Tag Archives: patent

What Is the Difference Between a Provisional and Non-Provisional Patent Application?

by: Robert Wagner, patent attorney at the Pittsburgh law firm of Picadio Sneath Miller & Norton, P.C. ()

What is the Difference Between a Provisional and Non-Provisional Patent Application?

PSMN What Is...? SeriesOne of the key decisions that an inventor needs to make in the patenting process is whether to file a provisional or non-provisional patent application, so understanding the difference between these two kinds of applications is important for inventors. Both of these types of applications serve useful roles in the patent process, but they are two very different kinds of patent applications that create very different rights.

Non-Provisional Applications

A non-provisional patent application is an application filed with the United States Patent & Trademark Office that is examined by a patent examiner and can potentially lead to the issuance of a patent. It has a number of formal requirements that must be satisfied in order to be accepted by the Patent Office. For instance, it must contain a written description of the invention with sufficient detail to both demonstrate that the inventor has invented something and to explain it in sufficient detail such that one of ordinary skill in the art could practice the invention without undue experimentation. It generally must contain formal drawings that show various embodiments of the invention. It must be accompanied by an oath or declaration by the inventor or inventors that confirms that they invented the invention described in the application. The inventors must also identify all relevant prior art that they are aware of. Finally, it must contain a series of claims, which are what defines the scope of the patent and the protections it provides.

In general, non-provisional applications are complicated documents that must be prepared with extreme care if an inventor wants a patent that will be enforceable and that will product his or her invention to the broadest extent possible. The precise language of the claims is incredibly important, as is making sure that the written description and drawings adequately explain the invention and enable one to make and use it. As such, it takes time (and money) to draft one correctly.

Provisional Applications

A provisional application, on the other hand, is never examined by a patent examiner and can never lead to the issuance of a patent by itself. Unlike a non-provisional application, there are only two requirements for filing a provisional application—it must contain a written description of the invention and sufficient drawings (which can be informal) to understand the invention. The other formal requirements of a non-provisional application (such as formal drawings, claims, oaths, declarations, and prior art disclosures) are not necessary. A provisional patent application lasts for one year before it expires, and this one-year period cannot be extended.

Because provisional applications are significantly less formal than a non-provisional application, they can be drafted more quickly (and cheaply) and can include more information than is necessary or prudent to include in a non-provisional application. Inventors can literally attach journal articles, PowerPoint slides, photographs, hand-written drawings, etc. to the application, in addition to the narrative that describes the invention.

In order for a provisional application to lead to the issuance of a patent, it must either be converted or it must be appropriately referenced in a non-provisional application that is filed within one year of the filing date of the provisional application (this one-year date cannot be extended).

So, why would one choose to file a provisional application?

So, if a provisional application only lasts for one year and cannot, by itself, ever become a patent, why would anyone want to file one? Under the current patent laws, the public sale or disclosure of an invention before a patent application (either a non-provisional or provisional application) has been filed can act as a bar that prohibits an inventor from being able to obtain a patent on the invention in the future. A provisional application provides a way for an inventor to get an application on file before a key event so as not to prevent him or her from getting a patent later on.

For example, if a company is about to present a new product at a trade show or if an inventor is about to present a paper or give a talk at a conference, the inventor can file a provisional application that contains the materials that will be publicly disclosed, along with a sufficiently detailed write-up of the invention, before that information is disclosed without having to go through the considerable time and effort required to file a non-provisional application.

In addition, in the new first-inventor-to-file regime that exists under the America Invents Act (AIA), it may be prudent for an inventor to file a series of provisional applications as it is refining and developing a new product or invention in order to protect those ideas from another inventor filing in the Patent Office first. A provisional patent application provides a quicker and cheaper means for doing so.

Conclusion

These descriptions give you some idea of the differences between provisional and non-provisional patent applications. Both types of applications serve important roles in the patenting process, and are often utilized in concert—i.e., an inventor files a provisional patent application followed by a non-provisional patent application within a year. As with all the information in our What Is…? series, there is significantly more detail and nuance behind what is described in this article. If you are interested in obtaining a patent, you should consult a patent attorney to help you determine which application is appropriate for the circumstances you find yourself in.

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Busy IP Docket for US Supreme Court Upcoming

Sneath, Henry 2012 headshotBy: Henry Sneath, Chair of the Intellectual Property practice at Picadio Sneath Miller & Norton, P.C.  hsneath@psmn.com or 412-288-4013

The US Supreme Court has a very busy IP docket in the next few months. Close watchers of the court predict a continuing focus on IP cases. Our friends at AIPLA provide a nice summary of the oral argument schedule of IP cases through April. We will follow these cases and post any important decisions. See AIPLA link below: http://www.aipla.org/resources2/reports/2014/Pages/140214AIPLA-Direct.aspx

Supreme Court Holds That Patentee Bears Burden of Persuasion on Infringement When Licensee Seeks a Declaratory Judgment

By: Joe Carnicella, intellectual property attorney with Picadio Sneath Miller & Norton, P.C.

We posted about this case in May 2013, and on January 22, 2014, the Supreme Court decided this matter.

First, the Supreme Court held that the Federal Circuit did not lack subject-matter jurisdiction.  Because federal courts determining declaratory judgment jurisdiction often look to the “character” of the declaratory judgment defendant’s “threatened action,” which in this case, the threatened hypothetical action would constitute the licensor terminating a license and bringing suit for infringement under federal patent laws, the declaratory judgment action would arise under federal patent laws.

Second, the Supreme Court held that when a licensee seeks a declaratory judgment against a patentee that its products do not infringe the licensed patent, the patentee bears the burden of persuasion on the issue of infringement.  The Supreme Court based this ruling on three settled legal propositions: (1) a patentee ordinarily bears the burden of proving infringement; (2) the operation of the Declaratory Judgment Act is only procedural leaving substantive rights unchanged; and (3) the burden of proof is a substantive aspect of a claim.

By way of background, the United States Supreme Court granted cert. to hear argument on whether, in a declaratory judgment action brought by a licensee, the licensee has the burden to prove that its products do not infringe the patent, or whether the patentee must prove infringement.  Medtronic Inc. (licensee) licensed a patent from Mirowski Family Ventures LLC (patentee / licensor) relating to a device used to stop imminent heart failure.  Medtronic subsequently created new products and then filed a declaratory judgment action claiming that its new products do not infringe the patent.  The Federal Circuit Court of Appeals held that Medtronic bears the burden of proving that its products do not infringe Mirowski’s patent.  Medtronic argued that the U.S. Supreme Court should overturn the Federal Circuit’s ruling, which Medtronic argued is inconsistent with the Supreme Court’s decision in MedImmune, Inc. v. Genetech, Inc., 549 U.S. 118 (2007).  In MedImmune, the Supreme Court ruled that a patent licensee that believes that its products do not infringe the patent is “not required . . . to break or terminate its . . . license agreement before seeking a declaratory judgment in federal court that the underlying patent is . . . not infringed.”  According to Medtronic, the Federal Circuit’s opinion undercut the MedImmune decision because it caused a licensee to take on the significant burden and cost of a presumption that its products infringe.  In turn, Mirowski argued that this case is distinguishable from MedImmune because the licensing agreement at issue specifically required Medtronic to file a declaratory judgment action if a dispute arose.  Mirowski submitted that the Federal Circuit correctly decided that, based specifically on the contract terms between the parties, Medtronic should bear the burden of proving that it should be let out of the contract for the new products.

Supreme Court Announces It Will Hear Four New Intellectual Property Cases

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

SupremeCourtImage_1The Supreme Court announced on Friday that it will hear four additional intellectual property cases this term, which makes nine total intellectual property cases this term so far. Brief summaries of the issues presented are provided below, along with links to more information about each of these cases from our friends at SCOTUSblog.

New Cases

Limelight Networks, Inc. v. Akamai Technologies, Inc. (No. 12-786)

The issue in this case is whether a party may be liable for infringement under either 35 U.S.C. § 271(a) or § 271(b) where two or more entities join together to perform all of the steps of a process claim.

Nautilus, Inc. v. Biosig Instruments, Inc. (No. 13-369)

Two issues are raised in this case. Does the Federal Circuit’s acceptance of ambiguous patent claims with multiple reasonable interpretations—so long as the ambiguity is not “insoluble” by a court—defeat the statutory requirement of particular and distinct patent claiming? And, does the presumption of validity dilute the requirement of particular and distinct patent claiming?

POM Wonderful v. Coca-Cola (No. 12-761)

The issue in this case is whether the court of appeals erred in holding that a private party cannot bring a Lanham Act claim challenging a product label regulated under the Food, Drug, and Cosmetic Act.

ABC, Inc. v. Aereo, Inc. (No. 13-461)

The issue in this case is whether a company “publicly performs” a copyrighted television program when it retransmits a broadcast of that program to thousands of paid subscribers over the Internet.

Previous Cases

Medtronic v. Boston Scientific Corp. (No. 12-1128)

The issue in this case is is whether, in a declaratory judgment action brought by a licensee under MedImmune, the licensee has the burden to prove that its products do not infringe the patent, or whether (as is the case in all other patent litigation, including other declaratory judgment actions), the patentee must prove infringement.

This case was argued on November 5, 2013.

Lexmark International v. Static Control Components (No. 12-873)

The issue in this case is whether the appropriate analytic framework for determining a party’s standing to maintain an action for false advertising under the Lanham Act is (1) the factors set forth in Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters (“AGC”), 459 U.S. 519, 537-45 (1983), as adopted by the Third, Fifth, Eighth, and Eleventh Circuits; (2) the categorical test, permitting suits only by an actual competitor, employed by the Seventh, Ninth, and Tenth Circuits; or (3) a version of the more expansive “reasonable interest” test, either as applied by the Sixth Circuit in this case or as applied by the Second Circuit in prior cases.

This case was argued on December 3, 2013.

Highmark Inc. v. Allcare Management Systems (No. 12-1163)

The issue in this case is whether a district court’s exceptional-case finding under 35 U.S.C. § 285 (in a patent infringement lawsuit), based on its judgment that a suit is objectively baseless, is entitled to deference.

This case will be argued on February 26, 2014.

Octane Fitness v. Icon Health and Fitness (No. 12-1184)

The issue in this case is whether the Federal Circuit’s promulgation of a rigid and exclusive two-part test for determining whether a case is “exceptional” under 35 U.S.C. § 285 improperly appropriate a district court’s discretionary authority to award attorney fees to prevailing accused infringers in contravention of statutory intent and this Court’s precedent, thereby raising the standard for accused infringers (but not patentees) to recoup fees and encouraging patent plaintiffs to bring spurious patent cases to cause competitive harm or coerce unwarranted settlements from defendants?

This case will be argued on February 26, 2014.

Alice Corporation Pty. Ltd. v. CLS Bank International (No. 13-298)

The issue in this case is whether claims to computer-implemented inventions—including claims to systems and machine, processes, and items of manufacture—are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court.

This case will be argued on March 31, 2014.

$1Billion Pittsburgh Verdict Against Marvell Upheld on Post Trial Motions

marvell_chipPosted by Henry M. Sneath, Esq., Chair of the Intellectual Property group at Pittsburgh law firm Picadio Sneath Miller & Norton, P.C.

hsneath@psmn.com or 412-288-4013

Following a December 2012 Patent verdict in favor of CMU against Marvell in the amount of just over $1 Billion, the trial Judge Nora Barry Fischer of the USDC for the Western District of Pa. has denied the post trial motions filed by Marvell. Carnegie Mellon University v. Marvell Technology Group, Ltd., Case No. 09-290 (W.D. Penn. Feb 28, 2013). She has also found that the infringement was willful, but has not determined yet whether to multiply the verdict as an enhanced award.  The lengthy opinion is attached for review. More analysis to come and we will follow what is surely to be an appeal to the CAFC by Marvell. Opinion available only on PACER at the moment but we will search for an independent copy to post.

UPDATE: The full decision of the Court is available here.

End of Experimental Use Exception? Hamilton Beach v. Sunbeam

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

Hamilton BeachThe Federal Circuit issued an interesting decision today in Hamilton Beach Brands, Inc. v. Sunbeam Products, Inc. (No. 2012-1581). The opinion, written by Judge O’Malley and joined by Judge Bryson, invalidated a patent based on the patentee’s contractual agreement with its own supplier to purchase a product that utilized the patented invention more than one year before the date of the patent application.  The dissent, written by Judge Reyna, argued that this decision is inconsistent with the requirement that an offer for sale must by a commercial offer and that it will eviscerate the experimental-use exception.

Background

The patentee, Hamilton Beach, developed an improved slow cooker with clips to hold the lid of the cooker to the body of the cooker. Hamilton Beach’s original design had the clips mounted to the body. Sunbeam designed a competing version of the product with clips mounted to the lid. In response, Hamilton Beach filed a continuation patent application that specifically incorporated Sunbeam’s new design. This application eventually matured into the patent involved in the lawsuit.

In defense, Sunbeam argued that it did not infringe and that the patent was invalid as anticipated because Hamilton Beach introduced new matter into its continuation application and therefore could not take advantage of the earlier filing date. Sunbeam also argued that the patent was invalid due to an offer for sale more than one year before the earliest priority date.

More than one year before the original patent application was filed, Hamilton Beach issued a purchase order to one of its foreign suppliers, asking it to manufacture nearly 2,000 slow cookers based on Hamilton Beach’s specifications and designs. The supplier agreed to fulfill the order once it obtained a release from Hamilton Beach. The supplier’s confirmation occurred more than one year before Hamilton Beach filed its patent application. Hamilton Beach issued the release to its supplier within the one-year period before it filed its application, though.

The District Court ultimately agreed with Sunbeam on all three grounds, finding that Sunbeam did not infringe and that the patent was invalid.

The Federal Circuit’s Decision

A patent can be invalidated under 35 U.S.C. § 102(b)’s on sale bar provision “when two conditions are satisfied before the critical date: (1) the claimed invention must be the subject of a commercial offer for sale; and (2) the invention must be ready for patenting.” There is an exception to the on sale bar where the use is experimental in nature, which negates the commercial requirement of § 102(b).

The Federal Circuit only addressed Sunbeam’s on-sale bar argument, finding that the offer from Hamilton Beach’s supplier to manufacturer the slow cooker once it received the release was an offer for sale under § 102(b). Because this offer occurred more than one year before Hamilton Beach filed its patent application and Hamilton Beach clearly had specifications and drawings of its invention, the patent was invalid as anticipated.

It reaching its decision, the Court noted that there need not be a binding contract for purposes of § 102(b)—only an offer is required. Moreover, the Court found that there is no “supplier exception” to the on-sale bar.

The key dispute between the majority and dissent was whether Hamilton Beach’s purchase order should have been analyzed under the experimental use exception.

The majority stated that it was expressly not considering the experimental use exception because (1) Hamilton Beach never raised this argument and (2) the order of almost 2,000 slow cookers strongly suggested that the use was not experimental. The majority went out of its way to specifically state that this opinion has no bearing on that exception:

“Experimental use” is simply not at issue. There is, thus, no threat that this decision will have any impact on that defense; it certainly will not “eviscerate” that defense as the dissent fears.

The dissent disagreed, finding that Hamilton Beach had raised this issue and that there was sufficient evidence to suggest that the 2,000 units were being ordered in order to work out a defect in the design. The dissent further expressed concern that this ruling would “eviscerate” the experimental use exception and create havoc for companies that have third parties manufacture their goods.

Conclusion

It is somewhat difficult to predict how this case will be used in the future, but there are certainly some points to take away from it. First, companies need to be aware that contractual negotiations and offers with their own suppliers potentially can be used against them to invalidate their patents. This highlights the need to file provisional applications and keep track of the relevant dates so as not run into this issue. Second, where a use is experimental in nature, it is helpful to document its experimental nature for use later in litigation. Third, the majority fairly clearly states that this decision does not destroy or even implicate the experimental use exception, so that exception should still be available if properly raised at the trial court. Finally, this case highlights the importance of preserving this argument explicitly and clearly.

Survey of Proposed Patent Lawsuit Reform Bills in Congress (Part 3)

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

US Capitol BuildingIn a growing response to concerns about patent “trolls” and the tactics they use in litigation, the President and Congress are calling for changes in the patent laws to assist the targets of these patent assertion entities (PAEs). Currently, there are six bills pending in Congress that address, in some respect, these concerns. In the final part of this series, we are looking at the four remaining pieces of legislation, which are all more narrow in focus, and what changes are being proposed in them. (Parts one and two of our series are here and here.)

Pending Legislation:

  • Patent Abuse Reduction Act of 2013 (S. 1013)
  • Patent Litigation and Innovation Act of 2013 (H.R. 2639)
  • Saving High-Tech Innovators from Egregious Legal Disputes Act of 2013 (H.R. 845—SHIELD Act)
  • End Anonymous Patents Act (H.R. 2024)
  • Patent Quality Improvement Act of 2013 (S. 866)
  • Stopping the Offensive Use of Patents Act (H.R. 2766—STOP Act)

Saving High-Tech Innovators from Egregious Legal Disputes Act of 2013 (H.R. 845)

The SHIELD Act is designed to shift the costs of litigation to certain kinds of patentees that lose patent infringement lawsuits. Specifically, patentees that (1) are not the original inventor or assignee of the patent, (2) have not made a “substantial investment” to exploit the patent through production or sale of item covered by the patent, or (3) are not a university or a university’s technology transfer organization will be required to pay the full costs and attorneys’ fees of the prevailing party that asserted invalidity or non-infringement, unless the court finds that exceptional circumstances exist.

A party asserting invalidity or non-infringement may move the court for a judgment that the patentee does not fall within one of these three classifications. If the motion is made before initial disclosures are due, the court must stay discovery, except for that necessary to resolve this motion. If the motion is made after the initial disclosures, the court may wait until after entry of final judgment to decide the motion.

There are a couple of interesting points about this proposed litigation. First, there is no good faith or reasonable basis exception explicitly contained in the determination of whether to award fees. Thus, unless courts consider a good-faith basis for filing the suit to be an “exceptional circumstance,” entities that do not fall within one of the three categories must pay a defendant’s costs and fees regardless of the reasonableness of the lawsuit.

Second, the bill does not indicate what happens with mixed verdicts. If a patentee prevails on all but one claim, is a defendant entitled to collect all of its costs and fees, or only some pro-rated amount?

Third, how would this bill affect declaratory judgment actions? The language is not written in terms of plaintiff or defendant, but in terms of the “party asserting invalidity or noninfringement.” If a company receives a cease-and-desist letter from an entity that does not fall within one of the three categories and files a declaratory judgment action, is the patentee subject to this rule? Presumably, it would be, which means that these kinds of patentees would have to be extremely careful when sending licensing or cease-and-desist letters.

End Anonymous Patents Act (H.R. 2024)

This act is fairly straightforward. It simply requires that a patent owner file a disclosure with the USPTO of the real party in interest of any patent when (1) the patent issues, (2) a maintenance fee is paid, and (3) within 90 days of any transfer of ownership. If a patent owner does not, it cannot collect any damages in a patent infringement lawsuit until it cures its failure to do so.

Patent Quality Improvement Act of 2013 (S. 866) and Stopping the Offensive Use of Patents Act (H.R. 2766)

These two acts are basically mirror images of one another, except one was introduced in the Senate and one in the House. Both remove the sunset provision in 35 U.S.C. § 321 note, subsection (a)(3), which provides for a streamlined post-grant review of financial business method patents, and makes the program permanent. The acts would also expand the scope of review from financial business method patents to all types of business method patents.

The STOP Act also requires the USPTO to work with and support intellectual property law associations with pro bono programs “to assist financially under-resourced re-sellers, users, implementers, distributors, or customers of an allegedly infringing product or process.”

Conclusions and Final Thoughts

All six pieces of legislation target the patent “troll” problem, but do so in different ways. None of these approaches seem to be the silver bullet to solve this problem, however. In fact, some of them are likely to cause significant issues in the traditional patent litigation context. Also, there are many questions and ambiguities about how these laws would be applied. It will be interesting to see if any of these proposal garner  enough support to become law (and whether any changes are made to do so).

Survey of Proposed Patent Lawsuit Reform Bills in Congress (Part 2)

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

US Capitol BuildingIn a growing response to concerns about patent “trolls” and the tactics they use in litigation, the President and Congress are calling for changes in the patent laws to assist the targets of these patent assertion entities (PAEs). Currently, there are six bills pending in Congress that address, in some respect, these concerns. In this series, we are looking at the pending legislation and what changes are being proposed. (Parts one and three of our series are here and here.)

PENDING LEGISLATION:

  • Patent Abuse Reduction Act of 2013 (S. 1013)
  • Patent Litigation and Innovation Act of 2013 (H.R. 2639)
  • Saving High-Tech Innovators from Egregious Legal Disputes Act of 2013 (H.R. 845—SHIELD Act)
  • End Anonymous Patents Act (H.R. 2024)
  • Patent Quality Improvement Act of 2013 (S. 866)
  • Stopping the Offensive Use of Patents Act (H.R. 2766—STOP Act)

Patent Litigation and Innovation Act of 2013 (H.R. 2639)

Sponsors: Representatives Jeffries and Farenthold

The Patent Litigation and Innovation Act of 2013 (“PLIA”) is in many ways very similar to the Patent Abuse Reduction Act of 2013 (“PARA”) we discussed in the first part of this series, although there are some notable differences. These two bills are the most comprehensive and far-reaching of the currently proposed legislation. The bill would make five major changes to the patent laws that will affect all patent lawsuits, not just the “troll” variety.

First, like the PARA, the PLIA would require a patentee to plead substantially more information than is currently required in a complaint, including (1) identifying the patents that are allegedly infringed; (2) identifying the claims that are allegedly infringed; (3) identifying each allegedly infringing product, method, process, etc., including the specific name and model numbers; (4) identifying how each element of each claim is infringed; (5) identifying whether the infringement is literal or under the doctrine of equivalents; (6) for indirect infringement, identifying the acts and parties who directly infringed and the indirect infringer’s acts that give rise to liability; (7) identifying the basis of the patentee’s right to sue; (8) describing the principal business of the patentee; (9) identifying the owners, assignees, and exclusive licensees of the patents; and (10) identifying anyone who has a legal right to enforce the patents.

Unlike the PARA, the PLIA does not require that the patentee identify any previously-filed complaints involving the patents, whether the patent is subject to any licensing or pricing commitments, or the identity of anyone who has a financial interest in the patent (and the basis for that interest).

Given that the bare-bones nature of the current model Form 18 for patent lawsuits, the bill would also require that Form 18 be updated to include this information.

Second, like the PARA, the PLIA would require courts to join any interested parties on a defendant’s motion if the defendant shows that the plaintiff’s interest in the patent is limited “primarily to asserting any such patent claim in litigation.” The court may deny the motion if the interested party is not subject to service or would deprive the court of subject matter jurisdiction.

Third, the PLIA provides a mechanism for staying any actions against “secondary parties,” who are defined to be those whose alleged infringement is based on the use, distribution, resale, or consumption of a product or process by a primary party. Primary parties are those who manufacture or supply the product or process that allegedly infringes. If the primary and secondary parties agree, they can move the court, which then must stay the action against the secondary parties. The secondary party will then be treated as a non-party for purposes of discovery, hearings, and trials. However, the secondary party will be bound by any judgment against the primary party relating to common issues between the two.

Fourth, the PLIA creates a number of automatic stays of discovery. The court must stay discovery while ruling on any motion to dismiss, motion to transfer, or claim construction, although there are provisions for lifting the stay in extraordinary circumstances. The court can also allow whatever discovery is necessary to decide these issues.

Finally, the PLIA provides that the court must include specific findings in its final adjudication regarding the parties’ and attorneys’ compliance with Rule 11(b) and may impose sanctions for any violations.

The Consequences of This Proposed Legislation

While this bill is clearly directed at curbing abusive patent litigation, its effects will be felt in all patent lawsuits. Given that, all patent litigators should be aware of how patent litigation may change. In particular, there are many unanswered questions about this bill that could have some interesting consequences.

First, as with the PARA, the amount of information required in a complaint is extraordinary, especially in comparison to what is required now under the notice pleading standard of the federal rules. The same concerns discussed in the article on the PARA apply equally to the PLIA. As a practical matter, it is difficult to see what the purpose behind these changes is, especially in jurisdictions that have local patent rules that require this type of disclosure early in the process. Most plaintiffs, whether of the “troll” variety or not, have put together detailed infringement charts as part of their due diligence. While pleading this information will be time consuming, it should not be particularly difficult. In addition, what is the recourse if a plaintiff is “wrong”? A court should not be resolving questions of fact on a motion to dismiss. On the other hand, requiring this kind of information, whether in the pleadings or early in the litigation, is extremely helpful for defendants to understand the scope of the lawsuit and what products and claims are actually at issue and should help streamline the litigation. Whether it should be required in the complaint or as part of early disclosures is another matter.

Second, the provisions regarding staying the action against secondary parties are potentially very helpful in reducing the distractions caused by this kind of litigation tactic. It will be interesting to see how secondary parties react and whether they are willing to be bound to whatever judgments are entered against the primary party. In theory, a primary party should have a far greater interest in defending the lawsuit and the greater knowledge to do so.

Third, the stay of discovery while the court is construing claims could be helpful, but it also could prove problematic. For instance, sometimes it is difficult to know exactly what claims could be at issue until a defendant provides the details of how its product works or what the steps in its process are. Certain elements or steps may be unknowable without access to source code or knowledge of the precise process used. And, this cuts both ways. Sometimes, a patentee may believe that additional claims are infringed after learning more about the defendant’s products, but it could also be the reverse, where discovery reveals that certain claims that it believed were infringed are not infringed. In addition, a patentee may not appreciate that a particular claim term needs to be construed until it sees how the accused products work and the positions that the defendant is taking. Courts are unlikely to be thrilled at the prospect of having to engage in the claim construction process multiple times or having to construe claim terms that later turn out to be irrelevant once additional discovery is done.

Finally, it is unclear how useful the requirement that courts make specific findings regarding Rule 11(b) compliance will actually be. Presumably, if one of the parties or the court felt that another party’s behavior was inappropriate, they would have raised that issue anyway. Further, it is unlikely that a court will have sufficient evidence to make any findings of inappropriate behavior in those cases that settle early, even if the case actually had little merit.

Summary

There are clearly issues with patent litigation now, especially with respect to suits brought by “trolls.” While not as drastic as the PARA, it is not clear how helpful the PLIA will actually be in addressing some of the abuses that currently exist. It will also be interesting to see the discussions surrounding this piece of legislation and whether it ever becomes law.

Survey of Proposed Patent Lawsuit Reform Bills in Congress (Part 1)

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

US Capitol BuildingIn a growing response to concerns about patent “trolls” and the tactics they use in litigation, the President and Congress are calling for changes in the patent laws to assist the targets of these patent assertion entities (PAEs). Currently, there are six bills pending in Congress that address, in some respect, these concerns. In this three-part series, we will look at the pending legislation and what changes are being proposed. (Parts two and three of our series are here and here.)

Pending Legislation:

  • Patent Abuse Reduction Act of 2013 (S. 1013)
  • Patent Litigation and Innovation Act of 2013 (H.R. 2639)
  • Saving High-Tech Innovators from Egregious Legal Disputes Act of 2013 (H.R. 845—SHIELD Act)
  • End Anonymous Patents Act (H.R. 2024)
  • Patent Quality Improvement Act of 2013 (S. 866)
  • Stopping the Offensive Use of Patents Act (H.R. 2766—STOP Act)

Patent Abuse Reduction Act of 2013 (S. 1013)

Sponsor: Senator Cornyn

Along with the Patent Litigation and Innovation Act of 2013 that will be discussed in the next installment, the Patent Abuse Reduction Act of 2013 is the most comprehensive and far-reaching of the currently proposed legislation. The bill would make four major changes to the patent laws that will affect all patent lawsuits, not just the “troll” variety.

First, the bill would require a patentee to plead substantially more information than is currently required in a complaint, including (1) identifying the patents that are allegedly infringed; (2) identifying the claims that are allegedly infringed; (3) identifying each allegedly infringing product, method, process, etc., including the specific name and model numbers; (4) identifying how each element of each claim is infringed; (5) identifying whether the infringement is literal or under the doctrine of equivalents; (6) for indirect infringement, identifying the acts and parties who directly infringed and the indirect infringer’s acts that give rise to liability; (7) identifying the basis of the patentee’s right to sue; (8) describing the principal business of the patentee; (9) listing each previously filed complaint relating to the asserted patents; (10) identifying whether the patent is subject to any licensing terms or pricing commitments; (11) identifying the owners, assignees, and exclusive licensees of the patents; (12) identifying anyone who has a legal right to enforce the patents; (13) identifying anyone with a direct financial interest in the lawsuit or its proceeds; and (14) describing the basis for that direct financial interest.

Given that the bare-bones nature of the current model Form 18 for patent lawsuits, the bill would also require that Form 18 be updated to include this information.

Second, the bill would require courts to join any interested parties on a defendant’s motion if the defendant shows that the plaintiff’s interest in the patent is limited “primarily to asserting any such patent claim in litigation.” The court may deny the motion if the interested party is not subject to service or would deprive the court of subject matter jurisdiction.

Third, the bill would substantially change the timing and scope of discovery, including shifting the costs for non-core discovery materials. If a court determines that claim construction is required, discovery is limited to only that necessary for construction until after the court issues its ruling. After that ruling, discovery is divided into two groups—core documentary evidence and additional discovery. Core documentary evidence is limited to documents that (1) relate to conception, reduction to practice, and application for the patent; (2) are sufficient to show the technical operation of the accused products or services; (3) relate to invalidating prior art; (4) relate to prior licensing of the patent; (5) are sufficient to show the revenues attributed to the invention; (6) are sufficient to show the organizational structure of each party; (7) relate to the defendant’s awareness of the patent or infringement before the lawsuit was filed; and (8) are sufficient to show any marking, lack of marking, or notice of infringement.

Notably, computer code and electronic communications (e-mail, text messages, etc.) are not core discovery, unless the court finds good cause to classify them as such. Additional discovery is the discovery of every other kind of evidence. Each party bears the burden of producing its own core discovery, as is currently the case. However, the burdens shift with respect to additional discovery. There, a requesting party is not entitled to the additional discovery unless it pays for it (including both actual costs and reasonable attorneys’ fees) or posts a bond in that amount.

Finally, the court is to award costs, expenses, and attorneys’ fees to the prevailing party, unless the non-prevailing party’s positions and conduct were objectively reasonable and substantially justified or exceptional circumstances make such an award unjust. If the non-prevailing party cannot pay these costs, the court can make them recoverable against any interested party.

The Consequences of This Proposed Legislation

While this bill is clearly directed at curbing abusive patent litigation, its effects will be felt in all patent lawsuits. Given the far-reaching impact of these proposed changes, all patent litigators should be aware of how patent litigation may change. In particular, there are many unanswered questions about this bill that could have significant consequences.

First, the amount of information required in a complaint is extraordinary, especially in comparison to what is required now. Some of this information may be very difficult for a plaintiff to know at the filing stage, even with substantial pre-filing due diligence. For instance, it may be difficult to determine all of defendant’s allegedly infringing products beforehand. Indeed, discovery often reveals additional products that infringe. What are the consequences if a plaintiff later discovers infringing products? How can they be added to the lawsuit? Interestingly, there is no equivalent requirement for defendants to plead this level of detail with respect to their non-infringement or invalidity positions.

Second, how will these pleading changes affect declaratory judgment lawsuits? Normally, an infringement counterclaim must be raised in an answer as a mandatory counterclaim. These pleading requirements apply for counterclaims, as well as the initial complaint. What happens if a patentee is sued based on a licensing demand and does not have this information? Or does not have this information for all of the accused infringer’s products? Patentees would have to be extremely careful before sending out cease-and-desist or licensing letters.

Third, given that core discovery specifically excludes e-mails, how will the parties obtain some of the core discovery that may only be in e-mail format? For instance, a defendant’s awareness of the patent or infringement may only be found internal e-mail communications. Core discovery also excludes computer code. Presumably, a court will find this code to be core discovery for computer software patents or inventions that use a computer, but that is not clear.

Fourth, the bill states that a party is not entitled to additional discovery until it first pays for it. How will those issues be addressed? What happens if there is a dispute over the reasonableness of the costs? Will courts have to micromanage litigation budgets and fees? What happens if a party cannot afford the discovery? Is it completely barred from obtaining it? Is this a due process concern?

Fifth, core discovery is defined as “core documentary evidence” and only includes documents relating to the topics described above. How are depositions and expert discovery treated? What about interrogatories? Are they “additional discovery” that must be paid for by the requesting party? If so, this is especially problematic with experts. Unlike document requests and interrogatories, a party has no control over what experts (or how many) the other side hires. The bill is silent on how to address these issues.

Sixth, this bill turns patent litigation into a loser pays proposition. In other words, it is the equivalent of a default finding of exceptional circumstances in our current system. The bill is silent as to what happens if a position that was reasonable becomes unreasonable in the middle of the litigation. For instance, an infringement or non-infringement position may become unreasonable after the court issues its claim construction. What happens then? If a plaintiff does not withdraw its suit or a defendant does not immediately settle, are they liable for all of the fees? Only those fees after the ruling? A defendant may not be able to extricate itself on reasonable terms at that point, especially if the plaintiff now knows it will be able to collect its attorneys’ fees.

Finally, while this payment requirement can be challenged, this change will create even more pressure on a defendant to settle a case, especially if it is likely to be costly. Plaintiffs can presumably take more precautions to make sure that their positions are reasonable and substantially justified before they choose to file suit. A defendant may not have that luxury.

Summary

There are clearly issues with patent litigation now, especially with respect to suits brought by “trolls.” It is not clear whether the Patent Abuse Reduction Act of 2013 will help or hurt more, however. It will be interesting to see the discussions surrounding this piece of legislation and whether it ever becomes law.

Supreme Court Holds That Reverse Payments May Give Rise to Antitrust Violations

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

SupremeCourtImage_1Today, the United States Supreme Court in a 5-3 decision authored by Justice Breyer in Federal Trade Commission v. Actavis, Inc., No. 12-416, held that reverse payments by a patent holder to an accused infringer to settle a patent infringement lawsuit may implicate antitrust concerns and may be actionable. The Court declined to find that such payments are either per se actionable or immune from the antitrust laws. Instead, such payments must be analyzed under a “rule of reason” approach.

The case arose out of a “paragraph IV” patent infringement lawsuit brought by a pharmaceutical manufacture (Solvay Pharmaceuticals) against a generic manufacturer (Actavis). Solvay  filed a New Drug Application in 1999 for a brand-name drug called AndroGel that is used in testosterone replacement therapy. In 2003, Solvay obtained a patent covering the drug, which was disclosed to the FDA. Later in 2003, Actavis filed an Abbreviated New Drug Application for a generic equivalent to AndroGel, and asserted, under paragraph IV of the Hatch-Waxman Act, that it did not infringe Solvay’s patent because the patent was invalid and it did not infringe. Solvay promptly filed suit alleging infringement under 35 U.S.C. § 271(e)(2)(A).

In 2006, the parties settled the litigation. Actavis agreed to not bring its generic drug to market until 2015 (which was 65 months prior to the expiration of Solvay’s patent) and to promote AndroGel to urologists. In return, Solvay agreed to pay Actavis $19–$30 million annually for nine years. Solvay reached similar agreements with other generic manufacturers.

The Federal Trade Commission found that the settlements were designed primarily to limit competition in the marketplace. In essence, Solvay was simply paying the generic manufacturers to stay out of the marketplace, which would have the side effect of increasing prices for consumers. The FTC then brought an antitrust lawsuit against the drug manufacturers.

The District Court found that the FTC’s allegations did not state a claim under the antitrust laws and dismissed the case. The Eleventh Circuit affirmed. They held that absent an allegation of sham litigation, it was not an antitrust violation to reach these kinds of settlements when the restrictions expired prior to the expiration of the patent in question.

Justice Breyer, writing for the majority, disagreed with the Eleventh Circuit’s blanket rule based on the expiration date of the patent. Instead, the Court held that courts must use a “rule of reason” approach and consider the purpose behind the settlement before they can determine whether the settlements run afoul of the antitrust laws.

In reaching this conclusion, the Court considered that the patent may, in fact, not be valid, and there is a strong public interest in removing invalid patents that is frustrated if these kinds of settlements are allowed. The Court also considered the unusual nature of these settlements—where a patent holder pays substantial amounts to the accused infringer. This was not a case where the two parties met in the middle on a settlement figure or where the accused infringer had more valuable counterclaims. Finally, the legislative history behind the Hatch-Waxman Act suggested that Congress was not attempting to justify settlements like these.

The Court also considered the countervailing interest of encouraging settlements and allowing parties to reach mutually-agreeable resolutions. Despite that important interest, the Court was not willing to create blanket immunity for these kinds of settlements. It was concerned that these settlements have a very real potential to hinder competition.

The Court will also quick to note that it would not hold such reverse payment settlements as per se violations. It recognized that some reverse payments may be justified because they save litigation costs, allow for increased distribution of the drug, or will help develop new markets. In the end, the relevant question for antitrust purposes is why did the parties enter the agreement? “If the basic reason is a desire to maintain and to share patent-generated monopoly profits, then, in the absence of some other justification, the antitrust laws are likely to forbid the arrangement.”

The Court then remanded the case back for further proceedings. Justices Breyer wrote the opinion of the Court and was joined by Justices Kennedy, Ginsburg, Sotomayor, and Kagan. Chief Roberts dissented and was joined by Justices Scalia and Thomas. Justice Alito took no part in the decision.