely practiced abroad. The potential value of such method claim protection should be carefully weighed before embarking on an extensive foreign patent program.

R. Hain Swope is Counsel to the Gibbons Intellectual Property Department.

During the pendency of the district court proceedings, HemCon requested reexamination of the ’245 Patent with the United States Patent and Trademark Office (“PTO”). The examiner, in rejecting all of the claims, initially adopted a different claim construction than that of the district court. The examiner also determined “biocompatible” meant “low variability, high purity, and little or no detectable reactivity.” Further, the examiner noted that the district court’s construction was inconsistent with the numerous dependent claims that required a specific elution test score of zero, one or two.

Marine Polymer argued that the district court’s interpretation should be adopted and “biocompatible” should be construed to mean “no detectable biological reactivity.” Marine Polymer then cancelled the six original dependent claims that had specifically required an elution test score of 1 or 2. The language of the remaining claims, including all of the claims HemCon had been found to infringe by the district court, was unchanged.

Intervening rights do not apply where the accused product “infringes a valid claim of the reissued patent which was in the original patent.” 35 U.S.C. § 252. Therefore, intervening rights are available only if the original claims have been substantively changed, and in determining whether substantive changes have been made, the court must discern whether the scope of the claims has changed, not merely whether different words are used.

The Federal Circuit found that in narrowing the definition of “biocompatible” by argument, all of the remaining claims of the ’245 Patent had been substantively narrowed thereby substantially changing the scope of the claims. The Federal Circuit therefore determined that absolute intervening rights under the statute applied in this case. The specific products made before the date of reissue, which infringed the new reissue claims, were absolutely free of the reissued patent and may be used or sold after the date of the reissue without regard to the patent.

Under the Patent Statute, there are two types of intervening rights: (1) absolute intervening rights, which bar claims for infringement based on specific products that were manufactured before the reissue or reexamination; and (2) equitable intervening rights, which bar claims for infringement for new products and newly manufactured versions of prior existing products made after the reissue or reexamination. See 35 U.S.C. §§ 252, 307.

The Federal Circuit remanded to the District Court to determine whether the fact based doctrine of equitable intervening rights applies. The doctrine of equitable intervening rights allows the court to permit the continued manufacture, use, or sale of additional products covered by the reissued or reexamined patent when the accused infringer made, purchased, or used identical products before the reissue or reexamination date. It also protects a newly created product that was not of a type produced before the reexamination if the accused infringer made substantial preparations for manufacture of the product before the reissue or reexamination.

Charles A. Gaglia, Jr. is Counsel to the Gibbons Intellectual Property Department. Erich M. Falke, Counsel to the Gibbons Intellectual Property Department, co-authored this post.

Some predict that application and claim quality will decrease with the “race” to file applications. However, the quality of European patents under a similar first-to-file system has shown that this will unlikely be the case. Moreover, 35 U.S.C. §102, as revised, provides a unique protection for inventors that publish or publicly disclose their invention less than one year before filing their patent application. Under this new standard, third party patent application filings or publications that occur after the inventor’s publication or public disclosure will not be invalidating prior art. A company or inventor that makes the decision to pursue a patent in the United States only and in no other country, and who wants to obtain the earliest possible priority date, may consider publishing their invention or an embodiment of their invention on their website first. This will provide the practitioner and the client time to prepare a thorough patent application to submit to the Patent Office. One point of caution, though, is that this provision is unique to U.S. patent law and will cause the applicant to forego any opportunity to file for patent protection on the same invention in foreign countries.

One element of uncertainty that will be created by this Act, at least for the next five to ten years, is the definition of invalidating prior art. Prior to this reform, decades of case law had been established to define what was necessary for prior art to be invalidating because it was “known,” “used,” “patented,” “described in a printed publication,” “in public use” or “on sale.” However, 35 U.S.C. §102, as amended, has introduced a new standard of “otherwise available to the public.” The statute does not define this phrase and it will take time for the Federal Circuit to sort out. While this Act has created some certainty as to what may qualify as invalidating prior art with respect to the invention date, it has introduced a new level of uncertainty as to what types or quality of publications or events may qualify as invalidating prior art.

While first-to-file reform may be one of the most significant changes in U.S. patent law provided by the America Invents Act, other provisions relating to patent validity, prosecution and litigation will also have significant effects, and will be discussed in later Gibbons P.C. postings.

Christopher H. Strate is an Associate in the Gibbons Intellectual Property Department.

• Post-Grant Review Proceedings.

(i) Replaces “optional interpartes reexamination” with “interpartes review” to be conducted by Patent Trial and Appeal Board within 1 year. The threshold showing is “reasonable likelihood” that the petitioner will prevail based on published prior art. The estoppel standard is “raised or reasonably could have raised” before the USPTO and the courts. Appeals are directed to the Federal Circuit.

(ii) Establishes a “post-grant review” before the Patent Trial and Appeal Board to review validity of issued patents within 9 months of grant on any patentability issue. The threshold showing is "more likely than not" that at least 1 claim is unpatentable. The estoppel standard is “raised or reasonably could have raised” before the USPTO and the courts.

(iii) Establishes an 8-year transitional post-grant review proceeding for review of the validity of business method patents for financial products or services by defendants accused of infringement.

(iv) Allows a pre-issuance submissions procedure for published prior art but not public, use, sale or improper inventorship, which current 35 U.S.C. 122(c) continues to provide for. Submission must be made before the earlier of (a) allowance, or (b) later of 6 months after the date of application publication or the date of first rejection.

• USPTO's Fee Setting Authority and Funding. Provides the Director with fee setting authority to cover operating and administrative costs. This authority is subject to a 7 year sunset clause. Fees in excess of appropriated amounts still require authorization under the Appropriations Act.

Practitioners should take note of the effective dates for the key provisions as they differ. The “first-inventor-to-file” provision takes effect 18 months from the passage of the Act for patents and applications with a claim having an effective date on or after the bill is passed. Post-grant review proceedings such as inter partes review, post-grant review, certain business method review, and pre-issuance submissions, become effective 1 year after enactment and applies to patents issued before, on, or after that effective date. The USPTO's fee setting authority takes effect immediately upon passage of the Act.

Luis J. Diaz is a Director in the Gibbons Intellectual Property Department. Lisa H. Wang, an Associate in the Gibbons Intellectual Property Department, co-authored this post.

IP Registration Firms
IP registration firms generate a list of IP applicants and owners from public notifications of filings for trademarks, domain names, and patent applications. These firms then contact the applicants and owners with letters or e-mails bearing official-looking logos and titles seeking fees to “register” the IP property in the registration service’s private database. The firms do not explain the benefits of such a “registration” and often none exist, that is customers may not gain any legal rights or advantages as a result.

The letters from the IP registration firms identifies the IP property using details obtained from public notifications in a manner intended to give the correspondence an air of propriety. The letters often bear a name and header that are confusingly similar to those of official agencies. Thus, the documents are particularly provocative because it appears to have been issued by a legitimate, official organization, such as the World Intellectual Property Organization (WIPO). This appearance may coax the recipient to pay the fee or to forward the letter within a corporate entity for payment. WIPO addresses this issue on its website - Warning: Request for Payment of Fees - and includes links to examples of over 30 letters from IP registration firms. WIPO advises that these organizations have no connection to WIPO, and these organizations are unrelated to the processing of patent applications filed under the international Patent Cooperation Treaty. Other national IP offices that post similar warnings on their websites about unsolicited mail from IP registration services include the Australian, Austrian, Swiss, German, European, Great Britain, Israel, and Japanese patent offices.

All requests to register your IP assets, especially those including demands for fees, should be carefully reviewed to evaluate whether the solicitation is valid. One way is to visit the WIPO website and consult its listing of offenders and sample correspondence. Before entering into a contract with an invention promoter/ promotion firm, visit the USPTO and FTC inventor fraud prevention websites identified above.

Frank A. Bruno is a Director in the Gibbons Intellectual Property Department. Richard J. Katz, Counsel to the Gibbons Intellectual Property Department, co-authored this post.

Regarding Microsoft’s alternative argument that a preponderance standard should be applied at least to evidence before the fact finder that was not before the Patent Office, the Court found that its pre-codification cases never “adopted that kind of fluctuating standard of proof . . . .” Slip Op. at 15. Plus, the Court found there was nothing in the text of s 282 to suggest that Congress meant to enact a sliding scale for the standard of proof. Slip Op. at 16.

In his concurrence, Justice Breyer called for special jury verdict forms that separate legal conclusions from factual findings. He called on courts to keep the “standard within its proper legal bounds by separating factual and legal aspects of an invalidity claim,” Breyer concurrence Slip Op. at 1. Separating these aspects might keep non-novel, obvious subject matter from improperly retaining legal protection.

This decision adds certainty to patent enforcement. Patentees’ right to exclude is secure in all but those patents which are susceptible to invalidity challenges meeting the clear and convincing standard, and accused infringers will have to continue to formulate invalidity challenges which meet that standard.

Richard J. Katz is Counsel to the Gibbons Intellectual Property Department.

Centillion Data Systems, Inc. accused Quest Communications International and other Quest companies of infringing U.S. Patent No. 5,287,270. The claims-in-suit are directed to a system for presenting cost-of-service information to a customer, and recite server-side elements (a storage means, a data processing means, a transferring means) and a client-side element (a personal computer data processing means). Quest’s customer phone call transaction records are stored on the server-side storage means, and the data processing means generates a summary report as specified by the customer. The transferring means transfers the transaction records and summary reports to a customer, where the personal computer data processing means perform additional processing on the transaction records.

Centillion held that the customer “puts the system as a whole into service, i.e., controls the system and obtains benefit from it.” Centillion at 10. It did not matter to the court that the back-end processing was “physically possessed” by Quest and not the customer. What did matter to the court was that “but for the customer’s actions, the entire system would never have been put into service.” Id. at 11. The court reasoned that “[b]y causing the system as a whole to perform [server-side] processing and obtaining the benefit of the result, the customer has ‘used’ the system under [35 U.S.C.] § 271(a).” Id. at 10. The Federal Circuit held that the district court erred as a matter of law when it concluded that no single party could be liable for use of the patented invention. Id. at 11.

Prior to this decision, a patentee would likely have thought it necessary to name both a web-based enterprise and the enterprise’s third-party server farm host as joint infringers. By extending Centillion, the patentee could now assert that the web-based enterprise alone controls the claimed system and obtains benefit from the system. Naturally, patent claims are better drafted to capture a single class of infringers, and patent applicants would be wise to keep this in mind as they review the claims of their patent applications drafted during prosecution of the patent.

Richard J. Katz is Counsel to the Gibbons Intellectual Property Department.

Part 2 of the Guidelines addresses examination issues such as functional claiming as they relate to “computer-implemented inventions.” In an invention claimed using functional language, the so-called “written description” requirements of 35 U.S.C. § 112, 1 are not met when patent specification fails to “sufficiently identify how the invention achieves the claimed function.” For computer-implemented inventions, the Guidelines specify that a “determination of sufficiency “must be applied both to the disclosed hardware as well as the disclosed software. A sufficient disclosure will describe “the computer and the algorithm (e.g., the necessary steps and/or flowcharts) [ ] in sufficient detail such that one of ordinary skill in the art [ ] would know how to program the disclosed computer to perform the necessary steps.” With reference to prior art rejections of computer-implemented inventions based on 35 U.S.C. §§ 102, 103, Part 2 warns that “functional claim language that is not limited to a specific structure [will cover] all devices that are capable of performing the recited function.” For example, if the structure claimed is simply a “computer,” any known computing device capable of performing the claimed function will satisfy this claim element. Part 2 also notes that claims that are simply directed to a computer and claim no more than the implementation of a known function on a computer will not be patentable.

The Guidelines break little new ground with regard to current examination practice. It appears that they may be directed to emphasize the examination of patent claims for compliance under 35 U.S.C. § 112 early on during prosecution, and to provide a template for examination that can facilitate dialogue between the examiner and the patent applicant with regard to indefiniteness issues. Part 2 of the Guidelines complements Interim Guidance for Determining Subject Matter Eligibility for Process Claims in View of Bilski v. Kappos, issued by the USPTO on July 27, 2010 as a guide to subject matter eligibility for process claims under 35 U.S.C. § 101.

Thomas J. Bean is Counsel to the Gibbons Intellectual Property Department.

As reported in the October 7 press release, the USPTO believes that in order to provide a “balanced approach to measurement of examination quality,” these measurements will “address errors and positive action taken in both allowance and rejection, as well as matters such as search and restriction.,” and will complement other activities including the USPTO’s pendency initiatives, Patent Examiner Technical Training Program, and proposed Three-Track Examination initiative.

The USPTO intends to report the composite quality metric as a component of its "Patent Dashboard." It is expected that the metric will be reported to the public at the middle and end of each fiscal year, although some of the factors may be reported on a quarterly basis. It will be interesting to see what, if any, impact the new quality procedures will have, in particular in combination with the revisions made to the patent examiner count system adopted in September 2009. In the meantime, the USPTO encourages interested members of the public to comment on their experience with all of these initiatives via its “Feedback Channel” blog.

Thomas J. Bean is Counsel to the Gibbons Intellectual Property Department.

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"American economic security is threatened in a way Congress has failed to recognize. Our biggest challenge is stemming the outflow of jobs, talent, technology and manufacturing. All four losses drain away national economic power. All result from the same cause: chronic under-financing of our innovation infrastructure. Although invisible, it is our nation’s greatest asset. Strengthening it can assure our prosperity and restore our technological leadership. We urgently need to increase invention and make new products that Americans and others will need, want and buy. To increase innovation, however, we must increase investment.

And it is needed immediately because we are already losing our international lead in technology and our global competitiveness. In a recent study, the United States came in dead last of the 40 top technology countries in the world in strengthening its innovation infrastructure over the last decade. Foreign inventive activity has surged to the point where filings in the United States Patent and Trademark Office by foreign entities now equal filings by Americans. Filings in the Chinese patent office by Chinese companies show exponential advances in twelve out of twelve top technologies.

Public finance for increased investment in innovation, however, is not available. It has been exhausted by the cost of two, concurrent and continuing wars and a decade of fiscal mismanagement, saddling us with a huge annual debt payments and recent annual budget deficits of many hundreds of billions of dollars, and this year of $1.5 Trillion. In this recession when tax revenues are down, obtaining even a modest increase in public R&D funding will be difficult, if not impossible. Actually, the challenge will be to avoid cuts in government R&D funding. The Administration recently instructed all agencies except the Defense Department to plan for a 5% reduction. At best, agency budgets will be frozen. Anyway, private investment has always supported much R&D by research-based companies, universities, and other innovators. Only increased private finance, then, can fund the needed increase in research and development. But how do we incentivize increased private investment in innovation? The answer is simple: strengthen the intellectual property systems – patents, trademarks, trade secrets, copyright, but especially patents. What we most need is faster, sounder patent grants, plus swifter, stronger, subtler court enforcement. After all, no one can be expected to invest without confidence in a return. Patents, and the protection of investment they afford, provide the only incentives strong enough to cause a big enough increase in private investment in innovation.

A primary engine of American recovery and resurgence therefore will have to be an improved patent system. Without that, both short-term recovery and long-term prosperity will be stunted. By “system”, I mean primarily the Patent and Trademark Office and the Federal courts, which, along with the International Trade Commission, afford the only mechanisms to enforce patent rights.

Using patents to spur both economic and technological advances is hardly a new idea. They have been a primary engine of economic growth and technological progress since 1790 when the First Congress passed the first Patent Act. Unlike today’s Congress, the founders knew patents promote national prosperity, economic growth, and technological progress. Patents have promoted repeated surges of technological advance, the most recent in the information technology revolution of the 1990’s. Notice that this was the last time our country had a balanced budget. And now, bio-tech shows promise of another surge.

Note, too, that if we strengthen the patent system, the job creation needed if our country is to rehire the 15 million unemployed workers, half from the recent recession, and add 13 million new jobs by 2018 to absorb a growing labor force will naturally follow. So will migrations of the technologically talented. If more R&D is done here, they will come here and stay, at least if we fix our broken visa system. Otherwise, foreign talent studying at our research universities will all return home. Our own leading technologists will also go elsewhere, just as is now happening with U.S. companies such as Intel and Applied Materials. Both will soon open large research laboratories headed by their top American researchers, not in California but in China.

A few commentators, despite all evidence, still assume the nation could afford a large increase in public R&D funding. Others assume that even though public revenue is unavailable, the needed R&D can be funded by company revenues. But that is not realistic. Most innovative companies are new and small. Many do not yet make profitable products. Some do not yet sell any products. Yet the majority of new technologies and 75% of new jobs are now being created by small, young, companies. Therefore, the firms with the least revenue to support their R&D are those most needing and deserving private investment. Biotech start-ups are only one example. Without it, many of them will die. With it, medical science, public health and national wealth will surge. Besides, 2/3 of the economic growth and ¾ of the new jobs since WWII came from innovation, and technology-related jobs pay 2.5 time average salaries.

Well, what is wrong with the present patent system? First, and foremost: delay -- health and welfare-diminishing, wealth-reducing, job- destroying, technology-impeding delay. In some technologies it now takes, at least, 4-6 years even to get a patent. The product life-cycle is often shorter than that. For all technologies the average wait is three years. That is two times longer than in 1990. Too long! And it is going up. Even worse, because nearly all applications must by law be published at 18 months, foreign competitors can pirate inventions for years before the patents issue, for until then patent owners have no rights against infringements whether produced here or imported. No wonder foreign competitors minutely monitor the PTO website! The story is told that thousands of Chinese engineers sit at computers reading U.S. patent applications rather than doing research in labs.

Why such extensive delay? Because for two decades the patent office has been grossly underfunded. And it is still losing ground. It operates entirely on user fees paid by applicants and patent owners -- fees that were set by Congress six years ago -- at levels that do not support necessary operations. The PTO lacks sufficient numbers of examiners, especially experienced examiners, and modern computer systems. Imagine, the government’s own technology agency using decades-old computer technology! These are the principal reasons delays are so long.

The patent system is failing primarily because the patent office is failing. In a single, blunt word, the patent office has become dysfunctional. Applications have tripled, and the PTO simply cannot keep up. Over 735,000 applications sit unread in a warehouse in Alexandria, Virginia. Note that the warehoused applications equate to almost two years worth of filings. Although some 490,000 applications are being examined, their progress is far too slow. And every year another 460,000 more are filed. Of the 1.2 million applications currently awaiting final disposition, only about 350,000 complete the examination process each year. So the backlog, already intolerable, is actually growing by 110,000 applications per year. It is now four times the backlog of 1990.

There are too few examiners – mostly young engineers and scientists -- and too few with experience. Nearly one third of the examiner workforce has been at the PTO for less than 3 years. But it takes at least 3 years for new examiners to become both competent and efficient. Faulty decisions by inexperienced examiners, like delay itself, harm the system and therefore innovation; such examiners allow patent claims they should reject, blocking innovation, and reject ones they should allow, causing further unnecessary delays and costs for Board appeals. And the lack of quality assurance undermines the presumption of patent validity provided by law and also the credibility of patents in the eyes of the media, academia and the Congress.

The trial courts too are hobbled. Most lack sufficient numbers of judges to expeditiously enforce good patents and invalidate bad ones. Almost 100 judicial vacancies remain unfilled, the highest vacancy rate in the history of the country. Most of these have gone unfilled for many, many months, and some for years. That means the courts are normally 12% understaffed. And almost 100 additional district and circuit judgeships are desperately needed but have yet to be authorized by Congress despite repeated requests by the Judiciary for two decades. So, the courts struggle with almost 200 too few judges because of two decades of Congressional neglect, just like the Congressional neglect of the patent office.

The result of course is long litigation delays that diminish the value of patents and add uncertainty that impedes invention and economic growth. Most patent infringement cases now take 3-5 years to verdict, with each appeal adding at least another year. Like patent examinations, litigations are simply too slow both for the pace of technological advances and for domestic and global markets. Delay must be cut at least in half, and soon. Because of delays caused by chronic underfunding of the Judiciary, innovation incentives are shrinking just when the nation needs them to be growing.

The gears of our patent system seem seized up. Ironically, Congressional inaction is discouraging private action. Obviously we need to strengthen and speed up both examinations and litigations, but only public funds can jump start the process. How so? Although PTO operations should remain financed by user fees, it needs an emergency transfusion of public money to overcome its warehouse backlog of 735,000 and equip it to keep up with the annual influx of 460,000 new applications. It needs thousands of additional examiners and salary increases to retain experienced, quality examiners. Most of all, it needs new computer systems and new space to house the existing workforce, as well as new hires. At present, two thousand of the six thousand examiners work at home, as the PTO lacks sufficient workspace for one-third of its workforce. Thus, even if Congress finally raises the fees, which it should, resolving the current crisis still requires a large infusion of public money. That is because much of the fee revenue arrives only years after the patents issue as maintenance fees. But money is needed now. Deferral will have corrosive consequences that cannot be undone. Therefore, I suggest the following emergency steps:

First, a one-time capital investment in the PTO of one billion dollars. It could be spent over the next several fiscal years, but it should be authorized and appropriated promptly. That should be enough to replace the IT systems, which the Director correctly calls “moribund,” and secure work space for the examiners. It probably could also pay for new hires to beat down the backlog.

Second, the Congress must guarantee by law that the PTO can spend an amount equal to the user fees paid by patent applicants and holders. Between 1992 and 2010, Congress diverted $759 million in fees paid to the PTO by patent holders and applicants and directed them instead to other governmental activity. In this year alone, Congress will siphon off an estimated $230 million in PTO user-paid fees. Essentially, PTO users have unwittingly been paying an additional tax subsidizing governmental expenditures that have nothing to do with PTO functions. Permanently ending this Congressional practice, called “fee diversion”, is a necessary precondition to reviving the PTO. If Congress continues spending user fees for other purposes, raising fee levels will have little effect.

But there is a Catch-22. If public R&D funding is already “maxed out” and other public funding otherwise already committed, then how could Congress find a billion dollars for the PTO? Well, when Congress wishes, it freely spends many billions of dollars, such as the $700 billion it provided to Wall St. I suggest only $1 billion, once. Just $1 billion, spread over several years, but provided soon.

Is my suggestion realistic? Yes, if Congress were to follow proper priorities. This public investment is absolutely necessary to our country’s short-term and long-term prosperity.

Well, would such capital investment fix everything that is wrong with the patent office? Maybe not everything, but certainly all the big problems. And, without it, other reforms will surely not suffice. Although other remedial steps are also necessary, most have already been started, at least on a pilot basis, by the new Director, David Kappos. But without an immediate, large, one-time dose of public funding, even his very sound leadership initiatives cannot produce the needed results and do so fast enough. In fact, despite his initiatives, the examiner corps is still shrinking, losing 500 examiners in the last several years. A net loss is again predicted for this year. So just when the patent office needs more examiners, it has fewer.

In his recent testimony before a House Appropriations Subcommittee, Director Kappos admitted that it will take many years to achieve timely examinations even if in the next two fiscal years Congress allows him to hire 1,000 new examiners per year. But since each year 500 leave, the total gain would only be 1,000, not 2,000. A much larger increase in examiners is needed to eliminate the backlog of 735,000 warehoused applications and assure timely examination of 460,000 new applications. My estimate is 3,000 additional examiners are needed if the PTO is to examine all incoming applications within one year.

What else? First, let the PTO open satellite offices in places like Detroit, and Houston, and hire unemployed engineers, patent agents and patent attorneys who are already experienced IP professionals. They can be productive immediately, unlike new graduates who need years of training. But again, Congressional authorization is probably needed. Under current law, most employees must work at the PTO campus in Alexandria, Virginia, or at home with regular reporting in person if living over 50 miles away.

Second, pay examiners better. Congress also controls the pay structure for examiners. But the gap between the examiner pay schedule and the General Schedule for non-technical civil servants is shrinking. Industry, I am sure, would willingly pay higher fees to enable the PTO to pay more competitive salaries to retain skilled examiners. Congress should raise these fees and pay levels.

What about ending the delays in court? In addition to promptly filling nearly 100 vacancies and Congress adding the nearly 100 judgeships long requested, what else could be done?

First, more frequent use of expert special masters to do claim construction and magistrate judges to police discovery would help. Second, discovery should be narrowed. If discovery were limited largely to evidence that can actually be used at trial, much delay as well as excess cost could be avoided. Staging discovery by issue also looks promising. But both require closer judicial supervision which in turn requires more magistrate and district judges.

The bottom line is this: unless Congress invests more in the America patent system, private investors will not. We must encourage investors to boost their investments in order to surge American R&D. The PTO and the courts both need more money, more space and more adjudicators. Congress must “prime the pump”. Only then can private investment take over. This is the only practical way to increase innovation and restore our nation’s competitive advantage. This strategy could restore us as the technology leader of the world, increase private and public revenues and stock values, raise our standard of living and create millions of new, high-paying jobs. With so clear and compelling a strategy, Congress need not hesitate to act.

But because members don’t understand that patents increase prosperity, they must first hear from you, from private sector leaders in law, business, media, and academia. The question is: Will you advocate these reforms to Congress?"

David E. De Lorenzi is Chair of the Gibbons Intellectual Property Department.

Good Practices to Speed Up Any Examination
To achieve such a quick turn around, a priority application will be placed in a queue for all priority applications separate from Tier II cases, ensuring they will be taken up and considered in a more timely manner. Applications claiming priority from prior filed foreign applications will have to wait a bit and furnish some additional information before jumping onto the Tier I examination track. As explained in the Federal Register, to maximize the benefits of the priority examination, an applicant should be knowledgeable of the prior art, draft claims as broad as possible in view of the art and as narrow as one is willing to accept, respond within the shortened statutory periods, and be prepared to conduct examiner interviews.

Speed Comes With a Price
Anyone seeking to utilize Tier I or prioritized prosecution will be required to pay an additional fee to cover the priority request. The as yet-to-be-determined fee, will be used to hire and train the additional examiners needed to ensure that priority examination can be completed within the projected time frames. Additionally, to facilitate the processing of Tier I applications, the USPTO is considering limiting the number of claims in a Tier I application to 4 independent claims and 30 total claims.

Tier III examination on the other hand will allow an applicant to defer docketing of an application for review for up to 30 months after filing. By choosing to delay examination, an applicant can explore the market and focus on commercialization. If at any time during that 30 month period, the applicant deems the invention worth pursuing, they can request examination (and pay the fee) anytime prior to the expiration of the period. Failure to request examination will result in abandonment. The realization that one size does not fit all is a refreshing and welcome attempt by the USPTO to speedup the examination process and offer an applicant more choices.

Andrew M. Grodin is an Associate in the Gibbons Intellectual Property Department.

While the argument for cost savings is noted, overall this change may be more beneficial to only a relatively small number of pro se applicants who prepare and file applications on their own behalf without the assistance of skilled patent attorneys or agents. For those pro se applicants, this additional time would seem to allow them the opportunity to attempt to commercialize their potential patent while avoiding their only out of pocket expense of having to pay a large portion of the filing fees and ultimately, if and when a patent were to issue, the maintenance fees.

For all other applicants, including nearly all businesses and most individuals, relying on patent attorneys or agents for preparing patent applications, the cost of careful preparation of a patent application by the patent attorney or agent is the majority of where the out of pocket costs are spent rather than in the filing fees. Most business entities advantageously rely on in-house attorneys and/or retained outside patent counsel to draft the patent application for obtaining broad patent protection. As a consequence, it would be rare that such an applicant under the present rules would be willing to pay extension fees for merely delaying payment of the search fee.

Further, the USPTO notes that with regard to this proposed change, the non-provisional patent application need only include a single claim. However, the cost of preparing additional claims is incremental to the cost of preparing the patent application specification and single claim. Furthermore, it will be questionable whether this additional time will even be used to its fullest extent since the revision is adding just under half a year to the process in light of the current time to respond to a missing parts notice of up to seven months. Comments are to be submitted to the USPTO on or before June 1, 2010. Stay tuned - we will keep you updated.


Robert E. Rudnick is a Director in the Gibbons Intellectual Property Department.

The Dual Requirements for Written Description Are Part of 35 U.S.C. §112

With respect to a patent specification, the first paragraph of 35 U.S.C. § 112 sets forth that the specification shall contain a written description of:

1. the invention; and
2. the manner of making and using the invention (the enablement requirement)

Therefore, there are two requirements set forth in this statute with respect to the written description, one as to the invention and the other as to enablement (the manner of making and using the invention). The case of In re Barker, 194 U.S.P.Q. 474 (C.C.P.A. 1977) explicitly articulated that 35 U.S.C. §112 first paragraph set forth these two separate requirements for written description. To provide a written description of the invention, the specification must include a written description of each and every element of the claimed subject matter. This was enunciated by the Federal Circuit in Lockwood v. American Airlines. In the Lockwood case, the Federal Circuit specifically stated that:

It is the disclosure of the application that counts. Enablement of a filing date does not extend to subject matter which is not disclosed but which would be obvious over what is expressly disclosed.

The Written Description Requirement Has Been The Backbone of U.S. Patent Law Well Before 1967

The requirement for written description was reiterated by the C.C.P.A. in In re Ruschig. In Ruschig, the C.C.P.A. specifically held that a description of a genus does not constitute a description of a claimed subgenus unless that specific claimed subgenus is specifically described in the specification. The Ruschig case was directed to whether the specification contained a written description of a specific claimed compound. The claimed compound in Ruschig had a phenyl group substituted with chlorine and the C.C.P.A., in a prosecution and interference setting, held that there was no written description of this compound even though the application disclosed that phenyl ring could be substituted with chlorine or bromine. Discussing the written description requirement of 35 U.S.C. §112, first paragraph, the C.C.P.A. stated as follows:

Appellants refer to 35 USC 112 as the presumed basis for this rejection and emphasize language therein about enabling one skilled in the art to make the invention, arguing therefrom that one skilled in the art would be enabled by the specification to make chlorpropamide. We find the argument unpersuasive -- the question is not whether he would be so enabled but whether the specification disclosed the compound to him, specifically, as something appellants actually invented.

379 F.2d at 995.

Ariad May Not Affect the Law as to the Written Description Requirement and Its Dual Nature

The outcome of the per curiam appeal in the Ariad case may not affect the law as to the written description requirement and its dual nature because the appeal does not challenge these requirements for written description. The issue in Ariad is whether the describing of a claimed method which utilizes a compound to regulate by altering the transcription factor of specific genes to express proteins is sufficient to provide a written description for this method, even though no specific compound is disclosed for such regulation. Therefore, the Ariad application claims the use of any compound which provides a specific function and the issue is whether this description is sufficient for a written description of the invention and to enable the invention. The issue presented in Ariad is not directed to the fact that there is no new matter claimed which is not disclosed but whether the written description of the invention in chemical and biotech cases requires the definition of compounds by structure, formula, chemical name or physical properties and not by function. Therefore, the Ariad case never really challenges the basic requirements of 35 U.S.C. §112 for written description that, for at least 40 years, have and remain instrumental to the operation of the U.S. patent system.


William H. Epstein is Counsel to the Gibbons Intellectual Property Department.

A few years later, during prosecution of the ‘551 patent, the prosecuting attorney, who was familiar with the EPO opposition proceedings, established a new point of novelty before the USPTO to advance the prosecution of the ‘551 patent. That new point of novelty was that never before was the sensor known to work without a membrane. This assertion directly contradicted an earlier statement made by the applicant during the EPO opposition proceedings. See Therasense at pages 19–23.

The Federal Circuit affirmed the district court’s finding of invalidity of U.S. Pat. No. 5,820,551 due to inequitable conduct by applying the standard recently summarized by the Federal Circuit in McKesson Info. Solutions, Inc. v. Bridge Med., Inc.

To establish inequitable conduct by failure to disclose, the asserting party must show materiality of the information and the intent to deceive. The trial court held that the prosecuting attorney knew that to disclose the EPO opposition arguments would defeat the patent grant before the USPTO. The trial court then balanced the levels of materiality and intent, and found the withheld information “richly material” and that the prosecuting attorney had no explanation for his conduct, and that this was proved by clear and convincing evidence.

As we previously posted, a patent applicant’s duty of disclosure may also extend to references and office actions in “similar” but unrelated, co-pending patent applications. The Therasense and McKesson cases show continued development in the caselaw of inequitable conduct. Stay tuned for future developments.


Frank A. Bruno is a Director in the Gibbons Intellectual Property Department. Lucy Emhardt, an Associate in the Gibbons Intellectual Property Department, assisted in the preparation of this post.