USPTO Claim/Continuation Limit Rules Blocked

According to the the Practising Law Institute's "Patent Blog," PLI founder John White heard "an audible sigh in the courtroom when Judge Cacheris said the rules were enjoined:"

Judge Cacheris did not make any statements about the likely merits of the case
when making his ruling from the bench. He will, however, be issuing a formal written opinion which will be entered sometime this afternoon. As soon as we receive that ruling we will post it together with our analysis.

Thanks to Patently-O for posting a copy of the order which states:

4) Defendants are preliminarily enjoined from implementing the Final Rules titled “Changes to Practice for Continued Examination Failings, Patent Applications Containing Patentably Indistinct Claims, and Examination of Claims in Patent Applications,” 72 Fed. Reg. 46716, 46716-46843 (Aug. 21, 2007)(to be codified at 37 C.F.R. pt. 1);

5) Defendants are preliminary enjoined from issuing new regulations restricting the number of continuing applications, the number of requests for continued examination, and the number of claims that may be filed with the PTO;

6) This Order shall expire upon the entry of a final judgment in this matter, unless otherwise ordered by the Court;

PLI has also posted the39-page Memorandum Opinion, which includes these highly-redacted highlights:

C. GSK’s Motion for a TRO and Preliminary Injunction

In carefully weighing the factors of the Federal Circuit’s balancing test, for the reasons stated below, the Court will grant GSK’s Motion for a Preliminary Injunction.

1) Likelihood of Success on the Merits

. . . As the Court will explain, GSK raises serious concerns as to whether the Final Rules comport with the Patent Act. In addition, the Court also believes that GSK has created a colorable question as to whether the Final Rules are truly substantive. Thus, the Court will find that there is a genuine possibility that GSK will succeed on this issue.

GSK’s second claim, alluded to by the Court above, is that Final Rules 78, 114, 75, and 265 exceed the plain language of Title 35. . . . The PTO responds that Final Rule 78 is within its authority under Section 2(b)(2), is not an absolute bar to filing a third continuing application, and that the PTO will review petitions for a third application “on a case-by-case basis.” Defs.’ Opp’n to Pls.’ Mot. at 26 n.20; Ex. 2 to Defs.’ Opp’n at 46770-76. Nevertheless, the Court believes that, on balance, the law on this question tips in favor of GSK, and thus the Court will find that GSK has demonstrated a likelihood of success on this issue.

GSK further argues that 35 U.S.C. § 132 prohibits the promulgation of Final Rule 114, which governs RCEs. Section 132(b) requires that the PTO “prescribe regulations to provide for the continued examination of applications for patent at the
request of the applicant.” 35 U.S.C. § 132(b). While GSK reads this language and finds that Congress did not grant the PTO the authority to restrict the number of RCEs that may be filed, the PTO argues that Final Rule 114 complies with Section 132 even though it requires that a petition and showing accompany the filing of a second RCE. Given the limited briefing of this issue by both parties, the Court will find that, for the purposes of this motion, neither party can claim a strong likelihood of success on this issue.

GSK makes a similar claim with respect to Final Rules 75 and 265, which limit the number of claims an applicant may file. Section 111 and 112, the relevant statutory provisions, are similar to Sections 120 and 132 in that they do not specify whether the PTO has the authority to place a limit on the number of claims an applicant may file. 35 U.S.C. §§ 111 and 112. The PTO argues that it is entitled to Chevron deference on this issue because of the ambiguity of Section 2(b)(2). GSK, however, has raised serious questions as to whether the PTO is entitled to Chevron deference in this case. Nevertheles, given the limited briefing of this issue by both parties, the Court will find that, for the purposes of this motion, neither party can claim a strong likelihood of success on this issue.

The PTO justifies each of these rule changes on the grounds of administrative efficiency. GSK challenges this rationale as arbitrary and capricious because “it has not been adequately explained, ignores less-drastic and less-damaging alternatives to restricting abusive continuation applications, and is not supported by the PTO’s statistics on the number of third or subsequent continuation applications.” . . . Though the Final Rules would reduce the PTO’s backlog by only 2.7% and, by their own admission, are insufficient to reduce the backlog to a reasonable level, PTO models show that they will have an impact on the backlog. See Ex. 1 to Defs.’ Opp’n to Pls.’ Mot. at A05645. Thus, the PTO’s rationale appears to be sufficient to satisfy arbitrary and capricious review, and the Court will find that GSK has not shown a real likelihood of success on this issue.

GSK also takes issue with the alleged retroactive application of the Final Rules. . . . The Final Rules retroactively alter the bargain on which inventors like GSK rely in making their decision to surrender their rights. The Final Rules thus impair GSK’s right to this bargain. Furthermore, while procedural rules often do not raise retroactivity concerns when applied to pending applications, see Landsgraf, 511 U.S. at 275, there remains a serious question as to whether the Final Rules even qualify as procedural. Given all of these factors, the Court will find that GSK has demonstrated a real likelihood of success on the issue.

Finally, GSK claims that Final Rule 265, which delineates the requirements of an ESD, is unconstitutionally vague because it fails to provide “any boundaries on the scope of the search.” Mem. in Support of Pls.’ Mot. for a TRO and Prelim. Inj. at 26. Specifically, GSK complains that the “rule does not indicate whether the applicant must conduct electronic searches, manual searches, or both; in which countries’ databases the applicant must search; or which libraries it must search.” Id. at 27. According to GSK, the ESD requirement forces applicants to “search the patent literature of the entire world, as well as unspecified yet relevant ‘non patent literature.’” Pls.’ Reply Mem. at 18-19.

The PTO responds that, under Marsh, GSK does not have a vested property right in its patent application and therefore cannot bring a constitutional vagueness challenge. Defs.’ Opp’n to Pls.’ Mot. at 35. Regardless, the PTO also contends that the ESD requirements are sufficiently clear for applicants to be able to comply. The D.C. Circuit has found that to satisfy due process requirements, regulations “must be sufficiently specific . . . that a reasonably prudent person, familiar with the conditions the regulations are meant to address and the objectives the regulations are meant to achieve, would have fair warning of what the regulations require.” Freeman United Coal Mining Co. v. Fed. Mine Safety & Health Rev. Comm’n, 108 F.3d 358, 362 (D.C. Cir. 1997).

In the final Federal Register notice, the PTO explained that “[t]he standard for the preexamination search . . . is the same standard that the [PTO] uses to examine patent applications, which is set forth in MPEP §§ 904-904.03,” and that following the MPEP §§ 904-904.03 standard “should be sufficient” to meet the ESD requirements. Ex. 2 to Defs.’ Opp’n to Pls.’ Mot. at 46800. The PTO has also published further guidance documents to assist applicants in meeting these requirements. See Ex. 4 to Defs.’ Opp’n to Pls.’ Mot. at Ex. A “Guidelines for Examination Support Document (“ESD”) under 37 CFR 1.265."

In response, GSK notes that the need for official guidance suggests an admission of vagueness. Moreover, any guidance documents generated by the PTO outside of the notice and comment rulemaking process violate the Administrative Procedure Act. See Appalachian Power Co. v. E.P.A., 208 F.3d 1015, 1028 (D.C. Cir. 2000). Thus, because the Court believes that GSK has raised serious concerns as to whether a reasonably prudent person would be able to comply with the ESD requirements, the Court will find that GSK has demonstrated a real likelihood of success on this issue.

Based on the difficult legal questions presented by this case, the Court will find that, in sum, the likelihood of success on the merits factor weighs in favor of GSK.

2) Irreparable harm to GSK if injunction is not granted

If the Final Rules go into effect on November 1, GSK claims that they will experience significant irreparable harm. GSK has about two thousand pending applications, the rights of which would be changed under the new rules. In particular, GSK’s ability to file continuing applications for those patent applications is truncated, and they will be unable to file the further claims they expected regarding applications for inventions that were developed based on the current rules.

. . . The PTO argues that GSK does not identify a specific patent application they intend to file immediately upon the implementation of the Final Rules, which the PTO offers as evidence that GSK will not experience certain harm. The PTO also explains the steps GSK might be able to take under the Final Rules which could prevent the loss of patent protection for at least one patent family. The mere necessity to make decisions or adjust patent prosecution strategy is not specific harm requiring a preliminary injunction. The PTO characterize the harms outlined by GSK as speculative and not immediate, emphasizing that GSK cannot definitely delineate certain, concrete financial harm beyond the costs of implementing the regulations. Although GSK cannot pinpoint an exact amount of monetary loss, the uncertainty caused by the regulations will cause harm to their investments and provide a disincentive to their filing of new patent applications for researching new pharmaceutical products. In addition, there is still some question as to whether following the complicated steps outlined by the PTO will indeed guard against lost patent protection. Finally, GSK will be unable to recover their losses if the Final Rules are ultimately determined to be invalid. Therefore, the Court finds that GSK is likely to suffer irreparable harm if the preliminary injunction is not granted.

3) The balance of hardships between the parties

The PTO claims that the balance of hardships tilts in their favor because they will have to endure the hardship caused by forcing a large organization in the midst of instituting a massive change to stop and reverse course. The PTO has spent millions of dollars training their staff and retooling their computer systems to prepare for the implementation of the Final Rules, changes that cannot be easily undone or simply placed on hold. If subjected to a preliminary injunction, they will be forced to use sub-standard systems, exposing themselves to the possibility of costly computer problems. In addition, they will continue to encounter the problems of inefficiencies and the increased likelihood of error that the Final Rules were promulgated to fix, exacerbated by the confusion among patent filers and the likely increase in erroneous filings. They will also have to pay the costs of retraining their employees to institute the Final Rules if they go into effect on a future date.

GSK characterizes the PTO’s harm as primarily sunk costs already incurred by training personnel and changing the computer systems to implement rules the organization knew might not go into effect. Any costs incurred by a delay in implementing the Final Rules would thus be merely the cost of maintaining the status quo. Additionally, GSK downplays the PTO’s expectation that the Final Rules would provide a significant gain in efficiency or a reduction in backlog. GSK argues that they, by contrast, will begin to experience the irreparable harms discussed above as soon as the rules go into effect, and do not have any avenues at all for maintaining any version of the status quo when it comes to certainty about their
patent protection. They will instantly suffer from uncertainty regarding the protection afforded their patents and their corresponding investment risk, in addition to the costs of attempting to comply with the Final Rules. Thus, the Court finds that, although the hardship to the PTO is not nonexistent, the uncertainty and loss of investment suffered immediately by GSK tilts the balance of the hardships in their favor.

4) The public interest

The PTO argues that the public interest is most benefitted by the Final Rules going into effect immediately. The PTO claims that the rules promote efficiency and timeliness and are needed immediately to alleviate the harm entrepreneurs suffer because of the current system’s uncertainty. In addition, patent applicants who are preparing to comply with the Final Rules will face uncertainty as to how to proceed with patent prosecution and as to which rules will govern their application during the period of an injunction.

GSK asserts that preserving the status quo while the litigation proceeds is important for maintaining stability for patent holders. Innovation is encouraged when patent holders and applicants have certainty about how their patents will be treated. The fact that three amicus briefs were filed by organizations representing a wide array of industries, all urging the Court to grant the preliminary injunction because their interests will otherwise be harmed, further demonstrates the possibility of potential immediate harm to the public if the rules are allowed to go into effect on November 1.

Many companies rely upon the stable, reliable protection afforded by the current patent system in determining whether it is costeffective to abandon their trade secret protection by pursuing a patent. Implementation of the Final Rules changes those companies’ calculus and immediately decreases their ability to pursue costly new innovations. Allowing the implementation of rules that may or may not remain in effect is likely to cause much greater uncertainty and squelching of innovation than a preliminary injunction giving the Court time to consider the validity of the Final Rules before they go into affect. Accordingly, the Court will find that the public interest is most served by continuing the status quo and granting the TRO.

Therefore, after considering the likelihood of GSK’s success on the merits, the possibility of irreparable harm to GSK if the injunction is not granted, the balance of hardships between the parties, and the public interest, the Court finds that GSK’s Motion should be granted.

Have You Registered for USPTO Recovery Codes?

Did you know that private PAIR and EFS-Web users must Register for Recovery Codes in order to avoid being automatically frozen out of the USPTO's electronic information sytems every 18-24 months when their digital certificate expires without warning?

If not, then you too will eventually get to hear a studiously nonchalant representative from USPTO's Patent Electronic Business Center explain why it's your fault that your practice will now be suspended for at least 24 hours while the USPTO attempts to send you a new digital certificate.

Perhaps this is one USPTO procedure that could be quietly improved without a new rules package or injunction?

USPTO Publishes Special Instructions for PCT Requests Involving Sequence Listings

Since neither the conventional PCT Request Form (PCT/RO/101) nor the PCT-SAFE/EASY Request has yet been modified to allow proper identification of the items in an international application containing a sequence listing and/or related tables filed in the RO/US via EFS-Web, the USPTO has now posted instructions for a temporary fix on the PCT Legal webpage at
http://www.uspto.gov/web/offices/pac/dapps/pct/sl_efs_web_instructions.pdf.

ECJ: Squeeze Bottle Devoid of Distinctive Trademark Character

According to the European Court of Justice in Develey Holding GmbH & Co. Beteiligungs KG v. Office for Harmonisation in the Internal Market (C-238/06 P), this squeeze bottle was devoid of the distinctive character required for European trademark registration, regardless of its registration as a mark in Germany:

79 According to consistent case-law, the distinctive character of a trade mark within the meaning of Article 7(1)(b) of Regulation No 40/94 means that the mark in question makes it possible to identify the product in respect of which registration is applied for as originating from a particular undertaking, and thus to distinguish that product from those of other undertakings (Joined Cases C‑473/01 P and C‑474/01 P Procter & Gamble v OHIM [2004] ECR I‑5173, paragraph 32, and Case C‑64/02 P OHIM v Erpo Möbelwerk [2004] ECR I‑10031, paragraph 42). That distinctive character must be assessed, first, by reference to the products or services in respect of which registration has been applied for and, second, by reference to the perception of the relevant public (Procter & Gamble v OHIM, paragraph 33, and Case C‑24/05 P Storck v OHIM [2006] ECR I‑5677, paragraph 23).

80 According to equally consistent case-law, the criteria for assessing the distinctive character of three-dimensional marks consisting of the appearance of the product itself are no different from those applicable to other categories of trade mark. None the less, for the purpose of applying those criteria, the average consumer’s perception is not necessarily the same in the case of a three-dimensional mark consisting of the appearance of the product itself as it is in the case of a word or figurative mark consisting of a sign which is independent of the appearance of the products it denotes. Average consumers are not in the habit of making assumptions as to the origin of products on the basis of their shape or the shape of their packaging in the absence of any graphic or word element, and it may therefore prove more difficult to establish distinctiveness in relation to such a three-dimensional mark than in relation to a word or figurative mark (Case C‑136/02 P Mag Instrument v OHIM [2004] ECR I‑9165, paragraph 30, and Storck v OHIM, paragraphs 24 and 25).

81 In those circumstances, only a mark which departs significantly from the norm or customs of the sector and thereby fulfils its essential function of indicating origin is not devoid of any distinctive character for the purposes of Article 7(1)(b) of Regulation No 40/94 (Case C‑173/04 P Deutsche SiSi-Werke v OHIM [2006] ECR I‑551, paragraph 31, and Storck v OHIM, paragraph 26).

82 In order to assess whether or not a trade mark has any distinctive character, the overall impression given by it must be considered. That does not mean, however, that one may not first examine each of the individual features of the get-up of that mark in turn. It may be useful, in the course of the overall assessment, to examine each of the components of which the trade mark concerned is composed (see, to that effect, Case C-286/04 P Eurocermex v OHIM [2005] ECR I‑5797, paragraphs 22 and 23, and the case-law cited).

89 Moreover, the Court of First Instance explained, in paragraph 53 of the judgment under appeal, that, ‘even if that feature could be considered unusual, alone it is not sufficient to influence the overall impression given by the trade mark sought to such an extent that it departs significantly from the norm or customs of the sector and thereby fulfils its essential function of indicating origin’.

90 Consequently, it cannot be maintained that the Court of First Instance failed correctly to assess the overall impression produced by the mark applied for.

TGIF for the Video Invention Disclosure From Hell

Thanks to the anonymous advertising geniuses for "Rockewell Automation," who appear to have inadvertently pitched the consummate prior art reference for those inevitable situations where a recalcitrant inventor just can't be assuaged that an idea is not quite "ready for patenting:"

Source: eBaum's World

Thank Goodness It's Friday (and your not here),

--Bill Heinze

A Concise Explanation of Prosecution History Estoppel

Lock See Yu-Jahnes gives this concise explanation of prosecution history estoppel in the PLI All-Star Briefing, Vol. 5.39, on October 25, 2007:

Prosecution history estoppel is a judicially created doctrine that prevents a patentee from taking inconsistent positions regarding claim language. It requires that the claims of a patent be interpreted in light of the proceedings before the PTO during the prosecution of the application. Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki, 535 U.S. 722, 733 (2002). This means that when enforcing a patent against an alleged infringer, the patentee may not take a position regarding the interpretation of a claim that is inconsistent with actions taken before the USPTO to obtain the allowance of the claim. Amendments and comments regarding a claim limitation made during prosecution may act to limit the scope of that limitation.
Prosecution history estoppel limits the reach of the doctrine of equivalents if the claim amendment was made for a substantial reason related to patentability. Warner-Jenkinson Co., Inc. v. Hilton Davis Chemical Co., 520 U.S. 17 (1997). In the absence of a reason for the claim amendment, there is a rebuttable presumption that the amendment was made for a substantial reason related to patentability. The Supreme Court in Festo held that an amendment made to satisfy any requirement of the Patent Act may give rise to an estoppel on infringement by equivalents. Festo, 535 U.S. at 722.

The Supreme Court also explained in Festo that there is a presumption that the patentee surrendered equivalent subject matter. This presumption may be rebutted by showing that (1) the equivalent subject matter was not foreseeable and thus not claimable at the time the application was filed, (2) the claim amendment is only tangentially related to the equivalent subject matter in dispute, or (3) the equivalent subject matter could not reasonably have been described at the time the amendment was made. Id.

The Federal Circuit interpreted Festo to hold that prosecution history estoppel applies only when a narrowing claim amendment is made for a reason substantially related to patentability. Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki, 344 F.3d 1359 (Fed. Cir. 2003). Therefore, there is a rebuttable presumption that the patentee surrendered the subject matter between the original claim and the amended claim through the narrowing amendment.

Arguments made during prosecution may give rise to estoppel. That is, claim amendments are a prerequisite for prosecution history estoppel to attach. If the arguments indicate a surrender of subject matter, then that subject matter may not be recaptured under the doctrine of equivalents during litigation.

An amendment made to a claim limitation in one claim gives rise to estoppel in an identical limitation in another claim. The scope of equivalents for the same limitation in different claims must be interpreted consistently. An argument made regarding a claim limitation will apply to the same limitation in another claim.

Rewriting a dependent claim in independent form also gives rise to prosecution history estoppel if the independent claim is canceled. Honeywell Int'l v. Hamilton Sundstrand, 370 F.3d 1131 (Fed. Cir. 2004). Likewise, a rewritten claim is considered a narrowing amendment of the independent claim.

Whether estoppel arises based on the prosecution history of a related application is determined on a case-by-case basis according to the facts. When statements made in one application are relevant to an understanding of a related application, then the patentee is bound by the statements. Microsoft v. Multi-Tech Systems, 357 F.3d 1340 (Fed. Cir. 2004). "When the applicant is seeking different claims in a divisional application, estoppel generally does not arise from the prosecution of the parent." Biogen v. Berlex Laboratories, 318 F.3d 1132 (Fed. Cir. 2003). The applicant is not barred from raising new arguments or correcting past errors.

A broadening amendment or an amendment that clarifies but does not narrow a claim limitation does not give rise to a surrender of equivalents. Business Objects v. Microstrategy, 393 F.3d 1366 (Fed. Cir. 2005). However, a narrowing amendment made voluntarily, without explanation, does not shield the amendment from a presumption that it was made for a substantial reason related to patentability. Pioneer Magnetics v. Micro Linear, 330 F.3d 1352 (Fed. Cir. 2003).

Learn more from Yu-Jahnes' "Selected Topics in Advanced Patent Prosecution" at "PLI in Brief," the online home of Practising Law Institute's weekly eNewsletter series.

BPAI: Method Relating to Character of Data Information Elements Not Patentable Subject Matter

Thanks again to Professor Hal Wegner for wading through the recent decisions of the U.S. Board of Patent Appeals and Interference on Westlaw to find three new decisions where the Board has relied upon Comiskey to suggest patent-ineligibility under 35 USC § 101:

• Ex parte Yang-Huffman, 2007 WL 2899992 (Bd.Pat.App. & Interf. 2007);
• Ex parte Gosby, 2007 WL 2843739 (PTO Bd. App. & Int. 2007);
• Ex parte Tieu, 2007 WL 2823746, n.2 (PTO Bd. App. & Int. 2007),

In the only on of these decisions that is posted on the USPTO website as of today, the representative claim in Yang-Huffman recited:

1. A dynamic configuration method, comprising:

receiving collection criteria categorizing a relevant node on a network;

receiving collection instructions indicating usage information to collect from the relevant node based on the collection criteria; and

providing configuration update information for the relevant node to collect the indicated usage information based on the collection criteria and the collection instructions.

According to the non-binding precedent of Administrative Patent Judge Thomas,

Turning first to the rejection of claims 11 through 19 and 31 through 33 as being directed to non-statutory subject matter, we agree with the Examiner’s views expressed in the Answer as to this issue. The Examiner has made a direct
point that the claimed policy manager, logic, collection criteria and collection instructions, based on the Specification as filed as well as their own recitation in the respective claims on appeal, directly relate to software elements per se. Appellant has not indicated among the claims rejected what structural relationships are actually stated in the claims on appeal despite his general argument to that affect. Moreover, we do not agree with Appellant’s view that MPEP § 2106 clearly indicates that software is not per se non-statutory. We do not view the claims as being consistent with any permissive language contained within this section of the MPEP. Nevertheless, there is no authority that we know of which permits software per se to be considered statutory within 35 U.S.C. § 101. Appellant’s arguments in the Brief and Reply Brief do not contest the Examiner’s view that the noted features in the claims are actually software elements per se.

At this point in our opinion, we observe in passing that, should there be any future prosecution of this application, it appears to us that all present pending claims on appeal may be subject to rejections under 35 U.S.C. § 101. The major argued features of collection criteria, collection instructions, usage information, update information etc., relate to mere information elements per se and to no structural element for which any change in methodology is actually recited. To be sure, the mere receipt and providing features of representative independent claim 1 on appeal are not characterized as being unique methodologies per se, but only the nature of the information related to or the characterization of the information element is argued to be operatively unique. These considerations are prompted by the recent decision by our reviewing court in In re Comiskey, Slip Op. at 21 (Fed. Cir. Sep. 20, 2007).

The Good Professor was also kind enough to pass along these somewhat less-tantalizing tidbits from the latter two "pay-per-view" decisions:

Ex parte Gosby, 2007 WL 2843739:

1. A method for document analysis and retrieval, comprising the steps of:

receiving a document having text therein from a host of a first computing system;

generating document keys associated with said text from analysis of said text, each said document key selected from the group consisting of a keyword of said text and a keyphrase of said text;

providing a document taxonomy having categories, each category having category keys, each said category key selected from the group consisting of a keyword of said category and a keyphrase of said category;

comparing the category keys of each category with said document keys to make a determination of a distance between the document and each category as a measure of how close the document is to each category; and

returning a subset of said categories to said host, wherein said subset of said categories reflects said determination.

"In performing the method steps of claim 1, there is no requirement that a computer be used. The only recitation of ‘computer’ or ‘host’ relates to the source or destination of data transmission. For example, a document is received from a host and a subset of said categories is returned to the host. The claim is merely drawn to
‘disembodied abstract ideas,’ which do not have any ‘real world effect’ until they are implemented. The absence of any transformation of physical subject matter according to the definition of a process under 35 U.S.C. § 101, places this claim on the other side of the line defining statutory subject matter. A case involving this issue is presently on appeal to the Federal Circuit: In re Bilski, No. 2007-1130 (to be argued Oct. 1, 2007). Additionally, in performing the method steps of claim 1, there is no
requirement that a computer be used. Therefore, the claimed subject matter
may be performed using only human intelligence, which has recently been held
to be non- statutory. In re Comiskey , No. 2006-1286, Slip Op. at 21 (Fed. Cir. Sep.
20, 2007)."


Ex parte Tieu, 2007 WL 2823746, n.2 (PTO Bd. App. & Int. 2007):

1. A method comprising:

developing a model of a motor based on a response of a winding of the motor to an application of a non-rotational inducing current across the winding for a predetermined time period; and

determining a substantially accurate position of a rotor of the motor within a first commutation state of an electrical revolution of the motor in which the rotor resides based on the model.

9. An apparatus adapted to determine a first commutation state of a motor that a rotor of the motor resides and determine a substantially accurate position of the rotor within the first commutation state.


"We observe that claims 1 and 9 recite method steps and functions to be performed by an apparatus, describing mainly a concept without indicating how the steps are
implemented. These claims are merely drawn to ‘disembodied abstract ideas,’
which do not have any ‘real world effect’ until they are implemented. The absence of any transformation of physical subject matter according to the definition of a process under 35 U.S.C. § 101, places these claims on the other side of the line defining statutory subject matter. A case involving this issue is presently on appeal to the
Federal Circuit: In re Bilski, No. 2007-1130 (to be argued Oct. 1, 2007). Additionally, in performing the method steps of claim 1, there is no requirement that a computer be used. Therefore, the claimed subject matter may be performed using only human
intelligence, which has recently been held to be non-statutory. In re Comiskey, No. 2006-1286, Slip Op. at 21 (Fed. Cir. Sep. 20, 2007). We do not need to reach the issue of whether claims 1 and 9 encompass non-statutory subject matter since we affirm the Examiner's decision rejecting these claims. However, we encourage the Examiner to consider patentability of the allowed claims 7 and 20, which are dependent upon claims 1 and 9, under Section 101 in the event the prosecution of these claims is reopened."

Sovereign Immunity Not Waived by Intervention in Related Dispute

In Biomedical Patent Management Corporation v. State of California, Dept. of Health Services (October 23, 2007), the Federal Circuit affirmed that DHS’s initial waiver of Eleventh Amendment sovereign immunity as intervenor in an earlier, related action that was dismissed for improper venue did not extend to this case or judicially estop DHS from asserting immunity in this case.

According to Kathleen M. O’Malley, District Judge, United States District Court for the Northern District of Ohio, sitting by designation:

. . . where a waiver of immunity occurs in an earlier action that is dismissed, or an entirely separate action, courts, including our own, have held that the waiver does not extend to the separate lawsuit. See Tegic, 458 F.3d at 1342-43 (discussed below); City of S. Pasadena, 284 F.3d at 1157-58. In City of S. Pasadena, relied upon by the district court in this action and described above, the dismissal without prejudice was found to prevent the "carry over" of an earlier waiver to a new lawsuit. City of S. Pasadena, 284 F.3d at 1157-58. Likewise, in Tegic, this court held that a State university’s participation in one lawsuit did not amount to a waiver of immunity in a separate lawsuit, even one involving the same patent. 458 F.3d at 1342-43.

. . . In sum, we conclude that any unfairness or inconsistency that would arise from permitting DHS to assert sovereign immunity in the present case is not so substantial as to cause us to diverge from the general principles of waiver that we have laid out in this opinion: that a waiver generally does not extend to a separate lawsuit, and that any waiver, including one effected by litigation conduct, must be "clear." Accordingly, we reject BPMC’s first theory as to why DHS should be prevented from asserting sovereign immunity in this case.

. . . [With regard to estoppel], the question here is whether it is fundamentally unfair to allow DHS to assert its immunity in this 2006 lawsuit solely because it chose to intervene in a related action almost ten years earlier; we conclude it is not.

We find that the district court correctly determined that DHS is not judicially estopped from asserting sovereign immunity in the present lawsuit, and did not abuse its discretion by dismissing this action in the face of BPMC’s argument to the contrary.

. . .Finally, BPMC argues that a recent Supreme Court decision, Central Virginia Community Coll. v. Katz, 546 U.S. 356, 126 S.Ct. 990 (2006), implicitly overruled Florida Prepaid such that sovereign immunity is no longer available in patent infringement actions. BPMC raises this issue on appeal, however, only to "preserve[] it for potential Supreme Court review." The holding in Katz was so closely tied to the history of the Bankruptcy Clause and the unique aspects of bankruptcy jurisdiction that it cannot be read to extend to actions for patent infringement. See, e.g., Katz, 546 U.S. at 378, 126 S.Ct. at 1005 ("In ratifying the Bankruptcy Clause, the States acquiesced in a subordination of whatever sovereign immunity they might otherwise have asserted in proceedings necessary to effectuate the in rem jurisdiction of the bankruptcy courts."). Because we find that Katz cannot be read to overrule Florida Prepaid, either expressly or implicitly, we find that the district court correctly rejected this argument.

"J.J. YELEY" Not Primarily Merely a Surname

Thanks to the TTABlog for pointing out In re Yeley, Serial No. 78489186 (October 17, 2007), where the U.S. Trademark Trial and Appeal Board reversed a refusal to register the mark "J. J. YELEY" (for various goods in 12 classes, ranging from baby bottles to vehicle floor mats) as not being “primarily merely a surname” after all.

Source: Kim Phillips via Wikipedia

According to the decision by Administrative Trademark Judge Bergsman:

The statute provides that registration should be refused if the proposed mark is “primarily merely a surname.” “Merely” is synonymous with “only,” and “primarily” refers to “first in order” or “fundamentally.” Thus, we must determine whether J. J. YELEY is fundamentally only a surname.

. . . [Although t]he Examining Attorney submitted the results from a nationwide LexisNexis phone directory with 147 “Yeley” listings, and the first ten listings (from what appears to be 178 total listings) for “Yeley” from the website Ancestry.com . . . the frequency with which YELEY is used as a surname is not rare in this ase.

. . . It is common knowledge that stock car racing has become one of the most popular spectator sports in the United States and that as such, many of its participating drivers have become well-known personalities to fans. Thus, based on applicant’s declaration, we are convinced that the primary significance of J. J. YELEY is the race car driver [Christopher Beltram Hernandez Yeley], and this primary significance outweighs the surname significance. In other words, applicant’s initials, “J. J.” do not reinforce the surname “Yeley”; rather, the mark in its entirety conveys the impression that it is a personal name.

. . . Lastly, we consider whether J. J. YELEY has the “look and sound” of a surname. As to this factor, the Examining Attorney argues that “consumers are accustomed to seeing and hearing the term YELEY in the context of a surname. Thus, the term YELEY has the ‘look and sound’ of a surname simply because consumers are accustomed to seeing and hearing this term as a surname and it is the surname of the applicant.”

This is a decidedly subjective factor based on whether prospective consumers would perceive J. J. YELEY to be a personal name or a surname. A surname is a “family name” as opposed to a given name.10 The fact that the designation at issue is a combination of applicant’s initials and surname (which he claims constitute his personal name) tends to show that consumers would perceive J. J. YELEY as indicating a personal name, not primarily merely a surname. See Michael S. Sachs Inc. v. Cordon Art B.V., supra (“The mark M.C. ESCHER would no more be perceived as primarily merely a surname than the personal names P.T. Barnum, T.S.
Eliot, O.J. Simpson, I.M. Pei and Y.A. Tittle”). In this regard, we note that a segment of American society uses euphonic or pleasant-sounding initials rather than given names. Examples include: e. e. cummings, H. L. Mencken, W. C. Fields, P. T. Barnum, H. R. Haldeman, H. L. Hunt, J. P. Morgan, J. C. Penney, J. D. Salinger, E. G. Marshall, K. D. Lang, C. C. Sabathia, and P. J. Carlesimo.

In sum, based on the record in this case, we find that “Yeley” is a rare surname and that the designation at issue, J. J. YELEY, has significance as the race car driver and has the “look and sound” of a personal name, not a surname. Accordingly, we conclude that J. J. YELEY is not primarily merely a surname. Furthermore, as noted above, we must resolve any doubt in favor of applicant. In re Benthin Management GmbH, supra.

In reaching this decision we are mindful of the decision of the predecessor to our primary reviewing court that the use of a first name initial followed by a surname reinforces, rather than diminishes, the surname significance of a term. In re I. Lewis Cigar Mfg. Co., supra (S. SEIDENBERG & CO.’S is primarily merely a surname). See also, In re Sears, Roebuck & Co., 87 USPQ 400 (Comr. Pats. 1950), aff’d, 204 F.2d 32, 96 USPQ 360 (CA DC 1953) (J.C. HIGGINS is primarily merely a surname). These decisions are based on the premise that if the surname is unduly emphasized or otherwise constitutes the only significant part of the mark, the addition of initials will not change the character of the mark as being primarily merely a surname. In re Sears, Roebuck & Co., 96 UPSQ at 362. See also Ex parte Dallioux, 83 USPQ 262, 263 (Comr. Pats. 1949) (ANDRE DALLIOUX would not be registrable if the surname were unduly emphasized or otherwise constituted the only significant part of the mark)

[FOOTNOTE 12 The Commissioner specifically noted that the prohibition against registering the name of an individual is no longer the law. 96 USPQ at 263.]

In Sears, Roebuck, the district court found that the mark J C HIGGINS “has as its foundation only the surname HIGGINS” (which the court found was not a rare surname) and it is “clearly dominated thereby.” In re Sears, Roebuck & Co., 96 USPQ at 361. The finding of fact was that the primary significance of the mark was as a surname.13 In Lewis Cigar Mfg., the CCPA held that under the facts presented therein, the addition of a single initial to the SEIDENBERG surname was not sufficient to remove the mark from surname status. In re I. Lewis Cigar Mfg. Co., 98 USPQ 267. In neither case was there any discussion of evidence indicating that the names J C Higgins or S. Seidenberg identified any particular individuals and, therefore, under the facts of those cases, the addition of initials to a surname served only to reinforce the surname significance of the marks at issue.

However, there is no per se rule that the addition of an initial(s) to a surname means that the mark is automatically primarily merely a surname. It depends on the principal or ordinary significance of the term, and that is a question of fact.

. . . In this application, the record convinces us that the primary significance of J. J. YELEY is a personal name and the identity of the race car driver.

Hearing on Stay of USPTO Rules Set for October 31 before Judge Caheris in Alexandria

Thanks to the MVS Filewrapper blog for letting us know that Glaxo's lawsuit challenging the USPTO's new rules on claims and continuations has been consolidated with an earlier case filed challenging the validity of the rules, and reassigned to the "Rocket Docket" of Judge James C. Cacheris in Alexandria, Virginia, along with

• Glaxo's opposition to the USPTO's motion for continuance
• Order granting the USPTO's motion
• Order consolidating cases
• USPTO Brief in support of Motion to strike declaration of former USPTO Commissioner Harry F. Manbeck, Jr. in support of Glaxo's motion for a preliminary injunction, also docketed for October 31.

The Practising Law Institute's John White will be attending the hearing and providing "near real time updates throughout the day" to PLI's Patent Practice Center blog, which notes that AIPLA, IBM, and ScanDisk have stepped in to support Glaxo.

"Whatever happens, it seems to me that the relationship between the USPTO and practitioners is profoundly unhealthy at the moment," adds Intellectual Asset Magazine editor Joff Wild in his IAM Blog. "That cannot be good for anyone who is interested in the future of the US patent system."

The "eRed Folder" Paper Tail at the USPTO

Thanks to Patently Academic for shedding light on the USPTO's "eRed Folder" internal, paper document handling processes:

If you’ve never been an examiner, then you might not know that examiners prepare file folders with the documents that are to be sent off to the LIE to get counted and mailed. These folders are red in the [Technology Centers] and green in the Academy. The left side contains documents that are scanned but not mailed (internal information), and the right side contains everything that will be sent off to applicant or applicant’s representative.

Those people who are hotelling have still had to (as far as I know) assemble their folders at home and bring them in for counting during their one hour on campus. In short, despite all the automation tools the office has supplied us with, they are still tethered to paper and the minor nuisance of hauling folders back and forth between home and work.

While that may not seem like an important point, it is one step closer to allowing examination to be done entirely through telecommuting, and opening up positions to people all over the country. Being able to send your eRed folder to your SPE to be signed or returned with corrections means that hoteling may be an option to even those without partial signatory authority. GS-11s may be able to work from home. This is my own speculation, by the way, not anything I heard during training.

I have mixed feelings about this process; while I would love the freedom to be able to work from home, I have also heard others discussing the possible ramifications to examiners’ salaries if the demand for positions was to suddenly go up.

If nothing else, I like that I can now have PDFs of every document I put into the file wrapper for local storage. Believe it or not, I think that’s even better than bookmarks.

Federal Jurisdiction Over Patent Malpractice Dispute Where Infringement Is Necessary Element of Proof

In Air Measurement Technologies, Inc., et al. v. Akin Gump Strauss Hauer & Feld, L.L.P., et al. (October 15, 2007) the Federal Circuit affirmed removal to federal court of a legal malpractice case between non-diverse parties based on alleged errors by counsel in patent prosecution and patent litigation. "Because we conclude that the patent infringement question is a necessary element of AMT’s malpractice claim and raises a substantial, contested question of patent law that Congress intended for resolution in federal court, we affirm," begins the decicision authored by Chief Judge Michel.

Reexamination Overview and Cry for Reform

In "Patent Reexamination and the Crossover with Litigation" Rajiv P. Patel offers (via PLI's "Lawyer's Toolbox" newsletter) an overview of patent reexamination and how it can impact litigation from both plaintiff's and defendant's points of view.

At the same time, Professor Hal Wegner is once again calling for reform of the patent reexamination process in his latest paper, which he breaks down as follows:

Executive Summary: The PTO should immediately reform the reexamination system – both ex parte and inter partes – so that all reexaminations where there has been or is previous or concurrent infringement trial litigation should be handled with strictest attention by the highest level PTO examining official designated as Examiner and under "special dispatch" that is not only desirable but also required by statute.

The Ten Year Bleak House Reexaminations: The average reexamination that
reaches a decision at the Federal Circuit has a life from first filing until
issuance of the reexamination certificate on the order of ten (10) years, which
is attributable in part to a difficulty that some examiners have in making final
decisions in "hot" cases and the possibility of review by the Board – which may
enter its own grounds for denial.

The Zero Record for the PTO Inter Partes Reexaminations: To date, the 1999 inter partes reexamination law has produced no appeals to the Federal Circuit (at least insofar as a check on October 22, 2007 on Westlaw ALLBRIEFS). Neither has there been even one final opinion from the Board in such a case (insofar as FIP-PTO accurately reflects any inter partes reexamination decision). There have been two (2) Board opinions in such cases, but neither was a final decision – the Board in each case finding that the Examiner below had done an incomplete job, necessitating further consideration.

The Translogic Cases – Yet Another Example of PTO Case Management: The recent Translogic cases represents perhaps the best recent examples of precisely why the reforms suggested in this paper should be adopted – as explaind in more detail in the attachment.

"Inter partes reexamination is a procedure that can be made strong and effective, if and only if the PTO reallocates a very tiny sliver of its mind-blowing nearly $ 2,000,000,000.00 annual budget to this extremely important area of practice," grouses The Good Professor. "If there is a strong and effective inter partes reexamination system in place, this would render moot much of the concerns now before Congress in the various patent reform proposals." His lsuggestion:

• "The best solution would be to designate an Administrative Patent Judge to handle an inter partes reexamination from the beginning – and then have this judge be a part of any appellate panel within the PTO."
• "A second solution is to hire new "super examiners" drawn from already successful outside counsel who would like to "give back" to society to handle individual inter partes reexaminations. Such "Special Master Examiners" should be appointed to the corps"

EU Presidency Publishes "Points For Discussion" on Possible EU Patent Litigation System

The EU Presidency has released new "Points for Discussion" toward an EU patent litigation system. The self-proclaimed "non paper" aims at setting out in more technical details for a unified European system, including

• an exclusive civil jurisdiction in all Member States dealing with patent validity, infringement and inter-related proceedings concerning European patents and future Community patents.
• comprising a first instance with divisions located in Member States, a second instance, and a Registry, all with uniform procedures
• in the official or designated language(s) of the Memeber State in question.
• The division concerned would be entitled to dispense with translation requirements for the patent and supporting documentation. Parties would also be entitled to agree on the use of the language of the patent, subject to approval by the competent division.

"The European Council’s working party on intellectual property is due to meet again on November 7," adds Emma Barraclough, in Managing Intellectual Property magazine. "If they can reach agreement, the proposals will then be discussed by COREPER, . . . and then by the Council of Ministers."

Austrailia Abolishes Duty of Disclosure for Patent Office Searches While U.S. IDS Proposal Faces Challenges at OMB

Thanks to Bill Bennett at Pizzeys [BBennett@Pizzeys.com.au] for pointing out that the duty of disclosure has now been abolished in Australia with regard to the results of documentary searches by, or on behalf of, foreign patent offices, except where:

(a) normal exam was requested prior to April 22nd, 2007, and
(b) the foreign patent office search issued prior to April 22nd, 2007, and
(c) acceptance (allowance) was officially advertised prior to July 22nd, 2007.

The amendment regulations will also "allow notices of matters affecting the validity of a standard patent to be filed up to three months from the date of advertisement of acceptance of an application." According to the four-page Notice from the Australian Intellectual Property Office:

As a result of the generally favourable nature of the feedback received [on a consultation paper], the Patents Regulations 1991 (Cth) have been amended to substantially remove the requirement to inform the Commissioner of Patents (the Commissioner) of the results of documentary searches by, or on behalf of, foreign patent offices. The amending legislation, the Patents Amendment Regulations 2007 (No. 1) (Cth), commences on 22 October 2007.

Learn more about "what is required" from F B Rice & Co, and get more, official IP news from down under here.

The USPTO's proposed rule changes on Information Disclosure Statements, currently under review by the President's Office of Management and Budget, seem to be heading in the opposite direction:

• Changes To Information Disclosure Statement Requirements and Other Related Matters (10 July 2006) [PDF]
• Executive Summary [PDF], Detailed Summary [PDF]
• Slides:
  IDS NPR (html version)(zip version), The Four Time Periods for Submitting an IDS and Their Corresponding Requirements (html version)(zip version), Application Prosecution Timeline (html version)(zip version)
• Comments from Public

Cantor Fitzgerald's David Boundy is leading the fight by 29 parties to challenge these proposals at OMB, while a second challenge has been filed by Richard B. Belzer on behalf of undisclosed clients.

USPTO Puts Excess 5/25 Claim Applications Back into the Queue, for now

Thanks again to Professor Dennis Crouch at Patently-O following-up on the USPTO's October 11, 2007 memorandum placing certain patent applications in "pre-examination PALM status" where they exceed the new 5/25 claim rule taking effect on November 1, 2007. Eight days later, on October 19, 2007, Deputy Commissioner for Patent Opperations Margaret Focarino issued a subsequent memo restoring those the status of those applications by ordering examiners to "continuing examining applications on their docket (status 30) under the rules and procedures currently in effect."

However, according to Erin-Michael Gill comenting on the new memo:

With or without the memo, examiners ultimately have discretion on which cases to examine. Since they all know that November 1 means less work on a given affected application, there should only be a few applications this would actually impact.

And, on the public relations front, it sure would help to lessen the intrigue surrounding these types of memos if the Office would simply post them on their website before they get leaked to practitioners.

USPTO Posts (Non-Fillable) Forms for Claim and Continuation Limits Rule Changes

Thanks to Donald Zuhn at Patent Docs for briefing us on the four new forms that have been added to the USPTO's Claims and Continuations Practice webpage:

1. Form SB/216, Examination Support Document Transmittal [PDF]
2. Form SB/211, Examination Support Document Listing of References [PDF]
3. Form SB/206, Listing of Commonly Owned Applications and Patents [PDF]
4. Form SB/201, Request for Streamlined Docketing Procedure [PDF]

Perhaps the Office will be so kind as to update these form in a savable, "fillable PDF format" before they are posted on the Patent Forms webpage?

Hurrah! We're Number Eleven (for Depressive Episodes)

Past Year Major Depressive Episode among Full-Time Workers Aged 18 to 64

by Occupational Categories for 2004-2006

Source: The NSDUH Report of the U.S. Department of Health and Human Services Substance Abuse and Mental Health Statistics Group. Get the bigger picture from Robert J. Ambroji at Inside Opinions, where he notes that

This study focused on occurrences of major depressive episodes, not milder
symptoms, which may account for its divergent findings [from previous studies] concerning lawyers. It reports that 6.4 percent of lawyers had such an episode in the past year, with the incidents higher among female lawyers than male (8.2 percent for women and 4.6 percent for men).

Now let's shoot for number 21, just behind our science and engineering clients in the patent arena.

Learn more about:

• Depression symptoms, causes, treatments, and information on getting help
• Stories of Depression: Does This Sound Like You?
• Depression: What Every Woman Should Know
• Men and Depression

TGIF for the New Ethics of Procedural Compliance at the USPTO

Thanks to Professor Dennis Crouch at Patently-O for posting USPTO Office of Enrollment and Discipline Director Harry Moatz's slide presentation entitled "Monitoring Practitioner Compliance With Disciplinary Rules and Inequitable Conduct" before the Intellectual Property Organization on September 11, 2007. According to Director Moatz, the USPTO is "monitoring compliance [for] conduct that can be perceived as failure to make reasonable inquiry, being interposed for improper purpose or delay, [and/or] incompetence or neglect." Here are a few of the other highlights from his slides:

• "Patent attorneys and agents are subject to discipline for not complying with adopted regulations."
• "Practitioners submitting papers must read each paper submitted to the Office before it is submitted. Each submitted paper must be read in its entirety."
• The duty to make a reasonable inquiry requires attorneys and agents to "Educate and arrange with clients to receive filing instructions and documents sufficiently in advance of a filing deadline."
• "Examples of conduct that may be perceived as failure to make reasonable inquiry:
  

  – A reference material to patentability is buried among a large number of
  cumulative references.
  • Buried reference anticipates one or more claims.
  • Reasonable inquiry has not been shown

  - Application filed with claims that are anticipated by at least one publication authored by one of the inventors executing the 37 CFR 1.63 declaration or oath.
  • Reasonable inquiry has not been shown."

• "Examples of situations potentially involving improper purpose or delay
  

  –Adding undue number of claims with multiple dependent claims.
  • Multiple dependency can add thousands of claims.
  • Each of must be examined for patentability.
  • May implicate violation of Disciplinary Rule 10.85(a)(1), to harass or injure another in reexamination situations."

• "Examples of situations potentially involving improper purpose or delay.
  

  –Filing an amendment, petition or other paper without required fee.
  • Insufficient funds.
  • Stop payment.
  • Lack of funds."

• "Duration of Duty To Disclose Under USPTO’s Ethics Rules
  - A first practitioner advises applicant that prior art is material to patentability of the claimed invention and must be disclosed to the USPTO.
  - The applicant refuses to follow this course of action and discharges the first practitioner.
  - The applicant engages a second practitioner without telling the second practitioner of the potentially damaging prior art.
  - Under § 10.85(b), the first practitioner would be required to disclose this situation to the Office.
  - See Practice Before the Patent and Trademark Office, Final Rule 50 FR 5158, 5165 (Feb 8, 1985)."

Professor Crouch calls these casual pronouncements "Ethical Duties to Comply with the New Rules" and Axel Horns at IPJUR adds that "It is a duty of the Office to refuse overbroad applications. It should, in my view, not be a duty of the applicant to refrain from applying for overbroad claims."

My own experience with a recent practitioner investigation left me with the impression that the USPTO's Office of Enrollment and Discipline is using thinly supported allegations of unscrupulous behavoir merely to urge better compliance with Office procedures that are not neccesarily consistent with an applicant's legal interests. Among the apparent deficiencies that I see in the current system are 1) a lack of published institutional guidelines and decisions for internally distingushing scandalous conduct from zealous representation; 2) a lack of institutional seperartion between those who raise, investigate, prosecute, judge, and punish practitioner misconduct; 3) a lack of published rules of procedure or evidence for investigations and prosecutions; and 4) an unwillingness to quickly and formally close investigations where there is insufficient evidence of misconduct to move forward. In fact, the general ethos of the Office seems to be one of "guilty until proven innocent" where accused practitioners, at the risk of losing their livelihood, are coerced into expounding upon their client's protected communications and work product simply because the Office disfavors an otherwise compliant patent prosecution strategy.

This apparent reversion to the the days of the "fraud squad" cries out for systematic reform. At a minimum, the Office must decide whether it is representing inventors, applicants, or itself in these challenges to practioners' professional responsibility and reputation. If it is to include the latter, and the Office is unable to effectively proscribe self-serving interdictions, then the entire disciplinary process must be transferred to a independent entity that is free to recoginize and balance the various competing interests at stake in the patent procurement process. As the managerial interests of the Office continue to diverge from those of its captive licensees, the state bar associations may now offer the only fora legitiums for assessing Official allegations against registered attorneys.

Thank Goodness It's Friday (and we're still registered to practice before the USPTO),

--Bill Heinze

"Ongoing Royalty" Order Remanded Only for Further Economic Analysis

In Paice LLC v. Toyota Motor Corp (October 18, 2007), the Federal Circuit remanded the imposition of an ongoing royalty (that was not a compulsory license) of $25 per vehicle for a patent that was asserted by a non-manufacturing patent holder on claims directed to a hybrid electric vehicle:

. . . we think it prudent to remand the case for the limited purpose of having the district court reevaluate the ongoing royalty rate. Upon remand, the court may take
additional evidence if necessary to account for any additional economic factors arising out of the imposition of an ongoing royalty. The district court may determine that $25 is, in fact, an appropriate royalty rate going forward. However, without any indication as to why that rate is appropriate, we are unable to determine whether the district court abused its discretion.

The district court’s order had read:

Defendants are hereby ORDERED, for the remaining life of the ’970 patent, to pay Plaintiff an ongoing royalty of $25.00 per infringing Prius II, Toyota Highlander, or Lexus RX400H (the “infringing vehicles”). Royalties shall be paid quarterly and shall be accompanied by an accounting of the sales of infringing vehicles. Payments shall begin three months after the date of signing this judgment and shall be made quarterly thereafter. The first payment shall include royalties for all infringing vehicles sold that were not accounted for in the jury’s verdict. Payments not made within 14 days of the due date shall accrue interest at the rate of 10%, compounded monthly. Plaintiff shall have the right to request audits. It is anticipated that the parties may wish to agree to more comprehensive and convenient terms. The parties shall promptly notify the Court of any such agreement. The Court maintains jurisdiction to enforce this portion of the Final Judgment.

In obtaining that order, Paice had been unsuccessful with all of the usual arguments to the lower court as to why the absence of an injunction would have an adverse effect on its ability to license the patented technology. As noted by Circuit Judge Prost,

With respect to irreparable injury, Paice argued that the absence of an injunction would have an adverse effect on its ability to license the patented technology. The court rejected this argument, however, noting that Paice had only adduced vague testimony that the company was “sidelined” in its business dealings during litigation. The court also pointed to evidence in the record suggesting that Paice’s inability to reach an agreement with Chrysler, for example, was due to public isrepresentations Paice allegedly made about its relationship with Chrysler, and was not due to the absence of an injunction. Id. Moreover, since Paice does not actually manufacture any goods, the court concluded that there was no threat that Paice would lose name recognition or market share without an injunction. Id. slip op. at 9.

Intertwined with its consideration of irreparable injury was the court’s analysis of
the adequacy of monetary damages. Given the relatively small reasonable royalty
awarded by the jury—which amounted to approximately $25 per accused vehicle—in
comparison to the overall value of the vehicles, the court concluded that monetary damages would suffice. Id. The adequacy of monetary damages was further bolstered, in the court’s opinion, by the fact that Paice had offered a license to Toyota during the post-trial period. Id. slip op. at 9-10.

With regard to the balance of hardships, Paice contended that it “faces extinction” without an injunction, whereas Toyota would suffer “only minor economic losses.” This contention was rejected by the court because, in its view, an injunction against Toyota (1) would disrupt “related business, such as dealers and suppliers;” (2) could have an adverse effect on the “burgeoning hybrid market;” and (3) might damage Toyota’s reputation. Id. slip op. at 10. The court further concluded that Paice’s “extinction” argument was unsound because it was based on the rejected premise that “only injunctive relief [of the type requested] will lead to a successful licensing program.” Consequently, the court held that the balance of hardships favored Toyota. Id.

Lastly, the court determined that the public interest favored neither party. Id. Accordingly, the court denied Paice’s motion for a permanent injunction. Id. slip op. at 11. However, rather than leaving the parties to their own devices with respect to any future acts of infringement, the court imposed an “ongoing royalty” of $25 per Prius II, Toyota Highlander, or Lexus RX400h vehicle sold by Toyota during the remaining life of the patent and entered final judgment. Paice LLC v. Toyota Motors Corp., No. 2:04-CV- 211, Docket No. 228, slip op. at 2 (E.D. Tex. Aug. 16, 2006).

The decision by Circuit Judge Prost began by clarifying, in footnote 13, that this "ongoing royalty order" was not a "compulsory license:"

The term “compulsory license” implies that anyone who meets certain criteria has congressional authority to use that which is licensed. See, e.g., 17 U.S.C. § 115 (“When phonorecords of a nondramatic musical work have been distributed . . . under the authority of the copyright owner, any other person . . . may, by complying with the provisions of this section, obtain a compulsory license to make and distribute phonorecords of the work.” (emphasis added)). By contrast, the ongoing royalty order at issue here is limited to one particular set of defendants; there is no
implied authority in the court’s order for any other auto manufacturer to follow in
Toyota’s footsteps and use the patented invention with the court’s imprimatur.

Circuit Judge Prost then went on to consider whether the district court had the statutory authority to issue this order, and whether Paice was denied its right to a jury trial under the Seventh Amendment to determine the amount of the ongoing royalty rate:

We begin with the language of 35 U.S.C. § 283, which provides in relevant part: "The several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable." Perhaps the most apparent restriction imposed by § 283 is that injunctions granted thereunder must “prevent the violation of any right secured by patent.” We have previously held that this statutory language limits the scope of activities that may be enjoined. See, e.g., Joy Techs. v. Flakt, Inc., 6 F.3d 770, 777 (Fed. Cir. 1993) (holding that noninfringing acts may not be enjoined). The more difficult question raised by this case, however, is whether an order permitting use of a patented invention in exchange for a royalty is properly characterized as preventing the violation of the rights secured by the patent.

Under some circumstances, awarding an ongoing royalty for patent infringement in lieu of an injunction may be appropriate. In Shatterproof Glass Corp. v. Libbey–
Owens Ford Co., 758 F.2d 613, 628 (Fed. Cir. 1985), this court upheld a 5% courtordered royalty, based on sales, “for continuing operations.” Although the parties in that case contested the amount of the royalty, styled a “compulsory license” by the court, there was no dispute as to the district court’s authority to craft such a remedy. See id. In the context of an antitrust violation, “mandatory sales and reasonable-royalty licensing” of relevant patents are “well-established forms of relief when necessary to an effective remedy, particularly where patents have provided the leverage for or have contributed to the antitrust violation adjudicated.” United
States v. Glaxo Group Ltd., 410 U.S. 52, 59 (1973).

But, awarding an ongoing royalty where “necessary” to effectuate a remedy, be it for antitrust violations or patent infringement, does not justify the provision of such relief as a matter of course whenever a permanent injunction is not imposed. In most cases, where the district court determines that a permanent injunction is not warranted, the district court may wish to allow the parties to negotiate a license amongst themselves regarding future use of a patented invention before imposing an ongoing royalty.

Should the parties fail to come to an agreement, the district court could step in to
assess a reasonable royalty in light of the ongoing infringement. In this case, the district court, after applying the four-factor test for a permanent injunction and declining to issue one, imposed an ongoing royalty sua sponte upon the parties. But, the district court’s order provides no reasoning to support the selection of $25 per infringing vehicle as the royalty rate. Thus, this court is unable to determine whether the district court abused its discretion in setting the ongoing royalty rate. Accordingly, we think it prudent to remand the case for the limited purpose of having the district court reevaluate the ongoing royalty rate. Upon remand, the court may take additional evidence if necessary to account for any additional economic factors arising out of the imposition of an ongoing royalty.

[FOOTNOTE 15. This process will also, presumably, allow the parties the opportunity to present evidence regarding an appropriate royalty rate to compensate Paice and the opportunity to negotiate their own rate prior to the imposition of one by the court, as the concurrence suggests.]

The district court may determine that $25 is, in fact, an appropriate royalty rate going forward. However, without any indication as to why that rate is appropriate, we are unable to determine whether the district court abused its discretion. Cf. Hensley v. Eckerhart, 461 U.S. 424, 437 (1983) (“It [is]
important . . . for the district court to provide a concise but clear explanation of its
reasons for the fee award.”). The district court should also take the opportunity on
remand to consider the concerns Paice raises about the terms of Toyota’s permissive continuing use.

Finally, we address Paice’s argument that it was entitled to a jury trial to determine the amount of the ongoing royalty rate. “The Seventh Amendment provides that ‘in Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved . . . .’” Markman v. Westview Instruments, Inc., 517 U.S. 370, 376 (1996). “The constitutional question of whether a party is entitled to a jury trial is a question of law that this court reviews de novo.” Tegal
Corp. v. Tokyo Electron Am., Inc., 257 F.3d 1331, 1339 (Fed. Cir. 2001).16 “[W]e ask, first, whether we are dealing with a cause of action that either was tried at law at the time of the founding or is at least analogous to one that was.” Markman, 517 U.S. at 376. “If the action in question belongs in the law category, we then ask whether the particular trial decision must fall to the jury in order to preserve the substance of the common-law right as it existed in 1791.” Id.

In contending that it was improperly deprived of a jury trial, Paice merely states
that “[i]t is well settled that the determination of damages is a legal question which
carries a Seventh Amendment right to a jury trial.” Appellee’s Br. 64. While Paice may be correct as a general matter, not all monetary relief is properly characterized as “damages.” See, e.g., Root v. Ry., 105 U.S. 189, 207 (1882) (“When, . . . relief was
sought which equity alone could give . . . in order to avoid a multiplicity of suits and to do complete justice, the court assumed jurisdiction to award compensation for the past injury, not, however, by assessing damages, which was the peculiar office of the jury, but requiring an account of profits . . . .”); cf. Bowen v. Massachusetts, 487 U.S. 879, 910 (1988) (“[E]ven if the District Court’s orders are construed in part as orders for the payment of money by the Federal Government to the State, such payments are not ‘money damages’ . . . . That is, since the orders are for specific relief (they undo the Secretary’s refusal to reimburse the State) rather than for money damages (they do not provide relief that substitutes for that which ought to have been done) they are within the District Court’s jurisdiction . . . .”). As such, the fact that monetary relief is at issue in this case does not, standing alone, warrant a jury trial. Accordingly, Paice’s argument falls far short of demonstrating that there was any Seventh Amendment violation in the proceedings below.

Concurring Circuit Judge Rader wrote separately to opine that the "Federal Circuit should do more than suggest that "the district court may wish to allow the parties to negotiate a license amongst themselves . . . before imposing an ongoing royalty:"

Instead, this court should require the district court to remand this issue to the parties, or to obtain the permission of both parties before setting the ongoing royalty rate itself.

District courts have considerable discretion in crafting equitable remedies, and in a limited number of cases, as here, imposition of an ongoing royalty may be ppropriate. Nonetheless, calling a compulsory license an "ongoing royalty" does not make it any less a compulsory license. To avoid many of the disruptive implications of a royalty imposed as an alternative to the preferred remedy of exclusion, the trial court's
discretion should not reach so far as to deny the parties a formal opportunity to set the terms of a royalty on their own. With such an opportunity in place, an ongoing
royalty would be an ongoing royalty, not a compulsory license.

. . . Evidence and argument on royalty rates were, of course, presented during the course of the trial, for the purposes of assessing damages for Toyota’s past infringement. But pre-suit and post-judgment acts of infringement are distinct, and may warrant different royalty rates given the change in the parties’ legal relationship and other factors. When given choices between taking additional evidence or not, and between remanding to the parties or not, a district court may prefer the simplest course – impose its own compulsory license. This simplest course, however, affords the parties the least chance to inform the court of potential changes in the market or other circumstances that might affect the royalty rate reaching into the future.

In most cases, the patentee and the infringer should receive an opportunity at least to set license terms that will apply to post-suit use of the patented invention. This general principle has deep roots in both law and policy. Projecting the costs to be incurred for what would otherwise be future acts of infringement is necessarily a speculative exercise, even for the most stable markets and technologies. As licenses
are driven largely by business objectives, the parties to a license are better situated
than the courts to arrive at fair and efficient terms. After all, it is the parties, rather than the court, that will be bound by the terms of the royalty. Particularly in the case of the patentee, who has proven infringement of its property right, an opportunity to negotiate its own ongoing royalty is a minimal protection for its rights extending for the remainder of the patent term.

For these reasons, I would require the district court to allow the parties an opportunity to set the ongoing royalty rate, or, at least to secure the permission of both parties before setting the rate itself. Of course, if the parties cannot reach agreement, the court would retain jurisdiction to impose a reasonable royalty to remedy the past and ongoing infringement.

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Mixed Territorial and Field of Use License Does Not Provide Standing to Sue

In International Gamco, Inc., et al. v. Multimedia Games, Inc. (October 15, 2007), the Federal Circuit held that an "exclusive enterprise license" (an amalgam of an exclusive territorial license and an exclusive field of use license), like a field of use licensee, does not grant all substantial rights in the licensed patent that would otherwise provide standing to sue for infringement where the license agreement at issue included these terms:

License. Gamco shall be granted and IGT grants to Gamco the exclusive right and
license, within the Territory, to make, use, sell, and offer to sell, with the
right to sublicense others to make, use, sell, and offer to sell game system
networks covered by the ’035 Patent, with the proviso that IGT shall have the
right to approve any sublicense offered by Gamco, which approval shall not be
unreasonably withheld . . . .

According to the opinion by Circuit Judge Rader,

In this case, Gamco’s exclusive enterprise license conveys both a territorial license and a field of use license. Because the “Territory” of the license includes both geographic (the NYSL-authorized sites) and field of use (“lottery games”) restrictions, Gamco’s “exclusive” rights must meet both conditions. The problem of a multiplicity of lawsuits arising from an exclusive field of use license is not cured by adding a geographic restriction. As discussed above, a field of use license, like the license in Pope, apportions the subject matter of a patent. Thus, an exclusive field of use licensesubjects an infringer to suit by multiple parties because the license has split the patented subject matter amongst various parties.

In this case, Gamco’s exclusive enterprise license limits its rights to lottery games, but the ’035 patent extends beyond that limitation. For example, a single infringing game system at an NYSL-authorized site could offer blackjack, keno, mahjong, and lottery games.1 Thus, the single infringing act of offering NYSL games might subject the infringer to suit by Gamco for the lottery games, and separately by IGT or some other game-specific licensee for the other games. This example also shows the potential of suits among licensees or between the licensee and licensor. For example, the hypothetical infringer’s keno game could conceivably lead to a squabble over whether keno was a "lottery game" under Gamco’s license. Divvying up the rights in the ’035 patent along subject matter rather than geographic lines would "permit several monopolies to be made out of one" in a manner not specifically sanctioned by the Patent Act.

These multiplicity problems in the event that an exclusive enterprise licensee could sue without joining its licensor were foreseen by the Supreme Court in Pope. In Pope, as in this case, the license only conveyed rights to a subset of the patented subject matter. For that reason, as in this case, the conveyance posed a threat of multiple suits based on the same allegations of infringement. This court therefore holds that Gamco lacks standing to sue in its own name without joining IGT. As an exclusive enterprise licensee, Gamco does not hold all substantial rights in the full scope of the ’035 patent. Therefore, this court reverses the district court’s denial of defendant Multimedia’s motion to dismiss Gamco’s complaint.

Dubitante Senior Circuit Judge Friedman was unconvinced that the district court erred in permitting Gamco to maintain its patent infringement suit without joining its licensor:

This court may be correct that field-of-use exclusive licensees pose a significantly greater likelihood of multiple lawsuits than geographically limited assignments do. It seems to me unlikely, however, that there would be a serious danger of such multiplicity, in the circumstances of this case. It also might seem anomalous for this court to rely on Supreme Court dicta in Pope while simultaneously distinguishing the seemingly inconsistent view of this court in its 1988 Textile Products case as dicta. Textile Prods v. Mead Corp., 134 F.3d 1481, 1484 (Fed. Cir. 1998)[referring to Justice Rader's conclusion that "The Textile case did not feature any field of use licenses. In fact, the Textile plaintiff did not even purport to be an assignee. In Textile, this court concluded that the plaintiff was a non-exclusive licensee without standing to pursue a claim for patent infringement against the licensor/purchaser and a third-party provider. Id. at 1485."]

USPTO Now Flagging Applications that Exceed 5/25 Claim Limits

Thanks to James McEwen and Randall Svihla for poiting out via Patently-O that the USPTO has begun inserting “Request for SIR -- Recorded” or “Preexam Flag for 1.75(b) Issues” in the status field for bibliographic information in PAIR. For example, check out the PAIR data for App. No. 20060294241.

Professor Crouch reports that

According to a telephone conversation with the Office of the Commissioner for Patents, these cases have been pulled from Examiner dockets because they exceed the 5/25 limit and are thus-far unexamined. . . . Of course, this appears to be a de facto implementation of the new rules prior to the stated November 1 effective date.

. . . This alert will help many practitioners ensure that they have found all their cases that exceed the new limits. Many attorneys keep no specific records of the number of claims filed. For published cases, Derwent keeps track of the number of claims.

Nice catch, Dennis!

p.s. - On 10/17/07 Crouch posted this update -- App. No. 20060294241 referenced above is no longer ‘flagged.’

Electronic "First Impressions" on KSR Via Michigan Law Review

In the "First Impressions" online companion to the paper-only Michigan Law Review, Michigan Law Professor Rebecca Eisenberg, George Washington Law Professor John F. Duffy, George Washington Law Adjunct Professor Hal Wegner, Eli Lilly Senior Vice-President Robert A. Armitage, and former USPTO Deputy Commissioner Stephen G. Kunin offer their commentary on the KSR decision in

"The Supreme Court and the Federal Circuit:Visitation and Custody of Patent Law" by Rebecca S. Eisenberg

"KSR v. Teleflex: Predictable Reform of Patent Substance and Procedure in the Judiciary" by John F. Duffy

"Making Sense of KSR and Other Recent Patent Cases" by Harold C. Wegner

"Now That the Courts Have Beaten Congress to the Punch" by Robert A. Armitage, and

"KSR's Effect on Patent Law" by Stephen G. Kunin & Andrew K. Beverina

First Impressions provides "op-ed length articles by academics and practitioners in order to fill the gap between the blogosphere and the traditional law review article. This extension of these printed pages aims to provide a forum for quicker dissemination of the legal community's first impressions of recent changes in the law."

The next issue of First Impressions will consider Pay-to-Stay Programs in Correctional Facilities. Get the RSS feed here, and send the the Executive Editors of First Impressions (mlr.fi@umich.edu) your comments and topic suggestions for future issues.

Race Card Played in WIPO Debate Over Future of Director General

According to William New, writing for "Intellectual Property Watch" on October 17, 2007, "the African Group of nations at WIPO raised the stakes in the debate [over WIPO Director General Idris's alleged age misrepresentation on official documents] with a press communiqué calling the attempt mainly by developed countries to get Idris to resign a racist and xenophobic attack."

. . . The communiqué, dated 11 October and reportedly circulated to member governments and bearing no signature, referenced a cartoon it said had been
circulated in Geneva that depicts Idris in a racist way. According to the communiqué, the cartoon showed Idris against a background of a Swiss flag as a black sheep being kicked out of a group of white sheep. This is a reflection of the highly charged political poster used by the far-right Swiss People’s Party of Christoph Blocher, the Swiss justice minister, who campaigns on an anti-immigration platform. Blocher’s poster has contributed to uncommon riots and other violence in the lead-up to the 21 October general election in the country.

“The ultimate message of this cartoon which should be condemned and repudiated by all, as it was with the afore-mentioned campaign poster, is that there can be security in WIPO and Switzerland only when black people are kicked out, since the white sheep kicking Dr. Idris out bears the WIPO logo,” the communiqué said.

The complete African Group Communiqué on Idris is available to IPW subscribers, here.

The "Cincinnatus" WIPO Staff Appeal on Idris (in French and English) has now been signed by 230 employees and is available to IPW subscribers here, with allusion to the humble Roman farmer who, within sixteen day of being chosen a dictator, led a defeat of the Roman army and then resigned his position so that he could return to his fields in order to feed his family. More on "Lucius Quinctius Cincinnatus" at LeadershipNow.com, here

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