Round 4: Patent Reform Act of 2009 Introduced in Congress

Bills were introduced today by Democratic and Republican leaders in both the House and the Senate calling, yet again, for comprehensive patent law reform.  Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) and House Judiciary Committee Chairman John Conyers (D-Mich.) held a press conference this afternoon at which they announced the introduction of the bills.  They were joined by co-sponsors of the bills, Senator Orrin Hatch (R-Utah) and ranking minority member Lamar Smith (R-Texas).

Although controversial provisions remain in the bill, the Congressional leaders expressed confidence that the legislation will pass this year.  Last year, Congressional leaders were equally optimistic, but the Patent Reform Act of 2007 died in the Senate after being passed by the House.  Some form of patent reform legislation has gone before Congress in three of the past five years.  This year may be the year it passes, but there are some significant differences of opinion yet to be resolved.

One of the most controversial portions of the bill are provisions relating to the assessment of reasonable royalty damages in patent cases.  However, these provisions have been defined as “marker provisions” by Congressional staff indicating that the provisions act merely as a placeholder.  This likely represents the co-spsonsors’ belief that, while the issue of reasonable royalty damages will be addressed in the final bill, the provisions will be different from what has been originally proposed.

The venue provisions also remain in the bill.  As written, the venue rules would eliminate the Eastern District of Texas and other plaintiff-friendly venues as a proper venue in most cases.  While the recent In re TS Tech decision reduced the availability of the Eastern District as a proper venue, the venue provisions proposed in the Patent Reform Act of 2009 are much more restrictive, essentially requiring plaintiffs to sue defendants where they are located or where they have signifcant operations.

Other controversial provisions from last year’s bill are not included.  These include provisions amending rules relating to inequitable conduct before the USPTO and the Applicant Quality Submissions provisions requiring patent applicants submit their own search data. 

Industry groups lobbying Congress remain divided, particularly in regard to the provisions governing reasonable royalty damages.  It is not clear yet whether the groups will find common ground.

Senatory Leahy promises to push the bill quickly, with a hearing within two weeks and a Committee markup to approve the bill within two weeks of that hearing.  This might be a lofty goal considering the controversy that still remains.

Supreme Court Denies Review of In re Volkswagen Appeal, Dashes any Hope of Overturning In re TS Tech

Today the Supreme Court denied a writ of certiorari seeking review of the Fifth Circuit’s grant of mandamus in In re Volkswagen transferring the case from the Eastern District of Texas to the Northern District of Texas.  The Fifth Circuit held that the district court had abused its discretion in refusing to grant a motion to transfer venue of the case to Dallas where most of the evidence and witnesses were located.

We previously reported on the In re TS Tech case in which the Federal Circuit followed In re Volkswagen and ordered the transfer of a patent infringement case from the Eastern District of Texas to the Southern District of Ohio.  As a result of that case, several patent infringement cases have since been transferred out of the Eastern District. 

A number of transfer motions have been denied as well where no one district was clearly more convenient to try the case or where a more substantial connection with the Eastern District was shown.  See Michael Smith’s recent blog posts for information about a recent transfer of a case and a case of “Fraternal Twins” in which one case was transferred and another case between the same parties but a different patent was denied.

Some practitioners have suggested that the TS Tech decision will be good for patent litigation in the Eastern District because it will reduce the backlog of cases, helping return the courts to the quick trial settings for which they were once known.  There is no question that, after TS Tech, the filing of patent infringement cases in the Eastern District has fallen off dramatically as many plaintiffs have decided they would rather not waste resources fighting venue battles.  While a decrease in the number of filings is certain, patent litigation in the Eastern District is still alive and well.

Permanent Patent Prosecution Highway between US and Korea

After a one year pilot program, a permanent Patent Prosecution Highway (“PPH”) between the U.S. and Korea was implemented on January 29, 2009.

Under the PPH, an applicant receiving a ruling of patentability from either the U.S. patent office or the Korean patent office may request that the other office fast-track the examination of the corresponding application pending there.  The prosecution in the second office is then based on the patentable results obtained from the first office, reducing the workload for the second office.

John Doll, Acting Director of the USPTO said, “The pilot project has demonstrated that the Patent Prosecution Highway provides real benefits to both the USPTO and KIPO by eliminating redundant work, expediting processing and ensuring high quality of patents.”

While Japan and Korea are the only countries that have permanently implemented the PPH, pilot programs are in place with a number of other countries.  The foreign offices with which the U.S. has pilot PPH programs in place are United Kingdom Intellectual Property Office, Canada Intellectual Property Office, IP Australia, European Patent Office, Danish Patent and Trademark Office, and Intellectual Property Office of Singapore.

For companies with international patent portfolios, the PPH has the potential to reduce the cost of obtaining patent protection internationally. This is in addition to the benefit of obtaining patent protection more quickly in a number of countries.

By Vincent J. Allen

Design Patents after Egyptian Goddess: The Comeback Kid

In 1871, the Supreme Court established the standard for proving design patent infringement in Gorham Manufacturing Company v. White.The design patent in Gorham covered the ornamental features of forks and tablespoons. The Supreme Court explained that the appearance of an article may increase its “salable value.”  The test of identity of design “must be sameness of appearance, and mere differences of lines in the drawing or sketch . . . or slight variances in configuration . . . will not destroy the substantial identity.”  Based on this rationale, the Court outlined the “ordinary observer” test that is still used by courts today in design patent infringement cases:

[I]f in the eye of an ordinary observer, giving such attention as a purchaser usually gives, two designs are substantially the same, if the resemblance is such as to deceive such an observer, inducing him to purchase one supposing it to be the other, the first one patented is infringed by the other.

In 1984, the Federal Circuit added an additional requirement to the ordinary observer test in Litton Systems Inc. v. Whirlpool Corporation.  In Litton, the Federal Circuit held that to prove design patent infringement, the accused design must not only be substantially similar under the ordinary observer test but it must also contain the novelty of the claimed design.  In other words, the accused design must contain substantially the same points of novelty that distinguished the patented design from the prior art.  This test came to be known as the “point of novelty” test.

The combination of the point of novelty test along with the extensive verbalization of the drawings of design patents in construing the claim led to an environment in which few design patents were found to be infringed. The pendulum has now begun to swing the other way with a recent en banc decision by the Federal Circuit.

After over twenty-four years of applying and refining the point of novelty test in addition to the ordinary observer test in design patent cases, the Federal Circuit rejected the test last year in Egyptian Goddess, Inc. v. Swisa, Inc.   The court held that only the ordinary observer test should be applied to a claim of design patent infringement.  The Federal Circuit also criticized the practice of providing excessive details in the construction of a design patent claim.

In rejecting the point of novelty test, the court pointed to the problems with the jury focusing on a single specified feature of the claimed design. The court found it significant that the more novel the design, the more opportunities there are for a defendant to argue its product does not infringe because it does not appropriate all of the points of novelty.

After rejecting the point of novelty test as being inconsistent with the Supreme Court’s ordinary observer test, the court then discussed the use of prior art in connection with the application of the ordinary observer test.  The court noted that in some instances the claimed design and the accused design will be sufficiently different that it is clear that the two designs would not appear substantially the same to the ordinary observer.  Thus, there is no need to compare the accused design and the patented design to the prior art.

However, where the accused design and the claimed design are not plainly dissimilar, the ordinary observer test will require a comparison of the claimed and accused designs with the prior art.  The court noted that the differences that may not have previously been noticed in the abstract may become important to the ordinary observer familiar with the prior art.

In the case at hand, the Egyptian Goddess patent claimed a fingernail buffer consisting of a rectangular hollow tube having a generally square cross-section. The buffer had buffer surfaces on three of its four sides. Swisa’s accused fingernail buffer was similar but had a buffer surface on all four sides.

swisa-design

Accused Design

 
Patented Design

Patented Design

 

The court compared the accused design, the patented design, and two of the closest prior art references-the Nailco patent and a product called the Falley Buffer Block.  The Falley Buffer Block is a rectangular block similar in shape to the accused design and the patented design, but the body is solid, not hollow as are the accused and patented designs.  The Falley Buffer Block also has four raised buffing surfaces similar to the accused design.  The Nailco patent disclosed a three sided hollow buffer with a triangular cross section and buffer pads on all three sides.

Prior Art--Top Nailco Buffer, Bottom Falley Buffer Block

Prior Art: Top--Nailco Buffer, Bottom--Falley Buffer Block

The court then considered the question whether an ordinary observer familiar with the prior art would be deceived into believing that the accused Swisa design is the same as the patented design.  After examining the expert testimony presented by each side concerning the appearances of the accused and patented designs and the prior art, the Federal Circuit held that an ordinary observer would not be deceived, thus affirming the district court’s grant of summary judgment in favor of Swisa.

Although the claim construction of the district court was stipulated by the parties in Egyptian Goddess, in its order granting en banc review the Federal Circuit raised the issue of whether trial courts should conduct claim construction in design patent cases.  The court noted that while it has held that trial courts should conduct claim construction in design patent cases, it has not prescribed any particular guidance as to the form claim construction must take.  The court provided guidance as discussed below in regard to claim construction, but found that there was no inaccuracy in the district court’s description and that neither party pointed to any prejudice resulting from the court’s interpretation.

Recognizing that a design is better represented by an illustration and that “a description would probably not be intelligible without the illustration,” the court stated that “the preferable course ordinarily will be for a district court not to attempt to ‘construe’ a design patent claim by providing a detailed verbal description of the claimed design.”  Nevertheless, the court held that the “level of detail to be used in describing the claimed design is a matter within the court’s discretion, and absent a showing of prejudice, the court’s decision to issue a relatively detailed claim construction will not be reversible error.”

Although allowing trial courts the discretion to provide a detailed claim construction, the Federal Circuit discourages the practice.  The court cautioned trial courts to recognize the risks of a detailed claim construction, such as a fact finder placing undue emphasis on particular features or focusing on each individual feature described rather than on the design as a whole.

As a practical matter, it is probable that most district courts will elect not to spend the time and effort to develop a detailed description of the drawings in a design patent.  Rather than issue a claim construction that might introduce reversible error into the case, the trial court could instead opt to construe the claim in the following simple form: A _____ as shown in Figures ______.  This is the manner in which the district court construed the claims in Dexas International, LTD v. Office Max Inc. even though it had previously adopted detailed claim constructions in another case regarding two of the same patents but different defendants.

While the Egyptian Goddess court held that the Swisa design did not infringe the patented design, the decision is a victory for owners of design patents because of the Federal Circuit’s rejection of the “point of novelty” test.  The new standard is arguably not as broad as intended by the Supreme Court in Gorham in that the ordinary observer is presumed to have considered the prior art in determining whether infringement exists. Nevertheless, the new standard will likely result in a finding of infringement in a higher percentage of cases than what was seen under the former standard.

Moreover, the Federal Circuit’s criticism of providing a detailed description of the drawings in claim construction will result in the fact finder relying on the drawings in most cases to determine infringement rather than focusing on specific elements in a detailed claim construction.  This will make it more difficult for defendants in most cases to get out on summary judgment by arguing that specific elements of the patented design are not present in the accused design.

BPAI Limits Patent Eligibility for Software Patent Claims after Bilski

In Bilski, the Federal Circuit held late last year that the machine-or-transformation test should be used for determining patent eligibility of a process. This test can be satisfied 1) by showing that the claim is tied to a particular machine or 2) by showing that the claim transforms an article.

Although the Federal Circuit did not decide in Bilski whether the recitation of a computer is enough to tie a process claim to a particular machine, the BPAI in Ex Parte Gutta found that a recitation in the preamble of the claim to a “computerized method performed by a data processor” adds nothing more than a general purpose computer that is associated with the steps of the process in an unspecified manner. The BPAI held that such a field of use limitation is insufficient to render an otherwise ineligible process claim patent eligible.

The BPAI also found that because the claim did not require any particular structure for the step of “displaying,” this was also insufficient to satisfy the machine prong of the test. The BPAI reasoned that a conclusion that such post-solution activity is sufficient to impart patentability to a claim involving solving a mathematical algorithm would exalt form over substance.

Finally, in finding the transformation prong was also not satisfied, the BPAI held that the data being manipulated did not represent a physical or tangible object. The data at issue represented information about user selection histories, which the BPAI found was an intangible.

In conclusion, the BPAI is not suggesting that software method claims are unpatentable. However, to avoid a 101 rejection, special attention should be paid to process claims to ensure that the claims satisfy one of the two prongs of the machine-or-transformation test. A general purpose computer recitation will no longer satisfy the patent eligibility requirement. Rather, the claim should be tied to a particular machine.

By Vincent J. Allen

The Federal Circuit Puts a Damper on Forum Shopping

The Eastern District of Texas has the reputation of being a favorable forum for filing patent infringement suits.  For the year ending September 31, 2007, more patent cases were filed in the Eastern District than in any other district in the nation.  The Central District of California, despite having a substantially greater population of businesses, trailed the Eastern District’s 359 filings by 25. 

Historically, a patent owner has been able to file suit against infringers in the Eastern District of Texas without fear of having the case transferred to another district so long as the court had personal jurisdiction over the alleged infringers.

Plaintiffs will now have a more difficult time maintaining venue in the Eastern District of Texas in many patent cases filed there and elsewhere in the Fifth Circuit in light of the Federal Circuit’s recent In re TS Tech USA decision handed down December 29, 2008.

venuecartoon

In that case, TS Tech filed a motion to transfer venue arguing that the Southern District of Ohio was a far more convenient venue to try the case.  The physical and documentary evidence was mainly located in Ohio, and the key witnesses all lived in Ohio, Michigan, and Canada. The only connection to Texas was that several Honda vehicles with the allegedly infringing headrest assembly had been sold in Texas.

Because a motion to transfer venue relates to a procedural matter rather than substantive patent law, the Federal Circuit looked to the Fifth Circuit’s recent In re Volkswagen of America, Inc. decision in deciding In re TS Tech.  In re Volkswagen involved an automobile accident that occurred in Dallas.  An injured motorist, a passenger, and the mother of a deceased passenger sued Volkswagen in the Eastern District of Texas.  Volkswagen moved to transfer venue to the Northern District of Texas on the grounds that all of the sources of proof were located in the Northern District of Texas.  The trial court denied the motion to transfer and Volkswagen filed a mandamus petition. 

Mandamus is an extraordinary remedy designed to be used only in those situations where a trial court “clearly” abused its discretion such that refusing transfer would produce a “patently erroneous result.”  The Fifth Circuit, finding that the case had no connection with the Eastern District, held that the trial court clearly abused its discretion in refusing to transfer the case to the Northern District of Texas. 

Following In re Volkswagen, the Federal Circuit in In re TS Tech held that the trial court abused its discretion in refusing to transfer the case to a venue with a more substantial connection to the case.  The Federal Circuit held that the fact that some infringing products were sold in the Eastern District is not enough to prevent transfer of the case to a venue where the physical and documentary evidence was mainly located and where the location of the court was more central to key witnesses.

Although In re TS Tech is different from In re Volkswagen in that infringing activity took place in the Eastern District, the Federal Circuit found that “the fact that this is a patent case as opposed to another type of civil case does not in any way make the district court’s rationale more logical or make the factor weigh against transfer.”  The court reasoned that the Eastern District’s connection with the case was no more significant than any other district because the infringing products were sold throughout the United States.

Thus, at least as to cases that have no connection with the Eastern District other than the fact that some of the infringing products are sold there, potential plaintiffs might want to consider filing in another district with a more substantial connection to the case.  Otherwise, there is a risk of having the alleged infringer choose where the case should be transferred.  Based on the risk involved in filing in the Eastern District, districts such as the Northern District of Texas, with its relatively new patent rules, could see an increase in the number of patent cases filed.

Proponents of legislative reform of venue statutes may have achieved the desired effect judicially, at least in part, with the In re TS Tech decision.  Defendants who find themselves in plaintiff-friendly venues now have another weapon to fight the plaintiff’s choice of venue in many cases. 

However, judges in the Eastern District will likely remain resistant to transferring cases, and thus the effect of the decision should be limited to those cases having no other contact with the Eastern District except that infringing activity took place there.  Additionally, the facts of many cases will not be the same as the facts of In re TS Tech, particularly in cases involving multiple defendants.  In a typical multiple-defendant case, defendants are located all over the country and there is no one location that is more convenient to try the case.

In conclusion, much more thought should be given to convenience transfer motions.  The likelihood of success of a convenience transfer motion should be considered by plaintiff’s counsel before the lawsuit is filed so as to maximize the chances of keeping a case in the plaintiff’s choice of venue.  Likewise, defense counsel should consider whether a transfer motion might be used to transfer the case to a more favorable venue for the defendant.

By Vincent J. Allen

Ding Dong! The Witch is Dead…or is She?

witch-picWhich old witch?  The wicked witch of patent reform.  Many in the patent community are singing the joyous news that the Patent Reform Act of 2007 is dead.

The departure of former Solicitor of the U.S. Patent and Trademark Office, John Whealan, from his temporary position with Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) on May 1, 2008 is a strong indicator that patent reform legislation will not pass in 2008.  Whealan has been on leave from the PTO for the past year to assist Senator Leahy with crafting patent reform legislation.  If the bill were not in fact dead, it is unlikely that Mr. Whealan would have left his position with the task unfinished.

Whealan’s departure was not the only sign that the bill was finished.  On April 10, 2008, Senator Arlin Specter (R-Pa.), ranking minority member of the Senate Judiciary Committee, commented on the floor of the Senate that the Republican caucus may refuse to act on pending patent reform legislation “as a matter of leverage to get fair and equitable treatment” in regard to the confirmation of federal judges.  On the same day, Senate Majority Leader Harry Reid (D-Nev.) stated that he was “disappointed we are not going to be able to move to the patent bill . . . we are not going to do a patent bill now.”  He also reported that “the chairman and ranking member [of the Senate Judiciary Committee] could not work out what they wanted to bring to the floor.”

The disagreement stemmed from the most controversial portions of the legislation, the apportionment of damages and Applicant Quality Submissions (AQS) provisions.  The current damages apportionment provision in the bill provides for a reasonably royalty to be calculated based on the economic value attributable to an invention’s specific contribution over the prior art.  This provision is opposed by the Bush Administration, the Court of Appeals for the Federal Circuit, and the PTO.  The AQS provision of the bill burdens patent applicants with a duty to search and describe the prior art in connection with filing an application.  The patent bar  vehemently opposes the AQS provision while the Bush Administration and the PTO are strongly in favor of AQS. 

Hal Wegner, a prolific commentator and former director of the intellectual property law program at George Washington University Law School, suggests that the AQS “is a major reason why many in the patent community have moved away from Senator Leahy’s bill.”  He also opines, “Indeed, it is hard to understand responsible members of the patent community supporting this provision.”  A system similar to that of AQS has already been tested in the PTO’s accelerated examination program initiated in August 2006.  According to PTO statistics, 85% of all petitions for accelerated examination during the first eight months of the program were dismissed or denied.  This was for applicants who voluntarily elected to apply for accelerated examination.  Although a portion of the failure rate may be attributable to the learning curve associated with a new program, the statistics do not bode well for the success of AQS. 

While the continuation rules that the PTO attempted to implement were blocked in the Tafas v. Dudas litigation in the Eastern District of Virginia, the Patent Reform Act provides for a legislative override of the summary judgment granted by the court barring implementation of the rules.  The PTO’s attempt to strong arm the patent community into accepting the continuation rules along with the PTO’s tireless lobbying for AQS has angered many in the patent bar.

Although the supporters of patent reform legislation promised on numerous occasions over the past several months that she would live, the witch is “most sincerely dead.”  The year 2008 will probably pass without further damage to the patent system other than reform provided by case law.  In any event, it is unlikely that the bill would be signed into law without major revisions.

This is not good news to the groups who lobbied Congress for patent reform.  The Coalition for Patent Fairness, a group of technology companies desiring to limit the damage awards and legal costs associated with patent litigation, spent $2.5 million on lobbyists during the past fifteen months according to the New York Times.  The group’s antithesis, the Coalition for 21st Century Patent reform, spent $1.8 million.  Apparently, the groups were unwilling to compromise on the major portions of the bill as reflected by the inability of the Senators to come to an agreement.

Although the Patent Reform Act of 2007 may be dead, reform of the patent system will be proposed again.  While change may be necessary to keep up with the times, change for the sake of change or to protect the special interests of lobbyists is not the solution.  As patent practitioners, we should heed the famous quote of Abraham Lincoln: “The patent system . . . added the fuel of interest to the fire of genius, in the discovery and production of new and useful things.”  Before making major changes to our patent system, we should encourage an open and honest debate about the best means for accomplishing a productive change.  Otherwise, we could end up harming the very system that has led to unprecedented innovation during the United States’ short history.

 By Vincent J. Allen

The Battle Continues: Supreme Court v. Federal Circuit

     The U.S. Supreme Court has reversed all nine patent cases decided on appeal from the Federal Circuit since 2002.  In two cases handed down in April of 2007, the Court continues its trend of reversing the Federal Circuit.  In a much anticipated decision, the Court in KSR v. Teleflex unanimously rejected the Federal Circuit’s rigid approach to determining whether a patent is non-obvious in view of the prior art.  Although not as far reaching as KSR, a second case, Microsoft v. AT&T, may hamper owners of software patents in their ability to prevent copying of software outside the United States.

KSR v. Teleflex

    A patent applicant is entitled to a patent only for inventions that are useful, novel, and non-obvious.  Because almost all inventions are combinations of elements that are already known, the non-obvious requirement is usually the highest hurdle. 

    The Supreme Court established the framework for determining obviousness in the 1966 Graham v. John Deere decision.  In that case, the Court held that the obviousness of an invention must be decided by determining the scope and content of the prior art, ascertaining the differences between the prior art and the claimed invention, and resolving the level of ordinary skill in the pertinent art. 

    To provide uniformity and to prevent the use of hindsight in deciding the obviousness question, the Court of Customs and Patent Appeals established the requirement of a “teaching, suggestion, or motivation” (TSM) to combine known elements to show that a combination is obvious.  Over the years, the TSM test has been refined by the Federal Circuit to require that “some motivation or suggestion to combine the prior art teachings” exist in the prior art, the nature of the problem, or the knowledge of a person having ordinary skill in the art.

    In KSR, Teleflex argued that there was no teaching, suggestion, or motivation in the prior art to make the combination of an adjustable accelerator pedal and an electronic sensor claimed by the patent at issue.  The Supreme Court reversed the Federal Circuit’s decision that upheld the validity of the patent.  The Court reasoned that Graham provides an expansive and flexible view to the obviousness question that is inconsistent with the narrow, rigid manner in which the Federal Circuit applied the TSM test.  The Court found convincing KSR’s evidence that combining the inventions of two prior patents was a design step that was well within the grasp of a person of ordinary skill in the relevant art.  Thus, the claimed combination of two previously known components was obvious.  The Court found that although the TSM test provides a helpful insight, “[t]he obviousness analysis cannot be confined by a formalistic conception of the words teaching, suggestion, and motivation, or by overemphasis on the importance of published articles and the explicit content of issued patents.”

    The KSR decision does not result in a radical change to patent law, but simply reinforces prior Supreme Court precedent.  However, the effects of the rejection of the TSM test as a bright line rule could prove significant, affecting both prosecution of patent applications and litigation of patent infringement disputes.  Patent applicants and litigants alike can minimize the effects of KSR by taking a proactive approach during prosecution and litigation. 

Patent Drawing of Pedal Assembly

Patent Drawing of Pedal Assembly

 

    The difference between the Federal Circuit’s application of the TSM test and the approach outlined by the Court in KSR is that the TSM test is now only a factor in the obviousness analysis rather than an absolute requirement.  The KSR Court favored a less rigid approach to determining the scope and content of the prior art.  This approach recognizes a long established corollary that “the combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.”

    A court must now consider whether inventions available both inside and outside the field of endeavor might be predictably modified in response to “design incentives and other market forces.”  In rejecting the Federal Circuit’s holding that courts and patent examiners should look only to the problem the patentee was trying to solve, the Court stated,  “Common sense teaches, however, that familiar items may have obvious uses beyond their primary purposes, and in many cases a person of ordinary skill will be able to fit teachings of multiple patents together like pieces of a puzzle.”

    For similar reasons, KSR rejected the Federal Circuit’s holding that a patent claim cannot be proved obvious by a showing that the combination of elements was “obvious to try.”  The Court reasoned that “[w]hen there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions, a person of ordinary skill has good reason to pursue the known options within his or her technical grasp.”

    Only time will tell the full extent of the KSR decision.  The U.S. Patent & Trademark Office could reject more patent applications citing KSR.  The flexibility allowed by the Supreme Court could make it easier for examiners to establish a prima facie case of obviousness based on “common sense” while placing the burden on applicants to present evidence of non-obviousness.  The Director of the Patent Office has acknowledged that “[t]he decision gives our examiners more flexibility to use their considerable technical skills to reject obvious changes to existing technology.”  Nevertheless, examiners must still provide an explicit non-conclusory analysis for the basis of any obviousness rejection.

    To help avoid obviousness rejections based on “common sense,” applicants should identify any improvements, unexpected results, and other evidence that the invention is not obvious.  Applicants should also avoid identifying problems in the prior art in a way that would lead the examiner to believe that the solution proposed by applicant is predictable.

    The KSR decision casts doubt on the validity of many existing patents, possibly affecting the licensing value and litigation value of certain combination patents.  For example, the Federal Circuit quickly followed the KSR decision with the Leapfrog v. Fisher-Price decision, deciding on facts similar to the KSR case that the conversion of a known mechanical toy into an electronic version of the same toy was obvious.  The court relied on the fact that the plaintiff failed to present any evidence that the claimed combination was outside the technical grasp of a person of ordinary skill in the art. 

   While it is clear that the Supreme Court is attempting to curtail patent protection, this does not mean that patent holders should dismiss all their suits or forego filing suits.  Rather, the patentee should focus greater efforts on proving how a patented invention is non-obvious.  This can be done, for example, by providing expert evidence that the claimed combination resulted in something more than a predictable use of prior art elements.  When appropriately handled, litigation of patents will likely result in a patent being found invalid only in the most unmistakable cases.  As for defendants, KSR is an added bonus in some cases, but will not always be a silver bullet.  Defendants must likewise present expert evidence of the obviousness of a claimed combination in the absence of explicit teachings in the prior art.

Microsoft v. AT&T

    A U.S. patent allows its owner to exclude others from making the invention in the United States.  But what if the components of the invention are built in the U.S. and assembled overseas?  In Microsoft v. AT&T, the Court was faced with interpreting a patent statute providing that where components of a patented invention are shipped out of the United States prior to assembly, whoever causes those components to be supplied for the purpose of assembly is liable for patent infringement.

    The application of the statute is relatively easy when faced with a patent that claims a machine or an apparatus.  However, because of the difficulty of defining “components,” the application of the statute is complicated where the components at issue include intangibles such as software.

    Microsoft argued that software in the abstract is not a component, and therefore, Windows software sent on a master disk or through electronic transmission from the United States did not constitute infringement of the AT&T patent.  The Supreme Court agreed, reversing the Federal Circuit and holding that only software in a tangible medium could qualify as a component.  Because the Windows software was copied onto a tangible medium outside the United States, the Court held that Microsoft was not liable for patent infringement for computers assembled outside the United States.  The Court found it inconsequential that the copying of the master disk was easy, opining that “the extra step is what renders the software a usable, combinable part of the computer.”

    In conclusion, the KSR and Microsoft decisions evidence the Court’s efforts to curtail the perceived proliferation of patent protection, a trend which will likely continue in the years to come.      

 By Vincent J. Allen

Local Patent Rules for the Northern District of Texas

     In an order issued April 2, Chief U.S. District Judge of the Northern District of Texas, A. Joe Fish, established case management rules on a trial basis for patent cases filed in the Dallas Division.  The patent rules apply to all civil actions containing an allegation of utility patent infringement and to any action seeking a declaration that a utility patent is not infringed, is invalid, or is unenforceable.  The patent rules take effect on May 1, 2007 and apply to any Dallas Division patent case filed on or after that date and to certain cases filed prior to the effective date.  Although other districts such as the Eastern District of Texas and the Northern District of California have had patent rules for some time, many other districts are now considering creating patent rules as well.  Dallas is the first in a new wave of districts likely to enact patent rules.

    In addition to the conference requirements of Federal Rule 26(f), parties in a patent case filed in Dallas must now confer on a number of additional matters common to patent cases. The patent rules also require certain disclosures designed to bring the parties to an early position on pivotal issues such as infringement and invalidity.  This will decrease the average time to bring a case to trial by both avoiding common pre-trial disputes that arise in patent cases and focusing the parties on the important issues.   

   The patent rules are based on rules proposed after debate by the Northern District of Texas Patent Rules Task Force, which is comprised primarily of local attorneys from law firms and companies interested in patent litigation.  Although modeled after rules established in the Eastern District of  Texas, there are some differences.  The differences include provisions requiring more detailed preliminary infringement and validity contentions (with potential sanctions for failing to comply), more liberal provisions regarding amendment of initial infringement and invalidity contentions, and a provision that the scope of discovery is not limited to the preliminary infringement or invalidity contentions.

    Adoption of the patent rules along with potential changes to the venue statute governing federal actions could significantly increase the number of patent cases filed in Dallas. Currently, the federal venue provisions allow a plaintiff to sue a corporate defendant in any judicial district in which that defendant is subject to personal jurisdiction.  Thus, the Eastern District is able to attract a large volume of patent filings, despite its sparse population and lack of a business presence there for many of the defendants sued.   

   Venue rules will be tightened should Congress enact the Patent Reform Act of 2007.  Identical bills with bipartisan support were introduced in both the Senate and the House on April 18.  If passed, the bills will amend the federal venue provisions to require patent cases to be brought in the district (1) where either party resides or (2) where the defendant has committed acts of infringements and has a regular place of business.  This would eliminate the Eastern District as a proper venue in many cases, causing some of the cases that would have been filed in the Eastern District under the old venue rules to be filed in Dallas instead.

    Upon enactment of the Patent Reform Act, the Dallas patent rules could provide additional incentive for patent holders to choose Dallas over other venues lacking patent rules.  Even without the change in the venue rules, the patent rules are expected to attract litigants who would not have otherwise considered filing in Dallas.

By Vincent J. Allen