Secretary Locke Leaving Commerce Dept.?

Press reports indicate that Commerce Secretary Gary Locke is expected to become the next US ambassador to China, taking over for Jon Huntsman.  In a March 9 press release, President Obama stated

In replacing Ambassador Huntsman, I can think of nobody who is more qualified than Gary Locke.  More than 100 years ago, Gary’s grandfather left China on a steamship bound for America, where he worked as a domestic servant in Washington State.  A century later, his grandson will return to China as America’s top diplomat.

[A]s Commerce Secretary, Gary oversaw a Census process that ended on time and under budget, returning $2 billion to American taxpayers.  He’s earned the trust of business leaders across America by listening to their concerns, making it easier for them to export their goods abroad, and dramatically reducing the time it takes to get a patent.  When he’s in Beijing, I know that American companies will be able to count on him to represent their interests in front of China’s top leaders.

Locke enjoys overwhelming support from various groups, and is expected to breeze through the confirmation process.

For more, see

Just-Style.com, "US: Apparel industry backs Locke as top China diplomat" (link)


AGIPNews: "Locke Nomination for China Ambassadorship Encouraging for Copyright Holders" (link)

China Hearsay: "Gary Locke to be Next US Ambassador to China. And There Was Much Rejoicing" (link)

Fed. Cir. Takes False Marking Down Another Peg, Holds Claims Must Be Pled "With Particularity"

In re BP Lubricants UA Inc., Misc. Docket No. 960 (Fed. Cir., March 15, 2011)

BP's CASTROL motor oil products are distributed in a unique bottle design for which BP received a design patent.  The patent expired in 2005, but BP continued to mark its bottles with the patent numbers.  Respondent Thomas A. Simonian (a patent attorney) filed a qui tam relator complaint under 35 U.S.C. §292.

BP attempted to dismiss Simonian's complaint in the district court under FRCP Rule 9(b), which provides:

In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, in-tent, knowledge, and other conditions of a person’s mind may be alleged generally.

When the district court concluded the complaint stated an actionable claim, BP petitioned the Federal Circuit for a writ of mandamus seeking to dismiss the complaint.  The Fed. Cir. granted the petition in this regard, noting that FRCP Rule 9(b)'s particularity requirement for false marking was "one of first impression for this court."

Simonian's complaint asserted mostly "upon information and belief" that: (1) BP knew or should have known that the patent expired; (2) BP is a sophisticated company and has experience applying for, obtaining, and litigating patents; and (3) BP marked the CASTROL products with the patent numbers for the purpose of deceiving the public and its competitors into believing that something contained or embodied in the products is covered or protected by the expired patent.

The Federal Circuit found this sort of pleading deficient:

A plaintiff is not empowered under the Rules “to plead the bare elements of his cause of action, affix the label ‘general allegation,’ and expect his complaint to survive a motion to dismiss.” . . . Instead, a complaint must in the § 292 context provide some objective indication to reasonably infer that the defendant was aware that the patent expired . . . Because the relator’s complaint here provided only generalized allegations rather than specific underlying facts from which we can reasonably infer the requisite intent, the complaint failed to meet the requirements of Rule 9(b).

* * *

First, relator contends that asserting in the complaint that BP is a “sophisticated company and has experience applying for, obtaining, and litigating patents” is enough under Rule 9(b). This court disagrees. That bare assertion provides no more of a basis to reasonably distinguish a viable complaint than merely asserting the defendant should have known the patent expired. Conclusory allegations such as this are not entitled to an assumption of truth at any stage in litigation.

Second, relator contends that a false marking inherently shows scienter. This argument is also unpersuasive. In Merck & Co., v. Reynolds, 130 S. Ct. 1784, 1793 (2010), the Supreme Court stated “[w]e recognize that certain statements are such that, to show them false, is normally to show scienter.” The Court gave as an example one claiming “I am not married” when in fact the person is married. Id. However, in other contexts where the relationship between factual falsity and state of mind is not nearly as apparent, Merck rejected this proposition. Id. This situation clearly falls into the latter category, requiring more than a mere statement.

Third, relator contends that unlike the inequitable conduct claim featured in Exergen, false marking is “anonymous” and is not an individualized fraud. . . . Overlooked by the relator is that the naming of specific individuals is not the only way to set forth facts upon which intent to deceive can be reasonably inferred. In an amicus brief, the United States points out that a relator can, for example, allege that the defendant sued a third party for infringement of the patent after the patent expired or made multiple revisions of the marking after expiration. None of these or similar assertions are present in the complaint here.

Read/download a copy of the opinion here (link).

FTC Issues 300-Page Report on IP Marketplace; Provides over 50 Recommendations for Improving Patent System

In 2008-2009, the Federal Trade Commission (FTC) held 8 days of hearings across the country on the U.S. patent system and its effect on innovation.  After compiling public comments and conducting additional research, the FTC released a new report today titled The Evolving IP Marketplace: Aligning Patent Notice and Remedies With Competition: A Report of the Federal Trade Commission.

The report supplements the earlier (2003) report titled To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy, and continues to maintain many of the criticisms of the patent system, namely, (1) too many patents are ambiguous, (2) too many patents have an indeterminate scope, (3) too many patentees are exploiting the courts solely for monetary purposes, and (4) too many infringers are paying "excessive" awards.

A fair amount of the 2011 report is a bit "old hat" in that it rehashes the same issues discussed in the 2003 report.  However, the new report places a greater focus on patent "notice" and asks for a much harder line on patentees in the area of section 112 and on defining claim scope.

Some of the recommendations are benign

"[i]n assessing indefiniteness, the PTO should adhere to the principle articulated in Miyazaki,"

but then slide into the slightly odd

"patent applicants [should] be required either (i) to designate a dictionary for use in assigning meaning to terms not defined in the application or (ii) to acknowledge acceptance of a PTO designated default dictionary for that purpose,"

and ultimately the really odd:

"[d]eterminations regarding whether a disclosure requires undue experimentation should give recognition to the competitive significance of the time required for experimentation; when product life-cycles are short, greater disclosures may be needed in order to be competitively meaningful."

As before, the FTC is urging that the USPTO to employ more "Rule 105" Requirements for Information (see MPEP 704.10), which allows the PTO to require the submission of information “reasonably necessary to properly examine or treat the matter” and also require information “reasonably calculated to lead to such relevant information."

On the damages side, the FTC again calls for a "prior art subtraction" in damages, and also recommends the application of a "prior use" (or "intervening rights") defense in the cases of continuations.  Also, instead of prohibiting continuations outright, the FTC recommends

[T]he enactment of legislation to protect from infringement actions third parties who (i) infringe patents only because of claim amendments (or new claims) following a continuation and (ii) developed, used, or made substantial preparation for using, the relevant product or process before the amended (or newly added) claims were published.

Of course, there are many proposals in this report that are sure to spark considerable debate.  One interesting side note is that the FTC has altered its nomenclature to distinguish between NPE's and "patent assertion entities":

This report uses the term “patent assertion entity” rather than the more common “non-practicing entity” (NPE) to refer to firms whose business model focuses on purchasing and asserting patents. Taken literally, the term NPE encompasses patent owners that primarily seek to develop and transfer technology, such as universities and semiconductor design houses. Patent assertion entities do not include this latter group.

Needless to say, the FTC is not a big fan of PAEs:

The business model of PAEs focuses on purchasing and asserting patents against manufacturers already using the technology, rather than developing and transferring technology.  Some argue that PAEs encourage innovation by compensating inventors, but this argument ignores the fact that invention is only the first step in a long process of innovation. Even if PAEs arguably encourage invention, they can deter innovation by raising costs and risks without making a technological contribution.

Read/download a full copy of the report here (link)

Byproduct of Patent Reform Act - More Satellite Offices (Denver, You May Be Next)

Yesterday, Colorado senators Mark Udall and Michael Bennet slipped in an amendment to S.23, authorizing the USPTO to create "three or more" regional satellite patent offices across the country in the next three years.  The Senate passed the amendment on a voice vote.  As a side note (and by sheer coincidence), the PTO passed over Denver and selected Detroit for its first satellite office back in December.

See Denver Business Journal: "U.S. Senate OKs amendment to add patent offices" (link).

Debate on patent reform continues today in the Senate, and a vote is expected shortly after.  Between February 28 and March 2, twenty-nine amendments have been proposed for the legislation, with more likely to follow.  To view the amendments to date, see here (link) and here (link).

Stay tuned . . .

POOF! $1.67B Verdict Overturned by Federal Circuit, Patent Invalidated Over Written Description

Centocor Ortho Biotech Inc et al v. Abbott Laboratories et al., No. 2010-1144 (Fed. Cir., Feb. 23, 2011) 

In 2009, Johnson & Johnson's biotech unit Centocor was awarded a $1.67B damages award for infringement of a patent on a genetically engineered antibody that blocks the action of a type of immune system cell ("TNF" or tumor necrosis factor).  Generally, TNF is considered the "messengers" of the immune system, and stimulates inflammation, a key problem in immune system disorders.

On Appeal, Centocor's patent was challegend for invalidity for lack of written description and in view of an Abbott patent that disclosed the claimed antibody, but was antedated by Centrcor's 1994 parent application by the lower court.  A brief synopsis of Centcor's patent family follows:

Centocor filed a patent application disclosing both its A2 mouse antibody and the chimeric antibody in 1991 . . . Centocor subsequently filed a series of continuation-in-part (“CIP”) applications. In 1993, [and] the U.S. Patent and Trademark Office (“PTO”) rejected certain pending claims in a CIP application because they encompassed antibodies with “less than an entire mouse variable region.” . . . Instead of responding to the rejections, Centocor filed a new CIP application and abandoned the pending application. In due course, the PTO issued the same rejection. Again, instead of responding, Centocor abandoned its application and filed three substantially identical CIP applications in 1994. These 1994 CIP applications added new matter that Centocor now [relied] on as evidence of written description to support the asserted claims. Although Centocor made these few additions, it did not present claims to human variable regions when it filed the 1994 CIP applications.

While Centocor focused its efforts on making a chimeric antibody, Abbott pursued an alternative path and sought to engineer a fully-human antibody. Abbott decided to work with collaborators to construct a fully-human antibody from scratch, and ended up filing a patent application disclosing a high affinity, neutralizing, fully-human antibody to human TNF-α in 1996, which ultimately issued as a patent.

After the grant of Abbott’s patent and after regulatory approval of Abbott's drug Humira®, Centocor filed its claims to fully-human antibodies. Because the patent family disclosing Centocor’s own chimeric antibody was still pending in 2002, Centocor filed the claims as part of a thirteenth application in the family, explicitly claiming human variable regions and fully-human antibodies.

After reviewing the "four corners" of Centocor's 1994 parent, the Federal Circuit concluded that there was inadequate written description to cover fully-human antibodies.

Contrary to Centocor’s assertions, very little in the ’775 patent supports that Centocor possessed a high affinity, neutralizing, A2 specific antibody that also contained a human variable region. The overwhelming majority of the ’775 patent describes the A2 mouse antibody and the single chimeric antibody that Centocor made based on A2’s mouse variable region . . . However, the mouse variable region sequence does not serve as a stepping stone to identifying a human variable region within the scope of the claims.  The undisputed trial testimony indicated that the sequence of Centocor’s mouse variable region was “very different” from the sequence of a human variable region like the one in Abbott’s fully-human antibody.

[Centocor's expert] was able to point to only a few sentences sprinkled throughout the ’775 patent that mention human antibodies or human variable regions at all . . . [A second expert]  testified that references in the patent addressing phage display “describe[] very general library technologies that could be used to make antibodies, including human antibodies,”. . . but they do not teach how to isolate or use such antibodies. The fact that a fully-human antibody could be made does not suffice to show that the inventors of the ’775 patent possessed such an antibody.

* * *

In view of the lack of written description in the specification for fully-human, A2 specific, neutralizing, high affinity antibodies, Centocor’s argument that an inventor need not physically make an invention to claim it misses the mark. Indeed, we have repeatedly indicated that the written description requirement does not demand either examples or an actual reduction to practice. . . . What it does demand is that one of skill in the art can “visualize or recognize” the claimed antibodies based on the specification’s disclosure.  In other words, the specification must demonstrate constructive possession, and the ’775 patent’s specification fails to do so.  Centocor’s asserted claims to fully-human antibodies “merely recite a description of the problem to be solved while claiming all solutions to it.”  The actual inventive work of producing a human variable region was left for subsequent inventors to complete.

REVERSED

Read/download a copy of the opinion here (link).

Are Patent Damages "Excessive?" New Study Suggests That They Aren't

As part of the ongoing debate over patent reform, Michael Mazzeo, Jonathan Hillel and Samantha Zyontz set out to empirically analyze damage awards from 1995 to 2008 and establish if a systematic or pervasive problem of "excessive" damages exist.

From the Abstract:

In their arguments for patent reform, proponents have cited cases with very large damage award amounts as evidence of pervasive “excessive” damages. This paper uses economic value of patents as a benchmark for comparison to conduct a systematic empirical analysis of patent damage awards to get a more complete understanding of the scope of the potential problem of “excessive” damage awards. We build a dataset consisting of information about damage awards in a comprehensive list of 340 cases decided in US federal courts between 1995 and 2008, supplemented with information about the litigants, their lawsuits and the economic value of the patents-at-issue. Our findings demonstrate that the largest awards dominating the conversation come from isolated cases: damage awards in the largest eight cases represent over 47% of total damages in our database. We build an econometric model based on our supplementary data that explains nearly 75% of the variation in observed damage award amounts, suggesting the awards are highly predictable and correlated with economic value of patents. We argue that the empirical results do not establish an argument for substantial patent reform based on a pervasive problem with “excessive” damages. 

Some interesting findings:

-  The number of cases with patent damage awards have increased recently, but are still quite small - between 2006 and 2008, there were less than 50 cases each year awarding damages; in 2002 there were slightly more than 30 and in 1997 there were about 17 cases.  According to the authors, "the small number of patent infringement cases in which damages are awarded may give reason to question the hyperbolic claims by some that patent litigation damages have significant deleterious effects on research and development activities in the United States."

-  Median damages between 1995 and 2008 have held relatively steady, with occasional ups-and-downs - in 2003, the median damage award peaked at $10.41M; in 2007 it sank to a low of $1.11M.

-  Once again, juries continue to be associated with larger damages awards.

-  The Federal Circuit has been more active in reviewing patent damage awards.  None of the eight largest damage awards have gone unchallenged.  While 2 of the cases are still ongoing, none of the other six awards have stood.

This excellent paper goes through previous studies on patent damages, recent patent damages case law (yes, even the Uniloc v. Microsoft decision, which abolished the 25% rule), and even reviews the different legislative proposals for limiting reasonable royalties, and is a must-read for anyone involved or interested in patent reform.  While the document is still in draft form, the authors are welcoming comments.

Read/download a copy of the study here (link)

Wednesday Shorts - Patents and Politics

Patent Reform Now Part of Snappy-Sounding Agenda - as part of a rebranding strategy, patent reform is being packaged in the Senate as part of a larger "competitiveness agenda" (or "innovation agenda," depending who you ask) that includes bills to expand/renew research and development tax credits, advance job-training and worksharing, develop a Clean Energy Deployment Administration and strengthen cybersecurity.  According to Sen. Reid, first up is completion of a bill to modernize air traffic control system, followed by the patent reform bill (link 1) (link2).  Meanwhile, Rep. Bob Goodlatte (R-Va.) has indicated that he will be taking the lead for the GOP in the House efforts to draft a companion patent reform bill.

UPDATE: Reid said he plans to bring the bill to the Senate floor after lawmakers return from a week-long recess set to start on Friday (link)

White House Tech Office Launches R&D "Dashboard" - not to be outdone by the USPTO, the White House’s science and technology office announced the launch of the beta version of its R&D Dashboard, a website to track where federal funding for research and development is going and what impact it’s having.  In a nutshell, the Dashboard tracks the first infusion of federal cash (the “award”) and proceeds to track whether federal funding led to significant outcomes, such as publications and patent applications (link).

Using CFIUS To Block Patent Deals by Foreign Corporations -  Chinese company Huawei paid $2M for server technology firm 3Leaf Systems,where the deal included several patents and 15 3Leaf employees.  Shortly thereafter, US lawmakers sent letters to Commerce Secretary Gary Locke and Treasury Secretary Timothy Geithner, expressing concerns that Huawei posed a "serious risk" to US national security as a result of the deal.  These concerns were communicated to the Committee on Foreign Investment in the United States (CFIUS), who yesterday recommended that Huawei divest itself from the deal.  Huawei declined to act on the recommendation.  The matter has now been forwarded to President Obama for a decision (link1) (link2) (link3).