IP Update, Vol. 10, No. 8, August 2007
August 2007
Patents / Obviousness - Experimental Confirmation of Expected Outcome Obvious over Prior Art
Patents / Infringement - Capability Not Enough—Infringement Requires Performance
Patents / Litigation - Federal Circuit Makes D.C. Swallow its Own Medicine
Copyrights / Merger Doctrine - Commodity Settlement Prices Subject to Copyright Merger Doctrine
Patents / USPTO Regulations - USPTO Issues New Continuation Rules
Trademarks / Trademark Rules - Modification and Modernization of the Trademark Rules
Patents / Willfulness / Attorney-Client Privilege / Work Product Exemption
En Banc Federal Circuit Reverses “Duty of Due Care”
By Paul Devinsky
In a decision that eliminates the “affirmative duty of due care” that has historically been created by simple notice of infringement by the patent owner, a unanimous en banc opinion by the U. S. Court of Appeals for the Federal Circuit overruled its own precedent (Underwater Devices v. Morrison-Knudsen) by holding that willful infringement enhanced damages now requires “at least a showing of objective recklessness.” Moreover, when asserting an opinion of counsel in defense to a willful infringement claim, any waiver of privilege or work product materials no longer normally extends to trial counsel. In re Seagate Technology, LLC, Misc. Docket No. 830, (Fed. Cir., Aug. 20, 2007) (en banc) (Mayer, J., Gajarsa, J. and Newman, J., concurring).
Seagate Technology petitioned for a writ of mandamus seeking to vacate orders of a district court compelling disclosure of materials and testimony that Seagate claims is covered by the attorney-client privilege and work product protection. The Federal Circuit ordered en banc review of three questions:
- Should a party’s assertion of the advice of counsel defense to willful infringement extend waiver of the attorney-client privilege to communications with that party’s trial counsel?
- What is the effect of any such waiver on work-product immunity?
- Given the impact of the statutory duty of care standard announced in Underwater Devices v. Morrison-Knudsen, on the issue of waiver of attorney-client privilege, should this court reconsider the decision in Underwater Devices and the duty of care standard itself?
Elimination of “Duty of Due Care” Standard
After noting that the duty of due care announced in Underwater Devices sets a lower threshold for willful infringement that is “more akin to negligence” compared to the standard used by the Supreme Court in other statutory and civil contexts, i.e., “reckless” violations or “conduct that not merely negligent,” the Court overruled Underwater Devices and held that “proof of willful infringement permitting enhanced damages requires at least a showing of objective recklessness. Because we abandon the affirmative duty of due care, we also reemphasize that there is no affirmative obligation to obtain opinion of counsel.”
As a first step down what may be a long judicial road as to the meaning of “reckless,” the Court announced that “to establish willful infringement, a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent” and that “[i]f this threshold objective standard is satisfied, the patentee must also demonstrate that this objectively-defined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer.”
Attorney-Client Privilege
After noting the divergent results reached by district courts regarding the reach of the waiver of privilege (once privilege was waived by an accused infringer as to an exculpatory opinion offered in defense of a change of willfulness), the Court concluded that “the significantly different functions of trial counsel and opinion counsel advise against extending waiver to trial counsel. Whereas opinion counsel serves to provide an objective assessment for making informed business decisions, trial counsel focuses on litigation strategy and evaluates the most successful manner of presenting a case to a judicial decision maker. And trial counsel is engaged in an adversarial process.”
As for when “willful” behavior was relevant, the Court noted “when a complaint is filed, a patentee must have a good faith basis for alleging willful infringement. So a willfulness claim asserted in the original complaint must necessarily be grounded exclusively in the accused infringer’s pre-filing conduct. By contrast, when an accused infringer’s post-filing conduct is reckless, a patentee can move for a preliminary injunction, which generally provides an adequate remedy for combating post-filing willful infringement.” The Court reasoned that a patentee that does not attempt to obtain a preliminary injunction to stop an accused infringer’s post-filing activities “should not be allowed to accrue enhanced damages based solely on the infringer’s post-filling conduct.” In so holding, the Court recognized that “an accused infringer may avoid a preliminary injunction by showing only a substantial question as to invalidity, as opposed to the higher clear and convincing standard required to prevail on the merits,” but dismissed the concern since “this lessened showing simply accords with the requirement that recklessness must be shown to recover enhanced damages.”
Because the “new” willful infringement inquiry focuses on pre-litigation conduct, the Court concluded that “communications of trial counsel have little, if any, relevance warranting their disclosure.” Thus, on the attorney-client privilege issue the Court concluded “we hold, as a general proposition, that asserting the advice of counsel defense and disclosing opinions of opinion counsel do not constitute waiver of the attorney-client privilege for communications with trial counsel.”
Work Product Exemption
On the work product issue, the Federal Circuit reasoned that the same rationale for limiting waiver of the attorney-client privilege with trial counsel “applies with even greater force” to limit work product wavier “because of the nature of the work product doctrine.” As for the specific issue in this case, the Court noted that “trial counsel’s mental processes, which fall within Convolve’s discovery requests, enjoy the utmost protection from disclosure; a scope of waiver commensurate with the nature of such heightened protection is appropriate.”
The Court then held that “as a general proposition relying on opinion counsel’s work product does not waive work product immunity with respect to trial counsel.”
Judge Gajarsa, in his concurring opinion, presented his analysis as to why the Federal Circuit jurisprudence, which has (in Judge Gajarsa’s words) “grafted” a willfulness requirement onto 35 U.S.C. § 284, ought to be reexamined. In Judge Gajarsa’s opinion, the plain meaning of § 284 does not require willfulness for enhanced damages, and the issue of when an award of enhanced damages is appropriate ought to be left “in the capable hands of the district courts.”
Practice Note: This en banc decision will provide a degree of certainty as to the subject matter and temporal scope of any privilege waiver made when relying on opinions of independent counsel in defense of a charge of willful infringement. Elimination of the “duty of due care” to avoid infringement should tend to lessen the circumstances under which exculpatory opinions of counsel will be sought in the future. However, obtaining an exculpatory opinion, especially when confronted by a patent that is difficult to parse or that matured from a complicated prosecution history, is likely to be a powerful defense against a change of reckless infringement. Absent “chicanery” or the like, the waiver of privilege in that opinion no longer raises a risk that trial counsel communications will be sucked into the scope of waiver Moreover, the Court’s clear implication that willfulness only relates to pre-litigation conduct is likely to eliminate many of the litigation tactics that have driven up defendant’s litigation costs. This temporal limitation, coupled with the new and higher standard of recklessness, is likely to alter the respective bargaining powers at the settlement table since an accused infringer may feel far less threatened by the threat of a treble damage award.
Board of Appeals Imposes Higher Barrier to Overcome Obviousness in the Wake Of KSR
By Patricia E. Chow
In its first precedential decisions since the Supreme Court’s landmark KSR opinion, the U.S. Patent and Trademark Office’s Board of Patent Appeals and Interferences (the Board) considered the issue of obviousness and affirmed final rejections of claims relating to three different inventions on obviousness grounds, heralding a higher standard for overcoming obviousness rejection in the future. In re Smith, Appeal No. 2007-1925 (B.P.A.I., June 25, 2007) (per curiam); In re Catan, Appeal No. 2007-0820 (B.P.A.I., July 3, 2007) (per curiam); In re Kubin, Appeal No. 2007-0819 (B.P.A.I., May 31, 2007) (Linck, APJ).
Obvious to Try—Kubin
The rejected claims in Kubin concern an isolated nucleic acid molecule that binds CD48, a glycoprotein that is a counter-structure to NAIL, a surface marker on natural killer cells that play a key role in the human immune system. The examiner rejected the claims as obvious in light of three prior art references: Valiente, a treatise on molecular cloning by Sambrook and a journal article by Mathews. Valiente disclosed protein p38, which is identical to NAIL, but did not disclose the sequence or coding of p38. Valiente also taught isolation of p38 using conventional techniques, such as those taught in Sambrook. The relevant teachings of Mathews were cumulative to those found in Valiente and Sambrook and demonstrated how routine skill in the art could have been used to clone and sequence the cDNA of a polypeptide similar to p38.
The Board affirmed the examiner’s rejection, finding that at least one of the appellants’ claimed polynucleotides would have been obvious to one of ordinary skill in the art at the time the invention was made. The Board rejected the appellants’ argument that In re Deuel made it improper for the USPTO “use the p38 protein identified in [Valiente] together with the methods such as those [taught in Sambrook] to reject claims drawn to specific sequences,” stating that Deuel was factually distinguishable and not controlling in light of the increased level of skill in the art. Moreover, the Board noted that “the Supreme Court recently cast doubt on the viability of Deuel to the extent the Federal Circuit rejected an ‘obvious to try’ test [in KSR]. Under KSR, it’s now apparent that ‘obvious to try’ may be an appropriate test in more situations than we previously contemplated.” Therefore, the appellants’ isolation of NAIL cDNA would have been obvious to one of ordinary skill in the art because a “skilled artisan would have had reason to try [the isolation methods taught by Sambrook] with the reasonable expectation that at least one would be successful.”
Combination of Old Elements—Smith
The rejected claims in the Smith application were directed to a pocket insert for a book comprised of two sheets of material adhered together in three edges such that the pocket opening faces the book’s binding. A two-part pocket could be formed by adhering an additional strip perpendicular to the book’s binding. The Board affirmed the examiner’s rejection of these claims as obvious in light of three prior art references. The first reference taught forming a pocket for a three-ring binder by folding a sheet of material and using an adhesive to join the edges adjacent to the fold, thereby creating a pocket opening that faces the binder rings. The second reference taught creating a pocket on a flyleaf by adhering a sheet to the flyleaf along three edges, leaving a pocket opening facing the book’s binding. The third reference taught creating a two-part pocket for a photo album by attaching a transparent cover to a display page with three lines of attachment: one along the page’s upper edge, one along its lower edge and one parallel to the upper and lower edges. The Board determined that the Smith claims “were combinations which only unite old elements with no change in their respective functions and which yield predictable results.” Moreover, there was no evidence that “the modifications necessary to effect the combination[s] are uniquely challenging or difficult for one of ordinary skill in the art.”
Substitution of Elements—Catan
The claims at issue in Catan concerned a consumer electronics device using bio-authentication data, such as a fingerprint, to authorize credit transactions over a network. The Board affirmed the examiner’s rejection of these claims as obvious in light of three prior art references. The first prior art reference initially disclosed a consumer electronic device using a PIN or passcode to authorize credit transactions over a network; the only difference between this reference and the Catan invention was that the latter uses bio-authentication data instead of a PIN to authorize transactions. The second prior art reference explicitly taught substituting a voiceprint in place of a PIN to increase authentication security, and the third prior art reference demonstrates that use of bio-authentication data was well known in the art to be more secure than use of a PIN. The Board, quoting KSR, stated, “Where, as here, ‘[an application] claims a structure already known in the prior art that is altered by the mere substitution of one element for another known in the field, the combination must do more than yield a predictable result.’ In that regard, Appellant has provided no evidence that replacing … manual authentication means with … known bio-authentication means yields an unexpected result or was beyond the skill of one having ordinary skill in the art.”
Patents / Declaratory Judgment Jurisdiction
Scant Showing of Future Plans to Infringe Insufficient for Declaratory Judgment
By Krista Vink Venegas, Ph.D
The U.S. Court of Appeals for the Federal Circuit affirmed the dismissal of Nucleonics’ declaratory judgment counterclaims for patent invalidity and unenforceability since no legal threat existed where Benitec voluntarily dismissed its patent infringement claims and granted a covenant not to sue Nucleonics. Benitec Australia, Ltd. v. Nucleonics, Inc., Case No. 06-1122 (Fed. Cir., July 20, 2007) (Whyte, Dist. J.(sitting by designation), Dyk, J., dissenting).
Benitec’s infringement action involved U.S. Patent No. 6,573,099 (the ’099 patent) for RNA-interference technology that prevents expression of disease-causing genes. Nucleonics answered and moved to dismiss Benitec’s premature complaint. Nucleonics’ allegedly infringing conduct involved clinical testing for FDA submission on human disease treatment—exempt from infringement under 35 U.S.C. §271(e)(1). Nucleonics later amended its counterclaims to allege invalidity and unenforceability of the ’099 Patent.
Benitec’s infringement action against Nucleonics dissipated largely due to the Supreme Court’s recent decision in Merck v. Integra Lifesciences, which expanded the pharmaceutical research exception of § 271(e)(1). Consequently, Benitec voluntarily dismissed the infringement action and, in its appellee’s brief, granted Nucleonics a covenant not to sue for its accused human health activities arising before the dismissal. Although no longer faced with an infringement challenge, Nucleonics sought to litigate the invalidity and enforceability of the ’099 patent to remove concerns regarding future activities in animal applications of RNAi technology—not exempt under § 271(e)(1). Consequently, Nucleonics appealed the dismissal of its counterclaims.
The Court found Benitec’s voluntary dismissal of the infringement action and covenant not to sue rendered the existing controversy between the parties resolved. According to the Supreme Court’s recent MedImmune decision, declaratory judgment jurisdiction persists only where the party invoking jurisdiction shows “a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality... .” Applying MedImmune, the panel majority found Nucleonics’ discussions with a third party relating to expansion of RNAi technology into animal husbandry and veterinary products did not meet the “immediacy and reality” requirements, since there had been no manufacture, use, sale or offer to sell patented technology triggering an infringement claim.
In dissent, Judge Dyk argued that 1993 Supreme Court precedent in Cardinal Chemistry permits a counterclaim for invalidity to stand even when the underlying claim of infringement is mooted, unless the patentee demonstrates that there is no possibility of a future controversy with respect to invalidity. Judge Dyk believed the burden was on Benitec to overcome the presumption of an ongoing controversy and that Benitec failed to do so. Interestingly, this is the only Federal Circuit case in which a circuit judge has dissented from an opinion written by a district court judge sitting by designation.
Patents / Patent Term Extension
USPTO Lacks Authority for Interim Term Extension After Request Denied
By David A. Gay
The U.S. Court of Appeals for the Federal Circuit affirmed a district court’s denial of a preliminary injunction seeking to compel the director of the U.S. Patent and Trademark Office (USPTO), Jon W. Dudas, to grant a request for an interim patent term extension. Somerset Pharmaceuticals, Inc. v. Dudas, Case No. 07-1447 (Fed. Cir., July 31, 2007) (Moore, J.).
Somerset Pharmaceuticals is owner of U.S. Reissue Patent No. RE 34,579 (the ’579 patent), which expired on August 18, 2007. Somerset obtained marketing approval from the U.S. Food and Drug Administration (FDA) for its drug product EMSAM®, a transdermal pharmaceutical patch that includes selegiline as the active ingredient.
In April 2007, Somerset filed a Patent Term Extension Application with the USPTO seeking to extend the term of the ’579 patent under 35 U.S.C. § 156. Section 156 provides for the extension of the term of a patent covering an approved product for a portion of the regulatory review process. Earlier, Somerset had filed a request for an interim extension under § 156(e)(2), which requires the director of the USPTO to grant up to a one-year extension under certain conditions prior to a determination on the merits. Somerset also filed suit and a motion for a preliminary injunction seeking to compel the director to act on and grant its request for interim extension. The district court denied that motion on June 29, 2007.
On appeal, Somerset moved to expedite the briefing schedule, which was granted on July 12. On that same day, the director denied both of Somerset’s applications for interim patent term extension and for term extension on the merits, rendering moot that portion of the appeal seeking to compel the director to act on the request for interim relief.
Reviewing the plain language of the statute, the Court concluded that Somerset cannot establish a reasonable likelihood of success on the merits. Section 156(e)(2) gives the director authority to grant an interim extension when the patent for which a term extension is sought “would expire before a certificate of extension is … denied.” The Court reasoned that, because Somerset’s application for extension had been denied on the merits, the director has no statutory authority to issue the interim extension. In a footnote, the Court noted that nothing in its opinion was intended to address any claim that Somerset may have on the underlying merits of the director’s action.
Patents / Declaratory Judgment Jurisdiction
Reinstating Lawsuit Over V-Chip Patents, the Federal Circuit Clarifies Requirements for Declaratory Judgment Action
By Rita Weeks
Addressing whether a district court erred in dismissing a declaratory judgment action, the U.S. Court of Appeals for the Federal Circuit overturned the district court’s dismissal based on lack of an “actual controversy.” The Court instructed that the Supreme Court’s ruling in MedImmune v. Genentech “made clear that a declaratory judgment plaintiff does not need to establish a reasonable apprehension of a lawsuit” to establish that an actual controversy exists. Sony Electronics, Inc. v. Guardian Media Technologies, Ltd., Case No. 06-1363 (Fed. Cir., Aug. 3, 2007) (Prost, J.).
Guardian holds several patents covering “V-Chip” adult content censoring technology. Guardian sent notices of infringement to television manufacturers such as Sony, Matsushita Electric Industrial and Mitsubishi, and later sent detailed claim charts. Four years later, Guardian contacted the manufacturers again, claiming that each owed millions in back royalties but offered to settle the claims through license agreements.
Shortly thereafter, the manufacturers filed declaratory judgment actions. On motion, the district court dismissed the suit for lack of declaratory judgment jurisdiction because Guardian had not explicitly threatened to sue and the circumstances did not imply a threat of immediate suit. Further, even if declaratory jurisdiction existed, the court said it would not hear the case because the question of jurisdiction was “close,” and it felt that the manufacturers were using the case as a negotiation tool and not a means to settle the dispute. Sony appealed.
The Federal Circuit reversed, finding the district court applied the wrong legal standard in light of the Supreme Court’s recent ruling in MedImmune v. Genentech. Judge Prost said that “jurisdiction may be met where the patentee takes a position that puts the declaratory judgment plaintiff in the position of either pursuing arguably illegal behavior or abandoning that which he claims a right to do.”
Under the new standard, the Court determined that the dispute was “manifestly susceptible of judicial determination.” An actual controversy existed because Guardian asserted that it was owed royalties based on the manufacturers’ past and present activities, while the manufacturers contended that they could engage in those activities without a license. Thus, the Court found that the district court had abused its discretion in refusing to hear the action because its decision was based on an erroneous conclusion of law.
Further, the Court was “troubled” by the district court’s inference of a nefarious motive on the part of the manufacturers, noting that it was inappropriate to infer that suit was filed as an intimidation tactic in the absence of affirmative evidence of that fact.
The Court remanded the case to the district court for reconsideration of whether, in the appropriate exercise of its discretion, the case should be dismissed.
Patents / Claim Interpretation
Drafting to Help the Reader May Limit Claim Scope: A Cautionary Tale
By Sabrina Chang
Relying on a narrow reading of the plaintiff’s patent claims, based primarily upon inferences drawn from the patent specification, the U.S. Court of Appeals for the Federal Circuit affirmed a district court’s summary judgment finding of non-infringement. SafeTCare Mfg., Inc. v. Tele-made, Inc., Case No. 06-1535 (Fed. Cir., Aug. 3, 2007) (Gajarsa, J.).
SafeTCare brought a patent infringement action against Burke, alleging that Burke, Inc.’s TriFlex II product infringed SafeTCare’s patent, directed to a bariatric modular bed particularly suited for use by obese patients in hospitals. The patent discloses that its bed’s panels are “pushed” upwards and away by a motor. The district court’s Markman order construed the term “pushing force” in accordance with its plain and ordinary meaning, i.e., “a physical force applied in the direction away from the body exerting it.”
The district court found that the Tri-Flex II operates by lifting the bed’s panels indirectly using a motor, through an actuator and a bracket, to pull the bed upwards. The district court determined, on summary judgment, that Burke did not infringe SafeTCare’s patent because the Tri-Flex II operates in “pull (exertion of a force towards itself), not in push (exertion of a force away from itself) as claimed.” SafeTCare appealed.
SafeTCare argued that the Tri-Flex II panel’s upward motion, away from the motor, is covered by the district court’s construction of the claim term “pushing force.” Although the Federal Circuit agreed with SafeTCare that as a factual matter the alleged infringement created a motion away from the motor, it found that this dispute is not resolved by that factual question. “Rather, the critical question is one of claim construction.” The Federal Circuit focused on the patent specification’s numerous references to “pushing” forces and found that the specification specifically taught away from the use of pulling forces.
Thus, even though the Federal Circuit agreed that the “pushing force” contemplates intermediates and did not require that the motor exert a direct force, by applying the claim construction rules of Phillips the Court nevertheless concluded that the repeated emphasis in the written description on a pushing (rather than pulling force) required the claim to be narrowly construed to require a force that pushes, not pulls. The Federal Circuit concluded that the patentee’s focus on “pushing” inferred that “this attribute of the invention is important in distinguishing the invention over the prior art,” thus disclaiming alternatives.
Practice Note: Patent drafters should ensure that nothing in the patent document is described with over-emphasis or by elimination, i.e., a negative description of alternatives. Such characterization might aid a reader in understanding the invention, but may result in limiting claim scope.
Foreign Priority Document Must Be Filed by or on Behalf of U.S. Applicant
By Stephen K. Shahida
The U.S. Court of Appeals for the Federal Circuit held that for a U.S. patent application to be entitled to claim priority based on a previously filed foreign application, the entity filing the former application must have been acting on behalf of the U. S. inventor at the time of the foreign filing. Boston Scientific/Scimed v. Medtronic Vascular, Case No. 06-1434 (Fed. Cir., Aug. 8, 2007) (Mayer, J.). The appeal stemmed from a district court review filed by Scimed (under 35 U.S.C. § 146) of a decision rendered by the U.S. Patent and Trademark Office (USPTO) on a Board of Patent Appeals and Interferences (Board) in an interference proceeding, where the Board denied Scimed the benefit of its claim to foreign priority under 35 U.S. C. § 119.
The technology at issue related to bifurcated stent-grafts used for treating abdominal aortic aneurysms or AAAs. In the underlying interference, after Scimed changed the inventorship of the application in interference to eliminate all of the inventors named in its (French) priority application, the USPTO granted priority of invention to Medtronic (based on its U.S. filing date), denying Scimed the priority benefit under § 119 of its foreign-filed application. The district court, on cross-motions for summary judgment, affirmed the Board, ruling that § 119 requires the foreign application to have been filed by the inventor who files the later U.S. application or on that inventor's behalf. Scimed appealed.
The Federal Circuit affirmed, relying principally on Vogel v. Jones, a 1973 case by its predecessor court, the Court of Customs and Patent Appeals. The Federal Circuit stated that the right of priority is “personal” to the U.S. applicants and, as such, a U.S. applicant can only obtain the priority benefit of a foreign application that was filed by the U.S. applicant or “on his behalf.” Scimed had argued that such a nexus does not have a temporal requirement and as long as at some point prior to the issuance of the U.S. patent the foreign filer establishes a relationship with the U.S. inventor, the nexus requirement of § 119 is met. The Court disagreed, holding that under § 119 a foreign application may only form the basis for priority “if the application was filed by either the U.S. applicant himself, or by someone acting on his behalf at the time the foreign application was filed.” (Emphasis in original.)
Practice Note: Although the Board in the underlying decision had stated this temporal nexus requirement under § 119 has been a long-standing practice under the law, the Federal Circuit’s explicit pronouncement of the rule highlights the need for vigilant scrutiny when companies with research and development facilities in certain foreign countries file patent applications here and abroad, or when changing inventive entities.
Federal Circuit Finds Research Was Reasonably Related to Submission of Information to FDA
By Astrid R. Spain
Applying the Supreme Court’s 2005 interpretation of the Hatch-Waxman Act (35 U.S.C. § 271(e)(1)), the U.S. Court of Appeals for the Federal Circuit held that experiments were “reasonably related” to research that, if successful, would be appropriate to include in an application to the U.S. Food and Drug Administration (FDA), fell within the statute’s infringement exemption. Integra Lifesciences I, Ltd v. Merck KGaA, Case Nos. 02-1052, -1065, (Fed. Cir., Corrected: Aug. 27, 2007) (Newman, J.; Rader, J., dissenting-in-part).
In its earlier decision, the Federal Circuit affirmed the District Court’s finding that Merck’s activities did not fall within the ambit of the § 271(e)(1) infringement exemption for activities “reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products,” relying on Congress’ perceived intention to balance the interests of patent-holders and generic drug companies, as evidenced by the legislative history of the statute.
On appeal, Supreme Court found that § 271(e)(1) “exempted from infringement all uses of patented compounds ‘reasonably related’ to the process of developing information for submission” to the FDA. The Supreme Court noted that the term “reasonably related” includes uses in research that are conducted after the biological mechanism and physiological effect of a candidate drug have been recognized, such that if the research is successful it would appropriately be included in a submission to the FDA. (See IP Update, Vol. 6, No. 7)
Now on remand from the Supreme Court, the Federal Circuit recited the 16 experimental categories that were undisputedly performed by Merck and co-defendant Scripps Research Institute, along with co-defendant Dr. David Cheresh. Integra reiterated, as it had before the Supreme Court to no avail, that any work that was not included in the Investigational New Drug (IND) application, as well as more than half of the experiments performed by Merck that had nothing to do with either human safety or efficacy, were not properly within the scope of the § 271(e)(1) exemption. Integra took particular issue with the angiogenesis chick CAM assay and the tumor growth chick CAM assay, arguing that experiments with chick embryos do not necessarily or reliably predict safety or efficacy in humans. However, since the Supreme Court had interpreted the statute to encompass experiments directed towards “efficacy, mechanism of action, pharmacology, or pharmacokinetics,” which Integra conceded were the types of experiments at issue, this argument was unavailing. According to the Federal Circuit, the key fact was that “all of the challenged experiments were performed after the discovery that a cyclic RGD peptide inhibited angiogenesis.” According to the Court, this knowledge provided the bright line that distinguished potentially exempt “research” or “discovery” from exempt experiments directed towards “efficacy, mechanism of action, pharmacology, or pharmacokinetics.”
Finally, the parties and the panel majority agreed with the Supreme Court that this case did not involve “research tools” as defined by the National Institutes of Health and thus did not provide an opportunity for the Federal Circuit to decide whether research tools fall within the scope of the § 271(e)(1) exemption.
While concurring as to two of the patents, Judge Rader’s dissent accuses the majority of interpreting the Supreme Court’s decision too broadly based on its inclusion within the exemption of the two other patents in suit, which apply only to laboratory methods “without any possibility of submission to the FDA.”
Experimental Confirmation of Expected Outcome Obvious over Prior Art
By Astrid R. Spain
The U.S. Court of Appeals for the Federal Circuit affirmed a district court’s judgment of non-infringement of two patents relating to cryopreserved human neonatal or fetal hematopoietic stem cells from umbilical cord or placental blood, and reversed the judgment that the patents were not invalid for obviousness. PharmaStem Therapeutics Inc. v. ViaCell Inc., Case Nos. 05-1490, -1551 (Fed. Cir., July 9, 2007) (Bryson, J.; Newman, J., dissenting).
PharmaStem sued six defendants alleging that the defendants had infringed two patents owned by PharmaStem, U.S. Patent No. B1 5,004,681 (the ’681 patent) and U.S. Patent No. 5,192,553 (the ’553 patent), a continuation-in-part of the ’681 patent. The patents in suit recite compositions and methods relating to a medical procedure for treating persons with compromised blood and immune systems. The treatment is based on the discovery that blood from a newborn infant’s umbilical cord is a rich source of a type of stem cells useful for rebuilding an individual’s blood and immune system after that system has been compromised by disease or a medical treatment such as chemotherapy.
Following the jury’s verdict finding infringement of both patents, the district court granted the defendants’ judgment as a matter of law (JMOL) motions and entered a judgment of non-infringement with respect to both patents. The district court agreed with the defendants that, in light of the legal theories pressed by PharmaStem at trial, the evidence failed to show that any of the defendants had infringed any of the asserted claims of either patent in suit. Although granting the defendants’ motions for JMOL as to infringement, the district court denied their motions for JMOL of invalidity with respect to the asserted claims. PharmaStem appealed.
The Federal Circuit agreed with the district court that defendants’ proffered evidence of infringement of the ’681 patent, which consisted almost entirely of advertising materials, did not provide a sufficient basis for a finding of infringement. Overall, the Court found that the evidence failed to establish the central issue of whether the preserved samples contained sufficient numbers of stem cells to effect hematopoietic reconstitution of an adult. The Court also agreed with the district court that PharmaStem had failed to prove that the defendants were guilty of contributory infringement of the ’553 patent and upheld the lower court’s interpretation of the contributory infringement statute to require “a sale or an offer of sale of a product; the statute is not satisfied … by the provision of a service for compensation.” Here, the Federal Circuit noted that the cord blood remained at all times the property of the families whose infants supplied it, and that the defendants merely stored and maintained the blood until it was requested under the terms of a contract between the parties.
Turning to the jury verdict on the issue of obviousness, the Court applied Third Circuit law to the standard of review and limited its inquiry to whether there was substantial evidence supporting the jury’s verdict. The Court stated that the obviousness standard required the patent challenger to show that a person of ordinary skill in the art would have had reason to attempt to make the claimed invention and would have had a reasonable expectation of success in doing so. The Court found no serious question as to whether there was a suggestion or motivation to devise the patented composition or process. The Court noted that the more difficult question was whether the prior art would have given rise to a reasonable expectation that cord blood could be successfully used in transplants for hematopoietic reconstitution. The Court found PharmaStem’s expert testimony that none of the prior art showed that cord blood contains stem cells irreconcilable with statements made by the inventors in the joint specification and with the teachings of prior art references themselves.
In dissent, Judge Newman accused the majority of limiting patentability to the serendipitous and unexpected, in contravention of established patent law, which recognizes that advances of great power may be based as much on persistent and skilled investigation as on the flash of creative genius.
Claim for Pharmaceutical Compound Invalidated for Obviousness-Type Double Patenting
By Mary Boyle, Ph.D.
The U.S. Court of Appeals for the Federal Circuit recently affirmed a district court’s finding of invalidity based for double-patenting and held that a claim to an active pharmaceutical ingredient is invalidated by an earlier claim to a three-element composition that included the active compound. In re Metoprolol Succinate Patent Litig., Case No. 06-1254 (Fed. Cir., July 23, 2007) (Gajarsa, J.; Schall, J. dissenting-in-part).
Generic drug companies applied to the U.S. Food and Drug Administration (FDA) for approval to market generic versions of Toprol-XL, a branded cardiovascular drug containing extended-release metoprolol succinate. The generic applicants made Paragraph IV certifications under the Hatch-Waxman Act that AstraZeneca’s patents listed in the FDA’s Orange Book for Toprol-XL (the ’161 and ’154 patents) were invalid or not infringed by the proposed generic products. AstraZeneca sued the generics for patent infringement. The district court granted summary judgment of invalidity for obviousness-type double patenting on both patents. Obviousness-type double patenting is a judicially created doctrine adopted to prevent claims in separate applications or patents that do not recite the same invention, but nonetheless claim inventions so alike that granting both exclusive rights would effectively extend the life of patent protection. Astra appealed the grant of summary judgment for invalidity of the ’154 patent.
The earlier claim at issue was to an oral pharmaceutical composition that had a core containing “metoprolol succinate” (or one of 10 other active ingredients) with a surrounding inner coating that allowed gradual release and an outer coating that was designed to stay intact until the pill reached the lower digestive tract. The later claim in the ’154 patent was to “metoprolol succinate.” On appeal, the Federal Circuit noted that its 1997 In re Emert decision, which presented closely analogous facts, mandated a finding of invalidity. The panel majority observed that “in this case, Claim 1 of the ’154 patent claiming a compound (A1) is an obvious variation of Claim 8 of the ’318 patent claiming a composition comprised of one compound of an enumerated list (A1, A2, A3, etc.), an inner layer (B), and an outer layer (C),” and therefore that “it would have been an obvious variation of Claim 8 of the ’318 patent to omit the inner layer (B) and the outer layer (C).” Citing the Supreme Court’s decision in KSR, the Federal Circuit also noted that the omission of the known elements from the composition in this case was the product of ordinary skill and common sense rather than of innovation.
Judge Shall’s dissent argued that the claim to the three-element composition A-B-C is, under the law, patentably distinct from a claim to A alone, and that the majority’s holding prevents the issuance of a later claim to an active ingredient when the active ingredient has been patented and marketed as part of a composition.
Capability Not Enough—Infringement Requires Performance
By Paul Devinsky
In a non-precedential but academically interesting decision, the U.S. Court of Appeals for the Federal Circuit, in the context of a business method patent (BMP), vacated and remanded a district court decision, noting that in order to infringe a claimed method, the defendant must actually practice the method, not merely possess the capability to do so. Cybersettle v. National Arbitration Forum, Case No. 07-1092 (Fed. Cir., July 24, 2007) (Bryson, J.).
The National Arbitrators Forum (NAF) is a private corporation that handles arbitration matters. Cybersettle owns a patent on a computerized dispute resolution method. According to the claimed method, disputing parties make settlement bids into a computer. If there is a close-enough match between the parties, the case is settled. A party may pre-submit multiple bids to be used in consecutive bidding rounds.
Cybersettle sued the NAF claiming that the operation of two of NAF’s online dispute resolution systems infringed certain method claims of Cybersettle’s patent. Cybersettle’s claimed method includes the steps of “receiving a plurality of demands [and] a plurality of settlement offers.” On cross-motions for summary judgment, the district court construed the asserted claim as not requiring actual receipt of multiple offers and demands, but simply the capacity to receive multiple offers and demands and entered summary judgment for Cybersettle. NAF appealed.
The Federal Circuit vacated, noting that “[a] patented method is a series of steps, each of which must be performed for infringement to occur. It is not enough that a claimed step be capable of being performed.” The Court emphasized, “[a] party that does not perform a claimed step does not infringe a method claim merely because it is capable of doing so.”
Practice Note: As of the time of the district court proceeding, it is reported that the accused NAF computer system had generated no revenue and Cybersettle had been granted no damages at the district court—simply an injunction. NAF nevertheless took the appeal to vindicate what it perceived to be an incorrect district court opinion that required clarity as to what the Cybersettle’s patent actually covered. Neither party raised the issue of whether business method patents, such as the one in issue here, comprise patentable subject matter under 35 U.S.C. § 101 or questioned the continuing vitality of State Street Bank, an issue the Federal Circuit is all but certain to speak to when deciding on several pending cases including In re Nuijten, In re Comiskey, In re Bilski and In re Ferguson.
Patents / Litigation / Procedure
Initial Opinion on Time for Responding to Amended Complaint Clarified on Remand
By Paul Devinsky
The U.S. Court of Appeals for the Federal Circuit, responding to Kraft’s petition for rehearing, has reiterated that the time period to assert a counterclaim in the face of an amended complaint was not tolled by a motion to dismiss. General Mills, Inc. v. Kraft Foods Global, Inc., Case Nos. 06-1569, -1606 (Fed. Cir., July 31, 2007) (Linn, J.).
In its initial opinion in this case (IP Update, Vol. 10, No. 6) the Federal Circuit affirmed the district court’s decision that Kraft did not have a counterclaim pending at the time judgment was entered. Although Kraft asserted a counterclaim against General Mills in response to its original complaint, General Mills subsequently filed an amended complaint, which Kraft successfully moved to dismiss. The Federal Circuit held that Kraft’s filing of its motion to dismiss did not toll its deadline to answer the amended complaint and reassert its counterclaim. Kraft petitioned for rehearing, arguing that the Federal Circuit’s decision undermines the “clearly expressed intent” of Rule 12—to permit certain defenses, including failure to state a claim upon which relief can be granted, to be raised by motion instead of in a responsive pleading.
In its decision on rehearing, the Court emphasized that Rule 12(a)(4), by its express terms, only alters “the periods of time enumerated in Rule 12(a)(1)-(3), which does not include the period of time to answer an amended complaint.” That time period (10 days) is specifically covered by Rule 15(a). “The language of the rule is unambiguous. Rule 12(a)(4) does not extend the time for filing an answer to an amended complaint when ‘the time remaining for response to the original pleading’ has elapsed.”
The Court noted that the only time Rule 12 (a)(4)(A) will apply to responses to amended pleadings is “when there is ‘time remaining for response to the original pleading’—for example, when a plaintiff amends her complaint as a matter of right before serving the defendant or before the defendant answers.”
According to the Court, Kraft should have filed its Rule 12(b) motion and also answered before the Rule 15 deadline, asserted its Rule 12(b) defense in the answer itself or sought an extension of time (from the Rule15 time period) from the district court.
Finally, the Court agreed with Kraft that it did not “abandon” its counterclaim by missing the deadline for filing an amended answer. Rather, the Court amended its prior opinion to hold only that Kraft did not have a counterclaim “pending” when judgment was entered.
Belgian Court Rules Against Internet Provider for P2P Copyright Piracy on Its Network
By Elena Kostadinova and Mélanie Bruneau
The Brussels Court of First Instance set an EU-wide precedent by ruling that the Belgian internet service provider (ISP) must install a filter to prevent internet users from downloading music illegally via peer-to-peer (P2P) software. SABAM vs. Scarlet SA, Case No 04/8975/A, (Bru. Ct. of First Instance, June 29, 2007) (Wansart, J., Heilporn, J.).
The ruling ended a three-year battle by the Belgian Society of Authors, Composers and Publishers (SABAM) for an injunction against Scarlet for copyright violations. The court had earlier agreed that SABAM had an interest in obtaining an injunction against Scarlet, in the latter’s capacity of intermediary ISP. The court established copyright violations through the unauthorized exchange of music files through P2P software and ordered an expert to assess whether technological solutions could prevent illicit downloads. Out of seven proposed solutions, the court preferred the Audible Magic’s CopySense Network Appliance because it was the only program that could distinguish music from other content exchanged via the P2P network. The court expert considered serious problems that would need to be confronted by implementing program filters, such as the fact that the program’s effectiveness would diminish rapidly as more encrypted (undetectable) files were exchanged and the expense of adapting the CopySense program to cope with Scarlet’s heavy traffic volume. However, the court ignored these reservations, noting that P2P networks require all information to be legible, other ISPs had used CopySense successfully and the estimated investment costs could be recouped within three years by charging EUR 0.50 per month to each of Scarlet’s 150,000 clients.
In its defense, Scarlet argued that the requested technical measures would impose on Scarlet a general obligation to monitor all P2P information it transmits or stores, contrary to Article 15 of the EU Directive 2000/31 [1]. Further, Scarlet argued it was not liable for the information it transmits by reason of Article 12 of the directive. Finally, Scarlett argued that CopySense is similar to interception tools that violate the fundamental human rights to private life, confidential correspondence and freedom of expression.
The court rejected Scarlet’s defenses, noting that Scarlet would not be monitoring transmitted and stored information because CopySense is a technical tool used to block or filter information. Furthermore, the directive does not preclude the use of digital surveillance technology and does not bar the court from issuing orders to prevent infringements. Finally, since software filters do not identify internet users or process personal data, the court held that they do not infringe fundamental privacy rights.
The Court gave Scarlet six months to introduce one of the proposed solutions, preferably CopySense, or face a fine of EUR 2,500 per day if they fail to do so.
This is a landmark decision because it does not target the individuals illegally uploading music, but forces ISPs to actively prevent copyright abuse. Scarlet is appealing, while SABAM is seeking to have similar measures applied to other ISPs.
[1]Directive 2000/31/EC of The European Parliament and of the Council of June 8, 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market.
Federal Circuit Makes D.C. Swallow its Own Medicine
By Eric Hinkes
The U.S. Court of Appeals for the Federal Circuit affirmed a district court’s ruling that the District of Columbia’s Prescription Drug Excessive Pricing Act of 2005 (the Act) is preempted by federal patent laws and facially unconstitutional as invalidated by the Commerce Clause of the United States Constitution. Biotechnology Indus. Org. v. District of Columbia, Case No. 06-1593 (Fed. Cir., Aug. 1, 2007) (Gajarsa, J.).
According to the Act, “[a] prima facie case of excessive pricing shall be established where the wholesale price of a patented prescription drug in the District is over 30% than the comparable price in any high income country in which the product is protected by patents or other exclusive marketing rights.” Once a prima facie case of “excessive pricing” is shown, the burden shifts to the defendant to prove that the price is not excessive.
Pharmaceutical Research and Manufacturers of America (PhRMA) and Biotechnology Industry Organization (BIO) initially filed suit in the United States District Court of the District of Columbia, alleging that the Act was invalid as it violated the Commerce Clause of the Constitution and was further preempted by federal patent laws. The district court consolidated the two actions and issued an opinion stating that the Act was preempted by federal patent laws and invalidated by the Commerce Clause of the Constitution. The District appealed the preemption ruling.
On appeal, the Federal Circuit initially found that it had subject matter jurisdiction to hear the case because, while patent law did not “create” the cause of action, it was a necessary element of the case. As to the issue of standing, the Federal Circuit found that members of both plaintiff organizations had shown that the Act threatens them with “concrete, imminent injury” due to the “realistic danger of sustaining a direct injury as a result of the statute’s operation or enforcement,” and thus satisfied the elements of causation and redressability.
The Court next addressed the preemption argument. While acknowledging the lack of an express provision in the patent statute that prohibits states from regulating the price of patented goods, the Court stated that “state law must yield to congressional enactments if it ‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.’” The Court pointed out that Congress has decided that patentees’ present amount of exclusionary power, the present length of patent terms and the present conditions for patentability represent the best balance between exclusion and free use. The Court also noted that the Act applies only to patented drugs and represented an attempt by the District of Columbia to change federal patent policy within its borders. The Court stated that the underlying determination about the proper balance between innovators’ profit and consumer access to medication is exclusively one for Congress to make. Accordingly, the Court held that the Act stood as an obstacle to the congressionally established balance of objectives for federal patent law and thus preempted by federal patent law.
Trademarks / Classification of Goods
Request for Particularized Description in Trademark Registration Not Abuse of Discretion
Terry W. Ahearn
Addressing whether the registrant’s U.S. trademark description can be more particularized than the international classification of goods, the U.S. Court of Appeals for the Federal Circuit affirmed the decision of the Trademark Trial and Appeal Board (TTAB) that the United States Patent and Trademark Office (USPTO) has the discretion to require a more precise statement of goods. In Re Omega Sa (Omega AG) (Omega Ltd.) Case No. 06-1234 (Fed. Cir., July 23, 2007) (Newman J.).
Omega applied for a U.S. trademark on AQUA TERRA in Class 14 for “jewelry, precious stones; watches, watch straps, watch bracelets and parts thereof; chronometers, chronographs, watches made of precious metals, watches partly or entirely set with precious stones in International Class 14.” The USPTO refused to register the trademark unless Omega amended its application to limit “chronographs” to “chronographs for use as watches” on the grounds that the term “chronograph” can refer to both “watches” in Class 14 as well as “time recording instruments” in Class 9.
Omega did not dispute the finding that “chronograph” in Class 14 can also designate “time recording instruments” in Class 9. Omega declined, however, to amend its application. Omega argued that the requested limitation was unnecessary under the Trademark Manual of Examination Procedures (TMEP) and would lead to inconsistent application of U.S. trademark laws since the only “chronographs” in Class 14 were watches. Omega further argued that it already had foreign and domestic registrations in Class 14 without such a limitation and requiring one on this application would adversely affect Omega’s other trademarks in that class.
The USPTO responded by arguing that U.S. registrations are not governed by international classification, nor by the existence of other foreign and domestic registrations in the same class. The USPTO argued that such an unfettered description of goods could allow Omega to assert the proposed trademark on “time recording instruments,” although Omega would not be using the trademark on such goods. The USPTO argued that the requested limitation in the current application could not be used against any of Omega’s existing trademarks.
The Court held that the USPTO has discretion to require a more particularized description in U.S. trademark applications than the international classification of goods, as long as such requirements are not extreme or unreasonable. Although the Court was doubtful whether the USPTO’s concerns were realistic, the Court held that confusion or conflict between similar trademarks registered in Class 9 and Class 14 could be avoided without harm to Omega’s trademarks. The Court also confirmed the general rule that that the definition of goods in one registration does not taint the definition of similar goods in any other registration.
Commodity Settlement Prices Subject to Copyright Merger Doctrine
By Brian W. Nolan
The U.S. Court of Appeals for the Second Circuit affirmed the district court’s grant of summary judgment and rejected allegations of copyright infringement by the New York Mercantile Exchange (NYMEX) against IntercontinentalExchange, Inc. (ICE). New York Mercantile Exchange, Inc., v. IntercontinentalExchange, Inc., Case No. 05-5585 (2nd Cir., Aug. 1, 2007) (Katzmann, J.; Hall, J., concurring-in-part).
The dispute boiled down to an attempt by NYMEX to prevent ICE from utilizing NYMEX-generated settlement prices to clear trades. NYMEX claimed that its determination of settlement prices results from independent authorship having at least a minimal degree of creativity, thus entitling the settlement prices to copyright protection. Without reaching a decision on whether NYMEX’s settlement prices were copyrightable, the Second Circuit rejected NYMEX’s allegations of copyright infringement. The Second Circuit anchored its rejection in the merger doctrine, which forecloses allegations of infringement in those instances where there is only one or a few ways of expressing an idea such that finding copyright infringement would be akin to granting a copyright on the idea itself.
NYMEX is an exchange for trading futures and options on energy commodities and consists of a physical trading floor located in New York. In order to clear its trades at the end of the day, NYMEX must set a settlement price to allow for the valuation of open positions. Additionally, the U.S. Commodity Futures Trading Commission requires NYMEX to generate and disseminate these prices. The NYMEX Settlement Price Committee is charged with the task of determining the settlement price for each open futures contract on each commodity. NYMEX argues its generation of these prices is copyrightable.
ICE is an internet-based commodities market that does not clear its own trades, but contracts with the London Clearing House to do so. In order to clear these trades, ICE obtains NYMEX’s settlement prices from a subscriber to NYMEX services and forwards those settlement prices to the London Clearing House to effectuate the clearance of ICE customers’ trades. It is this activity that NYMEX sought to prevent through its copyright infringement suit.
The district court granted ICE’s motion for summary judgment, finding the settlement prices to be “real-world facts” that are not eligible for copyright protection and that the idea represented by the settlement price merged with the expression of it. Alternatively, the district court found that the settlement prices are “non-copyrightable words or short phrases.” NYMEX appealed.
The Second Circuit affirmed. Even assuming the settlement prices merit copyright protection, the majority concluded that because the settlement prices had to be numerical and based upon underlying market data, few manners of expression existed to represent these prices and thus the merger doctrine foreclosed NYMEX’s claim.
Judge Hall filed a concurring opinion in which he agreed with the majority’s application of the merger doctrine, but disagreed with the majority’s dicta concerning whether there exists a strong argument that the settlement prices are merely facts not eligible for copyright protection. Judge Hall read existing precedent to require an extremely low threshold to demonstrate originality and criticized the majority’s statements on this point as implying a higher threshold exists.
Copyrights / Jurisdiction and Procedure
Online Defamation Case Dismissed For Lack Of Personal Jurisdiction
By Philip Canelli
The U.S. Court of Appeals for the Second Circuit has held that an out-of-state website operator cannot be sued in a New York court based solely on the posting of allegedly libelous material on a website. Best Van Lines, Inc. v. Tim Walker, Case No. 04-2934 (2nd Cir., June 26, 2007) (Sack, J.).
Defendant Timothy Walker, a resident of Waverly, Iowa, operates a website, MovingScam.com, out of his home. As its name suggests, the website provides consumer-related comments, most of them derogatory, about household movers in the United States. In August 2003, Walker posted statements on the site asserting that Best Van Lines was operating without legal authorization and without the proper cargo insurance required by law.
In response to the disparaging post, Best Van Lines instituted a lawsuit in the Southern District of New York alleging that it was defamed on Walker’s website. Walker moved to transfer the action to the Southern District of Iowa and alternatively to dismiss the action for lack of personal jurisdiction.
The district court granted Walker’s motion to dismiss on the ground that CPLR §302(a), New York’s “long-arm” statute, did not give the New York court personal jurisdiction over Walker. Best Van Lines appealed.
Addressing the issue of online defamation for the first time, the appeals court affirmed the district court’s dismissal, finding that New York case law establishes that making defamatory statements outside of New York about New York citizens does not, without more, provide a basis for jurisdiction, even when those statements are published in media accessible to New York readers. Specifically, the panel held that Best Van Lines failed to allege facts sufficient to show that Walker had transacted business in New York for purposes of CPLR §302(a)(1) or that its suit arose from such transactions for purposes of long-arm jurisdiction.
Practice Note: Even though New York’s “long-arm” jurisdiction statute (CPLR §302(a)), which governs out-of-state acts that injure a New York plaintiff, explicitly excludes defamation cases, the Second Circuit noted that a state court can claim jurisdiction over a non-domiciliary under CPLR §302(a)(1) if the defendant transacts any business within the state or contracts anywhere to supply goods or services to the state. To satisfy the “transacting business” requirement of New York’s long-arm statute, one would have to show that a defendant’s internet postings or other activities were the kind of activity by which the defendant purposely avails itself of the privilege of conducting activities within New York, thus invoking the benefits and protections of its laws, and over which the New York legislature intended New York courts to have jurisdiction.
USPTO Issues New Continuation Rules
By Paul Devinsky
On August 21, 2007, the U. S. Patent and Trademark Office (USPTO) published new rules that, in the words of the USPTO, are designed to “allow the agency to continue to make the patent examining process more effective and efficient.”
Under the new rules, an application or chain of continuing applications may include two continuing applications (continuation or continuation-in-part applications) and a single request for continued examination (RCE) in any one of these three applications (the initial or two continuing applications), without justification. However, the USPTO is revising the rules of practice “to require that any third or subsequent continuing application that is a continuation application or a continuation-in-part application, and any second or subsequent request for continued examination in an application family, be filed to obtain consideration of an amendment, argument, or evidence, be supported by a showing as to why the amendment, argument, or evidence sought to be entered could not have been previously submitted.” In other words, applicants seeking additional continuations will be required to explain why the filing is necessary. Current practice allows applicants to file an unlimited number of continuations. The applicant may file divisional applications to the non-elected invention(s) only if the USPTO issues a restriction requirement in the prior application.
Under the new rules, the USPTO will also limit the number of claims an applicant may include in an initial application to 25, no more than five of those independent. If any application includes more than 25 claims, the applicant will be required to include a prior-art search and a filing that explains how their invention differs from the prior art.
Also under the new rules, the applicant must identify other commonly owned pending applications or patents that have a claimed filing or priority date within two months of the claimed filing or priority date of the application and name at least one inventor in common with the application. In addition, the applicant must also file a terminal disclaimer or explain how the applications (or application and patent) contain only patentably distinct claims if the applications also have the same claimed filing or priority date and contain substantial overlapping disclosure. The USPTO may require the applicant to put all of the patentably indistinct claims in a single application unless there is good reason for multiple copending applications having patentably indistinct claims.
In approving the new rules, the USPTO noted that “placing conditional boundaries on a previously unbounded process provides for more certainty and clarity in the patent process. The result is that application quality will be improved and piecemeal or protracted examination will be avoided, enhancing the quality and timeliness of both the examination process and issued patents.”
The new rules are scheduled to go into effect November 1, 2007. According to the USPTO, the new rules are the result of the ever increasing number of continuation filings. In 2006, almost 30 percent of applications were continuation requests, up from 27 percent in 2005 and 25 percent in 2004.
The new rules were published in the Federal Register on August 21, 2007 and can be found on-line at the PTO website (www.USPTO.gov). An analysis of the rules changes will be presented in the September edition of the IP Update.
Modification and Modernization of the Trademark Rules
By Natalie A. Ward
On August 1, 2007, the United States Patent and Trademark Office (USPTO) posted its final rule on amendments to the Trademark Rules of Practice, which govern Trademark Trial and Appeal Board (Board) proceedings. The amended rules implement a direct-service approach for the commencement of Board proceedings and a disclosure model that requires mandatory party disclosures and standard protective orders. Other miscellaneous changes to the rules eliminate CD-ROM submissions, allow parties to electronically exchange documents with consent and otherwise clarify and conform the rules to current practice.
By making these changes, the USPTO seeks to maximize the efficiency of Board proceedings. The amendments are effective November 1, 2007, except for minor changes that will be effective August 31, 2007.
Direct-Service Approach for Commencement of Proceedings
Under the amended rules, the Board plaintiffs will assume the initial responsibility of service on the defendants. Board plaintiffs include opposers filing notices of opposition against published trademark applications, petitioners for cancellation of trademark registrations and concurrent-use applicants filing claims of right to concurrent-use registrations. Opposers and petitioners will thus initiate proceedings by concurrently filing a complaint with the Board and directly effecting service on the defendant(s) or designated representative at the correspondence address, as identified by the USPTO’s Trademark Applications and Registration Retrieval (TARR) system. If a plaintiff is unable to effect service at the address provided, plaintiffs have 10 business days to notify the Board, which will then assume responsibility for service.
Except for concurrent-use applicants, plaintiffs bear no further obligation to search or otherwise investigate the defendant’s correspondence data, but must notify the Board of any new contact information for the defendant or other interested parties that comes to a plaintiff’s attention. If the Board’s notice is returned or undelivered, notice by publication will be effected through the Official Gazette.
Modified Disclosure Model
The mandatory disclosure model requires parties to engage in a disclosure/discovery/settlement conference and exchange initial, expert and pretrial disclosures within regulatory time frames. This change is intended to facilitate earlier settlement of Board cases, increase the efficiency of discovery and prompt parties to exchange potentially dispositive information early on without the formality of discovery requests.
The disclosure schedule may be modified by stipulation of the parties (subject to Board approval), motion granted by the Board or order of the Board. In the absence of jurisdictional claims (e.g., lack of Board jurisdiction, claim or issue preclusion), parties may not seek traditional discovery or move for summary judgment until they have made initial disclosures. The new disclosure regime also subjects all Board proceedings to a standard protective order that may be modified by stipulation. Parties may also move for an alternate order under the Federal Rules of Civil Procedure.
The full text of the USPTO’s Final Rule is available at http://www.uspto.gov/web/offices/com/sol/notices/72fr42242.pdf.
