Moving Day
IP Wise is moving.
Our firm, Brann & Isaacson, launched its new website, www.brannlaw.com, on Friday. And that site is the new home of IP Wise at http://www.brannlaw.com/ip-wise/.
Same authors, same content, same perspective on the intersection of IP law and litigation and the business community. Not even the name has been changed to protect the innocent.
Thanks for reading us here, and we look forward to seeing you over there.
A Little Light Reading
On the eve of Labor Day weekend, perhaps you were planning on sneaking off to the beach with the latest bestseller. Just in case you were looking for a bit more serious fare, the U.S. Copyright Office has obliged, releasing a compendium that tips the scales at over 1,200 pages.
Perhaps you are less than excited, but the compendium is the first major revision in more than two decades, setting forth the administrative practices of this important IP entity. According to the press release, the draft (which will remain so for approximately 120 days, pending final review and implementation) “sets the stage for a number of long-term improvements in registration and recordation policy.”
Happy reading!
More Bad News For NPEs At The ITC
Last month an administrative law judge at the International Trade Commission posed a straightforward question, and gave a straightforward answer:
“whether a licensing entity whose patent-related activities are purely revenue driven can choose to prove the existence of a domestic industry under subsections (A) and (B) of section 337(a)(3), avoiding the requirements of subsection (C)? The answer is no.”
In the Matter of Certain Optical Disc Drives, Components Thereof, and Products Containing the Same, has, in short, continued the ITC’s trend of making it more difficult for a non-practicing entity to establish a “domestic industry” sufficient to invoke the jurisdiction of the ITC.
Optical Discs tried to avoid the requirements of (C) (which require substantial investment in a patent’s exploitation, including engineering, research and development, or licensing), by relying on its licensee’s activities under subsection (A) (significant investment in plant and equipment) and (B) (significant employment of labor or capital). No dice, said the ALJ.
Yes, Patent Trolls Are Doing What You Think They Are Doing
Timothy Lee of Vox directs our attention to the latest empirical study into the economic impact of patent trolls: a paper published by Lauren Cohen of the Harvard Business School, Umit G. Gurum of the University of Texas at Dallas, and Scott Duke Kominers of Harvard, entitled simply, “Patent Trolls: Evidence from Targeted Firms.”
Among the findings:
- Non–practicing entities target firms with large amounts of cash.
- NPEs don’t seem to care where the cash comes from, or whether it has anything to do with the asserted patent or allegedly infringing technology.
- NPEs don’t seem to care whether their targets are active in the field of the asserted invention or hold patents in that area.
- NPEs seem to go after businesses distracted by other non–IP–related litigation or that seem disposed to settle.
- NPE lawsuits affect research and development—firms that settle or lose lawsuits to NPEs spend significantly less on R&D than firms that prevail in NPE litigation.
It is unfortunate that successful retailers that sell goods online but aren’t necessarily on the cutting edge of web development seem to fit the NPE bill.
When Should You Ask Alice?
Friday was a good day for AOL, Google, IAC Search & Media, Gannet Company, and Target. The Federal Circuit reversed a district court determination that patents asserted against them by I/P Engine were valid and infringed. For the disinterested reader, however, the Federal Circuit’s split opinion was as interesting for how the panel reached the result. The panel split 2–1 on the question of whether the asserted claims were obvious as a matter of law, with Judges Wallach and Mayer saying, yes, and Judge Chen, no. Case closed? Well, yes, and no.
In an impassioned concurrence, Judge Mayer wrote that this case could and should have been decided at the outset because, in his view, the asserted claims were not patent–eligible under 35 U.S.C. § 101 and Alice Corp. v. CLS Bank. Leaving aside Judge Mayer’s assessment of the particular patents in issue, he reads the Supreme Court as requiring courts to conduct a subject–matter eligibility analysis before considering other grounds of invalidity. In addition to seeing the analysis as a legal requirement, Judge Mayer writes, “From a practical perspective, there are clear advantages to addressing section 101’s requirements at the outset of litigation. Patent eligibility issues can often be resolved without lengthy claim construction, and an early determination that the subject matter of the asserted claims is patent ineligible can spare both litigants and courts years of needless litigation.”
We are quite sympathetic to this line of argument, having made it ourselves.
Patent Reform: Not (Yet) A Dead Letter
Pardon the pun.
Patent reform, a perpetual hot topic of conversation in the halls of the United States Congress, is seemingly on the minds of five Democratic senators who are trying a different tactic: Administrative, rather than legislative, reform.
In a recent letter to the Secretary of Commerce, the coalition urged five goals formulated under the mindset that an ounce of prevention is worth a pound of cure:
(1) Implement steps to incentivize examination quality over quantity.
(2) Direct Patent Examiners to ensure that the patent file history is complete and ambiguities resolved prior to patent issuance.
(3) Assess whether the PTO’s additional steps to address functional claiming concerns “are sufficient to address concerns that functional claiming provides a loophole from definite, precise claims.”
(4) Expand crowdsourcing and public data analysis as a mechanism to identify ambiguous patents and categories of patents, or those that generate litigation risk — then target those areas for more thorough examination.
(5) Ensure public access to information about patents and their histories.
A Patented Problem
Tough time to be at the Patent & Trademark Office. Reports surfaced last month that a recent investigation had revealed that the federal government had paid out nearly $5 million to work-at-home PTO paralegals hired in 2009 to ease the patent backlog for exercising, doing laundry, surfing the Internet, and watching TV – because of a hiring freeze that prevented the implementation of additional patent judges to hear cases.
Now, it seems, the story simply gets worse. The Washington Post has reported that some of the thousands of patent examiners who work from home full time repeatedly lied about the hours they were putting in, and many were receiving bonuses for work they didn’t do. Not only were supervisors who asked to have the employee’s computer records pulled allegedly rebuffed by top agency officials, but the investigative findings sent to the Commerce Department were reportedly shortened and watered down.
All in all, these findings may spell out the end for the PTO’s remote workplaces.
A Fraternity of Federal Judges
We’ve mentioned the reversal rates on claim construction before – under the current de novo standard of review (no deference) the Federal Circuit routinely reverses trial judges on claim construction, very often the decisive issue. The Supreme Court has recently agreed to hear the case of Teva Pharmaceuticals v. Sandoz, which will address the issue of how much (if any) deference the Federal Circuit should afford a district court on issues of claim construction. Until then, however, a victory or defeat at the trial court level provides very little certainty to litigants facing an appeal.
Unless, of course, the district court judge has previously sat by designation on a claim construction appeal. A hat tip towards Written Description for calling our attention to a fascinating study by Lemley & Miller that concluded that the reversal rate dips by approximately 50% if the district judge previously participated in a claim construction appeal compared to cases where the district judge had never sat by designation. Sometimes, it seems, it pays to put in a little face time at the Federal Circuit.
To Stay or Not to Stay?
We are fashionably late to the party on this particular issue, but nonetheless wish to pay notice to the Federal Circuit’s decision last month in VirtualAgility Inc. v. Salesforce.com, Inc.—notable as its first opinion confronting the issue of when it is appropriate to grant a stay of a district court lawsuit while a covered business method review proceeding (“CBM”) occurs.
A blog about a procedural issue may already have you yawning, but CBM proceedings have become increasingly common defensive tactics for retailers and other defendants accused of patent infringement, who might otherwise have never seen the inside of the Patent & Trademark Office. Given the speed of resolution, and the reversal rates at the PTO, a CBM is often an attractive—if expensive—proposition. Rather than fighting a costly war on two fronts, staying district court proceedings while the CBM plays out is a desired, if not necessary, step in this process.
VirtualAgility emphasis the importance of filing a motion to stay early on in the case, as timing will be an important factor in determining the correctness of a decision on a stay. Additionally (and intuitively) important is whether or not all asserted claims are included in an instituted CBM proceeding—if not all claims are included, then the case will need to proceed regardless of the outcome of the CBM, and thus, the patentee may be able to argue that a stay will not simplify matters.
Should the patentee delay filing suit, or fail to seek a preliminary injunction, it will have a more difficult argument demonstrating prejudice from a stay. Finally, should the patentee move to amend claims in the CBM, this may weigh in favor of a stay (the potentially changing claim language could complicate claim construction).
On the other hand, don’t go arguing that the age of potential witnesses should weigh against a stay, or you’ll receive this retort from the Federal Circuit: “Since when did 60 become so old?”
No. 1 Most Wanted
We wanted to direct our readers to an interesting blog post from the Wall Street Journal’s “Market Watch.” In sum, if you work in the ecommerce industry, and feel as though the problem of patent trolls is getting out of hand – you’re not alone. Fascinatingly, relying on data compiled by Patent Freedom, Market Watch reports that the retail industry has been the most targeted sector for patent trolls this year – a trend expected to continue through 2014. That puts retailers ahead of high-tech industries such as electronics.
Why? With patent trolls more of a threat to a particular way of operating (for example, a particular website feature such as live chat) than to the next great product offering, retailers are more inclined to pay nuisance value settlements than to shoot their way out of a patent suit. And savvy plaintiffs know it.
Read what Market Watch has to say:
IP Wise 