The curious case of the new rules timeline
I recently noticed the strange timeline that has developed for the controversial continuation and claim limit rules promulgated by the Patent and Trademark Office (and currently subject to a permanent injunction via Tafas v. Dudas).
Consider these events:
1. The Patent and Trademark Office introduced the controversial continuation and claim limit rules during the first week of the year way back in 2006. Happy New Year!
2. When making the rules final, the Office decided to draw the line in the sand on November 1, 2007, placing the deadline for filing rules-inspired continuation applications on Halloween. Happy Halloween!
3. On that same day, the United States District Court for the Eastern District of Virginia issued a preliminary injunction, temporarily preventing the Office from implementing the rules. Happy Halloween, part two!
4. On April 1, 2008, District Court Judge Cacheris permanently enjoined Director Jon Dudas and the Patent and Trademark Office from implementing the controversial continuation and claim limit rules. Nope, this was no April Fool’s joke.
5. The Court of Appeals for the Federal Circuit has scheduled oral argument in the appeal of the new rules injunction for December 5, 2008, which, of course, is the annual Day of the Ninja.
All kidding aside, the timing of the oral argument is a bit strange, too. Consider this - we have a lame duck administration with lame duck policies, and a President-elect with a yet-to-be announced Director of the Patent and Trademark Office and yet-to-be announced administrative policies. Will the new PTO administration support the rules? Will they pursue them with the same fervor as Director Dudas? Or, will the new PTO administration choose to abandon the rules, perhaps in an effort to mend fences in the partnership that used to exist between the Office and its stakeholders?
The court has a calendar to manage, of course, and the hearing date is probably the result of standard scheduling procedures. But, arguing this case in December is probably the strangest event on the new rules timeline. What if the PTO wins on appeal but the new administration doesn’t support the rules? What if they lose but the new team has somewhat less passion for the rules than the Dudas adminstration does? Do they appeal again, as the current administration has promised?
In the end, with either a win or a loss, it’s possible the rules might just disappear depending on the policies of the new administration, meaning our resource-strapped Patent and Trademark Office might have just wasted untold amounts of time and money.
With a hearing in December, the court will likely hand the new administration a ruling as the ink is drying on the new business cards. I’m betting on February 14th, Valentine’s Day.
Our pro-patent neighbors to the North deliver a victory for big Pharma
The Supreme Court of Canada recently dismissed a challenge to a patent held by pioneer pharmaceutical company Sanofi‑Synthelabo for its anticoagulant medicine Plavix. Apotex, a generic drug manufacturer seeking to market its version of the drug, challenged the patent based on prior art and double patenting grounds. While the decision has an interesting evergreening aspect, its ultimate significance may lie in the stark contrast it draws between the state of obviousness law in the United States and that in Canada.
The opinion pays little attention to the double patenting/evergreening issue, dismissing it in very short order. The Sanofi “selection” patent at issue claims a species of, but does not claim priority to, an earlier genus patent. While recognizing that “attempts to extend the time limit of exclusivity of a patent may be contrary to the objectives of the Patent Act,” the Court reasoned that evergreening strategies - such as selection patents - do not necessarily lead to illegal double patenting. Indeed, the Court recognized the benefit provided by selection patents:
“…selection patents encourage improvements over the subject matter of the original genus patent because that selection does something better than or different from what was claimed in the genus patent.”
While the evergreening/double patenting aspect of the decision is significant, the Court’s treatment of the obviousness challenge is perhaps more interesting. In considering whether the claims of the selection patent are obvious over the disclosure of the genus patent (”the ‘875 patent”), the Court stated:
“Here, when the relevant factors are considered, the invention was not self‑evident from the prior art and common general knowledge in order to satisfy the test. While there were five well‑known methods to separate this racemate into its isomers, there was no evidence that a person skilled in the art would have known which of the five known separation techniques would work with this racemate. Further, [Sanofi] spent millions of dollars and several years developing the racemate up to the point of preliminary human clinic trials before it was discovered that the dextro‑rotatory isomer was active and non‑toxic. As the ‘875 patent did not differentiate on the basis of efficacy and toxicity, what to select or omit was not then self‑evident to a person skilled in the art. It was also not self‑evident from the ‘875 patent or common general knowledge what the beneficial properties of the dextro‑rotatory isomer of this racemate or its bisulfate salt would be and therefore what was being tried ought to work. The course of conduct and the time involved throughout demonstrate that the advantage of the dextro‑rotatory isomer was not quickly or easily predictable.”
That language has to encourage the pioneering side of the pharmaceutical industry, which seems to have suffered blow after blow from United States patent law in recent years. Indeed, in the waning days before the Supreme Court of the United States issued its landmark obviousness decision in KSR v. Teleflex, the Court of Appeals for the Federal Circuit issued an opinion in Pfizer v. Apotex (yes, that Apotex) that treats the “science of selection” quite differently than the Supreme Court of Canada did in Apotex v. Sanofi-Synthelabo.
The Pfizer court considered the validity of a patent that can fairly be characterized as a ’selection’ patent - Pfizer scientists had identified and patented a salt form of a compound it disclosed in an earlier patent. The later patent did not claim priority to the earlier patent, giving Apotex an opening for its obviousness argument.
The court flatly rejected Pfizer’s argument that a conclusion of obviousness would disregard the ‘discovery’ made by its scientists through ‘trial and error procedures.’ Indeed, the court turned this argument on its head, considering the nature of the testing in precisely the opposite manner intended by Pfizer. While careful to note the statutory requirement that “patentability shall not be negatived by the manner in which the invention was made” (citation omitted), the Court concluded that consideration of the ‘routine testing’ performed by Pfizer, which led to the ‘discovery’, was appropriate here because “the prior art provided not only the means for creating acid addition salts but also predicted the results, which Pfizer merely had to verify through routine testing.”
The court even went so far as to distinguish the ‘routine testing’ involved in ’selection science’ from the work of an inventor:
“At most, then, Pfizer engaged in routine, verification testing to optimize selection of one of several known and clearly suggested pharmaceutically-acceptable salts to ease its commercial manufacturing and marketing of the tablet form of the therapeutic amlodipine. Creating a “product or process that is more desirable, for example because it is stronger, cheaper, cleaner, faster, lighter, smaller, more durable, or more efficient . . . to enhance commercial opportunities . . . is universal - and even common-sensical.” (citing Dystar Textilfarben v. C.H. Patrick).
“The experimentation needed, then, to arrive at the subject matter claimed in the…patent was nothing more than routine application of a well-known problem solving strategy and, we conclude, the work of a skilled artisan, not of an inventor.” (internal citation and quotations omitted) (citing Dystar).
The Pfizer decision issued just 39 days before KSR did. In the days and months leading up to the Supreme Court’s KSR decision, the CAFC seems to have set out on a path of tightening its obviousness law, with Dystar and Pfizer as visible trail blazes. Interestingly, the Court of Appeals for the Federal Circuit considered Apotex’s challenge of Sanofi’s US patent after Dystar but before Pfizer and KSR. Sanofi, no doubt, benefitted from this timing - the court rejected the obviousness argument at that time. You’ve got to wonder whether the court would have decided the issue differently if it had been considered later in the journey down the new path.
Current PTO administration will not make proposed IDS and Markush rules final
AIPLA is reporting that Margaret Focarino, USPTO Deputy Commissioner for Patent Operations, announced at its recent Annual Meeting in Washington, DC that the proposed rules relating to Information Disclosure Statements and alternative claim language (Markush claiming) will not be published as final rules by the current administration.
The two controversial rules packages have remained in limbo for years, leaving many to wonder whether they would be the subject of a final push for finalization in the waning days of the Jon Dudas-directed administration. The AIPLA report seemingly kills this possibility.
At the time of writing this post, the USPTO “Proposed Rule Changes” page does not mention this announcement.
The fate of these proposed rule changes, like that of many other reform efforts of the Office, now lies in the hands of the to-be-named new Director.
Congressional Budget Office - S.1145 would increase budget deficits by $1.4 billion from 2009 to 2018
The Congressional Budget Office released its analysis of the budgetary impact S.1145, the Patent Reform Act of 2007. The Office estimates that enacting the bill as reported by the Senate Committee on the Judiciary would increase direct spending by $26.9 billion while increasing revenues by $25.5 billion over the 2009-2018 period. The bulk of the revenue increase would come from making permanent PTO’s authority to collect and spend certain fees. The net effect of the bill is estimated to be a $1.4 billion deficit increase between 2009 and 2018.
Most important to patent applicants, the report estimates that the required ’search reports’ would add an additional $5,000 to $10,000 to each patent application (a range apparently provided by the Patent and Trademark Office). The Office notes that the sum total to the private sector for this provision alone would “substantially exceed the annual threshold” for unfunded private sector mandates established by the Unfunded Mandates Reform Act (UMRA).
Those costs are easy to get a handle on…and are probably fairly accurate (and, notably, are considerably less than the $26k that the dreaded examination support document could cost if the new rules survive).
According to the CBO estimate, though, there’s a lot of budgetary uncertainty that arises out of the two special-interest provisions of the bill.
First, section 13 would allow the Director of the Office to accept late filings of applications in certain cases of unintentional delay. This special-interest provision has been kicked around for nearly two years and now it seems that it is directed at a particular pharmaceutical patent (we suspected so). Indeed, the Office calls the drug out specifically:
“CBO anticipates that enacting this provision would lead PTO to accept an application for extension of the patent term for a drug known by the trade-name Angiomax. The firm that holds the patent for Angiomax missed the statutory filing deadline by one day for its application to restore the patent term authorized under the Drug Price Competition and Patent Term Restoration Act. Under the bill, we expect that PTO would grant nearly five years of additional patent protection to that product.” (emphasis added)
The Office notes that this provision would not only have a direct impact on the generic drug industry (via lost revenue due to the extended patent term), but also that it would indirectly impact health insurance premiums and tax revenues:
“CBO anticipates that the increase in net costs for private health insurance plans would result in higher insurance premiums, thus increasing the amount spent by employers for tax-favored health insurance and reducing the amount spent on taxable wages. That change would reduce federal revenues from income taxes and payroll taxes by an estimated $3 million over the 2010-2013 period and $30 million over the 2010-2018 period. Social Security payroll taxes, which are off-budget, would account for about 30 percent of those totals.”
Second, section 14 would essentially eliminate infringement of patents relating to “check collection systems,” all but guaranteeing lawsuits against the federal government for Fifth Amendment takings. CBO estimates that the affected patent holders will ultimately prevail in such lawsuits…to the tune of “about $1 billion, representing a royalty of 0.5 cents per check on more than 200 billion checks cleared by financial institutions that would be authorized to infringe on the rights of patent holders under the bill.”
You can view/download a .pdf of the Congressional Budget Office Cost Estimate for s.1145, the Patent Reform Act of 2007, here.
Leahy and Hatch on Patent Reform Act of 2007 - we’re making progress beacuse no one is entirely happy
This morning’s Washington Times includes Meaningful Patent Reform, an op/ed piece co-authored by Senators Leahy and Hatch. Characterizing themselves as “close partners on intellectual property issues,” the current and immediate past chairman of the Senate Judiciary Committee pitched their case for passage of S.1145, the Patent Reform Act of 2007.
The primary rationale advanced by the Senators can be paraphrased as such:
Congress has neglected to modernize our patent system to keep pace with the boom in American innovation. Recent Supreme Court decisions have nudged things in the right direction…[b]ut the Court is constrained in its decisions by the laws on the books….If we are to maintain our position at the forefront of the global economy and continue to lead the world in innovation and production, we need an efficient and streamlined patent system that issues high-quality patents while limiting wheel spinning and counterproductive litigation.
The article specifically notes the post grant review, forum shopping (venue), and inequitable conduct reform measures contained in the bill. It also carefully addresses the controversial damages provision which appears to be the key sticking point at this time:
We must also restore fairness to the rules that govern how courts determine damages when a patent is infringed. The threat of excessive damages is ruthlessly curtailing progress, and the loss of jobs and innovation is directly linked to litigation costs. But we must be careful to strike the right balance so that violating the intellectual property rights of others does not just become an acceptable cost of doing business. The goal of our reforms is to ensure that patent holders will be able to obtain appropriate compensation in case of infringement.
The Senators close with an interesting note about the bill’s progress to date:
As legislators, we know we are headed in the right direction when everyone is complaining that the entire bill is not going their way. We see this as a necessary, albeit somewhat difficult, part of the legislative process. But we welcome it. But at the end of day, we are confident that we will resolve the remaining issues in ways that should make everyone comfortable and will ensure final passage.
PTO spokeswoman - invention must be ‘very innovative’ to be patentable
Fortune Small Business recently ran “A guide to what you can (and can’t) patent” as a response to a question posed by a reader regarding the patentability of “an idea for a website.”
In an attempt to get the best information for its audience, Fortune went straight to the United States Patent and Trademark Office.
Good idea, right?
I’m not so sure.
Jennifer Rankin Byrne, the Office spokeswoman interviewed for the article, properly told the author that patentability might exist for any business method that underlies the web site idea.
So far, so good.
She didn’t stop there, though. Nope. In an apparent attempt to reference the basic requirements for patentability (utility, novelty, and nonobviousness), Ms. Rankin Byrne noted that:
“…it would have to be representing something very innovative and new….”
(emphasis mine)
What?
It has to be ‘very innovative‘? Since when? Since the Supreme Court decided KSR v. Teleflex, perhaps?
To make matters worse, she never mentioned the nonobviousness requirement:
“It would have to be some new, novel technology or old technology that’s used in a new way. It would have to be representing something very innovative and new. It would have to be something more than a concept. The person applying for the patent would have to explain in a very detailed way how it would work,” Rankin Byrne said.
Some PTO watchers may see this official comment as harmless, while others may view it as accurately reflecting current examination policy.
No matter.
What matters to me is how the article’s audience views it.
Seems to me that the Patent Office just sent a strong message directly to our small business community: We only grant patents on very innovative inventions, so please don’t waste your time disclosing your plain old novel, useful and nonobvious inventions.
NOTE: Fortunately, the author of the article included a paragraph that notes the proper requirements for patentability.
Pharma-backed Coalition spent $1.2M lobbying for patent reform
Lobbyist disclosures are beginning to shed light on the scope of the battle being fought behind the scenes on patent reform. Just last week we learned that Blackberry-maker RIM spent $890k lobbying Congress (mostly) on patent reform in 2007 (the sum also includes fees related to “regulatory rules to make more digital wireless handsets accessible to consumers with hearing disabilities”). Now we’ve got a sense of the “defense” being mounted by those on the other side of the battle (which, interestingly enough, isn’t limited to just pharma and biotech companies). According to this CNN report, recently-filed lobbyist disclosures reveal that the Coalition for 21st Century Patent Reform “paid a lobbying firm nearly $1.2 million in 2007 to lobby on patent reform legislation.” Some interesting details:
Of the $1.2M, more than 60% ($760k) was spent in the second half of 2007, the same time that the House bill (HR 1908) picked up a bit of steam The Coalition’s lobbying firm is Akin Gump Strauss Hauer & Feld LLP, which currently reports 77 attorneys in its intellectual property practice group.
Patent reform update presented at Stanford Law School
Last Friday, I presented “Patent Reform Update” as a guest lecture at Stanford Law School. Jeff Schox, a San Francisco-based patent attorney and long-time friend, asked me to help him with the ‘patent reform’ topic in his patent law class.
(yes…’patent reform’ has received syllabus-level attention in the country’s leading law schools for some time)
You can download a .pdf of my presentation here. Feel free to use the whole presentation or any individual slide any way you like…I only ask that you provide attribution and a linkback to Promote the Progress if it’s possible.
My presentation style is fairly loose - not much text on the slides and the bulk of the material comes from my talk. If you have any questions when reviewing the slides, please feel free to send an e-mail.
Jeff’s students were great - full of wonderful questions about patent reform and patent practice in general. Thanks, Jeff, for the opportunity.
Cable GC - patent reform is about loopholes, frivolous lawsuits, and American jobs
According to Grier C. Raclin, executive vice president and general counsel of Charter Communications Inc., patent reform legislation is necessary to guard against “existing loopholes” and to protect against “frivolous lawsuits.”
In this Op/Ed piece on STLtoday.com, Mr. Raclin invokes two powerful concepts - loopholes and frivolous lawsuits - that immediately resonate with folks having no legal background.
“Loopholes? Yes, those are always bad. Frivolous lawsuits? Outrage!”
Unfortunately, Mr. Raclin offers no details on the “loopholes” of which he speaks. Nor does he tell us what constitutes a “frivolous” patent lawsuit. I hate to make assumptions, but it seems fair to surmise that he would characterize continuation practice as a “loophole” and would equate frivolity with the much-maligned practice of owning patents and not making products.
Oh, and patent reform is about protecting American jobs, too:
“[The Patent Reform Act of 2007] would rectify the current imbalances in the patent system that are working against American innovation, job growth and consumer welfare…Patent reform is the key to cutting down on frivolous lawsuits and placing the focus back where it should be — on introducing ground-breaking innovations and promoting American jobs.”
Odd that he didn’t mention the letter of opposition to S.1145, the Patent Reform Act of 2007, that was recently signed by more than a dozen major labor unions.
Dirty pool in patent politics?
The “Dear Senator” letters and memoranda on patent reform have been flying fast and furious over the last several weeks. The rhetoric of late is at an all time high and seems to reflect the “false choice” on innovation described by PTO Director Jon Dudas in his explanation of the Bush administration’s letter of opposition to the Senate bill (S.1145, The Patent Reform Act of 2007) - some describe the bill as an innovation killer while others paint it as necessary for the survival of some of our most innovative industries.
The letters are, for the most part, non-revealing because we’ve known where the lines have been drawn in this battle for so long. Most contain the same recycled language and few present any new or interesting information, causing many of us that follow the issue to glaze over them quickly.
At least one should have raised our eyebrows, though. According to this article from Inside Higher Ed, the Coalition for Patent Fairness, which counts Google, Microsoft, Intel, Micron and other computer/software companies as members, circulated a memorandum last week that claimed that the concerns raised by various educational institutions and related associations had been “addressed” by the bill and the committee review process.
Universities have strongly opposed several provisions of the various vintages of the Patent Reform Act…so an impression that their concerns had been “addressed” could cause one to believe that the legislation was a step or two closer to significant movement.
Not so fast, though. Turns out the CPF memorandum was not, um, blessed by any single university or association.
A call-to-action alert from the National Association of State Universities and Land-Grant Colleges aimed to set the record straight:
“The briefing paper implies that all of the university community’s concerns with S. 1145, the Patent Reform Act of 2007, have been addressed. CPF’s assertion is factually incorrect and misrepresents the position of the university community and individual institutions on patent reform legislation.”
Looks like there’s no harm from the gaffe, though…CPF claims it didn’t intend to suggest that the heavy lifting was done, and the Association of American Universities acknowledged that several important changes that address university concerns have been made to the bill.