PracticeGroupPodcastsThe Federalist Society has a new patent law podcast posted on the Quanta Computer v. LG Electronics case before the Supreme Court and its impact on patent licensing.   In Quanta, the Supreme Court is being asked whether the Federal Circuit erred by holding, in conflict with decisions of this Court and other courts of appeals, that respondent’s patent rights were not exhausted by its license agreement with Intel Corporation, and Intel’s subsequent sale of product under the license to petitioners.

Quanta: Patent Rights in the Supreme Court 9-30-09 - MP3
Running Time: 01:40:52

To listen, please right click on the audio file you wish to hear and then select “Save Link As…” or “Save Target As…”  After their opening remarks, the panelists engage in a vigorous exchange of ideas about exhaustion doctrine and patent licensing.

In the case, LG Electronics owned a patent for a microprocessor chip, which it licensed to Intel, but excluded from the licensing agreement any Intel customer that used the chip with non-Intel products.  One third-party purchaser integrated the chip with Dell, HP and Gateway products.

In this U.S. Supreme Court case, the Court was asked whether a patent holder can seek royalties from the downstream third-party purchaser.  The Court concluded unanimously that it could not. Writing for the Court, Justice Clarence Thomas relied on the theory of “patent exhaustion,” which provides that a patented item’s initial authorized sale terminates all patent rights to that item, denying LGE royalties from companies down the line of commerce.  The panel of experts discuss the decision, and the implications of the decision for patent law and  licensing agreements.

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    Job opening from American Conference Institute:

    Legal Conference Directors

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    nihlogoThe NIH Office of Biotechnology Activities (OBA) tries to promote science, safety, and ethics in biotechnology through advancement of knowledge, enhancement of public understanding, and development of public policies. The OBA manages the Secretary’s Advisory Committee on Genetics, Health, and Society (SACGHS), which advises the Secretary of Health and Human Services on the broad range of human health and societal issues raised by the development and use and potential misuse of genetic technologies.

    To this end, SACGHS looked at whether changes are needed in patenting and licensing practices that affect genetic testing, and the appropriateness, feasibility, and implications of policy options in its draft report on Gene Patenting and Licensing and Their Impact on Patient Access to Genetic Tests.  The report makes several recommendations that would restrict the ability to obtain or undermine the enforceability of patents and exclusive licenses with respect to genetic tests.

    In the fall of 2006, SACGHS initiated a study to assess the positive and negative effects of gene patenting and licensing practices on patient and clinical access to genetic tests and on the public’s health and quality of life. In March 2009, SACGHS released a Public Consultation Draft Report on Gene Patents and Licensing Practices and Their Impact on Patient Access to Genetic Tests for public comment until May 15, 2009.  During the summer of 2009, SACGHS reviewed comments and any relevant new data. The final draft report and recommendations were then discussed at SACGHS’ October 2009 meeting.

    The Biotechnology Industry Organization (BIO) provided comments to the Advisory Committee taking issue with many of the draft report’s recommendations, which were not supported by the Committee’s own findings and case studies.  Those findings and case studies show how patenting and exclusive licensing practices can be necessary to foster the development of valuable genetics tests for patients, particularly those with rare disorders, and that they have other positive impacts – such as incentives to promote physician and patient education, broader insurance coverage, and improved compliance. Those real benefits were largely ignored by the Committee in proposing its over-reaching and restrictive recommendations.

    The report showed:

    Based on its review of the literature, case studies, and review of international policies regarding gene patents, SACGHS found little in the way of broad or consistent evidence that indicates either positive or negative effects of gene patents on patient access to diagnostic tests.

    Apparently, the Committee just had a gut felling that patents are bad.  See their own vague conclusions:

    What role did patents play in the commercialization of the genetic tests?

    The case studies suggest that for those who secured a patent on a gene-disease association, there was an incentive to commercially develop a genetic test. [A] patent apparently is not uniformly a necessary incentive to develop or commercialize a genetic test. Patents, however, may be necessary to stimulate commercial development of genetic tests for rare alleles.

    How did patents and licensing practices affect availability?

    The case studies generally found that for patented tests that were licensed to many providers, there was no evidence of any limitations on availability. Where there is a sole provider, due to the patent holder practicing the patent exclusively or licensing exclusively to a single entity, the effects on availability can be positive or negative.

    What is the potential that the patent may cause some future harm?

    The case studies note that patents relating to genetic tests could hinder the anticipated increase in multiplex genetic testing and the foreseeable clinical use of whole genome analysis/sequencing (emphasis added).

    So, they did a big ol’ study and found that patents can provide an incentive to commercialize and that patent rights give companies exclusionary rights over others.  I’m shocked.  And so was BIO:

    The patent, licensing, and tech transfer system in this country is, by any objective measure, working quite well overall.  The evidence shows that decisions about what patents to seek and how best to license them are decisions that are best made by the researchers and their commercial partners, who have the greatest incentives to achieve widespread patient access to their discoveries,” concluded Greenwood.  “Enacting these recommendations would risk thousands of jobs across the country by stifling university-industry partnerships and undermine the country’s global leadership in biotech innovation.”

    SACGHS own report acknowledges that the patent system is designed “to promote the progress of science and useful arts” by granting to inventors, for a limited period of time, the right to exclude others from making, using, or selling the patented invention. This approach to encouraging scientific research and development involves a tradeoff between the incentive exclusive rights can provide for innovation and the potential costs from granting such exclusive rights.

    So, why is everyone suddenly beating up on gene patents?  Anti-gene patent proposals are not new.  Reps. Xavier Becerra (D-Calif.) and Dave Weldon (R-Fla.) tried to kill them with the Genomic Research and Accessibility Act, which sought to prevent the patenting of “nucleotide sequences” along with their “functions, correlations, or the naturally occurring products [they] specify.” More recently, the ACLU filed a suit claiming that patenting genes is unconstitutional for limiting research and the free flow of information, and as a result violates the First Amendment.

    A lot seems to have to do with the government wanting to pay less for healthcare.  But, knocking out a segment of patents is a short-term solution.  Everyone wants to save money but killing gene patents would only yield access to patented gene patents already developed.  What is to happen regarding incentivizing commercialization of  future developments.

    BIO’s comments are available here.  BIO’s more comprehensive comments on the draft report are here.

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    Under Secretary of Commerce for Intellectual Property and Director of the USPTO David Kappos has officially rescinded the highly hated regulations that would have limited patented claims and continuations — with an emphasis on the fact that they were proposed by the previous administration. The regulations were published in the Federal Register in August 2007, but were enjoined and never came into effect.

    The USPTO also announced that it will file a joint motion with GlaxoSmithKline – one of two plaintiffs in the Tafas v. Kappos lawsuit – to dismiss and vacate the federal district-court decision in a lawsuit filed against the USPTO that sought to prevent the rules from taking effect.

    In March, the Federal Circuit issued its 55 page decision in Tafas v. Doll holding that aside from the rule limiting continuations, the other rule changes were procedural in nature and the PTO does have the rule-making authority to implement the rules limiting the number of claims in each application, providing for Requests for Continued Examination (RCEs) and requiring Examination Support Documents (ESDs).

    Then, an eleven member en banc panel has voted to rehear the case en banc. Tafas v. Doll, 2008-1352 (Fed. Cir. 2009)(Order, per curiam). In its en banc order, the Federal Circuit vacated the panel decision, set up a briefing schedule and said it would announce an oral argument at a later date.

    Kappos issued a statement showing that the Patent Office may be changing from its anti-patent stance:

    “The USPTO should incentivize innovation, develop rules that are responsive to its applicants’ needs and help bring their products and services to market,” Kappos said. “These regulations have been highly unpopular from the outset and were not well received by the applicant community. In taking the actions we are announcing today, we hope to engage the applicant community more effectively on improvements that will help make the USPTO more efficient, responsive, and transparent to the public.”

    The regulations would have permitted an applicant to file only two continuation applications and one request for continued examination (RCE) per application family as a matter of right. For a third or subsequent continuation application or RCE, the applicant would have had to make a case to the USPTO to show why the additional filing was needed. Another regulation would have permitted an applicant to file five independent claims and twenty-five total claims per application. If an applicant desired more than five independent claims or more than twenty-five total claims, then the Claims Rule would have required the applicant to supply information to the USPTO about the claimed invention to assist the Office’s examination.

    The press release notes that “many in the applicant community felt the combination of these new requirements would ultimately have had an effect that was at odds with their intended purposes.” That huge understatement belies the fact that some estimates showed that put the minimum direct paperwork cost for only one part of the IDS Rule at $1.9 billion – more than the PTO’s total budget of $1.7 billion.

    There has also been speculation that the Continuations and Claims rules had been effectively killed nineteen months ago, along with the IDS rule, by the White House Office of Management and Budget (OMB). The rules came up for review under the Paperwork Reduction Act in September 2007, and this required a notice-and-comment period.  Between November 2007 and January 2008, David Boundy, Ron Katznelson and Richard Belzer filed several letters with the White House Office of Management and Budget, showing that PTO had underestimated the paperwork burdens of the Continuations and Claims Rule by billions of dollars per year, and had failed to comply with numerous procedural requirements of the Act. Although the law requires an agency to respond to such comments, there is no public record that PTO ever did so. Many (though not all) of the submissions to OMB are here.

    Recently OMB approved the PTO’s September 2007 Paperwork clearance filing. The PTO’s final version of its request for Paperwork approval reads “At the direction of OMB, this renewal [for Paperwork clearance] is being resubmitted with all of the [requests for approval of the Continuations, Claims and IDS rules] removed.”

    If it is correct that the Paperwork clearance was denied and/or revoked by the OMB, it would appear that even if the PTO had won the Tafas case, the PTO would have been forbidden by law from demanding this information from patent applicants.

    Though the information on OMB’s web site is not clear on the point, it appears that the directive from the White House to PTO to withdraw the rules may have issued no later than late January 2008, and that PTO had fully acquiesced by mid-April.

    Note that briefing on cross-motions for summary judgment were pending in the Tafas/GSK litigation during the time when PTO was “directed” to withdraw the rules.  It is not clear if the PTO ever informed Judge Cacheris or the parties that it had made these changes in its paperwork filings.

    OMB’s final determination on the Paperwork aspects of these three rules was issued on July 1, 2009.  However, it is not shown if the PTO informed the Federal Circuit, even though a petition for en banc rehearing was pending. The en banc petition was granted July 6.

    Biotechnology Industry Organization (BIO) President and CEO Jim Greenwood issued a statement on the decision, which had been opposed by BIO:

    “BIO applauds the action by Under Secretary Kappos today to formally withdraw the controversial and harmful proposed rules that would have limited the ability of biotechnology applicants to secure full coverage of their inventions. This action is a positive sign that the new Administration wants to work in a constructive manner with the patent applicant community to address the serious challenges facing the PTO, and BIO stands ready to work with Under Secretary Kappos and others at the PTO to do so.”

    GlaxoSmithKline’s press release is available here.

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    Event: CincyBio 2009.  The Bioscience Event for Innovators and IP Professionals

    Date & Time: Wednesday, November 4, 2009 7:30AM – 4:30PM

    Event Description and Agenda:

    • Lessons from the Trenches:  Biomedical Device Case Study
    • Lessons from the Trenches:  Pharmaceutical Product Case Study
    • Lessons from the Trenches:  Voices of Experience
    • Biomedical Device Panel Breakout – Panel Discussion of patent and licensing issues, including deal killers and market potential, in the context of the case study and the panelists’ experiences, as specifically related to biomedical devices.
    • Pharmaceutical Product Panel Breakout – Panel Discussion of patent and licensing issues, including deal killers and market potential, in the context of the case study and the panelists’ experiences, as specifically related to pharmaceutical products.
    • Policy Issues in Patenting the Breast Cancer Gene
    • Lunch and Keynote by John F. Lewis, Jr. on the State of the Life Science Industry in Ohio
    • Panel Discussion on:  Open Innovation – Partnering with Other Companies to Drive Innovation
    • Panel Discussion on:  Innovations in University and Industry Collaborations
    • Biotech Patenting in Europe

    CLE Credit: 5.5 credit hours of General CLE for OH (pending approval).

    Co-Sponsoring Organizations: Cincinnati Intellectual Property Law Association (CincyIP), the Cincinnati Chapter of the Licensing Executive Society and the University of Cincinnati.

    Speakers/Moderators: Anne H. Chasser (Associate Vice President for Intellectual Property and former Commissioner for Trademarks at the United States Patent and Trademark Office, Carol J. Frankenstein (President of BioStart), Sam Han, Ph.D. (Assistant Professor of Law at The University of Dayton), John F. Lewis, Jr. (Vice President and COO of BioOhio), Leonard W. Lewis (Associate General Counsel Intellectual Property at Procter & Gamble), Cyra Nargolwalla (European Patent Attorney and partner at Cabinet Plasseraud), Mary Beth Privitera, Ph.D. (Assistant Professor of Biomedical Engineering at the University of Cincinnati), and Chris Thoen, Ph.D. (Managing Director, Global Open Innovation Office at Procter & Gamble)

    Location: Kingsgate Marriott Conference Hotel at the University of Cincinnati
    151 Goodman Drive, Cincinnati, Ohio 45219; Phone: 513.487.380

    Register Deadline: Noon –Tuesday, October 27, 2009.

    Detailed Agenda: CincyBio_2009_Schedule.pdf

    Cost: $35 for students and non-lawyers; $60 for law professors; $80 for CincyIP members; $100 for lawyer non-members.

    Click here to Register Now.

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    The US Court of Appeals for the Federal Circuit ruled in favor of Roche in a longstanding patent-infringement dispute with Stanford University regarding ownership of PCR-based test kits for the HIV virus. Board of Trustees of the Leland Stanford Junior University et al. v. Roche Molecular Systems et al. (09 2008-1509, -1510).

    Earlier, a district court held that the claims of U.S. Pat. Nos. 5,968,730, 6,503,705 and 7,129,041 are invalid for obviousness. Now, the Federal Circuit has ruled that the ruled that Stanford did not have standing to file suit against Roche because it didn’t own the patents in the first place. The court determined that Roche owned the patents and so vacated the district court’s judgment of invalidity and remanded with instructions to dismiss Stanford’s action.

    The patents-in-suit claim methods for quantifying Human Immunodeficiency Virus in human blood samples, and correlating those measurements to the therapeutic effectiveness of antiretroviral drugs. The claimed methods use the polymerase chain reaction (PCR) to measure ribonucleic acid (RNA) from HIV in the blood plasma of infected humans who are taking drugs such as zidovudine (AZT). Stanford first sued Roche in 2005, looking for more than $200 million for infringement of the three patents.

    The technology related to the patents was developed by researchers at Stanford and Cetus and the collaborations between Stanford and Cetus included a series of written agreements signed by Stanford researcher Mark Holodniy, one of the inventors on the patents, who collaborated with Cetus on the development of the test kits. Holodniy had signed a “Copyright and Patent Agreement” with Stanford that required him to assign his inventions to the university, but then later signed a conflicting “Visitor’s Confidentiality Agreement” with Cetus that required him to assign to the company any inventions that resulted from the collaboration.

    During the same period, Cetus also collaborated with inventors Merigan and Katzenstein to develop a separate HIV treatment. Merigan, Stanford, and Cetus signed multiple “Materials Transfer Agreements” that permitted Stanford to use certain PCR-related materials and information supplied by Cetus. These agreements provided Cetus with licenses to technology that Stanford created as a result of access to Cetus’s materials.

    Eventually, researchers determined that HIV RNA, measured through PCR, was a suitable “marker” of drug efficacy. These results formed the basis for the patents-in-suit.  In1992, Stanford filed an invention disclosure for the HIV RNA assay with the NIH and confirmed to the Government the grant of a “nonexclusive, nontransferable, irrevocable, paid-up license” under the parent application.

    The district court granted Stanford’s motion in part, finding that (1) Roche’s ownership claims were barred by California statutes of limitation, laches, and the Bayh-Dole Act; (2) Roche’s license claims failed because Stanford never consented to Roche’s acquisition of Cetus’s patent licenses; and (3) Roche lacked shop rights to the patents.

    Roche moved for summary judgment that the asserted claims were invalid. The district court granted the motion, holding all asserted claims obvious.  The district court said that the applicable California statutes of limitation and the doctrine of laches foreclosed Roche’s counterclaim for a judgment of ownership, and that such determination was fatal to Roche’s ownership and standing defenses.

    The Federal Circuit didn’t wholly agree:

    While we agree with the district court that the statutes of limitation preclude Roche from obtaining a judgment of ownership, we do not agree that such determination prevents Roche from asserting Stanford’s lack of ownership of Holodniy’s interest as a defense and a challenge to Stanford’s standing to maintain its action against Roche.

    Holodniy signed the CPA with Stanford, which recites: “I agree to assign or confirm in writing to Stanford and/or Sponsors that right, title and interest in . . . such inventions as required by Contracts or Grants.” The court said this wasn’t enough:

    We have held that the contract language “agree to assign” reflects a mere promise to assign rights in the future, not an immediate transfer of expectant interests…. Therefore, in the CPA, Holodniy agreed only to assign his invention rights to Stanford at an undetermined time.

    But, Holodniy signed the VCA with Cetus, which recites: “I will assign and do hereby assign to CETUS, my right, title, and interest in each of the ideas, inventions and improvements.” This somehow made the agreement “different” from the one with Stanford:

    In contrast to the CPA, the VCA’s language of “do hereby assign” effected a present assignment of Holodniy’s future inventions to Cetus. E.g., Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245, 1253 (Fed. Cir. 2000) (interpreting “shall belong” as a present assignment); FilmTec Corp. v. Allied-Signal, Inc., 939 F.2d 1568, 1572-73 (Fed. Cir. 1991). Therefore, Cetus immediately gained equitable title to Holodniy’s inventions.

    Cetus’s equitable title converted to legal title no later than the parent application’s filing date. However, because Cetus’s legal title vested first, Holodniy no longer retained his rights, negating his subsequent assignment to Stanford during patent prosecution.

    Stanford argued that it was a bona fide purchaser but that also fell short. Stanford contends that it purchased Holodniy’s rights through his 1995 assignment of the parent application for “good and valuable consideration,”that Cetus and Roche never recorded their interests with the Patent and Trademark Office, and that Stanford received no notice of Holodniy’s countervailing assignment to Cetus.

    While a good attempt, the court refused to buy this argument:

    However, Stanford’s argument fails because there can be no genuine dispute that Stanford had at least constructive or inquiry notice of the VCA. … Therefore, Stanford’s claim that it remained ignorant of the VCA until shortly before the current litigation is inconsequential.

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    2009sep14kappos_speechDavid Kappos, Director of the US Patent and Trademark Office, made a series of proposals to bring change to the examiner count system – the process for determining the time a patent examiner has to complete a patent examination and how much credit is given for each stage of an examination.

    The proposal was developed by a task force comprised of senior managers in the Patents organization and leadership of the Patent Office Professional Association (POPA), the union that represents patent examiners.

    The proposed changes are designed to:

    • incentivizing quality work at the beginning of the examination process;
    • encourage examiners to identify allowable subject matter earlier in the examination process;
    • rebalance incentives both internally and externally to decrease rework; and
    • increase examiner morale and reduce attrition.

    The full proposal, with all its gory details, is available here.

    The proposal provides incentives to encourage examiners to do a high-quality first action, and shifts resources from a focus on examiner recertification to front-end quality improvements. The proposed changes will give examiners more time overall, more time for a first action on the merits, and time for examiner-initiated interviews, while decreasing credits on requests for continued examination (RCEs) and providing consistent credits for transferred or inherited amendments.  RCEs are still available and examiners will continue to be given credit for examining RCEs.

    When patent examiners review patent applications to determine if a patent is warranted, the examiners must meet two specific milestones in the patent examination process: first actions and disposals.

    First action: Patent examiners notify applicants about the patentability of their invention through a first action after determining if the invention is new and useful, as determined through an investigation of information related to the subject matter of the patent application.

    Disposal: Patent examiners dispose of a patent application by determining, among other things, if a patent will be granted—called allowance—or not.

    Patent examiners receive credit, called counts, for each first action and disposal, and are assigned production goals (also known as quotas) on the basis of the number of production units—composed of two counts—they are expected to achieve in a 2-week period. The counts in a production unit may be any combination of first actions and disposals.

    The production goals that are used to measure patent examiner performance are based on the same assumptions that USPTO established in the 1970s. At that time, the agency set production goals in the belief that it should take a patent examiner a certain amount of time to review a patent application and achieve two counts based on the patent examiner’s experience (as determined by the patent examiner’s position in the agency) and the type of patent application reviewed.

    As a result, these goals varied depending upon the patent examiner’s position in the federal government’s general schedule (GS) pay scale and the technology center in which the patent examiner works. In the past, a GS-12 patent examiner working on data processing applications is expected to achieve two counts in 31.6 hours, whereas a GS-12 patent examiner working on plastic molding applications is expected to do so in 20.1 hours. In contrast, GS-7 patent examiners working on these two types of applications are expected to achieve two counts in 45.1 and 28.7 hours, respectively.

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    The USPTO has prepared interim examination instructions for evaluating patent subject matter eligibility under 35 U.S.C. 101 (Interim Patent Subject Matter Eligibility Examination Instructions) pending a decision by the U.S. Supreme Court in Bilski v. Kappos, and invited the public to submit written comments on the Interim Patent Subject Matter Eligibility Examination Instructions on or before September 28, 2009. See Request for Comments on Interim Examination Instructions for Evaluating Patent Subject Matter Eligibility, 74 FR 47780 (September 17, 2009).

    Mary Till, Legal Advisor-Office of Patent Legal Administration at the U.S. Patent and Trademark, was speaking at the 11th Advanced Forum on Biotech Patents and mentioned that the USPTO has only received 9 comments to date.  Therefore, the USPTO is extending the comment period to ensure that members of the public have sufficient opportunity to submit comments on the Interim Patent Subject Matter Eligibility Examination Instructions.

    A notice extending the comment period will be published in the Federal Register, and it will provide a new comment deadline of 30 days from the publication date of the notice in the Federal Register.  The USPTO will revise the instructions as appropriate based on comments received. Comments that have already been received are under consideration.

    35 U.S.C. § 101 establishes the threshold for patentability by setting requirements for subject matter that is eligible for patenting. There are two criteria for determining subject matter eligibility and both must be satisfied. The claimed invention (1) must be directed to one of the four statutory categories (process, machine, manufacture, or composition of matter), and (2) must not be wholly directed to subject matter encompassing a judicially recognized exception, as defined below.

    Note that the guidelines provide for the following:

    A claim that covers both statutory and non-statutory embodiments (under the broadest reasonable interpretation of the claim when read in light of the specification and in view of one skilled in the art) embraces subject matter that is not eligible for patent protection and therefore is directed to non-statutory subject matter. Such claims fail the first step and should be rejected under § 101, for at least this reason. For example, a claim to a computer readable medium that can be a compact disc or a carrier wave covers a non-statutory embodiment and therefore should be rejected under § 101 as being directed to non-statutory subject matter.

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