Tag: USPTO

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Patent Law

The Value of Public Data: Update to “Turning Gold to Lead”

files labeled as "patents"By Kevin Madigan & Adam Mossoff

A key value in the empirical work done in the social sciences and in the STEM fields is that data is made public and available for review, testing, and confirmation. Humans are neither infallible nor omniscient, and thus this standard practice in empirical research has evolved as a way to ensure that mistakes are identified and corrected. All scholars should ensure that their data is accessible, their analysis is understandable, and the means by which they draw their conclusions in both content and method is independently verifiable. As scholars, we embrace these principles.

Thanks to our making the data publicly available, we recently discovered that we made a mistake in listing a patent application number in an essay we published on a dataset of patent applications. In Turning Gold to Lead: How Patent Eligibility Doctrine Is Undermining U.S. Leadership in Innovation, George Mason Law Review, vol. 24 (2017), pp. 939-960, we reported on a dataset compiled by David Kappos and Bob Sachs of 17,743 patent applications “that received a § 101 rejection in initial or final office actions and then were abandoned between August 1, 2014 and September 27, 2017” (p. 941, footnote 10). The Kappos-Sachs dataset, as we detail in our article, identifies 1,694 patent applications among these 17,743 applications that received initial or final rejections and were ultimately abandoned in the United States, but patents were granted on the same inventions by the European Patent Office, China, or both.

We used the Kappos-Sachs dataset in our essay to highlight a “disturbing trend” in the U.S. patent system today in comparison to other countries. Our essay does not draw statistical inferences about this dataset, but rather reports on it and contextualizes it within the changes in patent eligibility jurisprudence recently wrought by the U.S. Supreme Court. We compare the more restrictive approach in patent eligibility doctrine in the U.S. today with historically a more open and accessible patent system for cutting-edge innovation in the U.S. The earlier approach led commentators to refer to the U.S. patent system as the “gold standard” compared to the rest of the world. Thus the title of our essay, “Turning Gold to Lead.”

In our essay, we listed twelve patent applications that exemplified this new disturbing trend of the closing of the U.S. patent system to cutting-edge innovation, as compared to other countries (pp. 957-958). In accord with publicly accessible data standards, we identified these twelve applications in a table with their patent application numbers, the titles of the inventions in the applications, the publication dates of the applications, and the assignees of the now-abandoned U.S. applications.

We have since learned that we made a mistake in one of the patent application numbers listed in this table. The invention, “Method for Growing Plants,” is listed as application number US12/139,753. This was a “parent” application that was ultimately rejected on novelty (§ 102) and nonobviousness (§ 103) grounds, but it was not rejected for lack of § 101 patent eligibility. We should have instead listed patent application US12/968,726, which has the same title, “Method for Growing Plants,” and is the “child” application of the mistakenly listed “parent” application.

(For non-patent-law geeks, a “parent” is a patent application during which, while its examination is still pending, the applicant files another patent application on a related invention that is linked to the “parent” in order to receive the earlier invention/filing date of the parent. These patent applications are also linked in the database of applications in the USPTO. This related “child” application is a new application that may disclose new features of or adds new claims to the original “parent.” These additional, related applications are expressly permitted under § 120 and § 121 of the Patent Act.)

We would also like to make clear that our essay reports on the Kappos-Sachs dataset, which comprises patent applications that have been abandoned by the applicants after an initial or final rejection on § 101 patent eligibility grounds. A typo at the end of footnote 10 on p. 941 leaves out the “initial,” and this could be confusing given the earlier sentence in the footnote that refers to both “initial or final rejections.” An example of an initial rejection for lack of § 101 patent eligibility is a patent application in our table on pp. 957-958: patent application US13/746,180, titled “Methods For Diagnosing and Treating Prostate and Lung Cancer.” This patent application received an initial rejection based on § 101 for lack of patent eligibility, but the applicant continued to pursue the application at the USPTO, revising and resubmitting the application in the hope it would be granted. This patent application was ultimately abandoned, just like all the others in the dataset, and the very last rejection before this abandonment was one in which the examiner argued that it was not patentable given its obviousness (§ 103) and a lack of proper disclosure (§ 112).

Pursuant to the terms of the Kappos-Sachs dataset, there was an initial rejection under § 101 for patent application US13/746,180 and it was ultimately abandoned. In fact, given the extensive confusion now in the courts and at the USPTO between the legal standards of § 101 and § 103, as many scholars and others have widely recognized, it is completely unsurprising to find an initial rejection under § 101 morph into a rejection under § 103 after which the applicant then abandoned it (while the corresponding patent for the same invention was granted in other countries where it was not similarly rejected and abandoned).

We regret any confusion that may arise from the dynamic and evolving examination histories of the patent applications in the Kappos-Sachs dataset, and we especially regret listing the wrong “parent” application number instead of the “child” application number.

This is just the start of data collection on the nature and impact of the overly restrictive approach to patent eligibility in the U.S. in the past several years. We hope that scholars trained in rigorous statistical analysis will start to scrutinize the Kappos-Sachs dataset. As we state in the conclusion of our essay:

This Essay highlights empirical data about extensive invalidations of patents by the courts and by the PTO, and hundreds of patent applications rejected in the U.S. but granted for the same or similar inventions in Europe and China. This data reflects a very disturbing trend that portends darkly for the future of the U.S. innovation economy. The data deserves to be mined further with rigorous statistical analysis, investigating more closely issues like technology classes and other relevant variables, but this is beyond the scope of this conference Essay.

Our essay is short and so we invite any interested parties to consider it for themselves. Also, as we said, the dataset is on the Internet and available to all (unlike empirical claims made by others in the patent policy debates that are based in secret, proprietary data and infected with basic methodological problems in statistical analysis).

In conclusion, we wish to express (again) our profound appreciation to David Kappos and Bob Sachs for sharing their dataset with us. We were honored that they gave us permission to report on it. We apologize for any confusion caused by our “scrivener’s error” in listing the wrong patent application number and any confusion caused by an applicant’s ongoing attempts at trying to obtain a U.S. patent before abandoning it after receiving an initial § 101 patent eligibility rejection.

One final minor update is necessary. In our essay, we expressly state that if anyone has questions about the dataset, they should contact Robert Sachs, but the email address is at his old law firm and is now defunct. Bob can now be contacted at rsachs@patentevaluations.com.

Categories
Patents

CPIP Scholars To Federal Circuit: Protect Innovation in the Life Sciences

Microscopic image of cellsLast week, a group of CPIP scholars—Chris Holman, David Lund, Adam Mossoff, and Kristen Osenga—filed an amicus brief in Natural Alternatives International v. Creative Compounds, a case currently on appeal to the U.S. Court of Appeals for the Federal Circuit. The amici ask the appellate court to correct the district court’s misapplication of the patent-eligibility test under Section 101 of the Patent Act since it threatens innovation in the life sciences.

The plaintiff-patentee, Natural Alternatives International or NAI, provides nutritional products, including proprietary ingredients and customized nutritional supplements, to its clients. NAI owns several patents relating to beta-alanine, a non-essential amino acid that delays the onset of muscle fatigue. The district court held that the claims were ineligible subject matter under the two-step Alice-Mayo test: the claims were directed to a natural phenomenon and lacked an inventive concept containing more than conventional, routine activity.

The amici point out that the district court’s overly-restricted view of patent-eligibility doctrine will dissuade the research and development of natural products that are beneficial for mankind. They note that the district court glossed over several predicate factual questions and failed to properly consider the claims as a whole. They conclude that the continued misapplication of the Section 101 analysis has resulted in legal uncertainty, undermining the innovation industries that rely on stable and effective patent rights.

The Summary of Argument is copied below, and the amicus brief is available here.

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SUMMARY OF ARGUMENT

The district court’s decision in Natural Alternatives International, Inc. v. Creative Compounds, LLC, No. 16-cv-02146-H-AGS, (S.D. Cal. Sept. 5, 2017) and Natural Alternatives International, Inc. v. Hi-Tech Pharmaceuticals, Inc., No. 16-cv- 02343-H-AGS, (S.D. Cal. Sept. 5, 2017), represent an improper application of 35 U.S.C. § 101. The parties in their briefs address the relevant innovation covered by Natural Alternatives’ patents, as well as the application of the Supreme Court’s and the Court of Appeals for the Federal Circuit’s § 101 jurisprudence. Here, amici offer additional insight concerning the legal and policy problems with the trial court’s decision. Specifically, amici contend that Natural Alternatives’ claims represent precisely how the patent system should reward discovery of a therapeutic use of a natural compound, and thus their invention should be eligible for patent protection. The Supreme Court has repeatedly emphasized that patents claiming new uses of known drugs or new applications of laws of nature are patent eligible, and these teachings properly applied provide patent eligibility for the kinds of claims at issue in this case. Assoc. for Molec. Pathology v. Myriad Genetics, Inc., 569 U.S. 576, 594 (2013); Mayo Collaborative Servs v. Prometheus Labs., Inc., 566 U.S. 66, 87 (2012). The district court’s decision to the contrary conflicts with the Patent Act as an integrated statutory framework for promoting and securing innovation in the life sciences, as construed by this court as well as by the Supreme Court.

The Supreme Court has recognized that the plain meaning of the language of § 101 indicates that the scope of patentable subject matter is broad. See Diamond v. Chakrabarty, 447 U.S. 303, 315 (1980); Myriad at 577. This is why the Supreme Court consistently has held that “[t]he § 101 patent-eligibility inquiry is only a threshold test.” Bilski v. Kappos, 561 U.S. 593, 602 (2010). Accordingly, the “threshold test” of § 101 is necessarily followed by the more exacting statutory requirements of assessing a claim as a whole according to the standard of a person having skill in the art as to whether it is novel, nonobvious, and fully disclosed as required by the quid pro quo offered to inventors by the patent system. Id.

Unfortunately, courts have applied the two-step “Mayo/Alice test” from the Supreme Court’s recent § 101 cases in an unbalanced and legally improper manner. See Alice Corp. Pty. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014); Mayo, 566 U.S. at 66. These practices of the inferior courts include dissecting claims into particular elements and then construing these elements in highly generalized terms with no evidentiary support. Thus, as happened in this case, a district court all too often merely asserts a conclusory finding that the claim—actually, specific elements dissected out of the claim as a whole—covers ineligible laws of nature or natural products to conclude that a patented invention is ineligible.

The lower courts’ unduly stringent and restrictive patent eligibility test under the Mayo/Alice test produces results such as the district court’s decision in this case. This improper application of the Mayo/Alice test inevitably leads to § 101 rejections of patentable product and method inventions; here, the district court rejected an innovative invention in the biotechnology sector that the patent system is most certainly designed to promote. When a patent describes a discovery made by the inventor, even if that invention relates to a natural product or natural law, it should be possible to describe a particular application of that law or discovery that is patent eligible so as to reward the inventor for their efforts.

Furthermore, the improper treatment of the § 101 inquiry as primarily a question of law requiring no evidentiary findings whatsoever, especially when the parties expressly disagree as to what a person having skill in the art would consider routine or ordinary, allows courts to gloss over both what the claims are directed to and what importance limitations beyond the ineligible material may have. See Berkheimer v. HP Inc., 881 F.3d 1360, 1368-69 (Fed. Cir. 2018). This improper characterization of § 101 has sowed indeterminacy in patent eligibility doctrine, and has left inventors and companies in the innovation industries with little predictability concerning when or how courts will dissect claims and make conclusory assertions that they are patent ineligible under § 101.

The court in this case has an opportunity to more properly instruct the lower courts in the manner in which the § 101 analysis should be made, particularly with regard to the role of factual evidence in determining when a claimed application of a natural law or product is routine, well-understood, or conventional and when it is not and thus that the claimed invention is eligible for patenting.

To read the amicus brief, please click here.

Categories
Antitrust Patent Licensing

Department of Justice Recognizes Importance of Reliable Patent Rights in Innovation Economy

dictionary entry for the word "innovate"It is undeniable that the patent system has been under stress for the past decade, as courts, regulators, and even the Patent Office itself (as the newly confirmed Director Andrei Iancu has acknowledged) have sowed legal uncertainty, weakened patent rights, and even outright eliminated patent rights. This is why a series of recent speeches by Assistant Attorney General Makan Delrahim—head of the Antitrust Division at the Department of Justice—have signaled an important and welcome policy change from the past decade. It’s just one step, but it’s an important first step to restoring reliability and predictability to property rights in patents, which, as Director Iancu has also been saying in recent speeches, drives innovation and economic growth by promoting investments by inventors, venture capitalists, and companies in the new inventions that make modern life a veritable miracle today.

Delrahim’s speeches are important because one significant point of stress for the patent system and the innovation economy over the past decade has occurred at the intersection of antitrust law and the licensing of patents in standard setting organizations (SSOs). Many people are unaware of this particular issue, and it’s understandable why it flies under the radar screen. The technical standards set by SSOs are the things that make everything work, such as electrical plugs, toasters, and pencils, among millions of other products and services, but they are not obvious to everyday consumers who use these products. Also, antitrust law is a complex domain of lawyers, policy-makers and economists. Still, the patented innovation that comprises technical standards, such as 4G, WiFi, USB, memory storage chips, and other key features of our smart phones and computers, have been essential drivers of innovation in the telecommunications revolution of the past several decades.

In a series of recent speeches, Delrahim has signaled an important and welcome change from his predecessors in how antitrust law will be applied to patented technology that is contributed to the standards that drive innovation in the high-tech industry. Delrahim’s predecessors at the DOJ gave many speeches criticizing (and instigating investigations of) alleged “anti-competitive behavior” by patent owners on technical standards. The DOJ’s approach was one-sided, unbalanced, and lacked evidence confirming the allegations of anti-competitive behavior. Instead, Delrahim is emphasizing the key importance of promoting and properly securing to innovators the technology they create through their long-term, risky, and multi-billion-dollar R&D investments (as succinctly described in two paragraphs here about Qualcomm’s R&D in 5G by an official at the Department of Treasury).

Delrahim has announced that he will return to an evidence-based, balanced antitrust policy at the DOJ. He will not take action against innovators unless there is real-world evidence of consumer harm or proven harm to the development of innovation. The absence of such evidence is well known among scholars and policy-makers. In February 2018, for instance, a group of scholars, former government officials, and judges wrote that “no empirical study has demonstrated that a patent-owner’s request for injunctive relief after a finding of a defendant’s infringement of its property rights has ever resulted either in consumer harm or in slowing down the pace of technological innovation.” It’s significant that Delrahim has announced that the DOJ will constrain its enforcement actions with basic procedural and substantive safeguards long provided to citizens in courts, such as requiring actual evidence to prove assertions of harm. This guards against unfettered and arbitrary regulatory overreach against innocent owners of private property rights. This self-restraint is even more important when overreach negatively impacts innovation, which portends badly for economic growth and the flourishing lives we have all come to expect with our high-tech products and services.

For example, Delrahim has rightly recognized that “patent holdup” theory is just that—a theory about systemic market failure that remains unproven by extensive empirical studies. Even more concerning, “patent holdup” theory—the theory that patent owners will exploit their ability to seek injunctions to protect their property rights and thus “holdup” commercial implementers by demanding exorbitantly high royalties for the use of their technology—is directly contradicted by the economic evidence of the smart phone industry itself. The smart phone industry is one of the most patent-intensive industries in the U.S. innovation economy; thus, “patent holdup” theory hypothesizes that there will be higher prices, slower technological development, and less and less new development of products and services. Instead, as everyone knows, smart phones—such as the Apple iPhone and the Samsung Galaxy, among many others—are defined by rapidly dropping quality-controlled prices, explosive growth in products and services, and incredibly fast technological innovation. The 5G revolution is right around the corner, which will finally make real the promise of the Internet of Things.

In sum, Delrahim has repeatedly stated that antitrust officials must respect the equal rights of all stakeholders in the innovation industries—the inventors creating fundamental technological innovation, the rights of the companies who implement this innovation, and the consumers who purchase these products and services. This requires restraining investigations and enforcement actions to evidence, and not acting solely on the basis of unproven theories, colorful anecdotes, or rhetorical narratives developed inside D.C. by lobbyists and activists (such as “patent trolls”). This is good governance, which is what fosters ongoing investments in the R&D that makes possible the inventions that drives new technological innovation in smart phones and in the innovation economy more generally.

We will delve more deeply into the substantive issues and implications of Delrahim’s recent speeches in follow-on essays. Since his speeches have been delivered over the course of the past six months, we have aggregated them here in one source. Read them and come back for further analyses of these important speeches (and more speeches that will likely come, which we will keep adding to the list below):

  • November 10, 2017. In a speech at the University of Southern California, Gould School of Law, Assistant Attorney General Delrahim discussed why patent holdout is a bigger problem than patent hold-up. “[T]he hold-up and hold-out problems are not symmetric. What do I mean by that? It is important to recognize that innovators make an investment before they know whether that investment will ever pay off. If the implementers hold out, the innovator has no recourse, even if the innovation is successful.” He further noted that antitrust law has a role to play in preventing the concerted anticompetitive actions that occur during holdout.
  • February 1, 2018. In a speech at the U.S. Embassy in Beijing, Delrahim noted that the proper antitrust focus should be on protecting the innovative process, not “short-term pricing” considerations. With this focus, using antitrust remedies should be approached with “caution.”
  • February 21, 2018. In a speech at the College of Europe, in Brussels Belgium, Delrahim observed that antitrust enforcers have aggressively tried to police patent license terms deemed excessive, and “have strayed too far in the direction of accommodating the concerns of technology licensees who participate in standard setting bodies, very likely at the risk of undermining incentives for the creation of new and innovative technologies.” The real problem and solution he noted is that the “dueling interests of innovators and implementers always are in tension, but the tension is best resolved through free market competition and bargaining.”
  • March 16, 2018. In a speech at the University of Pennsylvania Law School, Delrahim expanded on his detailed remarks from his talk at USC by adding some historical context from the founding fathers. He also made the core point that “patent hold-up is not an antitrust problem,” noting that FRAND commitments from patent owners are part of the normal competitive process and are therefore appropriately policed by contract and common law remedies. He further describes the necessary impacts of having a right to exclude in the patent right, including that the “unilateral and unconditional refusal to license a patent should be considered per se”
  • April 10, 2018. In a keynote address at the LeadershIP Conference on IP, Antitrust, and Innovation Policy in Washington, D.C., Delrahim emphasized the harm that can occur when “advocacy positions lead to unsupportable or even detrimental legal theories when taken out of context.” He specifically noted that some advocacy about patent hold-up could undermine standard setting as “putative licensees have been emboldened to stretch antitrust theories beyond their rightful application, and that courts have indulged these theories at the risk of undermining patent holders’ incentives to participate in standard setting at all.”
Categories
Administrative Agency Innovation Patent Law

The PTAB’s Regulatory Overreach and How it Cripples the Innovation Economy

files labeled as "patents"On August 14, 2017, the Regulatory Transparency Project of the Federalist Society published a new white paper, Crippling the Innovation Economy: Regulatory Overreach at the Patent Office. This white paper examines how an administrative tribunal created in 2011—the Patent Trial and Appeal Board (PTAB)—has become “a prime example regulatory overreach.” Several CPIP scholars are members of the Intellectual Property Working Group in the Regulatory Transparency Project that produced the white paper, including Professors Adam Mossoff, Kristen Osenga, Erika Lietzan, and Mark Schultz, and several are listed as co-authors.

Among the sweeping changes to the U.S. patent system included in the America Invents Act (AIA) was the creation of the PTAB, a new administrative body within the U.S. Patent and Trademark Office (USPTO). The PTAB hears petitions challenging already-issued patents as defective. Anyone can file a petition to have a patent declared invalid. The original idea was that this would help to weed out “bad patents,” i.e., patents that should not have been issued in the first place.

In the past five years, however, it has become clear that the PTAB has become an example of an administrative tribunal that has gone too far. Lacking the proper procedural and substantive restraints that constrain courts and even other agencies in respecting the rights of citizens brought before them, the PTAB is now “killing large numbers of patents and casting a pall of uncertainty for inventors and investors.”

In just a few years, the laudable goal of the PTAB in providing a cheaper, faster way to invalidate “bad patents” has led to a situation in which all patents now have a shroud of doubt around them, undermining the stable and effective property rights that serve as the engine of the innovation economy. The former chief judge of the court that hears all patent appeals recently said that the PTAB is a “patent death squad,” and confirming that this is not extreme rhetoric, the first chief judge of the PTAB responded to this criticism by embracing it: “If we weren’t, in part, doing some ‘death squadding,’ we would not be doing what the [AIA] statute calls on us to do.”

The white paper briefly discusses the history and purpose of the U.S. patent system and describes the PTAB and how it operates. The substance of the white paper details extensively the procedural and substantive problems in how the PTAB has failed to respect both the basic requirements of the rule of law and the rights of patent owners. The concern is that this undermines the stable and effective platform that patent rights provide as the engine of the innovation economy.

To read the white paper, please click here.

Categories
Innovation Patent Law

An Ever-Weakening Patent System is Threatening the Future of American Innovation

dictionary entry for the word "innovate"Over the past ten years, the United States patent system has been transformed by new legislation, regulatory actions, and numerous decisions by the Supreme Court addressing nearly every area of patent doctrine. The many disruptive legal changes have affected infringement remedies, licensing activities, and what types of inventions and discoveries are eligible for patent protection, resulting in a profound sense of uncertainty for most stakeholders. This current state of doubt about the American patent system is pushing investors to look outside of the US for less risky ventures. And because investors are shifting their focus overseas, foreign countries are for the first time poised to bypass the US as the forerunners of innovation.

Last month, the United States Patent & Trademark Office (USPTO), along with the University of Texas Law School and Antonin Scalia Law School, George Mason University, hosted the 12th annual Advanced Patent Law Institute in Alexandria, Virginia. The program featured a distinguished panel of patent experts discussing “current issues around patenting, licensing, enforcing, and monetizing patents in the U.S., and look[ing] at what the UK, EU, and China are experiencing and the impact on U.S. patent practice.” Titled The Current Patent Landscape in the US and Abroad and focusing on the economic factors that spur invention, the consensus was that dramatic changes to the US patent system are driving investment in research and development outside the country and threatening the future of American innovation.

US Patent System No Longer Adequately Incentivizes Investment

Serving as co-moderator with the Hon. Paul R. Michel, Robert Sterne—a leading patent attorney and founding partner of Sterne, Kessler, Goldstein & Fox—kicked off the panel with an overview of a patent system that is falling behind China and the European Union as a driver of innovation. Questioning the Supreme Court’s radical distortion of patent law over the last ten years and the institution of post-grant review, Sterne pointed out that the Patent Trial and Appeals Board (PTAB) has produced over 6,000 proceedings, with patent owner success rates hovering between a meager 30 to 40%. Because of these discouraging numbers, and because injunctive relief has become almost impossible to obtain for patent owners, Sterne warned that critical investment in small and medium-sized companies and universities is rapidly declining.

Judge Michel echoed many of the same sentiments, expressing concern with the “health and vitality and effectiveness of the patent system.” Michel stressed that the principle goal of the patent system is to incentivize investment, but that continued assaults on the system are driving investors to foreign jurisdictions and moving the US in the direction of “off-shore invention.” Citing studies by the Kauffman Foundation and US Census Bureau, Michel explained that most new jobs come from small start-up companies dependent on technology, and that without adequate incentives to invest in these job creators, the patent system and economy are in serious danger.

Expanding on the problem of investment incentivizes, Paul Stone—a partner at venture capital firm 5AM Ventures—discussed his backing over 60 life science startups in the last 15 years, all of which specialized in therapeutics aimed at developing life-saving drugs and drug delivery technologies. Stone offered the following three points to consider regarding the current innovative investment landscape: (1) 60% of the new drugs approved in 2016 came from venture capital-funded small biopharmaceutical companies, not pharma industry giants, (2) of these new approvals, the origin of half the molecules are outside the United States, a much higher percentage than ten years ago, and (3) personalized medicine and the influence of information technology on biotech is leading to smaller market sizes, and a weaker patent system is threatening the ability to realize a return on investments in this area.

Innovation is Moving Overseas

Damon Matteo of Fulcrum Strategy, an IP asset management firm, began his comments with an ominous warning: “Be afraid, be very afraid.” As a practicing IP attorney, Matteo noted that he has seen clients increasingly interested in securing their IP in Europe and China rather than the US, and that China specifically is embracing the software and business method patents that have been abandoned by the US system. Investment has been moving overseas because that’s where patents still have value. Matteo also pointed out that China has been much more favorable to patent owners in IP litigation, as plaintiffs in infringement suits prevail 60% of the time. And injunctive relief—which has become a completely improbable outcome in US litigation—is granted in upwards of 90% of infringement cases in China when there’s been a finding of infringement.

Peter Detkin, founder of the IP development and licensing company Intellectual Ventures, weighed in on some of the “alternative facts” and hysteria that have resulted in the current state of the US patent system. Despite claims over the last 15 years that extortionary demand letters were being sent by the thousands, patent ligation had gotten out of control, and patents were killing investment in R&D and startups, Detkin pointed to multiple analyses by government agencies such as the FTC and the Government Accountability Office that revealed no such exceptional activity. Unfortunately, policymakers took the bait, and entrepreneurs in Silicon Valley have suffered as a result of over-reactive legislative and judicial efforts.

As in-house Chief Intellectual Property Officer of Vivant, a fast-growing home security technology company, Paul Evans provided more insight into how absolutely vital patents are to investments and private equity–backed tech startups, emphasizing how “patents have historically created an important competitive advantage in the marketplace.” Sharing a recent professional anecdote, Evans recounted a conversation with the managing director of a private equity firm with $10 billion in assets in which they discussed the past successful sale of a company based largely on its strong patent portfolio. The two agreed that the transaction would never have happened today due to the immeasurable decline in the value of patents. Evans noted that about 85% of small businesses in the US are now technology based, and that if our patent system can’t protect the inventions they rely on, investments and jobs will be reallocated to jurisdictions that will.

Shifting the discussion to the effect innovation uncertainty is having on universities, patent law and tech transfer expert Chris Gallagher warned that university research funding is at risk, and that the system of grants can no longer be relied upon. Despite a recent case that found the 11th amendment shielded state-chartered schools from IPR exposure, Gallagher encouraged all stakeholders to reach out to Congress to push back on the persistent troll narrative that continues to affect university research.

Efficient Infringement is Devaluing Patents

The panel then moved into a discussion of the increasingly common practice of “efficient infringement,” where companies choose to infringe patents instead of licensing, understanding that the current system has made enforcing patents too expensive and risky. Damon Matteo likened the practice to robbing a bank, getting caught, and as a punishment, only having to return a fraction of the money. Peter Detkin then expanded on the analogy:

It’s a great analogy — the bank robbery — because you not only get to say whether you get caught, but if you get caught, you’ll then be able to argue to the Federal Reserve that the bank really shouldn’t have existed in the first place. Then if that fails, you get to argue to them again that their certificate never should have issued, because it’s a different ground than the first time you argued. Then you could argue that the money was improperly issued to the bank… you have all these administrative ways.

Commenting on efficient infringement, Paul Evans explained that bringing a suit for patent infringement now makes no sense, as the current ecosystem demands high costs to defend patents subject to inter partes review (IPR). According to Evans, the cost of each IPR is between $200,000 and $300,000. IPRs are instituted 70% of the time, and of those cases, 80% of the challenged claims are invalidated. Evans noted that investors are aware of these realities and are hesitant to back certain patent-reliant companies. As a result of the uncertain innovative economy in the US, Peter Detkin noted that patent application filings are down, as well as enforcement actions. Alternatively, countries in Asia and the European Union that have embraced software and biotech patents have seen an increase in filings, enforcement actions, licensing, and investment.

Judge Michel then identified software and health science technology as suffering the most under the current “huge cloud of uncertainty,” and pointed out that China and Europe have broadened patent eligibility in these two tech fields as the US Supreme Court has narrowed it. Michel questioned how anyone could make a eligibility determination given the vague standard set by the Mayo and Alice decisions, and expressed frustration in the Supreme Court’s denial of cert in Sequenom v. Ariosa—a case that would have given the Court an opportunity to correct or at least clarify the Section 101 eligibility analysis. With the Supreme Court unwilling to clean up its mess, Judge Michel expressed support for statutory amendments to 101 recently proposed by the Intellectual Property Owners Association (IPO).

Confidence Must Be Restored in the US Patent System

Wrapping up the panel, Robert Sterne made clear that the patent troll narrative that contributed to so many drastic changes in the US patent system is outdated and no longer relevant. While uncertainty about Section 101 eligibility is ubiquitous, Sterne asserted that “[w]hat is clear is that things are not getting better for innovators in the United States who are relying on the U.S. patent system and who are creating a large bulk of the innovation in our country.” And in addition to losing an edge to foreign jurisdictions in industrial competiveness and job creations, Sterne warned that missing out on innovations in the technology the US employs to protect itself could have dire consequences for national security.

In conclusion, Sterne asked each panelist—as practitioners working in the innovation economy—what they would suggest to bring a sense of confidence back to the bleak patent law landscape. Judge Michel encouraged writing to bring awareness to the situation, including articles, op-eds, and direct letters to members of Congress. Paul Stone urged all stakeholders to focus on quality—specifically on the quality of patents reviewed and the quality of advice given to clients. Damon Matteo suggested adopting a financial mindset that considers the dynamics of returns on investments, which would help stakeholders see patents for the commercial instruments they are and should be. Peter Detkin stressed the importance of relying on hard, verifiable data, not anecdotes and hysteria. Paul Evans discussed the need to create an ecosystem that can be viewed by the investment community with some sense of understanding and confidence. Finally, Chris Gallagher insisted that, no matter the excuses of not having enough time, or not wanting to offend the wrong people, everyone must get involved to insert integrity back into the innovative ecosystem.

The concerns expressed by this panel are being echoed by stakeholders in almost every section of the innovation economy, and without a concerted effort to bring sense and clarity back to the patent system, the US is in danger of losing its competitive and innovative edge.

Categories
Conferences Innovation

Event Recap: Great Inventors and the Patent System

hand under a lightbulb drawn on a blackboardOn February 16, 2017, CPIP hosted a panel discussion, America as a Place of Innovation: Great Inventors and the Patent System, at the Smithsonian National Museum of American History in Washington, D.C. The event was co-hosted by the Lemelson Center for the Study of Invention and Innovation at the Smithsonian Institution and the U.S. Patent and Trademark Office (USPTO). The video of the event is available here, and the event program is available here.

The panel featured three professors who have written extensively on the role of innovation and patenting in American history. Professor Ernest Freeberg, University of Tennessee, discussed Thomas Edison’s invention of electric light and its effects on American life and culture. Professor Christopher Beauchamp, Brooklyn Law School, discussed Alexander Graham Bell and his fight to secure patent rights in the telephone. Professor Adam Mossoff, Antonin Scalia Law School, George Mason University, discussed the centrality of patents to early American innovations by Charles Goodyear, Samuel Morse, and Joseph Singer. Arthur Daemmrich, Director of the Lemelson Center, moderated the discussion. Alan Marco, Chief Economist at the USPTO, delivered the closing remarks.

The theme of the panel was twofold. First, the late-nineteenth to early-twentieth era was marked by extraordinary innovation and progress. Second, patent rights both spurred and supported American innovation at every critical juncture: from invention and discovery to commercialization, and then to the delivery of life-changing products and services to the American people.

The panel highlighted a broad and rapidly-paced array of contributions that innovators made throughout the late-nineteenth and early-twentieth centuries, enriching and transforming American lives in the process. Several panelists emphasized the enthusiasm that Americans evinced for the inventions of their day. Electric lights, telephones, labor-saving devices, and gadgets were all welcomed by the scientific press and the populace as exciting hallmarks of progress. As Professor Freeberg emphasized, everyone agreed at the turn-of-the-century that American innovation was a deeply democratic act.

Central to the growth of innovative progress was the consolidated strength and support of the American patent system. Professor Beauchamp emphasized the multiple roles that patents play in a strong innovative economy. First, they secure rights that motivate inventors to create and commercialize their work. Second, they are an asset around which companies are organized and in which investors are eager to invest. Third, they are a business tool that enables transactions, contracts, licensing, and the exchange of rights to occur. And fourth, they are a means for disseminating and furthering public knowledge.

Patents were the bedrock of American innovation, but they were frequently also controversial. Professor Mossoff observed that today’s “patent wars” are nothing new, but instead are part of a lineage of disputes over ownership of new inventions, technologies, and commercial products. Historically, however, there is a much more important constant than litigiousness: the unique approach that America took toward patents.

As Professor Mossoff underscored, the commitment to patents is an integral and enduring part of American exceptionalism. Patents were created and protected as property rights of the innovators who created them. This has many important dimensions. Patents were from the start protected through the rule of law. They were granted to inventors not just as an abstract concept, but as a concrete grant of secure and effective rights. And they were a way for people to structure their lives.

Professor Mossoff observed that patents as property ensured that patent owners could use and deploy their inventions however they wanted. Ownership and control over patents were features of the system from its inception. This institutionalization of the patent system was central to the democratization of American innovation. It allowed Americans to invent, commercialize, and in a larger sense to innovate: to take technology and turn it into a commercial, viable product that consumers could actually use and benefit from in the marketplace.

The conversation among the panelists was centered on innovation and its longstanding role in generating disruptive innovation that changes lives as dramatically then as it does now. But an equally powerful theme was that innovation needs patents to make progress commercially viable and to bring products and services to people. It was, and has always been, the exceptional nature of the American patent system that has indeed enabled America to be the place of innovation.

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Biotech High Tech Industry History of Intellectual Property Innovation Intellectual Property Theory Inventors Legislation Patent Law Patent Litigation Patent Theory Patentability Requirements Software Patent Supreme Court Uncategorized

Federal Circuit Brings Some Clarity and Sanity Back to Patent Eligibility Doctrine

By Adam Mossoff and Kevin Madigan

closeup of a circuit boardFollowing the Supreme Court’s four decisions on patent eligibility for inventions under § 101 of the Patent Act, there has been much disruption and uncertainty in the patent system. The patent bar and most stakeholders in the innovation industries have found the Supreme Court’s decisions in Alice Corp. v. CLS Bank (2014), AMP v. Myriad (2013), Mayo Labs v. Prometheus (2012), and Bilski v. Kappos (2010) to be vague and doctrinally indeterminate. Given the moral panic about the patent system that has been created as a result of ten years of excessive lobbying in D.C. for legislation that weakens patent rights, judges have responded to the excessive discretion they have under these cases by invalidating whole swaths of patented innovation in the high-tech, biotech, and pharmaceutical industries. The Patent Office is also rejecting patent applications at record levels, even for traditional inventions outside of high-tech and life sciences directly affected by the recent § 101 case law.

In Sequenom v. Ariosa, the Supreme Court had the opportunity to bring some clarity to the law of patent eligibility and to reign in some of the judicial and Patent Office excesses, but unfortunately it rejected this opportunity when it denied Sequenom’s cert petition this past June. Fortunately, the Court of Appeals for the Federal Circuit is now taking the lead in providing some much-needed legal guidance on patent eligibility to the inventors and companies working in the innovation industries. In two recent decisions, Enfish v. Microsoft and Rapid Litigation Management v. CellzDirect, the Federal Circuit has set forth some important doctrinal guideposts for defining what counts as a patent-eligible invention. Not only do these two decisions bring some reason and clarity back to the law of patent eligibility under § 101, they provide important doctrinal insights on how stakeholders may wish to address this problem if they ultimately choose to seek relief in Congress.

Enfish and the Patentability of Computer-Implemented Inventions (a/k/a “Software Patents”)

At the time it was decided, some commentators believed that the Alice decision was a directive from on high that most, if not all, computer software programs were not patentable inventions. This was a surprising claim if only because the Alice Court did not once use the phrase “software” in its entire opinion. Of course, “software patent” is not a legal term in patent law; the proper term is “computer-implemented invention,” as used by the Alice Court, and so the Court may have been only avoiding vague rhetoric from the patent policy debates. More important, though, this claim about Alice contradicts the Court’s opinion in Bilski just four years earlier, when the Court warned the Federal Circuit not to adopt a bright-line rule that limited § 101 to only physical inventions of the “Industrial Age,” because this created unnecessary and innovation-killing “uncertainty as to the patentability of software.”

Unfortunately, the ambiguities in Alice and in the Court’s prior patentable subject matter decisions, such as Mayo, left enough discretionary wiggle room in applying the generalized patent-eligibility test to permit judges and patents examiners to wage war on computer-implemented inventions. They thus made real again in the twenty-first century Justice Robert Jackson’s famous observation in 1949 that “the only patent that is valid is one which this Court has not been able to get its hands on.” Jungersen v. Ostby & Barton Co., 335 U.S. 560, 572 (1949) (Jackson, J., dissenting). As one commentator remarked several months after Alice was decided, “It’s open season on software patents.” The data over the next several years has borne out the truth of this statement.

The key argument against patents on computer-implemented inventions, such as key components of word processors, programs that run internet searches (like the patented innovation that started Google), and encryption software, is that such inventions are inherently “abstract.” The judicial interpretation of § 101 has long maintained that abstract ideas, laws of natural, and natural phenomena are unpatentable discoveries. In Alice, for instance, the Court held that a complex software program for extremely complex international financial transactions was an “abstract idea” and thus unpatentable under § 101. But beyond claims that something long known is “abstract,” the Court has failed to define with precision what it means for a discovery to be abstract. With little to no specific guidance from the Alice Court, it is no wonder that judges and examiners have succumbed to the recent moral panic about patents and declared “open season” on patents covering computer-implemented inventions.

In this context, the Federal Circuit’s decision in Enfish v. Microsoft is extremely important because it ends the unreasoned, conclusory “I know it when I see it” rejections of patents as “abstract” by judges and examiners.

In Enfish, the Federal Circuit reversed a trial court’s summary judgment that a patent on a computer-implemented invention was an unpatentable abstract idea. The patent covered a type of database management system on computers, a classic incremental innovation in today’s digital world. In its decision, the trial court dissected the invention down into the most basic ideas in which all inventions can be reframed as representing; for example, methods of using internal combustion engines can easily be reframed in terms of the basic laws in thermodynamics. In this case, the trial court asserted that this patent on a computer-implemented invention covered merely the “abstract purpose of storing, organizing, and retrieving” information. The trial court thus easily concluded that the invention was merely “abstract” and thus unpatentable.

The Federal Circuit rejected the trial court’s conclusory assertion about the invention being “abstract” and further held that such assertions by courts are a legally improper application of § 101. With respect to the patent at issue in this case, Judge Todd Hughes’ opinion for the unanimous panel found that

the plain focus of the claims is on an improvement to computer functionality itself, not on economic or other tasks for which a computer is used in its ordinary capacity. Accordingly, we find that the claims at issue in this appeal are not directed to an abstract idea within the meaning of Alice.

More important, the Enfish court cautioned courts against the methodological approach adopted by the trial court in this case, in which “describing the claims at such a high level of abstraction and untethered from the language of the claims all but ensures that the exceptions to § 101 swallow the rule.” The court recognized that adopting a “bright-line” rule that computer-implemented inventions—the “software patents” decried by critics today—are necessarily “abstract” runs counter to both § 101 and the recent Supreme Court cases interpreting and applying this provision: “We do not see in Bilski or Alice, or our cases, an exclusion to patenting this large field of technological progress.”

Further confirming that Enfish represents an important step forward in how courts properly secure technological innovation in the high-tech industry, the Federal Circuit relied on Enfish in its recent decision in BASCOM Global Services Internet Inc v AT&T Mobility LLC. Here, the Federal Circuit again rejected the trial court’s dissection of a patent claim covering a software program used on the internet into an “abstract” idea of merely “filtering content.” The BASCOM court emphasized that courts must assess a claim as a whole—following the Alice Court’s injunction that courts must assess a patent claim as “an ordered combination of elements”—in determining whether it is a patentable invention under § 101. As numerous patent scholars explained in an amicus brief filed in support of Sequenom in its failed cert petition before the Supreme Court, requiring a court to construe a “claim as a whole” or “the invention as a whole” is a basic doctrinal requirement that runs throughout patent law, as it is essential to ensuring that patents are properly evaluated both as to their validity and in their assertion against infringers.

CellzDirect and the Patentability of Discoveries in the Bio-Pharmaceutical Industry

The high-tech industry is not the only sector of the innovation industries that has been hit particularly hard by the recent §101 jurisprudence. The biotech and pharmaceutical industries have also seen a collapse in the proper legal protection for their innovative discoveries of new therapeutic treatments. One recent study found that the examination unit at the Patent Office responsible for reviewing personalized medicine inventions (art unit 1634) has rejected 86.4% of all patent applications since the Supreme Court’s decision in Mayo. Anecdotal evidence abounds of numerous rejections of patent applications on innovative medical treatments arising from extensive R&D, and the most prominent one was the invalidation of Sequenom’s patent on its groundbreaking innovation in prenatal diagnostic tests.

In this light, the decision on July 5, 2016 in Rapid Litigation Management v. CellzDirect is an extremely important legal development for an industry that relies on stable and effective patent rights to justify investing billions in R&D to produce the miracles that comprise basic medical care today. In CellzDirect, the trial court found unpatentable under § 101 a patent claiming new methods for freezing liver cells for use in “testing, diagnostic, and treating purposes.” The trial court asserted that such a patent was “directed to an ineligible law of nature,” because scientists have long known that these types of liver cells (hepatocytes) could be subjected to multiple freeze-thaw cycles.

In her opinion for a unanimous panel, Chief Judge Sharon Prost held that the method in this case is exactly the type of innovative process that should be secured in a patent. Reflecting the same methodological concern in Enfish and BASCOM, the CellzDirect court rejected the trial court’s dissection of the patent into its foundational “laws of nature” and conventional ideas long-known in the scientific field:

The claims are simply not directed to the ability of hepatocytes to survive multiple freeze-thaw cycles. Rather, the claims of the ’929 patent are directed to a new and useful laboratory technique for preserving hepatocytes. This type of constructive process, carried out by an artisan to achieve “a new and useful end,” is precisely the type of claim that is eligible for patenting.

In other words, merely because a patentable process operates on a subject matter that constitutes natural phenomena does not mean the patent improperly claims either those natural phenomena or the laws of nature that govern them. To hold otherwise fails to heed the Mayo Court’s warning that “all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas,” and thus to dissect all patents down into these unpatentable foundations would “eviscerate patent law.” The CellzDirect court was explicit about this key methodological point in evaluating patents under § 101: “Just as in [the industrial process held valid by the Supreme Court in] Diehr, it is the particular ‘combination of steps’ that is patentable here”—the invention as a whole.

Conclusion

The U.S. has long prided itself as having a “gold standard” patent system—securing to innovators stable and effective property rights in their inventions and discoveries. As scholars and economic historians have long recognized, the patent system has been a key driver of America’s innovation economy for more than two hundred years. This is now threatened under the Supreme Court’s § 101 decisions and the “too broad” application of the Court’s highly generalized patent-eligibility tests to inventions in the high-tech and bio-pharmaceutical sectors. The shockingly high numbers of rejected applications at the Patent Office and of invalidation of patents by courts, as well as the general sense of legal uncertainty, are threatening the “gold standard” designation for the U.S. patent system. This threatens the startups, new jobs, and economic growth that the patent system has been proven to support. Hopefully, the recent Enfish and CellzDirect decisions are the first steps in bringing back to patent-eligibility doctrine both reason and clarity, two key requirements in the law that have been sorely lacking for inventors and companies working in the innovation economy.

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Innovation Inventors Patent Law Statistics Uncategorized

Do As I Say, Not As I Do: Google’s Patent Transparency Hypocrisy

dictionary entry for the word "innovate"It is common today to hear that it’s simply impossible to search a field of technology to determine whether patents are valid or if there’s even freedom to operate at all. We hear this complaint about the lack of transparency in finding “prior art” in both the patent application process and about existing patents.

The voices have grown so loud that Michelle K. Lee, Director of the Patent Office, has made it a cornerstone of her administration to bring greater transparency to the operations of the USPTO. She laments the “simple fact” that “a lot of material that could help examiners is not readily available, because the organizations retaining that material haven’t realized that making it public would be beneficial.” And she’s been implementing new programs to provide “easy access by patent examiners to prior art” as a “tool to help build a better IP system.”

We hear this complaint about transparency most often from certain segments of the high-tech industry as part of their policy message that the “patent system is broken.” One such prominent tech company is search giant Google. In formal comments submitted to the USPTO, for instance, Google asserts that a fundamental problem undermining the quality of software patents is that a “significant amount of software-related prior art does not exist in common databases of issued patents and published academic literature.” To remedy the situation, Google has encouraged the Patent Office to make use of “third party search tools,” including its own powerful search engines, to locate this prior art.

Google is not shy about why it wants more transparency with prior art. In a 2013 blog post, Google Senior Patent Counsel Suzanne Michel condemned so-called “patent trolls” and argued that the “PTO should improve patent quality” in order to “end the growing troll problem.” In comments from 2014, three Google lawyers told the Patent Office that “poor quality software patents have driven a litigation boom that harms innovation” and that making “software-related prior art accessible” will “make examination in the Office more robust to ensure that valid claims issue.” In comments submitted last May, Michel even proposed that the Patent Office use Google’s own patent search engines for “streamlining searches for relevant prior art” in order to enhance patent quality.

Given Google’s stance on the importance of broadly available prior art to help weed out vague patents and neuter the “trolls” that wield them, you’d think that Google would share the same devotion to transparency when it comes to its own patent applications. But it does not. Google has not mentioned in its formal comments and in its public statements that even using its own search engine would fail to disclose a substantial majority of its own patent applications. Unlike the other top-ten patent recipients in the U.S., including many other tech companies, Google keeps most of its own patent applications secret. It does this while at the same time publicly decrying the lack of transparency in the patent system.

The reality is that Google has a patent transparency problem. Not only does Google not allow many of its patent applications to be published early or even after eighteen months, which is the default rule, Google specifically requests that many of its patent applications never be published at all. So while Google says it wants patent applications from around the world to be searchable at the click of a mouse, this apparently does not include its own applications. The numbers here are startling and thus deserve to be made public—in the name of true transparency—for the first time.

Public Disclosure of Patent Applications

Beginning with the American Inventors Protection Act of 1999 (AIPA), the default rule has been that a patent application is published eighteen months after its filing date. The eighteen-month disclosure of the patent application will occur unless an applicant files a formal request that the application not be published at all. An applicant also has the option to obtain early publication in exchange for a fee. Before the AIPA, an application would only be made public if and when the patent was eventually granted. This allowed an applicant to keep her invention a trade secret in case the application was later abandoned or rejected.

The publication of patent applications provides two benefits to the innovation industries, especially given that the waiting time between filing of an application and issuance of the patent or a final rejection by an examiner can take years. First, earlier publication of applications provides notice to third parties that a patent may cover a technology they are considering adopting in their own commercial activities. Second, publication of patent applications expands the field of publicly-available prior art, which can be used to invalidate either other patent applications or already-issued patents themselves. Both of these goals produce better-quality patents and an efficiently-functioning innovation economy.

Separate from the legal mandate to publish patent applications, Google has devoted its own resources to creating greater public access to patents and patent applications. From its Google Patent Search in 2006 and its Prior Art Finder in 2012 to its current Google Patents, Google has parlayed its search expertise into making it simple to find prior art from around the world. Google Patents now includes patent applications “from the USPTO, EPO, JPO, SIPO, WIPO, DPMA, and CIPO,” even translating them into English. It’s this search capability that Google has been encouraging the Patent Office to utilize in the quest to make relevant prior art more accessible.

Given Google’s commitment to patent transparency, one might expect that Google would at least be content to allow default publication of its own applications under the AIPA’s eighteen-month default rule. Perhaps, one might think, Google would even opt for early publication. However, neither appears to be the case; Google instead is a frequent user of the nonpublication option.

Google’s Secrecy vs. Other Top-Ten Patent Recipients

After hearing anecdotal reports indicating that Google was frequently using its option under the AIPA to avoid publishing its patent applications, we decided to investigate further. We looked at the patents Google received in 2014 to see what proportion of its applications was subject to nonpublication requests. To provide context, we also looked at how Google compared to the other top-ten patent recipients in this regard. The results are startling.

Unfortunately, there’s no simple way to tell if a nonpublication request was made when a patent application was filed using the USPTO’s online databases—nonpublication requests are not an available search field. The same appears to be true of subscription databases. The searches therefore have to be done manually, digging through the USPTO’s Public PAIR database to find the application (known in patent parlance as the “file wrapper”) for each individual patent that includes the individual application documents. Those interested in doing this will find startling numbers of patent applications kept secret by Google, both in terms of absolute numbers but also as compared to the other top-ten recipients of U.S. patents.

By way of example as to what one needs to look for, take the last three patents issued to Google in 2014: D720,389; 8,925,106; and 8,924,993.

For the first patent, the application was filed on December 13, 2013, and according to the application data sheet, no request was made to either publish it early or not publish it at all:

Publication Information: Box One: Request Early Publication (Fee required at time of Request 37 CFR 1.219). Box Two: Request Not to Publish. I hereby request that the attached application not be published under 25 U.S.C. 122(b) and certify that the invention disclosed in the attached application has not and will not be the subject of an application filed in another country, or under a multilateral international agreement, that requires publication at eighteen months after filing.

Since no such request was made, the application would normally be published eighteen months later or upon issuance of the patent. Indeed, that is what happened in due course—this patent issued just over one year after the application was filed, as it was concurrently published and issued in December of 2014.

For the second patent in our small set of examples, the application was filed on April 20, 2012. In this case, Google requested nonpublication by including a letter requesting that the application not be published:

Google thus opted out of the default eighteen-month publication rule, and the application was not published until the patent issued in December of 2014, some twenty months later.

Finally, for the third patent, the application was filed on November 10, 2011, and the application data sheet shows that Google requested the application not be published:

Publication Information: Box One: Request Early Publication (Fee required at time of Request 37 CFR 1.219). Box Two (which is selected here): Request Not to Publish. I hereby request that the attached application not be published under 25 U.S.C. 122(b) and certify that the invention disclosed in the attached application has not and will not be the subject of an application filed in another country, or under a multilateral international agreement, that requires publication at eighteen months after filing.

Google here again opted out of the default publication rule, and the application was not published until the patent issued in December of 2014—more than three years after the application was filed.

We applied this methodology to a random sample of 100 patents granted to each of the top-ten patent recipients in 2014.

In 2014, Google was one of the top-ten patent recipients, coming in sixth place with 2,649 issued patents:

2014 Top-Ten patent Recipients. X-axis: IBM, Samsung, Canon, Sony, Microsoft, Google, Toshiba, Qualcomm, LG, Panasonic. Y-axis: 0 through 8000, at increments of 1000.

SOURCES: USPTO PatentsView Database & USPTO Patent Full-Text and Image Database

We randomly sampled 100 patents for each of the top-ten patent recipients for 2014. We reviewed the file wrapper for each to determine the proportion of nonpublication requests in each sample.

Our results revealed that Google is an extreme outlier among top-ten patent recipients with respect to nonpublication requests. Eight of the top-ten patent recipients made zero requests for nonpublication, permitting their patent applications to be published at the eighteen-month deadline. The eighth-ranking patent recipient, Qualcomm, requested that one application not be published. By contrast, Google formally requested that 80 out of 100—a full 80%—of its applications not be published.

The following chart shows these results:

2014 Nonpublication Rates of Top-Ten Patent Recipients. X-axis: IBM, Samsung, Canon, Sony, Microsoft, Google, Toshiba, Qualcomm, LG, Panasonic. Y-axis: 0% through 90%, increments of 10%. Google goes to about 80%, Qualcomm shows about 1-2&, and the others show nothing.

SOURCE: USPTO Public PAIR Database

Conclusion

Based on this result, Google deliberately chooses to keep a vast majority of its patent applications secret (at least it did so in 2014). This secrecy policy for its own patent applications is startling given both Google’s public declarations of the importance of publication of all prior art and its policy advocacy based on this position. It is even more startling when seen in stark contrast to the entirely different policies of the other nine top patent recipients for 2014.

It is possible that 2014 was merely an anomaly, and that patent application data from other years would show a different result. We plan to investigate further. So, stay tuned. But for whatever reason, it appears that Google doesn’t want the majority of its patent applications to be published unless and until its patents finally issue. This preference for secrecy stands in contrast to Google’s own words and official actions.

As one of the top patent recipients in the U.S., you’d think Google would want its applications to be published as quickly as possible. The other top recipients of U.S. patents in 2014 certainly adopt this policy, furthering the goal of the patent system in publicly disclosing new technological innovation as quickly as possible. The fact that Google does otherwise speaks volumes.

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Economic Study Innovation Inventors Legislation Patent Law Uncategorized

How Patents Help Startups Grow, Innovate, and Succeed

Many academic studies of the patent system focus on the negative, extrapolating from anecdotes about a few bad actors to make the case that our patent system is broken and to bolster cries for legislation weakening patent rights. Precious few studies focus on the countless honest and hardworking patent owners whose inventive labors benefit us all. But understanding how patents support inventive enterprises is a crucial part of the equation, especially at a time when Congress is considering legislation that would make it extremely difficult for startups and individual inventors to enforce their patent rights.

In a newly-published working paper, The Bright Side of Patents, CPIP Edison Fellow Deepak Hegde, along with co-authors Joan Farre-Mensa and Alexander Ljungqvist, take a look how patents help startups grow. They show that, contrary to the claims made by several academics and activists, startups are not victims of the patent system. On the contrary, patents help startups become more successful and innovative.

The study finds that “patent approvals help startups create jobs, grow their sales, innovate, and eventually succeed.” When a startup’s first patent application is approved, its employment growth increases by 36% and its sales growth increases by 51% on average over the next five years. First-patent approval also has a strong causal effect on a startup’s continued ability to innovate, increasing the number of subsequent patent grants by 49% and increasing the quality of those patents by 27%. In fact, a startup with first-patent approval is twice as likely to end up listed on a stock exchange—a common indication of success for a startup.

Negatively affecting startups are delays in the patent application process and ultimate application rejections. For every year an ultimately-approved patent application is delayed, the startup’s employment growth decreases by 21% and its sales growth decreases by 28% on average over the following five years. Furthermore, each year a patent application is delayed, the average number of subsequent patents granted decreases by 14% while the quality of those patents decreases by 7%. And for each year of delay, the probability that a startup will go public is cut in half.

One big reason why patents help startups is that they make it easier to access capital from external investors. The authors find that patents serve to mitigate frictions in information between potential investors and startups. Patents play an important role by alleviating startups’ concerns about having their inventions misappropriated by investors and by alleviating investors’ concerns about the credibility, quality, and monetary future of the startups. Having access to capital in turn sets startups on a path of growth where they can turn ideas into products and services, generate jobs, increase revenue, and undertake further innovation.

What makes this study unique is its unprecedented access to the USPTO’s internal databases, which allowed the authors to evaluate detailed review histories of both approved and rejected patent applications. Prior studies only focused on approved applications, thus making it impossible to accurately separate out the economic and innovative effects. The authors here are able to demonstrate the direct benefits of patent protection with causal evidence from a large-sized sample—45,819 first-time patent applications filed by startups.

There is a surprising amount of criticism of the patent system today. Some claim that patents are a waste of time and resources for startups, useful only for defensive purposes. Others claim that patents actually harm startups. The authors here show that startups that secure patent protection are in fact more likely to succeed. As Congress considers yet another round of large-scale patent legislation, lawmakers need to understand the role that enforceable patent rights play in enabling startups to grow and succeed. This study is a great step in adding some much needed clarity to the ongoing patent policy debates.

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Administrative Agency Innovation Inventors Patent Law Patent Litigation Uncategorized

#AliceStorm for Halloween: Was it a Trick or a Treat?

The following guest post from Robert R. Sachs, Partner at Fenwick & West LLP, first appeared on the Bilski Blog, and it is reposted here with permission.

By Robert R. Sachs

Alice has been busy the last two months, continuing to haunt the federal courts and the Knox and Randolph buildings at the USPTO. Here are the latest #AliceStorm numbers through the end of October 2015:

There have been 34 district court decisions in the past two months, but the percentage of invalidity decision is holding constant at 70.5%. The number of patent claims invalidated is now over 11,000, but also holding steady at around 71%.

There have been no new Federal Circuit Section 101 decisions, but we’re going to see a flurry of activity in the next couple of months, as the court has recently heard oral argument in a number of patent eligibility cases, and more are on calendar for November.

Motions on the pleadings have soared, with 23 in the past two months alone, and the success rate is up a tick from 70.1% to 71.4%.

PTAB is a bit mixed: the CBM institution rate is down from 86.2% 83.7%, but the final decision rate is still 100%, with 6 decisions in the past two months invalidating the patents in suit.

Turning to the motion analysis, the motions on the pleadings are the second scariest thing to a patent holder after the specter of attorney fees under Octane Fitness:

The Delaware district court continues as the graveyard of business methods and software patents, with 31 eligibility decisions, up from 19 just two months ago, and their invalidity rate is up from 86.4% to 90.3%.

Jumping into second place is the Eastern District of Texas, with 23 decisions total (up from 16). Contrary to the rest of the rest of the bench, their invalidity rate is 34.8%. The Northern District of California edged up from 75% to 78.9% invalidity, and C.D. Cal is up almost 2%.

And finally, here is the run down on the all district court judges with two or more Section 101 decisions.

With today’s blog, I’m introducing some entirely new types of data, looking at the characteristics of the patents that have been subject to Section 101 motions.

As expected, business method patents are the most heavily litigated and invalidated (click to see full size):

The distribution of patents in terms of earlier priority dates shows a very large fraction of the invalidated patents were first filed in 2000:

Now compare that to the distribution of patent classes with respect to priority year as well:

Here too we see a very large number of the business method patents filed in 2000. I’ve coded all of the software related technologies as blue to group them visually.

Why the cluster around 2000? State Street Bank, which held that there was no rule against business method patents, was decided in mid-1998. As those of us who were practicing them remember, it took about two years before the impact of the decision was widespread. This was also the time of the Dotcom bubble when it seemed that just about everyone was starting up a business on Internet. Those two factors resulted in a surge of patent filings.

Of all the patents that have been thus challenged under Alice, only two have post-Bilski priority dates:

  • 8447263, Emergency call analysis system, filed in 2011, and litigated in Boar’s Head Corp. v. DirectApps, Inc., 2015 U.S. Dist. LEXIS 98502 (E.D. Cal., 7/28/2015). The court granted DirectApps motion to dismiss, finding the patent invalid.
  • 8938510, On-demand mailbox synchronization and migration system, filed in 2010, and litigated in BitTitan, Inc. v. SkyKick, Inc., 2015 U.S. Dist. LEXIS 114082 (W.D. Wash, 8/27/2015). BitTran’s motion for preliminary injunction was denied in part because of SkyKick successfully argued that BitTrans was not likely to succeed on the merits due to Alice problems.
  • 8,604,943; 9,070,295; 9,082,097; 9,082,098 and 9,087,313, all of which claim priority to March, 2012, and were invalidated just last week in MacroPoint LLC v. FourKites Inc., Case. No. 1:15-cv-01002 (N.D. Ohio, Nov. 5, 2015). The court invalided all 94 claims in these patents, as being directed to the abstract idea of “tracking freight.” While the last four patents were issued in June and July, 2015, none of them overcome an Alice rejection, and the court noted that “Nothing in the Reasons for Allowance dictate a finding that these concepts are inventive on the issue of patent-eligible subject matter.”

Over time we’ll see more post-Bilski patents being litigated, and then eventually a true test: a business method patent granted after Alice that overcame an Alice rejection. By my count, there are about 80 such patents thus far, and about another 90 that have been allowed. It will not be too long then before one of these patents is challenged under Section 101.

In my next column, I’ll review some very disturbing decisions by coming out of the Delaware district courts.