Thursday 28 February 2013

FAST welcomes new patent court arrangements

Palais de Justice? No:
gare du Nord ...
While many commentators complain that the United Kingdom has done nothing but moan about the recently-concluded package for patents in Europe, PatLit can confirm that at least one British-based body is taking a positive view of it: the Federation Against Software Theft (FAST) -- whose members are listed here -- could scarcely have taken a more rosy view if it tried, as the following media release suggests:
FAST welcomes arrival of Unified Patent Court in London 
Move promises to assist SMEs in the protection of their Intellectual Property

The Federation Against Software Theft (FAST) has welcomed news of the introduction of the Unified Patent Court’s Central Division in London [which is curious -- but London gets to litigate pharmaceuticals and life sciences], suggesting that it promises to aid access to the mechanisms which help to support Intellectual Property (IP).

Business Secretary Vince Cable has finalised a deal for a new patent court to be based in London. The new court and patent system will create a one-stop shop making it both easier and cheaper for companies to protect their business inventions in Europe.

FAST’s General Counsel, Julian Heathcote Hobbins, has welcomed the news [even though software patents -- which it may be presumed to be of some interest to FAST's members -- are to be litigated in Paris], suggesting that it represents a significant step in the Government’s on-going positive agenda and a welcome development for those who create patented technology which requires significant upfront investment and conviction of belief in the product:
“Securing finance for innovation is tough and depends upon a strong and accessible IP regime. Those developing innovative technical solutions need the ability to secure and enforce registered rights without undue barriers. Traditionally patents gained in more than one European Country have been costly to secure and enforce and arguably only the budgets of the larger rights holders have been able to endure. Technology SMEs and micro businesses who can patent inventions made from software-plus-kit need realistic access to patent protection in order to underpin the chances of IP for growth success [micro-businesses had better start checking their travel arrangements, then. It's Paris first, then on to Luxembourg for the appeal]. However it is possible that such a development could cut both ways, as a micro tech business could be on the end of a pan European injunction. Only time will tell as the costs of using the new system are yet to be made clear.”
Larry Cohen, an IP Litigation Partner at Latham & Watkins and member of FAST’s Legal Advisory Group (FLAG) said: 
“This is a big step forward, although as there is an opt out mechanism for patentees, take up may be slower than desired. Amongst hoped-for advantages are that the procedures of the unified court will take the best of the Continental and British systems, lowering litigation costs while widening coverage, and that the need to oppose grant early by an opposition in the EPO may diminish significantly as patents will be able to be revoked on a pan EU basis (except for opt out countries) only when enforcement is threatened.” 
FAST’s new CEO, Alex Hilton, concluded: 
“It’s vital that the industry can go forward with commercial certainty in creating products where their investments are protected and properly rewarded. We must work to support the software industry, and bolster the creative industries at large, to fuel employment and encourage growth through the development of the IP asset base.”

Semi-Nullification – BGH Polymerzusammensetzung

The BGH had to decide in a nullity appeal matter for a patent, the main claim of which was directed to a polymer composition. One ingredient of the composition was selected from a group comprising three different substances, which shall be named A, B, and C herein for the sake of simplicity.

The plaintiff had filed the nullity action requesting the nullification of claim 1 and other claims, insofar as the claims relate to or refer to compositions containing substance A.

The Bundespatentgericht had followed the usual practice and declared claim 1 invalid in its entirety, though only one of the three alternatives was attacked. Hitherto, a partial nullification of a claim was declared only if the patentee had filed a corresponding request, which was not the case here.

The BGH found that this does not comply with the disposition principle (non ultra petita) and that the Bundespatentgericht should have nullified only the part which was attacked, although the patentee did not submit a corresponding request with amended claims.
It will be interesting to see whether this decision will have consequences for cases where multiple alternatives in a claim are attacked and only one of them turns out to be invalid and for the cost distribution.

Please click here for the full text decision (in German).

Wednesday 20 February 2013

US Supreme Court Rules That Patent Malpractice Claims “Rarely, If Ever” Meet Requirements For Federal Court Jurisdiction

Under U.S. law, federal courts have limited jurisdiction. Fortunately, one area of exclusive federal court jurisdiction is lawsuits that “arise under” a federal patent statute. 28 U.S.C. § 1338. Exactly when a plaintiff’s claim arises under the Patent Act is sometimes difficult to determine. Recently, several district courts have ruled that state law malpractice claims against lawyers based on their negligent handing of a patent prosecution file or patent litigation “arise under” federal patent law because an element of the plaintiff’s claim turns on a substantive issue of patent law. Namely: If the negligence has not occurred, would the matter have resulted in a favorable outcome?

That was the situation in Gunn v. Minton, Case. No. 11-1118, decided today by the U.S. Supreme Court. Minton was an inventor who sued the NASD and NASDQ for patent infringement. The district court granted summary judgment that Minton’s prototype violated the on-sale bar in 35 U.S.C. § 102(b), and thus the patent was invalid. Minton’s attorney failed to argue that the prototype was protected by the experimental use exception, and when he attempted to raise it after the fact the court ruled that the point had been waived. After he exhausted his appeals, Minton sued his attorney for malpractice in a Texas state court. Ultimately, the Texas Supreme Court ruled that the action must be filed in federal court, “because the success of Minton’s malpractice claim is reliant upon the viability of the experimental use exception as a defense to the on-sale bar.” Minton v. Gunn, 355 S.W.3d 634, 641–642 (Tex. 2011).

In a 9-0 ruling written by Chief Justice Roberts, the U.S. Supreme Court reversed, and ruled that the malpractice claim must be heard in a state court. The court noted that: 
[F]ederal jurisdiction over a state law claim will lie if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress. Where all four of these requirements are met, . . . jurisdiction is proper because there is a "serious federal interest in claiming the advantages thought to be inherent in a federal forum," which can be vindicated without disrupting Congress’s intended division of labor between state and federal courts. [Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U.S. 308, 313-14 (2005).]
Slip op. at 6. The Court concluded that Minton's malpractice claim failed to satisfy the third and fourth factors identified in Grable. First, the patent issue was not "substantial:" 
Here, the federal issue carries no such significance. Because of the backward-looking nature of a legal malpractice claim, the question is posed in a merely hypothetical sense: If Minton’s lawyers had raised a timely experimental-use argument, would the result in the patent infringement proceeding have been different? No matter how the state courts resolve that hypothetical “case within a case,” it will not change the real-world result of the prior federal patent litigation. Minton’s patent will remain invalid.
Slip op. at 10. In addition, requiring federal courts to adjudicate malpractice claims would disrupt the state-federal balance: 
The States, on the other hand, have “a special responsibility for maintaining standards among members of the licensed professions.” Their “interest . . . in regulating lawyers is especially great since lawyers are essential to the primary governmental function of administering justice, and have historically been officers of the courts.” We have no reason to suppose that Congress—in establishing exclusive federal jurisdiction over patent cases—meant to bar from state courts state legal malpractice claims simply because they require resolution of a hypothetical patent issue.
 Slip op. at 12 (citations omitted). Thus, the claim did not fall within the federal court’s jurisdiction. Although the decision addresses legal malpractice claims, the application of the Grable factors could affect federal jurisdiction over other claims that implicate patent law. For example, courts have extended federal jurisdiction under § 1338 to suits involving license disputes, commercial defamation claims, and the like. Jurisdiction may well not exist under under the Gunn analysis.  The full opinion is available HERE.

Friday 15 February 2013

In Google Hangout, Barrack Obama Says That U.S. Patent System Needs Further Reform

On February 14, President Barrack Obama held a live Google Hangout to answer questions about administration policy and current issues. One topic that came up was the effect software patent litigation by non-practicing entities, or "trolls," has had on innovation. In apparently off-the-cuff comments, Obama acknowledged that some patent plaintiffs use the system to "hijack someone else's idea" and use litigation to "extort" costly settlements. He also noted the difficulty in balancing the interests of IP owners and the public, especially as technology evolves and advances so rapidly. Referring to the recent America Invents Act, the most significant reform of the U.S. patent system in 60 years, the President noted that:
[I] do think that our efforts at patent reform only went about half way to where we need to go, and what we need to do is pull together additional stakeholders and see if we can built some additional consensus on some smarter patent laws. 

You can view the full Hangout session HERE. The discussion of patent reform starts at about 16:00.

Juries and patent litigation: is there a case for reciprocity?

Via Chris Torrero (thanks, Chris!) comes this link to a piece on FiercePharma that emphasises one of the risks faced by foreign businesses litigating patents in the United States, particularly as a defendant: its exposure to the vagaries of jury trial. In this instance the case involved Teva's version of Pfizer's (and originally Wyeth's) Protonix heartburn drug. Facing a patent infringement action and claim for damages from Pfizer, the company -- which was confident that its challenge to the patent would succeed -- did its sums and estimated its exposure to lost profits at $670 million. The patent was subsequently held valid by a jury and, pressing for lost profits and damages, Pfizer is now seeking some £2.1 billion. FiercePharma reports that a trial is scheduled for early June.

Jury trials in US patent proceedings have recently been heavily criticised by another non-US business, Samsung, following the jury's assessment of a damages claim brought by Apple, here, and some big jury awards have already been reversed, according to this Bloomberg report last month.

This blogger cannot help feel that, for good or ill, the unpredictable nature of jury findings and awards is bound to exercise a chilling effect on commercial decisions -- whether, as in the case of pharma products, to leap ahead in marketing a drug that falls within the patent's claims or, as is more usually the case elsewhere, when the alleged infringer is dealing with a product or process which lies to some extent outside the parameters of the patent claims.  The keenly-fought European patent package does not contain a provision for EU-based businesses to opt for retaliatory jury trials against US-based defendants, though the prospect may appeal to many.  If such an option were offered, it would be good to whether, and on what grounds, US defendants might object.

Thursday 14 February 2013

AIA seminar on patent litigation comes to London

Law firm Pinsent Masons is hosting a free seminar at which US patent attorney Edward D. Manzo will be giving a presentation on the AIA.  Edward is the author of the recently-published The America Invents Act: A Guide to Patent Litigation and Patent Procedure--which quite fortuitously happens to be the title of the seminar.  PatLit would have offered a link to the book, but ten minutes online failed to uncover a link to it, even on the publishers' website.

Details of this event, which is free and open to all comers, are as follows:
The America Invents Act: A Guide to Patent Litigation and Patent Procedure  
Monday 25 February 2013 
Pinsent Masons is hosting an evening seminar on Monday 25th February. The seminar will explore the most significant changes brought about by the America Invents Act and will have plenty of opportunity to discuss the implications of these changes and draw comparisons with how things are likely to change in Europe in the not to distant future. All welcome! Please click on the link below to register. 
The seminar will be given by Edward D. Manzo, partner at US firm Husch Blackwell LLP, practicing in IP litigation, client counselling and IP portfolio development, will discuss the most significant changes brought about by the AIA. Edward is a renowned IP specialist lawyer in the US, and provides expert analysis on the AIA in his recently published book ‘The America Invents Act: A Guide to Patent Litigation and Patent Procedure’.

Key topics for discussion will include:

  • What difference will “first to file” really make?
  • How will the new and various post grant procedures change the landscape for the recipients of U.S. patents?
At a time when we are dealing with the prospect of significant change to the patent landscape in Europe, we have lined up a few panellists to join us. We are looking forward to some interesting discussion and comparisons relating to the proposed Unitary Patent and UPC. The panellists so far include:

Mark Platts-Mills. Mark is Head of Chambers at 8 New Square, the largest specialist IP chambers in the UK. Members of 8 New Square have been providing input into the drafting of rules of procedure for the UPC and will be continuing to work to ensure that the system provides speedy and efficient dispute resolution for those who choose to use the UPC instead of national courts.

Adrian Murray. Patent Attorney and consultant to WP Thompson.  Adrian's principal practice area is in the field of pharmaceuticals, advising clients on launch strategies and freedom to operate issues, as well as assisting them with securing protection for their inventions in Europe and internationally. Throughout his career, Adrian has worked principally in private practice, but also spent several years in house at a large pharmaceutical company.

Held at Pinsent Masons London offices at 30 Crown Place, London EC2A 4ES, registration is from 5.30pm, the presentation will begin at 6pm with questions and refreshments afterwards.

We hope you can join us.If you would like to attend this session please select the Register option below.

Date:Monday 25 February 2013
Time:Registration: 5.30pm; Seminar 6pm followed by questions and refreshments
Venue:Pinsent Masons LLP, 30 Crown Place, London, EC2A 4ES


Where are we now? Sir Richard Arnold's Jackson Implementation speech

Further to the IPKat's recent post here, the Judiciary of England and Wales website now hosts the 17th lecture in the Implementation Programme, "Intellectual Property Litigation: Implementation of the Jackson Report's Recommendations", here.

The lecture, delivered by Mr Justice Arnold and hosted by the AIPPI UK, gives a good where-are-we-now summary. It is easier to appreciate if you have already read the Jackson Report (which is rather long). A workable alternative is to glean the background from PatLit's earlier posts and its recommendations as they affect IP litigation which you can check out here.

Wednesday 13 February 2013

No reason to refuse amendment that makes no changes

Omnibus claims had a rare moment of glory in the British courts last week.  By way of background, according to Wikipedia (but shorn of references):
"A so-called omnibus claim is a claim including a reference to the description or the drawings without stating explicitly any technical features of the product or process claimed. For instance, they may read as "Apparatus as described in the description" or "An x as shown in Figure y". 
Omnibus claims are allowed under the EPC, but only "when they are absolutely necessary". Other patent offices, such as the United Kingdom Patent Office, are more receptive to this claim style".
The status of the omnibus claim was reviewed in Environmental Recycling Technologies Plc v Upcycle Holdings Ltd [2013] EWPCC 4decided in the Patents County Court for England and Wales by Judge Colin Birss QC on 5 February 2013.  Such claims, it seems, do neither harm nor good: they don't seem to serve any useful purpose at all:
"A point arises on new claim 2 because it is an omnibus claim and ERT contends an amendment leaving it in place should not be permitted. ...

New claim 2 (which was claim 13 as granted) is a so called "omnibus" claim. These were formerly quite common. They can be difficult to interpret. Are they very narrow, very broad or somewhere in between? 40 years ago a patentee found the last valid claim standing was the omnibus claim (Surface Silos v Beal [1960] RPC 154). However both the current edition of Terrell (17th Ed, 2011, paragraph 9-123) and its predecessor (16th Ed, 2006, paragraph 6-128) state that the circumstances in Surface Silos are unlikely to recur in the modern practice and so "it is therefore an unprofitable exercise to attempt to reconcile the many decisions, now of considerable antiquity, as to the scope of such claims, but previous editions of this work have gathered the principal references" [referring to the 15th Ed (2000)].

The EPO ordinarily does not grant such claims as a result of their difficulty in interpretation (T 150/82 IFF / Claim Categories (1984)). It may be noted this decision was in 1984. Such claims are only to be allowed in exceptional circumstances and the EPO places the onus on showing such exceptional circumstances on the patentee. In practice this means these claims have effectively been abolished in the EPO. However the UK IPO still grants such claims.

The claimant submits that given that EPO practice is now to be followed in amendment applications as a result of s75(5) of the 1977 Act and, since the patentee has not established or tried to establish any exceptional circumstances, the amendment should be refused as a matter of discretion.

I do not agree that this amendment can be refused on discretionary grounds. The reason is because this claim is not being amended at all. To renumber it does not count. For what it is worth I think the EPO, despite their antipathy to these omnibus claims, would take the same view. The patent has been granted with that claim in it. If the claim is invalid it should be revoked, but there is no reason to refuse an amendment which makes no change to it.

I will allow the amendment.

If I may say so, the UK IPO might like to consider whether omnibus claims serve any useful purpose today save in exceptional circumstances. I question whether they can really be said to satisfy the requirement of clarity (s14 of the 1977 Act) which is applicable pre-grant but is not a ground for post-grant revocation".
In these circumstances it might be worth asking whether, and if so to what effect, it is worth troubling the court with them.

Thursday 7 February 2013

CIPA Congress and patent litigation: a reminder -- and an opportunity

Many readers of this weblog are members of the Chartered Institute of Patent Attorneys (CIPA) or attend its annual Congress, which takes place in London this coming 3 and 4 October (mark your diaries if you have not already done so!)

For obvious reasons, patent dispute resolution will be featuring on the Congress programme, which seeks to offer some valuable input into our understanding of patent dispute resolution on both sides of the Atlantic, where great changes have either occurred or are in the process of occurring. For equally obvious reasons, it cannot be predicted with absolute precision which specific aspects of patent dispute resolution will be at the fore some eight months from now. An opportunity to raise fresh issues and debate them is however integrated into the programme with its 'hot topics' slot on the second day.

This blogger, who is privileged to sit on the Congress Steering Committee, is happy to make this blog available for anyone who wants to raise patent litigation issues which may be worth drawing to the attention of this year's speakers. Just email me here if there are topics you'd like to air on PatLit -- or which you'd like the speakers to give some thought to before Congress arrives.

Wednesday 6 February 2013

Heretical Economists Argue For Demise Of Patents, Citing Costly Patent Litigation As Proof

In a recent paper presented in a symposia issue of the American Economics Association’s Journal of Economic Perspectives, two economics affiliated with the Federal Reserve Bank of St. Louis argue that patents should be abolished because they do not promote innovation or technological progress, and exact too high a social toll in terms of transaction costs and impediments to other innovators. M. Boldrin and D. Levine, The Case Against Patents, 27 Jl. Econ. Perspectives, 3-22 (Winter 2013).

In part, the authors suggest that the conventional view that a strong patent system promotes innovation is not supported by available data. They find no evidence that the high rate of patenting activity in recent years has led to a “dramatic acceleration in the rate or technological progress” or increase in R&D budgets. Moreover, they argue that the real incentive to innovate flows from the “first mover” advantage: 
Both theory and evidence suggest that while patents can have a partial equilibrium effect of improving incentives to invent, the general equilibrium effect on innovation can be negative. The historical and international evidence suggests that while weak patent systems may mildly increase innovation with limited side effects, strong patent systems retard innovation with many negative side effects. More generally, the initial eruption of innovations leading to the creation of a new industry—from chemicals to cars, from radio and television to personal computers and investment banking—is seldom, if ever, born out of patent protection and is instead the fruit of a competitive environment. It is only after the initial stage of rampant growth ends that mature industries turn toward the legal protection of patents, usually because their internal growth potential diminishes and they become more concentrated. These observations, supported by a steadily increasing body of evidence, are consistent with theories of innovation emphasizing competition and first-mover advantage as the main drivers of innovation, and they directly contradict “Schumpeterian” theories postulating that government-granted monopolies are crucial to provide incentives for innovation. A properly designed patent system might serve to increase innovation at a certain time and place — and some patent systems, such as the late-nineteenth century German system allowing only process but not final product patents, have been associated with rapid innovation. Unfortunately, the political economy of government-operated patent systems indicates that such systems are susceptible to pressures that cause the ill effects of patents to grow over time. The political economy pressures tend to benefit those who own patents and are in a good position to lobby for stronger patent protection, but disadvantage current and future innovators as well as ultimate consumers.
The authors suggest, based on the recent high-profile smartphone patent wars, that companies obtain patents for strategic value, rather than protecting proprietary technology: 
To understand more about the actual effect of patents in the real world, consider the recent purchase by Google of Motorola Mobility, primarily for its patent portfolio—not for the ideas and innovations in that portfolio. Few if any changes or improvements to Google’s Android operating system will result from the ownership or study of these software patents. Google’s purpose in obtaining this patent portfolio is purely defensive: it can be used to countersue Apple and Microsoft and blunt their legal attack on Google. These remarks apply to the vast bulk of patents: they do not represent useful innovation at all and are just weapons in an arms race.
In addition, the authors argue that patent litigation is costly and contributes nothing to innovation or the betterment of society (except apparently for the income of litigators): 
While patent litigation has increased, few patents are actively used. Patent litigation often involves dying firms that have accumulated huge stockpile of patents but are no longer able to produce marketable products and that are now suing new and innovative firms. For example, Texas Instruments was one of the first producers of microchips, and many in our generation remember the capabilities of their first TI calculator. But Texas Instruments was unable to make the transition to the personal computer revolution and became, for a while, the symbol of a dying company trying to stay alive by suing the newcomers. In more recent times, Microsoft—once the giant bestriding the software industry—has been unable to make the leap to portable devices such as telephones and tablet personal computers. Thus, Microsoft now uses patent litigation to try to claim a share of the profits Google generates in this market.
As evidence for the disproportionate cost of patent litigation, the authors cite a study estimating that by the end of the 1990’s, litigation costs constituted nearly 14 percent of total research and development for publicly-traded companies.

Although the article may seem heretical to Schumpeterians, it does suggest that proponents of a strong patent system need to do a better job justifying patents as a catalyst for innovation. Much of the authors' anecdotal observations relate to the smartphone wars, which are in no way typical of the cost or strategic value of patent activity in most industries. On the other hand, the authors do not comment on the importance of patents in attracting capital, something that even economists would acknowledge is critical to new venture creation. I doubt many venture capitalists would be eager to invest in new companies relying only on "first-mover" status to maintain their technological edge, rather than a sound patent portfolio.