USPTO Issues Interim Guidelines on Patentable Subject Matter

Excerpted from Interim Guidelines for Examination of Patent Applications for Patent Subject Matter Eligibility (signed 26Oct2005)

"35 U.S.C. § 101 defines four categories of inventions that Congress deemed to be the appropriate subject matter of a patent: processes, machines, manufactures and compositions of matter. The latter three categories define "things" or "products" while the first category defines "actions" (i.e., inventions that consist of a series of steps or acts to be performed). See 35 U.S.C. 100(b) ("The term ‘process’ means process, art, or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material.")."

"The subject matter courts have found to be outside of, or exceptions to, the four statutory categories of invention is limited to abstract ideas, laws of nature and natural phenomena. While this is easily stated, determining whether an applicant is seeking to patent an abstract idea, a law of nature or a natural phenomenon has proven to be challenging. These three exclusions recognize that subject matter that is not a practical application or use of an idea, a law of nature or a natural phenomenon is not patentable."

"To satisfy section 101 requirements, the claim must be for a practical application of the § 101 judicial exception, which can be identified in various ways:

• The claimed invention "transforms" an article or physical object to a
  different state or thing.
• The claimed invention otherwise produces a useful, concrete and
  tangible result, based on the factors discussed below."

"One may not patent a process that comprises every "substantial practical application" of an abstract idea, because such a patent "in practical effect would be a patent on the [abstract idea] itself." Benson, 409 U.S. at 71-72, 175 USPQ at 676; cf. Diehr, 450 U.S. at 187, 209 USPQ at 8 (stressing that the patent applicants in that case did "not seek to pre-empt the use of [an] equation," but instead sought only to "foreclose from others the use of that equation in conjunction with all of the other steps in their claimed process"). Thus, a claim that recites a computer that solely calculates a mathematical formula (see Benson) or a computer disk that solely stores a mathematical formula is not directed to the type of subject matter eligible for patent protection."

"The following tests are not to be applied by examiners in determining whether
the claimed invention is patent eligible subject matter:

(A) "not in the technological arts" test
(B) Freeman-Walter-Abele test
(C) mental step or human step tests
(D) the machine implemented test
(E) the per se data transformation test."

USPTO Issuing Search Templates

As discussed at yesterday's Partnering in Patents XII program at the U.S. Patent and Trademark Office, the Office is preparing to publish "search templates" for each of the approximate 600 classified areas of science and technology found in the USPTO Manual of Classification.

These search templates will define the search field and resource areas of general subject matter, classes/subclasses, patent documents (both US and foreign) and non-patent luterature ("NPL") that an examiner should consider each time a patent application is examined in that classification area. Additionally, the search template will indicate what search tools or methodologies should be considered when performing the search.

The templates are based upon input from patent examiners and other searchers at the USPTO and represent an attempt to capture their institutional knowledge of what are the most relevant prior art searches for determining the patentability of subject matter in the area of technology. In an effort to ensure that each art area has an appropriately structured field of search and search strategy, the Office will begin publishing each of the search templates at at http://www.uspto.gov/web/patents/searchtemplates/. The website includes means for submitting comments and the identification of the other resources that could be added to the described field of search and search methodologies. The website also includes criteria by which suggestions for additional resources to be included in the search template will be evaluated.

The Office will respond to any comment or suggestion in writing. Through this mechanism, the Office will incorporate public comments and will make adjustments on how to refine each search template. This will not be a one-time event. As technologies evolve, so too will the search templates; and the public will have an on-going opportunity to comment on how to improve them. This process may require several iterations before the contents of these search templates become more settled and complete.

Through this new tool, the Office anticipates patent examiners will be able to focus their searches and will be able to locate the most pertinent prior art in their field when evaluating an application for obviousness or anticipation. It will give more structure and a better standard to measure the completeness of any search. It is also believed the public will benefit because these search templates can be used by applicants for their own pre-examination searches prior to the filing of a U.S. patent application or the submission of a petition to make special based on MPEP § 708.02, subsection VIII. – special examining procedure for certain new applications - accelerated examination. In addition, the USPTO plans to use these search templates for a pilot program to outsource U.S. patent searches for PCT applications.

The creation and use of these search templates are not intended to limit the professional discretion that any searcher, including patent examiners at the USPTO, employs in performing prior art searches. Rather these search templates are intended to capture the institutional knowledge and expertise of these searchers for the benefit of others who may desire or be required to perform prior art searches in any given technology area. A search is not expected to include a search of all of the listed resources, to use all of the listed tools, or employ all of the listed search techniques in every prior art search to be performed. Rather by relying upon the information contained in the search templates and the expertise of the individual performing the search, these materials will assist the individual in finding the most relevant prior art for the search being conducted in the art area.

TGIF for Recycling Your Pumpkin

U.S. Patent No. D404339 for "Pumpkin Decorating Kit"
Using pumpkins as lanterns at Halloween is based on an ancient Celtic custom brought to America by Irish immigrants. All Hallows Eve, on October 31st, marked the end of the old Celtic calendar year, and on that night hollowed-out turnips, beets and rutabagas with a candle inside were placed on windowsills and porches to welcome home spirits of deceased ancestors and ward off evil spirits and a restless soul called "Stingy Jack," hence the name "Jack-o'-lantern".

The centerpiece of contemporary Thanksgiving (on the fourth Thursday of November in the United States) is a large meal, typically in the late afternoon or evening, starring a large roasted turkey.

Thank Goodness It's Friday (and I'm at the APLF Annual Meeting),

--Bill Heinze

More Patents Valid, But Not Infringed Under the Federal Circuit

In "The Court of Appeals for the Federal Circuit's Impact on Patent Litigation," Matthew D. Henry and John L. Turnery of the Department of Economics, Terry College of Business, University of Georgia present evidence that since the inception of the Federal Circuit in 1982, district courts have invalidated patents less often, patentees have appealed invalidity decisions more often, and infringement has become the more frequently decisive inquiry in patent cases.

According to James Bessen, summarizing their article for the Technological Innovation and Intellectual Property blog,

Figure 1 (below) shows the annual share of district court cases where the patent was
determined to be invalid and the rate of affirmation by the appellate courts of
those “invalid” decisions that were appealed.

Both series show a dramatic and permanent drop in 1982, the year the CAFC was created, confirmed by statistical tests for “structural breaks.” After 1982, district courts have been roughly half as likely to issue an “invalid” decision, patentees have been 22 percent more likely to appeal these decisions, and the appeals court has been nearly three times more likely not to affirm an “invalid” decision.

The series for “not infringed” (in Figure 2, below) exhibits a markedly different pattern. While the CAFC did not appear to change the affirmation rate (from previous appeals courts) on patents judged “not infringed” by district courts, district courts gradually began to find a higher percentage of patents “not infringed.”

Henry and Turner conclude that the CAFC has, in fact, shifted the law in favor
of patent holders, but only with respect to patent validity, not infringement
(see also Lunney, “Patents, the Federal Circuit, and the Supreme Court: A Quiet
Revolution,” 11 Sup. Ct. Econ. Rev. 1). They suggest that this may explain part
of the increase in litigation and patenting seen since the 1980s. Indeed, some
people may find it surprising that invalidity rates have remained low over the
last decade while there has been rapid growth in patents for software, business
methods, and others that many believe to be of “low quality.”

The Economist's I/P Survey

Peter Zura's "271 Patent Blog" is reporting on the I/P survey in this week's Economist magazine which notes that

Companies cannot simply turn their back on what is happening in intellectual
property. Even if they refuse to play the game, they may be unwittingly
infringing someone else's patents because there are so many more of them around.
Unless firms have patents of their own to assert so they can reach a
cross-licensing agreement (often with money changing hands too), they will be in
trouble. Thus many companies are acquiring large numbers of patents for purely
defensive reasons, for use only to keep others' patent threats at bay.

This survey will argue that, despite some adjustment problems, the huge changes in intellectual property currently taking place in the IT sector will in time produce more efficient markets. But what do the IT firms themselves make of it all?

WTO Reexamines Compulsory Pharmaceutical Licensing

According to William New writing for Intellectual Property Watch on October 25, 2005, one of the key issues being addressed at a meeting of the World Trade Organization committee responsible for intellectual property rights matters are various proposals for a permanent amendment to the TRIPS agreement that would allow WTO members to import and export patent-protected pharmaceuticals made under compulsory license.

According to the WTO's frequently Asked Questions on TRIPS and Health, Article 31 of the TRIPS Agreement allows domestic compulsory licences to be granted mainly to supply the domestic market. However, the subsequent 2001 Doha Declaration on TRIPS and Public Health stated that countries unable to manufacture the pharmaceuticals could obtain cheaper copies elsewhere (from exporters) if necessary. The legal means of making that change ocurred on August 30, 2003 when the General Council decided to waive the TRIPS provision, allowing generic copies made under compulsory licences to be exported to countries that lack production capacity, provided certain conditions and procedures are followed.

According to the WTO, "the waiver on its own is not enough." To use the system, potential exporting countries probably have to change their laws too. This is where their laws complied with the original TRIPS provision by requiring production under compulsory licensing to be predominantly for the domestic market. So far Norway, Canada and India have informed WTO members (through the TRIPS Council) that their new laws and regulations are in place. The EU, Switzerland and Republic of Korea have said they are close to completing the legislation.

However, as part of the 2003 waiver, a group of 23 developed nations plus 10 new members of the European Union, agreed not to use the waiver for import with an eye toward keeping out cheaper generic versions of the patented drugs. Some non-governmental groups have raised fears that the opt-out of the 2003 waiver means that these developed countries cannot import drugs necessary to address an emergency such as an avian flu pandemic.

In light of Avian flu outbreaks, India has begun exploring the compulsory licensing of Roche's Tamiflu (oseltamivir) for the domestic market as well as for export. According to the Wall Street Journal's Avian Flu News Tracker, Roche has reportedly warned countries not to make their own generic versions of Tamiflu without permission from the Swiss drug maker. "It needs special knowledge, special know-how to produce this drug," Roche spokeswoman Martina Rupp said. "Since we have been making this drug for the last 10 years, it would be best for countries to enter into a discussion with us." However, Taiwanese health officials reported that they've created a homegrown version of Tamiflu in just 18 days. Sweden's Medical Products Agency said that it will limit pharmacy sales of Tamiflu to ensure there won't be a shortage of the flu drug.

Interference Settlement Not Antitrust Violation

In Medimmune, Inc. v. Genentech, Inc., et al. (Fed. Cir. October 18, 2005), the court held that the settlement of disputes such as priority in patent interferences is not a presumptive violation of antitrust law:

[S]uch violation requires a showing of market power and other antitrust predicates. The antitrust posture that MedImmune urges for patent interferences can discourage if not prevent settlements, placing unnecessary burdens on the courts and the PTO. Priority determinations may raise complex questions of law and scientific fact, and the delays in their resolution by the PTO are notorious; settlement can, as here, expedite resolution of difficult issues. The per se or presumptive illegality urged by MedImmune for interference settlements is contrary to both precedent and policy, as recorded in the Antitrust Guidelines for the Licensing of Intellectual Property, 4 Trade. Reg. Rep. (CCH) ¶13,132, §2.2 (1995).

In this case, the United States Patent and Trademark Office (PTO) had declared an interference between Celltech's "Boss" patent and Genentech's "Cabilly II" application. After seven and a half years, the Board of Patent Appeals and Interferences decided priority in favor of the senior party Boss, holding that Cabilly had not established an actual reduction to practice before the Boss patent's British priority date. However, Genentech then filed a civil action in the United States District Court for the Northern District of California, in accordance with 35 U.S.C. §146.

During the subsequent litigation, a settlement agreement was reached whereby Genentech and Celltech agreed that the Cabilly II application was entitled to priority over the Boss patent, based in part on new evidence of the content of a draft patent application during the period leading to filing of the Genentech application. Genentech and Celltech also entered into a cross-license agreement that included a formula for sharing of royalties. The district court entered judgment on the parties' resolution of the issue of priority, and then directed the PTO to vacate its prior decision, revoke the Boss patent, and issue a patent on the Cabilly II application.

MedImmune unsucessfully argued that the interference settlement between Genentech and Celltech was collusive and fraudulent, and that this provided an independent basis for standing to attack the Cabilly II patent in a Declaratory Judgment Action.

Free Webinar on Due Diligence in I/P

When should a due diligence review be conducted?
How can validity of a patent or strength of a trademark be determined?
What can be done if any intellectual property is the subject of a lawsuit?

Please join McDonnell Boehnen Hulbert & Berghoff LLP partners Jim McCarthy and Emily Miao for a webinar discussion of Intellectual Property Due Diligence on Thursday, October 27, at 2:00 p.m. CST.

Please contact Megan M. McKeon at 312.913.2105 or mckeon@mbhb.com for more information or to register.

POPA President Calls USPTO "Legal Sweatshop"

In the September-October issue of "Radio Free PTO," Patent Office Professional Association President Ronald Stern called the U.S. Patent and Trademark Office the "most ruthlessly effective federal agency in firing employees." The POPA newsletter report cites an August 2005 study by the National Academy of Public Administration finding that the USPTO was responsible for almost ten percent of all non-Defense federal employees fired in 2001. The USPTO fired three times more employees in one year than the State Department removed in 17 years. In his congressional testimony,

Stern described the toll that the USPTO's "quality initiatives" have taken on employee morale and productivity. The recertification of primary examiners, in-process reviews, and second-pair-of-eyes program intended to improve quality instead force examiners to constantly look over their shoulders. While only 60 percent of allegations of error were upheld in the first part of fiscal year 2005, the
need to defend themselves against alleged errors continues to sap examiners'
morale and fortifies employee bitterness and frustration.

While the USPTO speaks of the volume of examiners it's hiring, the patent corps is like a sieve leaking employees almost as fast as they're hired. From fiscal year 2000 through 2004, the agency hired 2,309 patent examiners yet lost 1,527. . . . "If the USPTO truly desires to reduce attrition, it must effectively address the reasons that most examiners leave—job dissatisfaction and higher pay," testified Stern. The USPTO's workplace benefits like flextime and transit subsidies are overshadowed by the day-to-day stresses of working in a "legal sweatshop." Stern noted that examiners are "skilled professionals and deserve to be treated as such... examiners want to do a good job they can be proud of."

NTN Files Unfair Import Complaint Against ILJIN

On October 24, 2005, NTN Corp. filed a "Section 337" unfair import complaint at the U.S. International Trade Commission. The complaint requests that an unfair import investigation be instituted involving "Axle Bearing Assemblies, Components Thereof and Products Containing the Same." The proposed respondents are ILJIN Bearing, Korea and ILJIN USA, Novi, MI. The complaint has been designated as confidential and assigned Docket No. 337-2453 for indexing in the Commission's database.

Such complaints typically include an allegation of intellectual property infringement and a request that the infringing goods be excluded from entry into the United States. The Commission now has 30-35 days from the filing date of the complaints in which to decide whether to institute the investigation. Upon institution, the proposed respondent will be served with the Complaint via postal mail and an Administrative Law Judge will schedule discovery, conduct a trial, and issue a written "Initial Determination," usually within about 10 months. Due to the expedited nature of these proceedings, and availability of general exclusion orders affecting non-parties, it is important to notify any potential importers of similar products as soon as possible.

Click here for more information on the importance of monitoring these ITC investigations, and click here for a free audio-visual Internet presentation on "Unfair Import Investigations at the U.S. International Trade Commission."

For the latest details on a particular Section 337 investigation, or to arrange a free, in-person presentation on these (and/or other) intellectual property topics, contact me, Bill Heinze (Bill.Heinze@tkhr.com), at Thomas, Kayden, Horstemeyer & Risley in Atlanta, Georgia.

ICC Reports on I/P Growth

According to "Intellectual Property: Source of innovation, creativity, growth and progress," International Chamber of Commerce (August 2005):

"International Monetary Fund data shows that trade in patents grew almost twice as fast as trade in goods between 1988 and 1996. The intellectual property system also spurs economic development by providing the basis for business transactions such as licensing. The patent system facilitates technology transfer and foreign direct investment, as it provides reassurance to companies considering investing in a country. Patent databases provide a deep pool of technical information that countries can use to build up their technological capacity."

"In recent decades, the fraction of the total output of [the US] economy that is essentially conceptual rather than physical has been rising. The trend has, of necessity, shifted the emphasis in asset valuation from physical property to intellectual property and to the legal
rights inherent in intellectual property.” -- US Federal Reserve Chairman Alan Greenspan,
27 February 2004

Dismissal with Prejudice for Lack of Standing on Second Try

In Sicom Systems LTD. v. Agilent Technologies, Inc., et al. affrimed the dismissal with prejudice of a complaint for patent infringement in light of Licensor Canada’s right to permit infringement in certain cases, the requirement that Sicom consent to certain actions and be consulted in others, and the limits on Sicom’s right to assign its interests in the patent.

[W]e hold that the Agreement transfers fewer than all substantial rights in the
patent from Canada to Sicom. See Calgon, 726 F. Supp. at 986. Accordingly, we
affirm the district court’s order dismissing Sicom’s complaint. We stress the
principle set forth in Independent Wireless requiring that a patent owner be
joined in any infringement suit brought by an exclusive licensee having fewer
than all substantial rights. 269 U.S. 459; see also Prima Tek II, 222 F.3d at
1377; Textile Prods., 134 F.3d at 1484; Rite-Hite, 56 F.3d at 1552; Abbott
Labs., 47 F.3d at 1131. Unlike an assignee who may sue in its own name, an
exclusive licensee having fewer than all substantial patent rights and seeking
to enforce its rights in a patent generally must sue jointly with the patent
owner. Ortho, 52 F.3d at 1030. Thus, Sicom does not have standing to sue alone
without joinder of Canada under the Patent Act. Calgon, 726 F. Supp. at 985
("[T]he patent holder or assignee is a necessary party to an infringement action in order to achieve consistency of interpretation and to avoid multiplicity of litigation. Under federal law, the patentee is the real party in interest in such litigation.").

. . .

We conclude that the district court did not abuse its discretion by
dismissing this case with prejudice. First, as the district court noted, this
action was Sicom’s second suit that was dismissed for lack of standing. Second,
as the district court noted, "Sicom has not contested Defendants’ assertion that
any dismissal by the Court of this action should be with prejudice, because
Sicom has twice attempted and twice failed to establish standing." Sicom, slip
op. at 6. Although Sicom correctly argues that dismissal with prejudice is
generally inappropriate where the standing defect can be cured, Sicom already
had a chance to cure the defect and failed. See Textile Prods., 134 F.3d at
1485. Accordingly, we affirm, holding that the district court was within its
discretion to dismiss the case with prejudice.

UN Adopts Convention on Cultural Diversity

On October 20, 2005, the United Nations Educational, Scientific, and Cultural Organization (UNESCO) approved its UNESCO press release

The Convention seeks to reaffirm the links between culture, development and
dialogue and to create an innovative platform for international cultural cooperation; to this end, it reaffirms the sovereign right of States to elaborate cultural policies with a view “to protect and promote the diversity of cultural expressions” and “to create the conditions for cultures to clourish and to freely interact in a mutually beneficial manner” (Article 1).

There is only one direct reference to intellectual property rights in the draft, located in the preamble, according to non-governmental sources. Item 17 of the preamble calls for recognition of “the importance of intellectual property rights in sustaining those involved in cultural creativity.” However, according to William New wiritng for Intellectual Property Watch, the spirit of the meeting had taken on a symbolism of defiance to the wide availability of US cultural influences. When a reporter accidentally asked a European delegate, “are you US?”, the reply was, “Not yet!”

“This is not about culture, it’s about trade,” a US official reportedly said in an interview afterward. “This is trade policy by cultural ministers” hesaid, refrring to specific efforts at the World Trade Organization by France to block liberalisation of audiovisual products, and by Canada to protect its publications.

The Convention will enter into force three months after its ratification by 30 States. While only the US and Israel opposed (and Australia and the South Pacific island of Kiribati abstained) some European nations like the United Kingdom, have privately assured the United States that they do not intend to ratify it, a US official said. The US does not plan to ratify the treaty, the official said.

U.S. Copyright Preregistration Begins November 15

On October 21, 2005, the U.S. Copyright Office has issued interim regulations governing preregistration of works being prepared for commercial distribution.

Preregistration will be available, by means of applications made online on the Copyright Office website, www.copyright.gov, starting November 15. The Register of Copyrights has determined that preregistration will be available for the following classes of works: motion pictures, sound recordings, musical compositions, literary works being prepared for publication in book form, computer programs (including videogames), and advertising or marketing photographs. To be eligible for preregistration, a work must be in one of these classes and applicant must certify that the work is being prepared for commercial distribution and that he or she has a reasonable expectation that the work will be commercially distributed to the public.

For more information, go to www.copyright.gov/prereg/rulemaking.html.

MPEP (8th ed., Rev. 3) Available in PDF

The U.S. Patent and Trademark Office has just released its Manual of Patent Examining Procedure (8th ed., Rev. 3) in PDF format, suitable for printing a paper copy. Woo-Hoo!

Check out the Patently-O Blog for a discussion of the changes from the earlier HTML version.

Free .EU Guidance for INTA Members

November 7, 2005
11:00 a.m. – 12:30 p.m. U.S. EST
Free for INTA members
Click here to join in the webcast

Wolter Wefers Bettink of Houthoff Buruma (Netherlands), Matthew Harris of Norton Rose (United Kingdom), and John Slafsky of Wilson Sonsini Goodrich & Rosati (United States) will offer background and strategic guidance on .EU, covering issues such as:

• Eligibility requirements for owners and licensees of European trademarks and other “prior rights”
• Guidelines for participating in the pre-launch "Sunrise"
• .EU domain name registrations and the rules for the .EU alternative dispute resolution program to be administered by the Czech Arbitration Court
• Best practices for trademark owners seeking to take advantage of the commercial opportunity presented by .EU

On November 7, just click here and join in.

Been Under the Gun Lately?

U.S. Patent No. 269,766 for "Animal Trap"
Then pop out of your hole and meet me at the AIPLA annual meeting in Washington DC. I'll be the one with the cheesy grin.

Thank Goodness It's Friday,

--Bill Heinze

p.s. - More rodent control technology here, via Patent Pending.

Hynix Hits Toshiba with Unfair Import Complaint

On October 20, 2005, Hynix Semiconductor filed a "Section 337" unfair import complaint at the U.S. International Trade Commission. The complaint requests that an unfair import investigation be instituted involving "NAND Flash Memory Devices." The proposed respondents are Toshiba Corporation, Tokyo, Japan; Toshiba America Electronic, Irvine, CA; Toshiba America Information Systems, Inc., Irvine, CA and Toshiba America Consumer Products, L.L.C., Wayne, NJ. The complaint has been designated as confidential and assigned Docket No. 337-2451 for indexing in the Commission's database.

Such complaints typically include an allegation of intellectual property infringement and a request that the infringing goods be excluded from entry into the United States. The Commission now has 30-35 days from the filing date of the complaints in which to decide whether to institute the investigation. Upon institution, the proposed respondent will be served with the Complaint via postal mail and an Administrative Law Judge will schedule discovery, conduct a trial, and issue a written "Initial Determination," usually within about 10 months. Due to the expedited nature of these proceedings, and availability of general exclusion orders affecting non-parties, it is important to notify any potential importers of similar products as soon as possible.

Click here for more information on the importance of monitoring these ITC investigations, and click here for a free audio-visual Internet presentation on "Unfair Import Investigations at the U.S. International Trade Commission."

For the latest details on a particular Section 337 investigation, or to arrange a free, in-person presentation on these (and/or other) intellectual property topics, contact me, Bill Heinze (Bill.Heinze@tkhr.com), at Thomas, Kayden, Horstemeyer & Risley in Atlanta, Georgia.

U.S.Patents Claim Twenty Percent of Human Genome

According to Stefan Lovgren writing for National Geographic News on October 13, 2005, a new study in the journal Science reveals that more than 4,000 genes, or 20 percent of the almost 24,000 human genes, have been patented in the United States, primarily by private firms and universities.

"While this does not quite boil down to [the patent holders] owning our genes … these rights exclude us from using our genes for those purposes that are covered in the patent," said Fiona Murray, a business and science professor at the Massachusetts Institute of Technology in Cambridge, and a co-author of the study.

International Accounting Guidelines for Intellectual Property

According to a background report for a June 2005 European Patent Academy conference on "Intellectual property as an economic asset: key issues in valuation and exploitation," steps have been taken in a number of countries to assist firms in publicly reporting information about their intellectual assets. The governments of Denmark, Germany and Japan, for example have worked with industry and other relevant stakeholders to develop guidelines for non-financial disclosures of information regarding intellectual assets, and the European Union, through its MERITUM project, has supported similar efforts:

• Intellectual Capital Statements: The New Guideline, Ministry of Science, Technology and
  Innovation, Denmark, 2003.
• Intellectual Capital Statement – Made in Germany, Federal Ministry of Economics and Labour, Germany, 2004.
• Reference Guideline for Intellectual Property Information Disclosure, Ministry of Economy, Trade and Industry, Japan, 2004.

These guidelines aim to redress weaknesses in financial accounting standards, which do not
address intangible assets. They provide guidance to firms on how to prepare reports that disclose qualitative and quantitative information about their intellectual assets and the contributions of those assets to firm performance. It is hoped that such disclosures will provide relevant information about the value of firms and improve the efficiency of financial markets.

Information on corporate tax accounting for intellectual property is available here and here.

Canadian Trademarks Database Tutorial

This tutorial explains the business benefits of using the Canadian Trade-Marks Database and demonstrates how to search the database, including

• Lesson 1: Trade-marks in Business
• Lesson 2: Search Basics
• Lesson 3: Refining Searches
• Lesson 4: Search Options
• Lesson 5: Design Searches
• Lesson 6: Search Examples

U.S. Trademark Electronic Appplication Update

John Welch at the TTABlog is reporting on USPTO TEAS Project Manager Craig K. Morris' presentation to the Boston Patent Law Association on the recent and upcoming developments for the PTO's Trademark Operation. Highlights include

• plans to add 80 more examining attorneys and two new law offices in FY2006
• requests for additions to the USPTO "ID Manual" may be sent (in 25 words or less) to Jesse Roberts at TMSuggest@uspto.gov. Additions to the ID Manual are made once per month
• applicants will be given an opportunity to approve or correct the design codes assigned to their marks
• the USPTO is considering allowing applicants to request more than a single 6-month extension at one time
• assignment documents that are filed electronically via ETAS are processed in one or two days, compared to the five months required for documents filed by mail
• Beginning December 17, 2005, the PTO will allow the attachment of pdf files in addition to jpegs, but initially only with regard to TEAS responses to office actions

PCT Changes for April 2007

Thanks to Bill Bennett at Pizzey's for sending us this message about the recent PCT Assembly Meeting resulting in the following changes will take effect from 1 April 2007:

RECTIFICATION OF MISSING PARTS

Under the new rules it will be possible to rectify the omission of missing part(s) without loss of the International Filing Date. However, it is essential that:

(a) the missing part(s) be fully contained in the priority document; and

(b) the PCT Request Form include a statement of incorporation of the priority document (the official forms, including those in PCT-Easy, will be amended prior to 1 April 2007 to include an appropriate statement); and

(c) the statement of incorporation must be confirmed by the applicant within 2 months of the International Filing Date (hence, it is necessary that the deficiency in the PCT filing be recognised within a short time after filing).

As an aside, it would appear to be prudent practice, as of 1 April 2006, to include a claim set in the priority document as insurance against the possibility that the claims may be inadvertantly omitted from the PCT filing.

RESTORATION OF RIGHT OF PRIORITY AFTER 12 MONTHS

Under the new rules, it will be possible to ask for a restoration of priority in circumstances where the applicant files the PCT application between 12 and 14 months after the earliest priority date. Thus, in effect, it will be possible to obtain up to a 2 month extension of the PCT filing deadline, provided one of two criteria are met. The application for restoration will need to be accompanied by a declaration establishing that the missed PCTdeadline was (a) "unintentional"; or (b) occurred despite "due care".

Note, however, that any restoration of priority granted by a Receiving Office/WIPO may not be recognised by national patent offices if the criterion of "unintentional" or "due care" is not recognised under relevant national law. It is observed here that more countries recognise "due care" than "unintentional" as a valid basis for extension. Accordingly, "due care" would be the preferred criterion to invoke, if available under the specific facts.

Given the uncertainty regarding the validity of any restoration of priority granted under the PCT rules, and given the possible fatal consequences if priority cannot be validly claimed, it will remain good practice to check with foreign counsel on a country-by-country basis if the normal PCT filing deadline is missed.

Further, it is noted that, if the PCT filing deadline is missed by more than 2 months, it may still be possible to file belated convention applications directly with the countries of interest, provided that those countries have extension provisions which remain operative after more than 2 months (note - both Australia and New Zealand fall into this category).

FOR FURTHER READING

The text of the changes as submitted to the PCT Assembly Meeting in September/October 2005 can be viewed at http://www.wipo.int/meetings/en/doc_details.jsp?doc_id=48427

USPTO "Rules" Partnership Meeting Nov. 9

The United States Patent and Trademark Office (USPTO) has announced its first "Rules Customer Partnership Meeting" to be hosted by the Deputy Commissioner for Patent Examination Policy (DCPEP) and managers of the Office of Patent Legal Administration (OPLA) on Wednesday, November 9, 2005, 8:00 am to 11:30 am, in the Madison Auditorium, at 600 Dulany Street, in Alexandria, Virginia, 22313. Requests for attendance should be submitted by November 4, 2005 to Grace Ramdat at (571) 272-7746 or grace.ramdat@uspto.gov with the attendee's name, affiliation, title, mailing address, telephone number, facsimile number and e-mail address.

The format of the partnership meeting is expected to be a series of presentations by Office staff, with each presentation followed by a period, time permitting, for comments or questions from the attending audience. Anticipated topics for the partnership meeting include recent rule packages, patent practice and policy initiatives, programs for enhanced quality in examination and reexamination procedure, and other topics specific to patent practice and policy.

The USPTO's Customer Partnership Initiative provides a forum to share ideas, experiences, and insights between individual users and the USPTO. The USPTO does not intend to use these customer partnership groups to arrive at a group consensus. Individual opinions are sought from varying participants, and the meetings are intended to be informal in nature. Another customer partnership neeting, "Partnering in Patents XII," will be held on October 26, 2005, 12:00 – 4:00 pm in the Madison Auditorium prior to the AIPLA annual meeting.

Free Symposium Webcast: Protecting & Enforcing Your Intellectual Property in China

The Association of Patent Law Firms and DePaul University College of Law, Center for Intellectual Property Law & Information Technology (CIPLIT), invite you to join them for a webcast presentation and discussion led by international experts from China and the US. All that you need to participate is Real Player for Windows, Mac, Linux, or Mobile

Date: October 20, 2005
Time: 8.30 am to 4.30 pm Central
Place: Center for Intellectual Property Law & Information Technology, DePaul University College of Law, Room 8005, 1 East Jackson Blvd., Chicago.

Schedule:

8.30-9.00 am
Background regarding "Protection and Enforcement of Intellectual Property in China" (Tim Malloy, McAndrews, Held & Malloy, Ltd.)

9.00-10.00am
"Protection and Enforcement of Intellectual Property in China from a Chinese Legal Affairs and Prosecution Perspective" - with question period (Mr. He, Director of the Legal Affairs Division of the Chinese State Intellectual Property Office)

10.00-10.15am
Break

10.15-11.15am
"Protection and Enforcement of Intellectual Property in China from a Chinese Litigation Perspective" (Mrs. Hao, Principle, Dragon International Patent Office; Ms. Xinyan (Paula) Wang - Dragon International Patent Office; Mr. Ying Tuo - Dragon International Patent Office)

11.15-12.15pm
"Protection and Enforcement of Intellectual Property in China from a U.S. Industry Perspective" (Thomas Kingsbury - Maytag Corporation; Bernard Plantz - Johnson & Johnson Company; Tony Zeuli – Merchant & Gould; Susan Perng Pan - Sughrue Mion, PLLC)

12.15-1.30pm
Lunch

1.30-2.30pm
"U.S. and Chinese Perspectives Regarding Enforcement and Protection of IP in China" (Question/Answer Panel Discussion)

2.30-3.30pm
Question/Answer Panel: Developments in U.S. Patent Law and Litigation Practice Panelists:
The Honorable Mark Bennett, Chief Judge, Northern District Iowa
The Honorable Martin C. Ashman, Magistrate Judge, United States District Court Northern District of Illinois

3.30pm
Closing Remarks (2006 APLF President)

European Counterfeits by Source Country in 2003

Get more information from the European Commission's proposal on a "Customs response to latest trends in Counterfeiting and piracy" (COM(2005) 479 final).

Get more data on counterfeits and piracy in the EU here.

What You Can Do to Help the USPTO

According to Sam Mamudi writing for Managing Intellectual Property on October 18, 2005, USPTO Commissioner Jon Dudas is calling on patent practitioners for "a reduction in the number of continuations, fewer claims for each application and a limit to the number of supporting references":

"Out of 375,000 applications we received last year, 100,000 were
[continuations]. When one-quarter of our work is rework, we look at that," said
Dudas, adding that "examiners are concerned about the quality of applications
coming through the door".

The fact that between 20,000 and 30,000 applications every year are second continuations makes the problem worse, said Dudas. As a result, he said, the Office is looking at whether there should be a limit to continuations.

Perhaps we could just start with eliminating restriction, election, and final action practices at the USPTO, before we dismantle the duty of disclosure. While the patent bar can no doubt do more to make claims easier to read, much less examine, I'm not sure that practioners have that much control over the volume of continuing applications and supporting references. Besides, isn't the examination process supposed to get just a little bit easier after the third round?

Revised Preliminary Amendment Procedure for U.S. Patents

In a pre-OG notice entiled "Revised Procedure for Preliminary Amendments Presented on Filing of a Patent Application (signed 11Oct2005)" the United States Patent and Trademark Office (Office) announced that it will require a substitute specification whenever an application is filed with a preliminary amendment to the specification (excluding the claims) in order to ensure that the application is correctly published.

The specific reference to a priior application that is required by 35 U.S.C. 120 or 119(e) and 37 CFR 1.78(a) can be submitted in an application data sheet (ADS) under 37 CFR 1.76 rather than in a preliminary amendment to the first sentence(s) of the specification. Nontheless, if the specific reference to a prior application is submitted in a preliminary amendment, a substitute specification will not be required if the preliminary amendment only adds or amends a benefit claim to a prior-filed application under 35 U.S.C. 120, 121, 365(c), or 119(e).

If an applicant receives a notice from OIPE (e.g., "Notice to File Corrected Application Papers") requiring a substitute specification because a preliminary amendment was filed that only adds or amends a benefit claim, applicant may reply to the notice explaining that a substitute specification should not have been required because the amendment was only to add or amend a benefit claim. If the preliminary amendment contains other amendments to the specification (other than the claims), a substitute specification would be required, and a reply to a notice requiring a substitute specification without the substitute specification will be treated as an incomplete reply with no new time period for reply being provided.

Because a preliminary amendment to the claims or abstract in compliance with 37 CFR 1.121(c) or I.121(b)(2) would include a complete claim listing or replacement abstract, the Office can publish the amended claims or a replacement abstract as submitted in the preliminary amendment without a substitute specification being filed. Applicants should note, however, that there is no need to file a preliminary amendment to the claims on filing. By making the new claim set part of the originally filed specification, applicant may avoid having to pay an application size fee, as both the specification (including the claims) and any preliminary amendment are used in counting the number of pages for purposes of 37 CFR 1.16(s).

The New "I/P Prospectors"

Read more about these latest players in the I/P market at "Going Once?" by Lisa Lerer in the the October 17, 2005 issue of IP Law & Business.

Intellectual Ventures

Founded in 2000 by former Microsoft chief technologist Nathan Myhrvold.
What it does: Billed as a company that invests in invention, IV hosts "inventions sessions" of major scientists, technologists and mathematicians, and has raised about $400 million in funding. IV has been secretive about its other plans, which may include licensing or spin-off companies.

IPotential

Founded in 2004 by former Intel licensing lawyers Ron Epstein and Joe Chernesky.
What it does: Acts as a patent broker in IP deals, and also offers some evaluation and consulting services. IPotential sold over $50 million worth of patents in the third quarter of 2005.

Ocean Tomo

Founded in 1999 by James Malackowski, cofounder of litigation strategy and consulting firm InteCap Inc. (now part of CRA International Inc.).
What it does: Aspires to be an IP investment bank. OceanTomo offers expert testimony, patent evaluation, asset management, patent acquisitions and, most famously, Ocean Tomo runs patent auctions. The company plans to run two auctions a year beginning in March.

ThinkFire

Founded in 2001, also by Myhrvold.
What it does: Offers brokerage, evaluation, litigation support, negotiation execution, and patent assertion analysis. Clients include Lucent Technologies Inc., Cisco Systems Inc., Ciena Corp. and NEC Corp.

USPTO Board Eliminates Technological Arts Test

In Ex parte Lundgren, (BPAI October 2005), the U.S. Board of Patent Appeals and Interferences formally recognized that "there is currently no judicially recognized separate "technological arts" test to determine patent eligible subject matter under § 101." The claims involved a method of compensating a manager including steps such as "determining a performance comparison base based on said set of comparison firm absolute performance measures by calculating a weighted average of said set of comparison firm absolute performance measures." According to the Board,

[C]laim 1 on appeal is directed to a process. Thus, one may wonder why there is any issue regarding whether claim 1 is directed to statutory subject matter. The issue arises because the Supreme Court has ". . . recognized limits to § 101 and every discovery is not embraced within the statutory terms. Excluded from such patent protection are laws of nature, physical phenomena and abstract ideas." Diamond v. Diehr, 450 U.S. 175, 185, 209 USPQ 1, 7 (1981). However, in this appeal, the examiner has not taken the position that claim 1 is directed to a law of nature, physical phenomena or an abstract idea, the judicially recognized exceptions to date to § 101. Rather, the examiner has found a separate "technological arts" test in the law and has determined that claim 1 does not meet this separate test.

The examiner finds the separate "technological arts" test in In re Musgrave, 431
F.2d 882, 167 USPQ 280 (CCPA 1970); In re Toma, 575 F.2d 872, 197 USPQ 852 (CCPA 1978); and Ex parte Bowman, 61 USPQ2d 1669 (Bd. Pat. App. & Int.
2001)(nonprecedential). We have reviewed these three cases and do not find that
they support the examiner’s separate "technological arts" test. . . . We
have also considered Ex parte Bowman, cited by the examiner. Bowman is a
non-precedential opinion and thus, not binding.

According to Tim Wall in 2004, the Board's older view of non-statutory subject matter rejections under Bowman appeared to parallel the "technical character" approach of the European, U.K., and Japanese Patent Offices. In essence, the Board had required a "useful, concrete and tangible result," having "clear world value," for method claims in the U.S. that are not "tied to a technological art or environment." The USPTO's Examination Guidelines in this area will now have to be rewritten.

"What is amazing about Lundgren," writes professor Wegner in his paper on Recent Softawre Protection Trends, "is not the unremarkable holding but, rather, that the entire set of opinions comprises more than 35,000 words and is a work that was many years in the making, all conducted in camera since a first decision of the Board in 1999 with subsequent shenanigans including intervention from PTO officials that led to the stacked deck enlarged panel. Interestingly, out of roughly sixty board members, the five member panel included the Chief Administrative Patent Judge and the Vice-Chief Administrative Patent Judge, both appointed by the PTO administration and hardly anything like a random panel selection." He then goes on to discuss his current views on the software patenting problem in the U.S., including, weaker patent standards in the software area, broadly interprted ambiguous claims, generic claims based on simple enablement, and the standard of "motivation" to combine for obviousness.

Feel free to contact me for a copy The Good Professor's latest thoughts on this topic.

Patent Income Balance of Payments

Source: Dr. Kamal Saggi, "The Role of Intellectual Property Rights in Facilitating Transfer of Technology," WTO Symposium on Trade and Sustainable Development (October 10-11, 2005)(World in red, low and middle income in green, least developed countries in blue, high income in yellow)

What is the balance of payments?

Patent Applications Filed by Nonresidents

Source: Dr. Kamal Saggi, "The Role of Intellectual Property Rights in Facilitating Transfer of Technology," WTO Symposium on Trade and Sustainable Development (October 10-11, 2005)(World in red, low and middle income in green, least developed countries in blue, high income in yellow)

The Concise Economics of Patents

According to David R. Henderson writing for The Concicise Encyclopedia of Economics, the economic justification for patents is straightforward. If there were no patents, then someone who invested time and money to create an invention would not necessarily get a return on even a very valuable invention.

"Although this argument is airtight, it is, in itself, an insufficient argument for patents. There are two main reasons. First, there is a cost to the patent system. By creating a monopoly, it causes higher prices for consumers and thus a loss to them that outweighs the gain to producers (see Monopoly). One might argue that the loss is fictitious because without the patent the invention would not have been made. But many inventions would be made and have been made without patents. Sometimes such inventions occur intentionally, such as when the inventor thinks he can keep the invention secret long enough (but typically much less than seventeen years) to collect a monopoly return on it. Other times, the inventions occur by accident. Either way, one of the patent system's negative effects is to create monopolies in inventions that would have existed anyway.

Second, as British economist Arnold Plant argued in the thirties, the patent system diverts creative energy into the patentable inventions and away from the kinds of improvements that cannot be patented. An example of such an unpatentable improvement would be a new way of organizing shelf space in a supermarket. There is no assurance that this diversion creates net economic benefits for society."

Supplementary Protection Certificate Basics

Supplementary Protection Certificates were introduced in the European Union to compensate for regulatory approval delays in bringing to market medicinal products (such as drugs) and plant protection products (such as insecticides, pesticides and herbicides). So-called "SPCs" are a sui generis form of intellectual property protection etsblished by Council Regulation (EEC) No 1768/92 for medicinal products and Regulation No 1610/96 of the European Parliament for plant protection products.

These regulations authorize certificates to be granted for products which constitute:

• the “active ingredient”, or combination of active ingredients, of a “medicinal product”, under 1768 Art 1(b) or
• the “active substance”, or combination of active substances, of a “plant protection product”under 1610 Art 1.8

However, the product must have received either its first authorization to place it on the market in the European Community after 1 January 1985. (Other dates may apply for medicinal products in some EC States.)

The term of a certificate is equal to the period which elapsed between the filing date of the patent and the date of the first authorization in the EC reduced by a period of five years. The term of a certificate may not exceed five years.

A certificate extends the protection conferred by the basic patent beyond the term of that patent but only with respect to the product covered by the authorization to place the corresponding product on the market. It does not extend the term of the patent itself. Applications for a supplementary protection certificate must be filed on a country-by-country basis. There is no unitary European supplementary protection certificate, but national ones only.

The International Patent Documentation Center ("INPADOC") database of the European Patent Office contains data on SPCs. However, the legal status (or "patent register service") "PRS" code used to indicate an SPC varies from country to country.

TGIF for the "Barbecook"

Thanks to John L. Welch at the TTABlog for calling attention to In re Saey N.V., Serial No. 75826909 (Sept. 21, 2005) [not citable] where the application described the mark


"consists of two holes and a handle, which are meant to represent and give the appearance of the eyes and nose features of a face on a tubular section of the barbecue." The applicanty went on in the briefs to describe this design as representing

. . . a face with eyes and nose that gives the appearance of the
face on the tubular section of the barbeque. The mark consists of two holes and
a handle, which are meant to represent and give the appearance of the eyes and
nose features of a face on the tubular section of the barbeque. The face is that
of the Barbecook and the graphic mark is a personification of the Applicant’s
personalized word mark Barbecook.

But the TTAB was not presuaded:

Applicant’s counsel is quite creative in ascribing to the design the
personalization of “the face of Barbecook” comprising two eyes and a nose.
However, the record is absolutely devoid of any promotion of the matter as the
“face” of Barbecook, or even that there is any fictional character named
“Barbecook.” Rather, “Barbecook” appears to be the trademark for applicant’s
grill. In point of fact, the record does not include even a single reference in
any promotional materials to the “face” design as a trademark for the goods.
There is a total absence of any “look for” promotion of the face as a trademark
for applicant’s goods. Rather, applicant’s brochures for the barbeque grills
point to the holes as follows: “Ventilation holes to control the air flow”; and “The intensity of the fire can be controlled by adjusting the ventilation system.”

Needless to say, the refusal to register was affirmed, and

Thank Goodness It's Friday,

--Bill Heinze

Brazil Threatens I/P Sanctions over U.S. Cotton Subsidies

According to Bridges Weekly Trade News Digest, on October 6, 2005, Brazil asked the WTO Dispute Settlement Body (DSB) to suspend its treaty obligations on services and intellectual property rights in order to retaliate against the U.S. for failure to comply with a March WTO ruling on cotton subsidies. U.S. Deputy Secretary of State Robert Zoellick, in Brazil for a goodwill visit that same day, warned that the country ought to think carefully about requesting sanctions, suggesting that they could incite a trade war. According to Joel Brinkley writing for the The New York Times on October 7, the former U.S. Trade Representative "suggested that Washington could choose to eliminate trade preferences that allowed Brazil to ship more than $2 billion in goods to the United States duty free, adding, 'When one side retaliates, who knows what the other side will do?'" Noting that US legislation has been proposed to fix the problem, Zoellnick added "In my view, a step towards retaliation at this point would actually aggravate the situation."

Under WTO rules, members may be granted permission for so-called "cross-retaliation" when it is not "practicable" or "effective" for them to impose penalties under the violated agreement. Whether this is indeed the case depends on the likely effects of retaliating against the same sector in the same agreement -- for example, in this case, retaliating under the General Agreement on Tariffs and Trade, or the GATT, which governs trade in agricultural and non-agricultural products. If granted permission to cross-retaliate, Brazil would, for example, have the right to suspend the effects of US patents, which would clear the way for companies in Brazil to make generic copies of medicines.

If Brazil receives the right to cross-retaliate and actually does so, it would become the first country in WTO history to impose such measures. In 2000, a WTO dispute arbitrator granted Ecuador permission to impose cross-retaliatory sanctions worth USD 200 million against the EU for the latter's failure to comply with a WTO ruling against its banana import regime. However, Ecuador chose not to avail itself of this right to retaliate.

In a meeting of the WTO Trade Negotiations Committee (TNC) in Geneva on October 13, WTO Director General Pascal Lamy indicated that his organization may be looking closer at intellectual property issues. “We must also ensure that the issues of implementation … and TRIPS and public health are taken up in an appropriate way in the lead-up to [the December ministerial meeting in] Hong Kong,” Lamy reportedly said. “And we must ensure that we build the necessary base for an ‘aid for trade’ package for the end of the round.”

More about "I/P Drama in Brazil" is available from the Promote the Progress Blog here.

Today in Patent History: Henry Blair

Henry T. Blair received U.S. Patent No. x8447 for a "Seed Planter" on October 14, 1834:
According to Don McClure and others, "Henry Blair was the only inventor to be identified in the Patent Office records as 'a colored man.' For many years Henry Blair was thought to have been the first black American to receive a patent. Later, research revealed Thomas L. Jennings received a patent in 1821 for the invention of the dry cleaning process, " U.S. Patent No. x3306.

The U.S. Patent Office records show that Mr. Blair signed his patents with an "x" because he could not write. However, the scanned copy of the patent available on the Internet does not display the racial epitaph.

Click here for more information about black inventors.

Patent Litigation Merely an Expensive Settlement Mechanism?

In "How Are Patent Cases Resolved? An Empirical Examination of the Adjudication and Settlement of Patent Disputes," U. Illinois Law & Economics Research Paper (2005), Jay Kesan and Gwendolyn Ball look at the evolution of about 3700 cases patent cases filed in 1995 and 1997. They track a variety of characteristics in order to estimate patent litigation costs in each case, including the amount of time taken by each case through to final disposition and the number of documents filed by all the parties in each case. They conclude that

[M]any more patent cases are adjudicated on the merits (either at the pre-trial stage through a grant of summary judgment or at trial) than is commonly thought. Our results demonstrate that in addition to the small number of patent cases going to trial (about 5%), another significant percentage of cases (about 8-9%) are resolved on the merits through summary judgment. Consequently, summary judgments are important in patent cases for determining patent validity and infringement, and the summary judgments related to patent validity occur earlier in the litigation compared to summary judgments related to patent infringement.

This result is somewhat encouraging given the important role played by the courts in revoking patent rights improvidently granted at the outset by the PTO. Nevertheless, despite the fact that such rulings occur "early" in the proceedings compared to patent trials, we should still be concerned about the huge transaction costs associated with patent litigation because summary judgments in general, and summary judgment based on invalidity in particular, are expensive compared to summary judgments granted on other grounds.

In addition, there is a significant difference in duration and number of documents filed in cases resolved through summary judgment for the 1997 filed cases compared to the 1995 filed cases. This is consistent with the changes brought about by the Markman decision that invigorated claim construction as a threshold legal issue in patent litigation. The increased importance placed on first construing the claims before addressing infringement or invalidity after Markman necessitates that significant resources be allotted to the step of claim construction before (or concurrent with) filing motions for summary judgment. Hence, it is not surprising that in the 1997 filed cases more resources were expended earlier in the litigation compared to the 1995 filed cases.

Overall, our results show that transaction costs associated with patent litigation loom large, and rulings on the merits by the courts concerning patent validity, patent infringement, and remedies for infringement (i.e., injunctive relief or damages) are rare, expensive, and not pursued to completion by most litigants. Instead, most patent cases settle fairly quickly (about 12-15 months) after the filing of the complaint, thereby reducing the actual cost of patent litigation considerably.

This work has significant implications for all civil litigation in general, and for recent efforts to reform the patent system by either improving patent quality through new administrative procedures at the PTO or for substantive patent law reform. Our results strongly suggest that patent litigation is largely a settlement mechanism, and hence, any proposed change in the patent laws should be analyzed in terms of the incentives generated for prompt settlement of patent disputes. In addition, entities and interest groups seeking cheaper and/or a greater number of patent rulings concerning validity and infringement will be wise to look elsewhere, perhaps at other patent institutions such as the PTO or at other alternative dispute resolution (ADR)
mechanisms that complement the courts.

New U.S. Deputy Trademark Commissioners

Last week, Deborah S. Cohn was named Deputy Commissioner for Trademark Operations, and Sharon R. Marsh was named Deputy Commissioner for Trademark Examination Policy.

Ms. Cohn is currently a group director for the trademark law offices. In her new position, Ms. Cohn will oversee the examination and processing of applications throughout the trademark operation and will work with other USPTO business units in helping to achieve agency goals.
Ms. Cohn began her career at the USPTO as a trademark examining attorney and was promoted to senior attorney and then managing attorney. She is a former Council of Excellence in Government fellow and has been the project coordinator for the trademark work-at-home program, the agency's first telework program. Ms. Cohn is a graduate of The American University and George Mason University School of Law.

Sharon Marsh is currently the Administrator for Trademark Examination Policy. In her new position, Ms. Marsh will oversee the development of examination policy in the trademark law offices and service units, and will manage the legal policy staff in the trademark commissioner's office. Since joining the USPTO, Ms. Marsh has held the positions of trademark examining attorney, senior attorney, and managing attorney. She also participated in the Commerce, Science, and Technology Fellowship program where she worked for the Technology and the Law Subcommittee of the Senate Judiciary Committee. Ms. Marsh is a graduate of Duke University and the Emory University School of Law.

Killing Automotive Innovation One Supplier at a Time

Peter Zura at the Two-Seventy-One Patent Blog has found a story by Christoph Hammerschmidt of EETimes Germany concerning suppliers who are required to surrender their IP rights in order to win contracts from auto makers. Wolfgang Runge, CEO of Bosch joint venture ZF Lenksysteme, and program committee chairman of the VDI Congress on Electronic Systems for Vehicles told the conference that "these are far from being isolated cases. This is happening at the domestic and international level.”

Such arrangements entitle OEMs not only to use the fruits of their suppliers’ R&D efforts for their own benefit, but also to divulge them to third parties. “We found that a competitor was using IP we’d developed,” complained one automotive electronics development manager who requested anonymity. “When we brought this situation to the attention of the relevant OEM, and asked them to at least pay a licensing fee, they told us that we were welcome to lodge this request but that in such a case they could not guarantee that we would receive orders from them in the future.”

Contacted this week to respond to Runge's allegations, the German auto industry group VDA (Verband der Automobilindustrie) a spokesman said, "We see no reason to comment." The group represents more than 500 companies, including most German auto manufacturers.

Corporate Legal Departments Maintain Status Quo

According to the Altman Weil Law Department Management Benchmarks Survey for 2005, despite years of discussion of cost controls and alternative billing arrangements, the status quo still rules in most corporate law departments.

“Law department expenditures and staffing remain largely unchanged,” notes Altman Weil principal Daniel J. DiLucchio. “And hourly rates remain the predominant law firm method of billing corporations, with the number one alternative billing technique reported as ‘reduced hourly rates’ — which ends up being no alternative at all in many cases. This suggests that law departments are not sufficiently analyzing their costs, nor implementing techniques that will assist their companies in managing, containing and controlling those costs,” DiLucchio adds.

Total law department expenses in all companies surveyed averaged $847,599 per lawyer in fiscal year 2004, virtually unchanged from the previous year. Internal expenses represented 50% of total expenses on average. For all companies participating in the survey, total legal expenses, measured as a percent of revenue, averaged 0.61% in 2004, which is virtually unchanged from the 0.59% reported-last year.

The 2004 cost of operating the in-house law department for all companies rose to an average of $324,547 per lawyer. This is a 2.5% increase over 2003 costs. Outside expenditures accounted for 51% of total law department costs. The Survey reports the highest percentage of non-litigation outside counsel fees went to general corporate practice (11%). For litigation practice areas, the greatest spending was on commercial/contracts (9.4%) and labor/employment (8.3%).

Lawyer staffing in corporate law departments decreased somewhat in 2004, with the key measure – lawyers per billion of revenue – dropping to 2.93 lawyers/billion compared with 3.5 lawyers/billion in 2003. This decrease was reflected in both a decrease in the average number of management lawyer positions as well as the average number of general lawyers. The average distribution of lawyers by practice areas within the law department remained consistent with 34.1% categorized as general corporate and 13% in litigation.

Staff positions were basically unchanged in 2004 with 0.9 paralegals per $1 billion in revenue reported in 2003 and 2004. In addition, administrative staffing was reported unchanged at 1.8 administrators per $1 billion of revenue for both 2003 and 2004. The Services industry employs the greatest number of lawyers at 4.02 per $1 billion of revenue, while the Wholesale/Retail industry employs an average of 1.47 lawyers according to the Survey.

Hourly billing by outside law firms continues to be the prevalent method of charging for legal services as 43.1% of the fees paid to outside counsel are based on hours. For those firms that do use alternative billing arrangements, reduced hourly rates are reported as the most prevalent by 57% of Survey participants.

In spite of in-house counsels’ continuing concerns over outside counsel cost management and service delivery, only 18% of in-house counsel formally evaluate their outside counsel. Although this is a 2% increase over the number reported for 2003, it remains low.

A separate Compliance Study conducted by Altman Weil, Inc. and Integrity Research Group reports that 66% of its participants have created a distinct compliance function in their organizations. Of those, one-third report to the Chief Executive Officer, one-third report to the General Counsel and one-third to “Others” in the organization.

The 2005 Survey includes data from 140 companies, 29% with revenues of $5 billion or more. Survey data is reported by sales revenue, number of corporate employees, industry type and law department size. Data was collected in the spring of 2005 and reports on fiscal year 2004.

Ninety-Five Percent of Madrid REPs to US Refused

Carl Oppedahl posted the following note to the INTA Listserv regarding Madrid Protocol Requests for Extension of Protection ("REPs") to the United States.

About 19740 REPs to the US have been made to the International Bureau, of
which 15454 have been registered by the International Bureau. The IB
transmits these REPs electronically to the USPTO, and right now 14799 of them
have US serial numbers. It takes about six and a half months for a REP to the US
that has a US serial number to get examined. For example right now the
USPTO is examining REPs that received US serial numbers in about March of 2005.
By far the majority of REPs to the US (about ninety-five percent) receive
international refusals. Of the 14799 REPs to the US that have received US
serial numbers, about 12413 have been examined, and 11776 have received an
international refusal.

What are the causes of refusal? A review of several hundred refusals
identifies the following.In well over half of all international refusals
emanating from the USPTO, at least one ground for refusal is the Madrid
applicant having failed to state, in section 2 of Form MM2, the "legal nature of
the legal entity:" of the applicant or the country "under the law of which the
legal entity is organized:" Although these two fields are merely listed on the
MM2 form as "may be required," for a REP to the US, these fields are very much
required.

In well over three-quarters of international refusals emanating from the
USTO, a chief ground for refusal is indefiniteness in the identification of
goods/services. The applications that avoided such refusals appear in
nearly all cases to have identifications selected directly from the USPTO's
Trademark Acceptable Identification of Goods & Services Manual. Of the 12413
REPs that have been examined, 4208 have been published for opposition, and 1353
have been registered.

Past Tense Prophetic Example Kills Patent

In Novo Nordisk Pharmaceuticals, Inc., et al. v. Bio-Technology General Corp., et al. (Fed. Cir. October 5, 2005) the court affirmed that Novo acted with deceptive intent in failing to disclose the prophetic nature of Example 1 to the PTO or the Board.

Example 1 described the production, purification, and evaluation of a fusion protein. It also described treatment of the fusion protein with the LAP enzyme in order to obtain ripe hGH and stated that standard tests indicated that the disclosed methodology produced ripe hGH protein that was 98% pure. Speaking in the past tense, the example states that "[t]he fusion product was purified from this extract," that "[t]he purified fusion protein was evaluated to be more than 98% pure," and that "[t]his . . . product was then treated with leucine aminopeptidase."

According to Circuit Justice Schall:

It is undisputed that Dr. Christensen was aware that Example 1 was prophetic and that Novo never successfully produced ripe hGH through the use of "pure LAP" enzyme. It also is undisputed that, during prosecution of the '856 application, Dr. Christensen was one of four Novo representatives present during the January 7, 1994 interview with the examiner, during which one of the issues addressed was enablement of the 1983 PCT application, of which the ’081 application was the U.S. counterpart. As noted, other representatives included Novo’s in-house patent attorney and in-house patent advisor.

Thus, Novo asks us to hold, on the one hand, that the failure of Dr. Christensen and his co-inventors to disclose the truth about Example 1 to Novo’s attorneys absolves them of their duty to disclose this information to the PTO or the Board, because without their attorney’s consultation, they could not have known that this information was material. At the same time, Novo asks us to hold that its counsel’s failure to disclose the truth about Example 1 to the PTO or Board is excused because the inventors failed to fully inform them of the details surrounding Example 1.

As we have done in similar situations in the past, we reject the "circular logic" of this request. See Brasseler, 267 F.3d at 1380 ("We refuse to pursue the circular logic of Brasseler’s request and decline to carve out an exception to the inequitable conduct law to shield those guilty of inequitable conduct from responsibility for their actions."); see also Molins, 48 F.3d at 1178 (stating that the knowledge and actions of an applicant’s representatives are chargeable to the applicant (citing FMC Corp., 835 F.2d at 1415 n.8)). Accordingly, the district court correctly concluded that Novo knew or should have known that the PTO and the Board would have considered the information relating to Example 1 important in evaluating whether the 1983 PCT application was enabled.

In the U.S., simulated or predicted test results and prophetical examples (paper examples) are permitted in patent applications. Working examples correspond to work actually performed and may describe tests which have actually been conducted and results that were achieved. Paper examples describe the manner and process of making an embodiment of the invention which has not actually been conducted. Paper examples should not be represented as work actually done. No results should be represented as actual results unless they have actually been achieved. Paper examples should not be described using the past tense. Hoffman-La Roche, Inc. v. Promega Corp., 323 F.3d 1354, 1367, 66 USPQ2d 1385, 1394 (Fed. Cir. 2003).

Internal Development Does Not Bar Patentability

In Invitrogen Corp. v. Biocrest Manufacturing, L.P., et al. (Fed. Cir. October 4, 2005) the court held that Invitrogen's secret use of cells internally to develop future products that were never sold is insufficient to create a public use bar to patentability. Invitrogen did not sell its invention or any products made with it, and kept the invention entirely confidential within the company. According to Justice Rader,

In some cases, this court has determined that a use before the critical period was not public even without an express agreement of confidentiality. See, e.g., Moleculon Research Corp. v. CBS, Inc., 793 F.2d 1261 (Fed. Cir. 1986) (inventor’s private use and demonstrations to colleagues were not public). For instance, in TP Laboratories, Inc. v. Professional Publishers, Inc., 724 F.2d 965 (Fed. Cir. 1984), the inventor was a dentist who installed the inventive orthodontic appliance in several of his patients. Although the inventor had not obtained any express promise of confidentiality from his patients, this court did not consider the use "public" because the dentist-patient relationship itself was tantamount to an express vow of secrecy. Id. at 972. In reaching that result, this court opined in general that secret use may be public "within the meaning of the statute, if the inventor is making commercial use of the
invention under circumstances which preserve its secrecy." Id. This court noted
specifically that, under the facts of TP Laboratories, it could find no "commercial exploitation" of the invention during the critical period, identifying "commercial exploitation" with sale of the device or a charge for its use of the invention within the confidential confines of the company to generate commercial benefits. Id. at 972-73. Thus, TP Laboratories bolsters the general point that an agreement of confidentiality, or circumstances creating a similar expectation of secrecy, may negate a "public use" where there is not commercial exploitation.

The classical standard for assessing the public nature of a use was established in Egbert. In Egbert, the inventor of a corset spring gave two samples of the invention to a lady friend, who used them for more than two years before the inventor applied for a patent. Egbert, 104 U.S. at 335. The invention was sewn into a corset and therefore, by its nature, not visible to the public. Thus, the Court had to decide whether such an invention could nevertheless be "public." Although he later married the lady friend, the inventor in Egbert received no commercial advantage. Nonetheless, on these facts, the Court established the principle that it was indeed "public" use to give or sell the invention "to another, to be used by the donee or vendee, without limitation or restriction, or injunction of secrecy." Id. at 336.

As the Supreme Court pointed out in Pfaff, supra, secrecy of use alone is not sufficient to show that existing knowledge has not been withdrawn from public
use: commercial exploitation is also forbidden. Invitrogen’s invention was not
given or sold "to another," or used to create a product given or sold to another, and was maintained under a strict obligation of secrecy. Without more, these circumstances are insufficient to create a public use bar to patentability.

Canadian Patent Prosecution Basics

In "Canadian Patent Prosecution ; Compared with U.S. Patent Law, the Differences Are in the Details," Marcus Gallie and Fraser Rowand write for the Fall 2005 issue of The Patent Lawyer that the novelty question in Canada is whether the subject-matter of the invention has been disclosed "in such a manner that the subject-matter became available to the public in Canada or elsewhere."

Therefore, some activities that may raise a disclosure bar in the United States, such as offering an embodiment of the invention for sale, do not necessarily cause a problem in Canada unless the activity makes the invention available to the public. Similarly, there are activities that may pose a novelty problem in Canada but not in the U.S., such as a public use or sale outside the United States that results in the subject matter of the invention becoming available to the public.

With respect to certain disclosures, like the United States, Canada provides a one-year grace period prior to the filing of an application in Canada during which such disclosures are not considered a bar to obtaining a valid patent. However, . . .
it is also important to note that the one-year grace period is measured back from the filing date in Canada, and not the filing date of any foreign priority applications.

. . . There is no statutory requirement for an applicant to file relevant prior art in Canada, although the Canadian Patent Office may request information relating to the prosecution of corresponding applications, including cited prior art. In any event, we recommend that the applicant always voluntarily disclose the prior art information at the outset since the examiner routinely will request it, it simplifies examination and prosecution, and, most importantly, should the resulting patent be subject to a validity challenge based on prior art, Canadian courts generally will refuse to consider any prior art which has already been considered by the examiner during prosecution.

. . . As a result of a March 2003 decision from the Federal Court of Appeal ("Barton"), small entity status is determined at the time that the patent regime is first engaged, normally at the time of filing the application and is not changed after that, regardless of subsequent transfers or licenses. In other words, the determination of entity status need only be made once.

Other aspects of Canadian practice to be aware of:

• No prosecution history estoppel.
• No excess claim fees or restrictions on multiple-dependant claims.
• No special treatment for means-plus-function claims.
• The deadline for entering national phase from a PCT application may be extended by twelve months with the payment of a government fee, although such extensions arenot available for regular Paris Convention filings.
• Signatures on an assignment need to be witnessed in order forthe Canadian Patent Office to record the assignment (unlessthe assignment has been recorded with the USPTO, in whichcase the Canadian Patent Office will accept the assignment ifsubmitted with the USPTO recordal page).