Texas Court Stuns Patent Troll Business Model
Texas has become well known, some would say infamous, for their patent friendly federal district courts. Over the years, “patent trolls” have increasingly flocked to Texas District Courts such as the eastern district (Marshall) to leverage these pro-patentee forums.
Since September 16, 2012, new USPTO post grant patent proceedings have been increasingly leveraged as the first true alternative to patent litigation. Here again, Texas courts offered patentees a benefit over many other districts in the U.S. That is, historically, Texas judges have been reluctant to stay litigation pending USPTO reexamination proceedings. To date, most presumed that this historical bias against staying litigation pending USPTO reexamination would continue despite the increase in speed in the new patent challenge proceedings of the America Invents Act (AIA). Yet, as made clear last week, the heightened standard necessary to institute an Inter Partes Review at the USPTO’s Patent Trial & Appeal Board (PTAB), coupled with the recent outcome in Fresenius USA v. Baxter Int’l. (CAFC 2013), has Texas courts rethinking the wisdom of their previous anti-stay stance. Read the rest of this entry »
Proposed Change to USPTO Claim Construction Practice Will Moot Markman Debates
One of the issues being debated in the current round of patent reform efforts is the current use of the broadest reasonable claim interpretation (BRI) in USPTO post grant patent proceedings. The rationale for this “broadest” interpretation practice of the USPTO has long been the ability to amend patent claims before the agency. That is — patent claims should be interpreted broadly in a forum where claim scope can be freely adjusted by the patentee (intervening rights aside).
Since the passage of the America Invents Act (AIA), a small, but vocal minority of bar association honchos (primarily those employed by large patent filers) have been shortsightedly advancing the notion that BRI should not be employed in the patent challenge proceedings of the AIA (Inter Partes Review (IPR) and Post Grant Review (PGR)). Instead, they argue that BRI claim construction should be replaced with the claim construction practices of the district court (i.e., Philips v. AWH). Their premise is that the new AIA proceedings are more “adjudicative in nature” as compared to examiner based patent prosecution/reexamination practices. Currently, the proposed legislation is adopting these changes for IPR and PGR proceedings (CBM is excluded).
As can be appreciated, large patent filers believe a narrower claim construction at the USPTO will help preserve the patentability of their patents that become subject to post grant patent challenges. Yet, in practice, if this change is implemented, it will have little impact on post grant proceedings. In fact, insisting that the USPTO perform the same analysis as district courts may help invalidate more patents. Read the rest of this entry »
Critical Technical Fix to CBM Statute Left out of Leahy Bill
Wasting no time…the Senate has quickly introduced a companion bill to H.R. 3309. The senate bill (here), sponsored by Senator Leahy of Leahy-Smith America Invents Act (AIA) fame, largely tracks the post grant related provisions of the existing house legislation — with one major difference. The Leahy bill does not include the technical fix to the Covered Business Method (CBM) provisions of the AIA, Section 18(a)(1)(C)(i). This fix is included in the Goodlatte bill to permit CBM challenges on prior art qualifying under 35 U.S.C. § 102(e). 102(e) is a critical class of prior art for business method patent challengers.
As explained previously, the exclusion of 102(e) was a drafting mistake of the AIA. This drafting error significantly degrades the appeal of CBM for business method patent challengers. While mark-up and evolution of H.R. 3309 /Senator Leahy’s Bill will certainly continue, it is disturbing that this critical fix was seemingly deliberately left out of the Senate bill.
Pro Software Lobby Drives Legislative Rewrite
Last week, the proposed patent reform legislation (HR 3309) was seemingly stalled for the remainder of 2013. This road block was primarily erected by the Business Software Alliance, and other pro software patent lobbyist that were taking issue with certain proposed changes to Section 18 of the America Invents Act (AIA). As a reminder, Section 18 of the AIA defines the Transitional Program for Covered Business Method (CBM) patents. The CBM proceeding is a post grant patent challenge program managed by the USPTO’s Patent Trial & Appeal Board (PTAB). The CBM program has proven especially successful in cost effectively combating and shutting down business method patent litigation.
The proposed changes to the CBM proceeding drawing the most heat were: 1) the recalibration of the definition of a business method patent to de-emphasize financial services aspect, while expanding the definition to embrace more generic software functionality; and 2) repeal of the “transitional” nature of the program (8 years) to make it permanent. Not surprisingly, large software patent filers were not at all enthusiastic.
Faced with the prospect of further hearings and delay, and with the White House clamoring for something, anything that can be spun as progress in the wake of the Obamacare fallout, HR 3309 has been repackaged by dropping these controversial CBM provisions (existing mark-up here).
With additional mark-up expected in the coming days (although likely very minor), look for a companion bill to be introduced on the Senate side by Senator Leahy. As was the case for the AIA, conference can be avoided if the Senate follows the Goodlatte lead, which appears to be the plan.
Patent Reform for Christmas is looking like a distinct possibility.
Statistics Demonstrate Robust Demand for PTAB Patent Challenge Proceedings
Last week, the USPTO issued the official tallies/progress statistics for Inter Partes Review (IPR), Post Grant Review (PGR) and the Covered Business Method (CBM) proceedings. As of November 7, 2013 the Patent Trial & Appeal Board (PTAB) has received 627 IPR petitions and 78 CBM petitions, 709 petitions in total. (While the Office is showing one PGR as being filed, this was an incorrectly filed IPR). (Click to Enlarge)
Not surprisingly, the vast majority of IPR petitions are in the predictable arts, significant concentrations being in consumer electronics and mobile communication technologies.
Although difficult to gauge from the numbers due to the lag in filing of preliminary responses across yearly boundaries, it seems that preliminary responses are pursued in roughly 75% of proceedings.
Based upon early numbers, the settlement rate appears to be leveling out at around 25%. As more proceedings mature toward written decision the rate may increase. Of course, it is within the discretion of the PTAB to continue to written decision for late stage settlements. (See CBM2012-00007)
Japanese Embrace New Patent Challenge Mechanisms
Generally speaking, inter partes patent reexamination was pursued relatively infrequently by foreign based entities. Unlike their U.S. based counterparts, foreign based companies rarely employed patent reexamination as a tool to resolve patent disputes in a more cost effective manner, and/or to pressure opponents in a parallel litigation. This phenomena was especially odd for Japanese innovators. This is because many of the top ten patent filers are Japanese companies. Clearly these companies were familiar with USPTO proceedings, but remained uncomfortable with the USPTO as a source of potential resolution for patent validity disputes.
Since the passage of the new patentability challenges of the America Invents Act (AIA), the public has overwhelmingly embraced Inter Partes Review (IPR) and Covered Business Method (CBM) proceedings as a viable option to traditional patent limitation—and, unlike inter partes patent reexamination, Japanese innovators are not far behind. Read the rest of this entry »
New USPTO Rules of Professional Conduct in Effect
Non-registered practitioners may, in limited circumstances, be permitted to appear before the Patent Trial & Appeal Board (PTAB) on a pro hac vice basis. 37 C.F.R § 42.10(c). Previously, in IPR (IPR2013-00010) (order here), the requirements for the motion and accompanying declaration were outlined.
As the Rules of Professional Conduct have been updated since the issuance of the above order, a new Model Order has been issued (here) to update factor (vi) so that it now properly references Part 11, rather than Part 10 of Title 37, Code of Federal Regulations (which was deleted in May of this year).
Recalibrating Indemnification Notice & Control Post AIA
Patent indemnification provisions are a fixture of modern contractual agreements for the exchange of technological goods. The indemnification clause, whether express or introduced by default via the Uniform Commercial Code (UCC), essentially warrants that the contracted goods are free from claims of patent infringement. In the event of a claim of patent infringement, the indemnity clause obligates the Seller/Supplier to defend against the claim in some manner, typically funding the defense, or taking over responsibility for the defense effort.
While the body of law pertaining to contractual interpretation has remained largely unchanged in recent years, the passage of the America Invents Act (AIA) has altered the landscape as to patent defense practices. In particular, the battle against the dreaded patent troll has shifted more toward the post grant patent challenge proceedings of the Patent Trial & Appeal Board (PTAB). Since many multi-defendant disputes are shifting to the PTAB for resolution it is imperative that indemnitors account for this eventuality in their contractual agreements. Read the rest of this entry »
Simplification of PTAB Trial Grounds May Not Help CAFC
Under the old inter partes patent reexamination model, patentees were often faced with 10+ grounds of rejection. The numerosity and overlap in these rejections rendered USPTO processing quite tedious and resource intensive. For at least this reason these proceedings would take upward of five years to make their way through the USPTO.
With the inefficiencies of inter partes patent reexamination still fresh on the minds of the Patent Trial & Appeal Board (PTAB), it is not surprising that the Board has attempted to simplify such issues for Inter Partes Review (IPR) and Covered Business Method (CBM) patent challenges (and presumably PGR). In the PTAB Trial Orders to date, grounds of unpatentability that are deemed “redundant” are filtered out at the close of the preliminary proceeding and trial is ordered going forward on the strongest grounds (as determined by the panel of PTAB judges). However, in view of the recent CAFC decision in Rexnord Industries LLC. v. Kappos (CAFC 2013), this redundancy determination may only serve as a temporary reprieve for patentees. Read the rest of this entry »
Early Determination Calibrates Plaintiff Expectations
Inter Partes Review (IPR) and Covered Business Method (CBM) proceedings of the Patent Trial & Appeal Board (PTAB) begin with a Trial Order that includes substantial guidance on matters of claim construction. Typically, key terms at issue in the proceeding are expressly construed by the panel of administrative patent judges (APJs). While such constructions are not binding per se on a parallel litigation proceeding, in some circumstances such findings can be nevertheless devastating to a litigation campaign, and, disruptive at a far earlier date than a typical Markman Order.
For example, in many cases involving non-practicing entities (NPE), an overly broad claim construction is advanced for the purpose of capturing the products/processes of an entire industry. At the PTAB, the broadest reasonable interpretation is applied. Naturally, if the PTAB does not agree with the NPEs claim interpretation some 5-6 months after petition filing, such is strong evidence that the plaintiff’s case will not go according to plan. In fact, the CAFC has found interpretations of the USPTO in this context to be persuasive evidence. See St. Clair Intellectual Property Consultants, Inc. v. Canon Inc., (Fed. Cir. 2011, non-precedential)
In other contexts, where the claim interpretation analysis is more akin to a district court analysis, such as in an expired patent or means-plus-function claim, the PTAB Trial Order can arguably supplant a Markman analysis. Read the rest of this entry »