The FTC Finally Targets an IP Troll

For any who don’t know, a “troll” is a company (and its lawyers) that sends out thousands of cease-and-desist letters threatening a lawsuit against a supposed infringer of that company’s supposed intellectual property. It’s a nasty practice that has brought the trolls (and their lawyers) many hundreds of thousands of dollars over the years. Finally, the Federal Trade Commission is beginning to protect the innocent public against these unscrupulous “licensing” demands.

Patent Secrets

Elon Musk, founder of SpaceX and co-founder of Tesla Motors & SpaceX, said during his interview with Wired Magazine:

“I can’t tell you much. We have essentially no patents in SpaceX. Our primary long-term competition is in China—if we published patents, it would be farcical, because the Chinese would just use them as a recipe book.”

The ultimate goals of patent and trade secret are the same: to protect invention. They go about it in completely different ways.

Patent is, by definition, an exercise in disclosure. The deal the inventor strikes with the government which issues the patent is that s/he can have a monopoly on the invention, but only if s/he discloses the best mode to make and use the invention, and only for a limited period of time.

Trade secret is, by definition, an exercise in secrecy. No disclosure is made, no governmental grant of permission occurs, but the inventor can keep the trade secret for as long as s/he can keep the secret. Some trade secrets have lasted for hundreds of years.

So yes, the patent system in a big repository for the dissemination of information about inventions. It’s designed to be that because sharing the information through the patent system (so the theory goes) sparks further invention. In the US (I’ll get to China in a minute), the grant of patent rights expires after really a very short time, enabling others to glom onto the invention and make it cheaper, though not necessarily better, than does the original rightsholder (generic drugs are a prime example of this phenomenon).

China is notorious for its lack of respect for intellectual property in general. Although they are trying to change this, the idea that someone can own a product of the human mind is simply completely foreign to that culture. Therefore, the Tesla/SpaceX decision not to patent its invention, but to protect the invention through trade secret, is a strategic and conscious decision. They want to protect their invention from prying eyes and infringers. They do run the risk of loss of the secrets through disclosure or independent invention, but they have done their risk/benefit analysis and made their business decision. It may be the right decision for them, it may not be; that will be determined by time.

Viagra Patent No Good in Canada

Pfizer wrote a patent application for one of its drugs and prosecuted it through to issuance in Canada. However, in that patent application, Pfizer’s Canadian patent attorneys/agents evidently failed to disclose the best mode of making and using the invention by “…failing to identify the active compound in the drug.” The drug is Viagra, a popular and profitable drug that enhances male sexual performance.

While this ruling is under Canadian patent law, this is a cautionary tale to all who seek patent protection. You must disclose the best mode of making and using the invention pursuant to 35 USC 112, Paragraph 1. The America Invents Act does not change that requirement.

It will be interesting to see what happens to the US patent for Viagra in the face of the Canadian ruling.

Apple v. Samsung Reversed and Remanded

According to the U.S. Court of Appeals for the Federal Circuit (“CAFC”), the U.S. District Court for the Northern District of California abused its discretion when it granted a preliminary injunction against the sale of the Samsung Galaxy Nexus pursuant to a patent infringement suit currently before that court.

The CAFC’s decision cements the process for determining whether a preliminary injunction should issue. According to the U.S. Supreme Court’s decision in eBay, Inc. v. MercExchange, 547 U.S. 388 (2006), the traditional four factors of whether a preliminary injunction should issue “apply with equal force to the Patent Act.” Id. at 391. Those factors are:

  1. The movant is likely to succeed on the merits of his case;
  2. The movant risks suffering irreparable harm if the injunction does not issue, though the CAFC has held that a patent infringement plaintiff must also show that the harm is sufficiently connected to the infringement, the relevant question being to what extent the harm suffered can be ascribed to the alleged infringement;
  3. The balance of equities tips in the movant’s favor; and
  4. The injunction is in the public interest.

Here, the CAFC held that the District Court abused its discretion because there is an insufficient proof of any nexus between the infringing features and the sales of the Samsung Galaxy Nexus. Thus, any irreparable harm suffered by Apple cannot be ascribed to Samsung’s alleged infringement of the patent in question.

America Invents Act Takes Hold

At 12:01 am on 16 September 2012, seven new provisions of the Leahy-Smith America Invents Act of 2011 went into effect. The new rules are intended to streamline the patent application process and introduce new procedures to ensure patent quality, spur innovation and grow the economy.

The rules that went into effect include:

  • The Oath and/or Declaration finally allows an assignee, rather than an inventor, to file a patent application;
  • Inter partes review, post-grant review, and the transitional program for covered business method patents give third parties timely and cost-effective alternatives to federal litigation to challenge the patentability of an issued patent;
  •  Applicants can now submit additional information relevant to the patentability of an issued patent to the Office; this new procedure may protect the patent from an inequitable conduct charge;
  •  The citation of prior art and written statements provision now enable the Office to treat the patent claims consistently with the patent owner’s representation of its claims to the courts or in other Office proceedings.

These steps are just the beginning: look for the first-to-file requirement to go into effect in 2013; that will be huge.

Parsing the Patent SHIELD Act

The bill introducing the Saving High-tech Innovators from Egregious Legal Disputes (Patent SHIELD Act, H.R. 6245) attempts to bring a “loser pays” system for software and hardware patent lawsuits, purportedly to protect startups from plaintiffs that want to force settlements through the threat of high legal bills. The Patent SHIELD Act was introduced by Peter DeFazio (D-OR) and Jason Chaffetz (R-UT).

The bill introduces a new 35 U.S.C. 285A, which reads, in relevant part:

“(a) In General- Notwithstanding section 285, in an action disputing the validity or alleging the infringement of a computer hardware or software patent, upon making a determination that the party alleging the infringement of the patent did not have a reasonable likelihood of succeeding, the court may award the recovery of full costs to the prevailing party, including reasonable attorney’s fees, other than the United States.”

Hmmm. Let’s parse this one.

  • “Notwithstanding section 285…” Section 285 allows the court to award attorneys’ fees to the prevailing party “in exceptional cases.” I guess any litigation surrounding a computer software or hardware patent is now supposed to be an “exceptional case.” That’s … odd. What about the startups whose product or service does involve patents but does not involve computer patents?
  • “upon making a determination that the party alleging the infringement of the patent did not have a reasonable likelihood of succeeding…” Um … when is this determination made? At the time of the complaint? At the time of the verdict? Somewhere in the middle? A plaintiff, up until now, could bring a lawsuit in good faith, regardless of whether the suit ultimately won or lost; now, legitimately aggrieved plaintiffs have to worry about whether losing a suit is the contingency that brings costs and attorneys’ fees into play for them? That chills the blood of the legitimately aggrieved plaintiff, to put it mildly, which has the effect of eviscerating the patent enforcement system, since a plaintiff who worries that his/her costs will be increased dramatically by losing his/her legitimate suit through the award of costs and attorneys’ fees won’t even start the process.
  •   Nowhere does the bill allow the prevailing plaintiff — the legitimate patentee — to recover costs and fees, which makes this bill extraordinarily one-sided.

The gentle, bipartisan language at the start of this new bill thus masks a bill that, if it becomes law, has the potential to punish a legitimate plaintiff who makes a good-faith decision to litigate the infringement of a legitimate patent.

While I absolutely agree that patent trolls need to go away, I think this is absolutely not the way to achieve that end.

Apple Wins

Apple won. Bigtime.

Their patents officially declared infringed by a jury, Apple walked away from the Apple/Samsung trial with an enormous award.

Not quite sure what I think of a billion-dollar patent infringement award. I agree, of course, that patents should be enforced, and infringers should be held liable for their infringements, but a billion dollars?? I guess it hits Samsung hard enough in the wallet to be felt, but GEEZ.

The USPTO Finally Takes Steps Toward the 21st Century

The US Patent & Trademark Office (“USPTO”) announces that it is in the process of modernizing electronic patent application filing to allow applicants to submit electronic patent applications in a text format. Prior to submission, we can (and should) expunge metadata from an appropriately formatted text file. We can also run an optional analytics report to ensure the abstract length is correct, generate an automated claims tree, and identify any errors in claims numbering. Based on information submitted in the Application Data Sheet (ADS), the USPTO will be able to generate maps that show relationships between patent applications, or patent family maps.

Hurray!!!!! It’s about time that this arbiter of high technology gets around to joining the 21st Century in terms of its patent filing requirements.

Up until the time when the new file format actually hits the eCommerce site, the requirement for online patent filing has been and continues to be .pdf only. Even that is a decided improvement over the BeforeTime; before .pdf, filing was done in this weird MS Word amalgam thing that ran only on Windows (I’m a Mac geek) and gave me so many problems that I generally filed on paper.

They’re also replacing their current fee collection system to (1) expand self-service capabilities and (2) further integrate financial information with the patent and trademark businesses. The fee collection system replacement effort is in the beginning stages, and while they are looking to other successful eCommerce sites for best practices, they believe that USPTO customers may have unique needs. In the next few months, they will reach out to practitioners to solicit user input.

Again, it’s about time.

AIA Changes Who Is Entitled to the Title of “Applicant” in US National Applications Under the PCT

On September 16, 2012, the America Invents Act is slated to change who is entitled to the title of “applicant” in U.S. national patent applications, removing the requirement that inventors be named as applicants solely for the purposes of US designation. This impacts applicants who have filed under the Patent Cooperation Treaty (PCT) and brings the US patent system further into alignment with those of the rest of the PCT signatory nations.