USPTO Releases Examiner Guidance on Business Process Subject Matter Eligibility under 35 U.S.C. Section 101

Professor Crouch has published a May 15, 2008 memo to U.S. patent examiners that was released at the last Business Method Partnership meeting. The memo is intended to help Examiners determine when a claimed business method is eligible for patent protection as a statutory process under 35 USC 101:

"Based on Supreme Court precedent and recent Federal Circuit decisions, the Office’s guidance to examiners is that a Section 101 process must (1) be tied to another statutory class (such as a particular apparatus) or (2) transform underlying subject matter (such as an article or material) to a different thing. If neither of these requirements is met by the claim, the method is not a patent eligible process under Section 101 and should be rejected as being directed to non-statutory subject matter.
An example of a method claim that would not qualify as a statutory process would be a claim that recited purely mental steps. Thus, to qualify as a Section 101 statutory process, the claim should positively recite the other statutory class (the thing or product) to which it is tied, for example, by identifying the apparatus that accomplishes the method steps, or positively recite the subject matter being transformed, for example by identifying the material that is being changed to a different state."

PWC Releases 2008 Patent Litigation Survey

According to PricewaterhouseCoopers' 2008 Patent Litigation Study:

• The number of patent infringement actions filed has a compound average growth rate (CAGR) of 5.8% since 1991.
• Meanwhile, the number of patents granted has a compound average growth rate (CAGR) of 3.8% since 1991—about two-thirds the growth rate of new case filings of patent infringement.
• The inflation-adjusted median annual damages award has remained fairly stable over the last 13 years at $3.9 million from 1995 through 2000, and $3.8 million from 2001 through 2007.
• Jury trial success rates have consistently outperformed their bench counterparts for every year since 1995.
• Alleged infringers increase their trial success rates slightly as plaintiffs, but have not experienced the same increased success in summary judgments.
• Recent awards by juries have been running several multiples of the amounts awarded by judges.
• While jury awards have remained high, bench awards have decreased significantly.
  Patent holders have been successful 37% of the time overall, with a 19% win rate in summary judgments and a 57% win rate at trial.
• 32% of summary judgments are appealed, with 59% modified or reversed; while 43% of trial decisions are appealed, with 67% modified or reversed.
• 66% of cases reached trial three years from the date the initial complaint was filed.
  Virginia Eastern and Wisconsin Western districts have the shortest time-to-trial, (.88 and .91 yrs, no data on Georgia).
• Certain federal district courts (particularly Virginia Eastern, California Central, and Pennsylvania Eastern) continue to be more favorable to patent holders, with shorter time-to-trial, higher success rates, and higher median damages awards.

On Wednesday, a federal jury in the Eastern District of Texas gave a big win to Sam Baxter of McKool Smith, awarding his client, Medtronic, $250 million in a patent infringement case against Boston Scientific. Howrey represented Boston Scientific.

Meaningful Preparation Must be Considered for Declaratory Judgment Jurisdiction

In Cat Tech. LLC. v. Tubemaster Inc. May 28, 2008), the U.S. Court of appeals for the Federal Circuit examined the second prong of the thw-prong test for determining the existence of declaratory judgment authority.

1. whether conduct by the patentee created a "reasonable apprehension" of suit on the part of the declaratory judgment plaintiff.
2. whether the plaintiff had done "meaningful preparation" to conduct potentially infringing activity.

According to the opinion by Circuit Judge Mayer,

. . . the issue of whether there has been meaningful preparation to conduct potentially infringing activity remains an important element in the totality of circumstances which must be considered in determining whether a declaratory judgment is appropriate. See Teva Pharms., 482 F.3d at 1339 (MedImmune requires that a court look at "all the circumstances" to determine whether a justiciable Article III controversy exists.). If a declaratory judgment plaintiff has not taken significant, concrete steps to conduct infringing activity, the dispute is neither "immediate" nor "real" and the requirements for justiciability have not been met. See Lang v. Pac. Marine & Supply Co., 895 F.2d 761, 764 (Fed Cir. 1990) . . .

We conclude that although MedImmune articulated a "more lenient legal standard" for the availability of declaratory judgment relief in patent cases, Micron Tech., 2008 U.S. App. LEXIS 4387 at *12, the issue of whether there has been meaningful preparation to conduct potentially infringing activity remains an important element in the totality of circumstances which must be considered in determining whether a declaratory judgment is appropriate. See Teva Pharms., 482 F.3d at 1339 (MedImmune requires that a court look at "all the circumstances" to determine whether a justiciable Article III controversy exists.). If a declaratory judgment plaintiff has not taken significant, concrete steps to conduct infringing activity, the dispute is neither "immediate" nor "real" and the requirements for justiciability have not been met. See Lang v. Pac. Marine & Supply Co., 895 F.2d 761, 764 (Fed Cir. 1990) . . . .

. . . although a party need not have engaged in the actual manufacture or sale of a potentially infringing product to obtain a declaratory judgment of non-infringement, there must be a showing of "meaningful preparation" for making or using that product. Id.; DuPont Merck Pharm., 62 F.3d at 1401; see also BP Chems. Ltd v. Union Carbide Corp., 4 F.3d 975, 978 (Fed. Cir. 1993) (requiring "present activity which could constitute infringement or concrete steps taken with the intent to conduct such activity"); Goodyear Tire & Rubber, Co. v. Releasomers, Inc., 824 F.2d 953, 955-56 (Fed. Cir. 1987) (requiring that the plaintiff "actually have either produced the device or have prepared to produce that device"). In general, the greater the length of time before potentially infringing activity is expected to occur, "the more likely the case lacks the requisite immediacy." Sierra Applied Scis., Inc. v. Advanced Energy Indus., Inc., 363 F.3d 1361, 1379 (Fed. Cir. 2004).

. . . In the present case . . ., TubeMaster has taken significant, concrete steps to conduct loading activity with configurations 1, 2 and 4. It has developed two basic loading device designs—one with circular plates and one with circular plates with tabs—and has developed four loading device configurations. TubeMaster has generated AutoCAD® drawings for each of its four configurations.

Each reactor is different because the tube diameter, the spacing between tubes and the size and shape of catalyst particles can vary significantly. Because TubeMaster’s loading device designs are customized based upon the dimensions of each customer’s reactor, it can take no further steps toward manufacturing its loading devices until it receives an order from a customer with the appropriate dimensions.

TubeMaster has already successfully manufactured and delivered a loading device using configuration 3. See Interdynamics, Inc. v. Wolf, 698 F.2d 157, 169-74 (3d Cir. 1982) (Declaratory relief appropriate where the manufacturer of a rear window defroster had produced a prior version of its product.); see also Super Prods. Corp. v. D P Way Corp., 546 F.2d 748, 754-55 (7th Cir. 1976) (Declaratory relief appropriate where the plaintiff had a business enterprise specifically directed to the manufacture and sale of a potentially infringing product.). It is prepared to produce loading devices using configurations 1, 2 and 4 as soon as it receives an order with the appropriate dimensions.

Furthermore, it expects that it can produce devices using these configurations "within a normal delivery schedule" once it receives an order. Constitutionally mandated immediacy requirements have been satisfied because once the threat of
liability to Cat Tech has been lifted, it appears likely that TubeMaster can expeditiously solicit and fill orders for loading devices using configurations 1, 2 and 4.

. . . The dispute between TubeMaster and Cat Tech also meets constitutionally mandated "reality" requirements. In the context of patent litigation, the reality requirement is often related to the extent to which the technology in question is "substantially fixed" as opposed to "fluid and indeterminate" at the time declaratory relief is sought. Sierra, 363 F.3d at 1379.

. . . Unlike the technology involved in Telectronics, Sierra and Benitec, which was fluid and in an early stage of development, TubeMaster’s technology is "substantially fixed." TubeMaster’s four basic loading device designs are designed "to cover virtually all of the reactor configurations that might be encountered at customers’ facilities." Thus, TubeMaster does not expect to make substantial modifications to its loading device designs once production begins. The dispute with Cat Tech is "real," not hypothetical, because it appears likely that, once the cloud of liability for infringement is eliminated, the accused products can be produced without significant design change. See Interdynamics, 698 F.2d at 174 (proceeding where the plaintiff planned to market a product that it would "be able to manufacture relatively quickly").

. . . Where, as here, there is cogent evidence that a declaratory plaintiff has made meaningful preparation to conduct potentially infringing activity, a showing that the plaintiff has prepared draft sales literature or otherwise disclosed its products to potential customers is not an indispensable prerequisite. See Interdynamics, 698 F.2d at 172 (sufficient that although the plaintiff "had not yet advertised or solicited orders for its proposed new product," there was significant evidence that the plaintiff intended to manufacture it).

A Concise Guide to Likelihood of Confusion

In Section 2(d) and (e)(1) Refusals and Substantive Issues in Ex Parte Appeals: The Applicant's Perspective, Christopher C. Larkin (of Seyfarth Shaw LLP, via PLI) provides a concise, yet thorough, overview of likelihood of confusion in trademark application prosecution.