June 27, 2008
An Empirical Study of Claim
Construction Rates (permalink)
In an upcoming article
in the Michigan Law Review entitled
Practice Makes Perfect? An Empirical Study of Claim Construction
Reversal Rates in Patent Cases (SSRN download page.) David Schwatrz
investigates whether U.S. District Court judges "with more claim
construction experience fare better on subsequent appeal."
"Surprisingly," Mr.
Schwaz concludes (rather harshly), "the data do not reveal that district
court judges learn from appelate review of their rulings."
Since the U.S. Supreme
Court decided in
Markman v.
Westview (Cornell University Law School) in 1996 that claim
construction is a matter of law, the issuance of a so-called Markman
ruling has become a standard feature of patent litigation in the United
States.
As Schwartz noted
"previous studies have shown that the Federal Circuit reverses decisions
on the issue of claim construction at an alarming rate" citing Kimberly
Moore's (now somewhat dated) 2001 empirical study that showed district
courts wrongly construed 34,5% of claim terms and that "29,7% of the
judgements entered in cases had to be reversed or vacated because of
erroneous claim construction."
In his article,
Reversing the Reversal Rate (Fordham University pdf), Paul M.
Schoenhard challenges the "pervasive perception that the Court of
Appeals for the Federal Circuit reverses district court rulings in
patent cases at an inordinately high rate."
Noting that there has been
"a precipitous drop in the Federal Circuit's reversal rate over the past
8 years - stabilizing at 13% in 2004 and 2005", he concludes that the
"Court's reversal rate has fallen in line with other courts of appeal."
July 31, 2007
More Patent
Nonsense (permalink)
"Suppose the
Houston Texans decided to play next season using the exact same
equipment and training techniques used in the 1950s. I doubt many
of the players would physically make it through the season, let
alone make the playoffs."
Thus, Ted Clark, senior
vice president and general manager of the Notebook Business Unit,
Hewlett-Packard (1 page pdf) writing
for the hometown Houston Chronicle
Throwing his support
behind the Patent Reform Act of 2007, Mr. Clark warns "If our
patent system isn't updated, the consequences could be loss of innovation
and jobs."
Loss of innovation and
jobs? According to U.S. law (35
USC 101) patents may be granted on "any new and useful process,
machine, manufacture, or composition of matter, or any new and useful
improvement thereof." Patents and innovation go hand in glove.
As of this Tuesday past,
USPTO records indicate that Hewlett-Packard has received a total
of 17,804 U.S. Patents. Since 2000. Hewlett-Packard has more than
doubled the number of patents it receives from the U.S. government.
Hewlett-Packard, the
company that attaches the word "invent" to it's Trademark -
has been among the top ten orgainzations receiving U.S. patents
for more the letter part of a decade. It would appear that HP is
more innovatiove than ever, so it is somewhat curious that Mr.
Clark argues that the "PRA would also address the need for
effective and timely methods for patent review that will weed out
bad patents in the system and cut down on need for immediate litigation."
Would this result in
fewer patents being issued to HP? Or is Mr. Clark, like
his colleague Bruce Sewell at Intel, concerned about his employer's
bottom line?
"The number of
patent cases and the size of damages and settlements in the United
States in just the past few years have been staggering. Nationwide,
the number of patent lawsuits nearly tripled between 1991 and 2004,
and the number of cases between 2001 and 2005 grew nearly 20 percent.
Up until 1990, only one patent damages award exceeded $100 million,
but more than 10 judgments and settlements greater than that amount
were awarded in the past five years, and at least four topped $500
million.
The cost of infringement
is going up. But isn't this expected? In industries where profits
are derived from intellectual capital, intellectual property rights
(IPRs) play a more dominant role in the realisation of these profits.
There is certainly an abundance of empirical evidence to indicate
that IPRs are assets of increasing business value. Isn't it to be
expected that the cost of infringing these IPRs should also go up?
As a technology aggregator,
HP's products contain hundreds, if not thousands of inventions, patented
by dozens, scores, or even hundreds of companies. There is a fragmentation
of patent rights (self-link) in complex technologies which places
pressure on the traditional approach to patent law. Reform may well
be needed, but it is questionable if the Reform Act of 2007 addresses
this problem in the right way. What is certain is that opaque corporate
advocacy does little to advance the debate.
Conflating the problem
of "bad" patents with the high cost of infringement, as
Mr. Clark does (and previously Intel's Bruce
Sewell did) is misleading. The threat to big business, like Intel,
comes from legitimate patents, duly and properly issued by the USPTO
(and other patent offices.) Multi-billion dollar damage awards result
from the refusal of infringers to accept a license when it is offered. (self-link)
What the PRA does is
make it significantly less expensive to infringe legitimate, useful
patents. Whether this makes sense in the Knowledge Economy is something
that the U.S. Congress must soberly consider.
July 19, 2007
Patent Nonsense (permalink)
Writing
in the Wall Street Journal, Bruce Sewell, General
Counsel for chipmaker Intel, urges Congress to pass the much
debated U.S. Patent Reform Act of 2007, introduced as S.1145 in
the Senate and H.R.1908 in
the House.
Observing that "the
number of patent lawsuits nearly tripled between 1991 and 2004, and
the number of cases between 2001 and 2005 grew nearly 20%" Mr.
Sewell quickly proceeds to his bottom line:
Until 1990, only one
patent damages award exceeded $100 million; more than 10 judgments
and settlements were entered in the last five years, and at least
four topped $500 million. One recent decision topped $1.5 billion.
The cost of infringement
is going up. But isn't this expected? In industries where profits
are derived from intellectual capital, intellectual property rights
(IPRs) play a more dominant role in the realisation of these profits.
There is certainly an abundance of empirical evidence to indicate
that IPRs are assets of increasing business value. Isn't it to be
expected that the cost of infringing these IPRs should also go up?
(And let's keep this
in perpective: Intel earned $87
bilion in the second quarter of 2007. A theoretical patent damage
award of $100m against Intel would correspond to just over 1% of
this quarterly amount.)
As a technology aggregator,
Intel's products contain hundreds, if not thousands of inventions,
patented by dozens, scores, or even hundreds of companies - including
(one assumes) Intel itself. There is a fragmentation
of patent rights (self-link) in complex technologies which places
pressure on the traditional approach to patent law. Reform may well
be needed, but it is questionable if the Reform Act of 2007 addresses
this problem in the right way. What is certain is that opaque corporate
advocacy does little to advance the debate.
Conflating the problem
of "bad" patents with the cost of infringement, as Mr.
Sewell does, is misleading. Whilst it is entirely true that "the
number of questionable, loosely defined patents, moreover, is rising" this
has little to do with the increasing number of claims being made
by legitimate patent holders. Ironically, Mr. Sewell seems to make
this point himself, mockingly referring to "[o]ne company[which]
holds patents that it claims broadly cover current technologies that
allow people to make phone calls over the Internet." The nerve
of them.
Mr. Sewell is obviously
referring to Verizon and their portfolio of VoIP patents - which
were recently upheld by a Federal District Court. In their suit
against VoIP competitor, Vonage, Verizon asserted seven U.S. Patents:
6,430,275 Enhanced
signaling for terminating resource
6,137,869 Network
session management
6,104,711 Enhanced
Internet domain name server
6,282,574 Method,
server and telecommunications system for name translation on a
conditional basis and/or to a telephone number
6,128,304 Network
presence for a communications system operating over a computer
network
6,298,062 System
providing integrated services over a computer network,
6,359,880 Public
wireless/cordless Internet gateway
The
jury found Vonage guilty of infringing three of these U.S. Patents
6,430,275, 6,128,304, and 6,359,880. It
would seem a bit unfair to characterize such patents as "questionable" and "loosely
defined." Verizon's patents came out of inventions developed
at GTE Labs before the 2000 merger of GTE and Bell Atlantic. GTE "was
the largest 'independent' US telephone company during the days
of the Bell System." GTE Labs was a resepected research
organisation. Comparing these patents to the matter of "a
five-year-old boy [who] patented a
method of swinging on a swing" is utterly absurd. Just
because some patents are bad does not mean that all patents are
bad.
The threat of ten figure
damage awards does not come from "questionable, loosely defined
patents." Far from it. The fact of the matter is that 5 year
old Steven Olsen of St. Paul Minnesota is unlikely to ever see any
income at all from U.S. patent 6,368,227.
This is fate of most patent holders. The difficulty of licensing
intellectual property remains the real threat to innovation.
The threat to big business,
like Intel, comes from legitimate patents, duly and properly issued
by the USPTO (and other patent offices.) Multi-billion dollar damage
awards result
from the refusal of infringers to accept a license when it is offered. (self-link)
June 4, 2007
Software Patents in the UK - Part
2 of 3
Part
I of this series looked at the way national courts of the EPC
contracting states (in particular the UK) give weight to the EPC
and decisions of the EPO's Boards of Appeal.
In October, 2006 the
Court of Appeal issued a decision in the matter of the appeal of
Aerotel Ltd. and Telco, the matter of The Patents Act of 1977, and
the matter of Patent Application GB 0314464.9 [2006]
EWCA Civ 1371 (49 page pdf). As the commercial impact of patent
decisions is what is most interesting to this blog, the matter of Aerotel
Ltd. an Israeli company specialising in pulse to tone converstion
products and Telco Ltd. one of the U.K.'s pre-paid telephony services.
Aerotel and Telco were engaged in a infringement dispute over Aerotel's GB
patent 2,171,877. The '877 patent
is concerned with
telephone systems and more particularly with telephone systems
wherein when a prepayment is in force the prepaid party can use
anytelephone forcompleting telephone calls including toll calls.
The telephone system may include public phones dedicated to use
by prepaid parties.
Sued for infringement,
Telco counterclaimed to have Aerotel's patent revoked. In the revocation
request, Telco argued that the claimed invention was not an inventyion
for the purpose of the U.K.
Patent Act of 1977 because it consisted of "a scheme, rule,
or method of doing business as such." As Mr. Justice Lewison
wrote;
The
correct approach.... was discussed by the Technical Board of
Appeal of the European Patent Office in Hitachi
Limited, Case T258/03.
A summary of the headnotes
of the Hitachi case states:
I. A method involving technical means is an
invention within the meaning of Article 52(1) EPC...
II. Method steps consisting
of modifications to a business scheme and aimed at circumventing
a technical problem rather than solving it by technical means cannot
contribute to the technical character of the subject-matter claimed..
In other words, the
invention itself must be of technical character and not simply involved
technical means. Applying this reasoning to Aerotel's patent, Mr.
Justice Lewiston concluded that
the
patent describes the method and having regard to the way in which
it solves what is a problem simply of payment for telephone calls,
I have come to the conclusion that it does, indeed, describe
no more than a method of business...
The patent was revoked
on May 3, 2006 EWHC
997 (Pat) (8 page MS Word format).
The
Court of Appeal took a different view of the matter. Looking aside
from Hitachi and focusing on the system claimed in the patent the
Court observed "the system as a whole is new", emphasising
that "it is new in itself, not merely because it is to be used
for the business of selling phone calls". The Court concluded
emphatically that "the system is clearly technical in nature."
On
this basis, the Court of Appeal argued that the method claims were "essentially
to the use of the new system" determining them to be "more
than just a method of doing business." The Appeal of Aerotel
was thus allowed.
Part
III of this series will focus on the examination guidelines issued
by the IPO and the surrounding controversy.
May 31, 2007
Software Patents in the UK - Part
1 of 3 (Permalink)
The
Register reports that five UK Companies have filed a legal
challenge against the U.K. Intellectual Property Office's recently
issued examination guidlines on
software patents.
The IPO's guidelines
result from the October, 2006 decision by the Court of Appeals in
the appeal of Aerotel Ltd. and Telco, the matter of The Patents Act
of 1977, and the matter of Patent Application GB 0314464.9 [2006]
EWCA Civ 1371 (49 page pdf). Before proceeding to the controversy
regarding the IPO's examination guidelines, it will be helpful to
review the Court of Appeals Decision.
The decision is remarkable
for a number of reasons, not the least of which is the way it illustrates
how national courts of the EPC contracting states defer to the EPC
and decisions of the EPO's Boards of Appeal. Writing for the Court
of Appeals, Lord Justice Jacob explains firstly that the EPC is the
equivalent of UK Patent Act.
As we have said these
appeals turn on the application of Art.52(2) and 52(3) of the EPC.
The provision was implemented in UK law by s.1(2) of the Patents
Act 1977. Although s.1(2) pointlessly uses somewhat different wording
from that of the EPC no-one suggests that it has any different
meaning.
Secondly, he underlines
the importance of the EPO Boards of Appeal to UK Law:
... decisions of the
Boards of Appeal on provisions of the UK Act intended to implement
corresponding provisions of the EPC have "great persuasive
authority"
Thirdly, Lord Justice
Jacob explains the desirability for harmonisation amongst convention
members in the interpretation of EPC and corresponding national law:
... European patent
judges ought, so far as they can, try to be consistent with one
another, particularly in relation to the interpretation of national
laws implementing provisions of the EPC.
Moreover, he points
out that such deference creates a bilateral obligation on the EPO
Boards of Appeal, noting that:
Decisions of national
courts on such provisions are also of persuasive authority within
the EPO Boards of Appeal itself..
This is very instructive.
Apart from the EU's desire to create a community patent and a common
court for patent litigation, there is already a strong motion within
the members of the EPC to achieve harmonization. This speaks volumes
about the existing "European" attitudes regarding patent
law and practice and suggests the there may be less of a need for
a Community patent than the EU Commission would have us believe.
European patent law is becomign increasingly complicated and it may
make good sense for the bureaucrats in Brussels to slow the rush
to exclude national courts from participation. In particular, the
work of the UK courts has (in this observer's humble opinion) provided
a valuable contribution to the formulation of case law relating to
patents.
Part II of this series
will discuss the details of the Court of Appeals Decision, Part III
will present the impact of this decision on the new examination guidelines
and the accompanying controversy.
May 14, 2007
Microsoft Accuses FOSS of Infringing
235 Patents
In
an interview with Fortune Magazine Microsoft's General Counsel Brad
Smith and "licensing chief" Horacio Gutierrez alleged
that "FOSS infringes on no fewer than 235 Microsoft patents." Suggesting
that the infringement is willful, Mr. Gutierrez asserted:
"This is not
a case of some accidental, unknowing infringement,"... "There
is an overwhelming number of patents being infringed."
This is not the first
time Microsoft has raised the spectre of a patent fight with Free
and Open Source Software. Following Microsoft's patent
cooperation agreement with Novell in November of last year, Microsoft's
CEO Steve Ballmer told analysts:
Microsoft's
nonaggression pact with Novell ... "clearly establishes
that open source is not free and open source will have to respect
intellectual property rights of others just as any competitor
will."
Microsoft's announcement
seems likely to benefit customers of Novell's SUSE Enterprise Linux
who "receive directly from Microsoft a covenant not to sue" for
patent infringement. Just last week Novell issued
a press release stating that 12 new customers (1blu, Arsys, Fujitsu
Services Oy, Gordon Food Service, Gulfstream Aerospace Corp., hi5
Networks Inc., Host Europe, Nationwide, PRISACOM SA, Reed Elsevier,
Save Mart Supermarkets, and state of California, Department of Fish
and Game) had come under the umbrella of their agreement with Microsoft.
What Patents Are
Being Infringed?
As reported in Fortune,
Microsoft asserts that:
the Linux kernel...
violates 42 Microsoft patents. The Linux graphical user interfaces
... run afoul of another 65, he claims. The Open Office suite of
programs ... infringes 45 more. E-mail programs infringe 15, while
other assorted FOSS programs allegedly transgress 68.
Microsoft, however,
so far refuses to specifically identify these patents "lest
FOSS advocates start filing challenges to them."
Why not? Shouldn't Microsoft
want to know if any of its patents are invalid? Microsoft's lack
of transparency on this is a bit troubling and does little to enhance
the credibility of their annoucement.
Certainly, U.S.
Patent 6,594,674 "System and method for creating multiple
files from a single source file" is is likely violated by
every file compression tool such as tar, unzip, and Java. Microsoft's FAT
patents are also likely included in the list of 235.
The announcement casts
a dark shadow over Dell's recent decision to supply its PCs pre-loaded
with Ubuntu. Corporate users of Red
Hat Enterprise Linux might also start feeling uncomfortable.
May 11, 2007
It's Stealing Dammit
Michael Kanellos writing
in CNET News.com explaining why he "loves patents and
copyrights" makes the best case for copyright I have ever
read:
But when you steal
movies, you're also whittling down the royalty checks for some
old lady who had to make out with William Shatner in a bit role
on Star Trek.
The Slashdot crowd responded with
their usual misinformed comments in particular the old shibboleth
that downloading a film without paying for it is not "stealing" in
the literal sense of the word. Downloading hipsters believe that "stealing" only
relates to physical property and only occurs when the owner of said
property is deprived of said property. In the on-line world only
cars, mobile phones, and iPods can be stolen. Downloading a copyrighted
film over Bittorrent cannot be "stealing" since the copyright
owner still has her original copy.
This facetious word-play
is supported by criminal statutes such as the Western
Australian Criminal Code, Section 371 in which stealing is defined
as "depriving the owner of the thing or property".
On Nov. 22, 1968, Star
Trek episode 65, "Plato's
Stepchildren" aired for the first time on American television.
Plato's Stepchildren was remarkable in that it included broadcast
television's first interracial kiss - between Captain Kirk (played
by William
Shatner) and Lt. Samara Uhuru (played by the Nichelle
Nichols). This was a landmark event for television.
Whilst a white man kissing
a black woman is be considered as a trivial event today, in 1968
- the same year Dr. Martin Luther King was assassinated and Tommie
Smith and John Carlos raised their fists on the medal stand at the
Mexico City summer Olympics - it was a very big deal. More than a
few television stations in the then still-segregated American south
refused to air the episode.
As one of the first
black women to appear in any significant role on a prime-time television
program, Ms Nichols was tempted to leave the series during its first
season. A conversation with Dr. King who told her she "could
not give up.. for she was playing a vital role for young black children
and women across the country." Ms Nichols went on to play in
every episode of the original Star Trek.
Residuals are "payments
made to actors, directors, and writers involved in the creation of
television programs or commercials when those properties are rebroadcast
or distributed via a new medium." In the 1950's a number of
unions, such as the Screen Actor's Guild, the American Federation
of Television and Radio Artists, the Writer's Guild of America, and
the Director's Guild of America negotiated residual payments from
the emerging television market. Residuals remain an important part
of the compensation for creative talent.
Born in 1932, Niclelle
Nichols is far more than "some old lady" but if I were
to download a copy of Plato's Stepchildren over Bittorrent (or any
other peer-to-peer network) instead of buying a licensed DVD or watching
a licensed re-broadcast, I would be depriving Ms Nichols (and everyone
else associated with that episode) of some small amount of money
she would otherwise earn from residuals. Considering that money is
most certainly "property" by any definition, infringing
the copyright on Plato's Stepchildren is stealing from Nichelle Nichols.
Who would do such a
thing?
May 10, 2007
KSR v. Teleflex
The Supreme Court of the United States issued its
decision in the case of KSR
v. Teleflex (31 page pdf). The
question presented to the court related to the matter of "obviousness":
Whether the Federal Circuit has erred in holding
that a claimed invention cannot be held "obvious", and
thus unpatentable under 35
U.S.C. § 103(a), in the absence of some proven "'teaching,
suggestion, or motivation' that would have led a person of ordinary
skill in the art to combine the relevant prior art teachings in the
manner claimed."
Since 1949, the guideline for USPTO examiners has
been Graver
Tank & Mfg. Co. v. Linde Air Products Co., 336 U.S. 271 (1949) which
specifies a four-factor test for obviousness:
a) determining the scope and contents of the prior art;
b) ascertaining the differences between the prior art and the claims
in issue;
c) resolving the level of ordinary skill in the pertinent art; and
d) evaluating evidence of secondary consideration.
In the intervening years, the Federal Circuit,
to resolve the obviousness question with more uniformity
and consistency, the Federal Circuit has employed a “teaching, suggestion,
or motivation” (TSM) test, under which a patent claim is only proved
obvious if the prior art, the problem’s nature, or the knowledge
of a person having ordinary skill in the art reveals some motivation
or suggestion to combine the prior art teachings.
In practice, the TSM test is has made it difficult
for patent examiners to reject claims by restricting the prior art
examiners were able to use to demonstrate obviousness. The result has
been a spate of patents comprised of known building blocks lacking
what European examiners know as "inventive step." Without
inventive step, most inventions would be just new combinations of known
elements. Writing for the majority, Justice Kennedy observed that:
...inventions in most, if not all, instances rely
upon building blocks longsince uncovered, and claimed discoveries
almost of necessity will be combinations of what, in some sense,
is already known.
Rejecting the Federal Circuit's "rigid" application of TSM,
Justice Kennedy argued:
The obviousness analysis cannot be confined by a
formalistic conception ofthe words teaching, suggestion, and motivation,
or by overemphasis on the importance of published articles and the
explicit content of issued patents. The diversity of inventive pursuits
and of modern technology counsels against limiting the analysis in
this way. In many fields it may be that there is little discussion
of obvious techniques or combinations, and it often may be the case
that market demand, rather than scientific literature, will drive
design trends. Granting patent protection to advances that would
occur in the ordinary course without real innovation retards progress
and may, in the case of patents combining previously known elements,
deprive prior inventions of their value or utility. (emphasis
added)
The court did not reject the TSM test outright, but
it rejected the Federal Circuit's rigid application of it. The impact
of this decision remains to be seen, but it is generally accepted as
raising the bar for patentability (and throws into doubt the validity
of countless patents already issued by the USPTO.)
The USPTO issued
a memo (2 page pdf) on the decision and promises to provide updated
guidelines in the near future.
This decision, along with the Roberts' court other
patent decisions (AT&T v. Microsoft, MercExchange v. eBay, MedImmune
v. Genetech) appear entirely consistent with a Supreme Court that is
bringing the Federal Circuit back into the mainstream of American jurisprudence.
May 2, 2007
Microsoft v. AT&T
The U.S. Supreme Court has issued its
decision (31 page pdf) in the matter of Microsoft v. AT&T
concluding:
Abstract software code is an idea without physical
embodiment, and as such, it does not match §271(f)s categorization:
components amenable to combination.
The SCOTUS decision overturns the Court of Appeals
for the Federal Circuit (CAFC) decision that Microsoft should be held
liable for patent infringement on copies of the Windows operating system
sold outside the United States.
In the wake of the U.S. Supreme Court's 1972 decision
in Deepsouth
Packing Co. v. Laitram Corp. 406 U.S. 518 the U.S. Congress (in
1984) amended 35
USC 271 to broaden the definition of infringement.
§271(f)(1) Whoever without authority
supplies or causes to be supplied in or from the United States all or
a substantial portion of the components of a patented invention,
where such components are uncombined in whole or in part, in such
manner as to actively induce the combination of such components outside
of the United States in a manner that would infringe the patent if
such combination occurred within the United States, shall be liable
as an infringer.
Writing for the majority, Justice Ginsburg
observed:
This case poses two questions: First, when, or in
what form, does software qualify as a component under §271(f)? Second,
were components of the foreign-made computers involved in this case
supplie[d] by Microsoft from the United States?
With regard to the former, the SCOTUS differentiated
between software as an intangible, abstract, set of instructions and
a physical copy of the software code concluding that "a copy of
Windows, not Windows in the abstract, qualifies as a component under §271(f)."
With regard to the second question (i.e., has Microsoft "supplie[d]
... from the United States" components of the [infringing] computer
involved?") the court succintly concluded the answer to be "No."
The parties reached
a confidential settlement in 2004 for domestic sales. The matter
of liability for exported code is no longer in dispute:
The lesson for patent practitioners is clear:
If AT&T desires to preventy copying in foreign
countries, its remedy today lies in obtaining and enforcing foreign
patents.
Dennis
Crouch at Patently-O and Cornell
Law School have nice backgrounds on the case.
April 26, 2007
Hedge Funds Fueling Patent Litigation
Forbes Magazine reports that "hedge
funds and institutional investors are financing the latest wave of
IP lawsuits." Forbes highlights the marriage between Altitude
Capital Partners and DeepNines in
DeepNines' patent infringement litigation against McAfee and observes
that ACP has
... plenty of company
in this new game. Coller Capital, a London private equity firm
with a $2.6 billion fund, quietly formed Coller IP Capital with
an eye toward investing $200 million a year. Rembrandt IP Management,
a Bala Cynwyd, Pa. firm, has raised $150 million, and Northwater
Capital, a $9 billion Toronto manager of funds of hedge funds,
put together NW Patent Funding last year. Both exist solely to
exploit patent lawsuits in the U.S.
Describing this development
in ominous tones, Forbes cites the "threat of war" and
notes the similarity to patent
trolling "a much-vilified practice."
Of course, the entrance
of private equity into the market might also be seen as solving the
problem of asymmetrical
litigation costs (9 page pdf) which can be used by large, incumbent
companies as an entry deterrence instrument against smaller competitors.
The increasing costs
of U.S. patent litigation (estimated in the 2005 AIPLA Economic Survey
$4.5m in cases where damages exceed $25m) and the attraction of significant
infringement damage awards ($612m in RIM v. NTP, $1.5b in Alcatel-Lucent
v. Microsoft) has created an enviroment of mutual interest between
patent holders and private equity. There can be no doubt that the
influx of capital will make its impact felt on the business of IP.
April 24, 2007
EU Commission Supports Rapid Introduction
of a Community Patent
In a speech (transcript)
to the European
Patent Forum honoring the European
Inventors of the Year, Günter
Verheugen, Vice-President of the Commission called for rapid
action on the London Agreement and the Community Patent to improve
protection of intellectual property rights in Europe "wie wir
alle wissen - immer noch stark fragmentiert ist."
The lack of a community
patent and the existing demands for translation into all languages
of the EU make obtaining patent protection across the European Union
significantly more expensive than in other regions of the world.
Ein Europäisches Patent
mit Benennung von 13 Staaten ist ungefähr 11 Mal teurer als ein
US-Patent und 13 Mal teurer als ein japanisches Patent, wenn man
Verfahrens- und Übersetzungskosten mitrechnet. Bei den Gesamtkosten
mit einem Schutz von bis zu 20 Jahren sind Europäische Patente
fast 9 Mal teurer als japanische und US-Patente.
Ratification
of the London
Agreement which outgoing EPO President Pompidou predicted would
be completed by France "by the end of this year" would
significantly reduce translation costs by waiving, "entirely
or largely, the requirement for translations of European patents
to be filed in their national language."
The EU
Community Patent which was again
endorsed earlier this year by Internal Market and Services
Commissioner Charlie
McGreevy would create a single, community-wide patent. This
however, along with the European
Patent Litigation Agreement (EPLA), an integrated EU-wide jurisdictional
system for patents, appear to remain much further out on the horizon.
It
would seem that assertions by the IPR community that the fragmentation
of IPR protection in Europe puts European companies at a disadvantage
are perhaps overstated and more than likely self-serving. In a global
business environment, the European fragmentation of IPRs affects
all companies (European and non-European) doing business in Europe
more or less equally.
What
lack of a community patent and EPLA does is make the EU a slightly
less attractive place for conducting R&D and a far less attractive
forum for resolving IPR disputes. The latter's effect on European
patent attorneys and litigators is palpable.
April 17, 2007
Linux: a patent-tax-free alternative
to Windows?
Marking the annual celebration
of tax season in the United States, the Software
Freedom Law Center (SFLC) has issued a
statement (2 page pdf) notifying taxpayers that if they are using
Microsoft's Windows Operating System, they are also "paying
a hidden tax of well over $20
that Microsoft has had to pay to other patent holders."
The SFLC estimates that
Microsoft has incurred more than $4,3b in patent-related costs (legal
fees, settlements, damages, etc.) over the past 3 years. Dividing
this figure by the number of Windows users, the SFLC arrived at its
estimate of the "tax" Windows users are paying. Users of
the Linux-kernel based Open Source Operating Systems, the SFLC observes,
pay no patent tax whatsoever:
...free operating
systems based on Linux have never been found guilty of patent
infringement, making Linux a patent-tax-free alternative to
Windows. Not only do these free software systems have no patent
tax, they have no taxes whatsoever, because — like all open
source software — they are available to the public at zero
cost.
Another way of looking
at this is that Linux users may not have a license to use all the
patented technology incorporated into the Linux-kernel (and its derivative
Operating Systems). With the increasing proliferation of patent-infringement
lawsuits, it seems hardly reassuring to remind Linux users of the "patent" risks
of using Linux.
The fact of the matter
is that it is highly unlikely that Linux is free of patent infringement.
Indeed, as
ITWeek noted:
Although there have
been no patent infringement claims against Linux distributors or
individual developers, few legal experts doubt that Linux is infringing
on numerous patents.
Because of the "patent
tax", Windows users have some confidence that their use of the
Windows OS will not make them patent infringers. Without any mechanism
to acquire the patent licenses which are increasingly necessary to
achieve interoperability, Linux users remain at risk.
April 11, 2007
EPO Boards of Appeal Decision T
1023/06: Computer Implemented Game Process
In
its decision
T 1023/06 (20 page pdf) the EPO Boards of Appeal refused the
application of International
Game Technology (NYSE:
ITG) for a patent on A Computer Implemented Game Process. The
decision illustrates some interesting aspects of how the EPO deals
with so-called Computer Implelemted Inventions (CII).
In
October 2005, the EPO's Examining Division refused IGT's European
Application No.
98 113 910.8 on the basis that the application did not
meet the requirements of Article 52(1) in combination with Article
56 for lack of inventive step having regard to a prior art U.S. patent.
In
their appeal, IGT argued that an additional, inventive step was present
in their claim which distinguished their invention from the prior
art and that this additional step served "a clear technical
function."
The
EPO Board of Appeal noted:
The
card game is implemented in an electronic video poker machine in
a series of display, detection and determination steps labelled
alphabetically in the claims. These steps which imply the use of
appropriate display and control means bestows technical character
on the claimed method as a whole...
Moreover,
they are carried out in accordance with the above rules of a card
game. Since the rules of playing games are explicitly mentioned
under Article 52(2)(c) EPC as not to be regarded as inventions
within the meaning of Article 52(1) EPC, the present invention
inherently has non-technical aspects. The term "non-technical" as
used here refers to subject matter which relates to things which
are not to be regarded as inventions within the meaning of Article
52(1) EPC.
According
to EPO practice, in the situation where an invention contains a mixture
of technical and non-technical features, inventive step is assessed
by taking into account of all those features which contribute to
the technical character. (T
641/00, OJ EPO 2003, 352 - 13 page pdf). There is however an
important caveat to this: features making no contribution to technical
character cannot support the presence of inventive step. In other
words, the invention must make a "technical contribution".
The
EPO uses a well-established method for determining whether or not
a claimed invention makes a technical contribution which follows
the problem-solution approach outlined in the Guidelines for Examination.
Firstly, the examiner first establishes the difference between the
closest prior art and the claimed invention and uses this to define
the problem to be solved. Secondly, if the problem and the proposed
solution seen as a whole belong to a technical field or are not excluded
under Article
52(2) then the invention may be considered to have a technical
character.
In
rejecting IGT's application, the Board concluded:
In
part the solution involves a non-technical modification of the
game rules, which, though it cannot itself contribute to inventive
step, is then implemented in an obvious manner in the machine.
In conclusion therefore, the Board finds that the subject-matter
of claim 1 of the main request does not involve an inventive
step.
April 4, 2007
Commission sets out vision for improving
patent system in Europe
The EU Commission announced the
publication of a
communication of the Commission's proposal
to enhance the patent system in Europe (22 page pdf.) Last week
at the EU Presidency/BDI Conference "A Europe of Innovation
- Fit for the Future?" Charlie
McCreevy, European Commissioner for the Internal Market and Services,
expressed some doubt over the future of EU patent policy.
The
Commissioner's remarks (4 page pdf) are a bit confusing. He
begins by discussing the well-known problem of costs of obtaining
patents in Europe,
"The
figures and the facts speak for themselves. Recent studies have
shown that a European patent designating 13 countries is about
11 times more expensive than a US patent and 13 times more expensive
then a Japanese patent. Heavy translation and legal costs make
registering, enforcing and challenging patents expensive and cumbersome."
As
the commissioner well knows the problem lies not with the EPO,
where "it
currently costs on average EUR 4 600 to take a patent with seven
or more designated states to the grant stage." The problem
lies with the post grant procedures. Because patents granted by
the EPO must be indivdually registered and translated in each national
patent office, according to
a study published last year by the EPO, it costs on average ¤32.000
($38,000) to obtain a European patent registered in six European
countries. (A breakdown of USPTO and EPO costs is shown here.)
It
is less clear that Commissioner McCreevy knows with whom the problem
does lie. It is not at all clear that a solution offered by the
EU Commission is desirable, or even necessary. The European Patent
Convention is still a valid treaty. The London
agreement on the application of Article
65 EPC, the EPO's 2000 legislative initiative to waive,
entirely or largely, the requirement for translations of European
patents to be filed in their national language, remains mired in
debate, but would receive a lift if the EU Commission would give
a green light to its efforts.
There
cannot be much anticipation of success in having the Commission deal
with this matter. Two other major legislative initiatives also launched
in 2000: EU Community
Patent and the European
Patent Litigation Agreement (EPLA) also remain no closer to consensus.
Add to this backdrop, the Commission's failed 2004 Directive
on the patentability of Computer Implemented Inventions and the
future for reform looks bleak.
Nevertheless,
Commissioner McCreevy explains why the Commission will focus on
the EPLA:
"While
our focus is on litigation issues, the Community patent has not
been left aside. I have said that the Community patent and improvements
to the current litigation system for European patents should not
be mutually exclusive. Indeed our aim should be to ensure that
they converge. If we can find a solution to the litigation issue,
it should also be possible to resolve the Community patent issue
by finding a consensus on translation arrangements."
As
the Commissioner noted in his remarks "... the patent dossier
is a very tough nut to crack." In annoucing his new legislative
intiaitive, Mr. McCreevy explained:
I
will not be pulling a rabbit out of a hat next week when it is
adopted. But I will be putting forward some constructive suggestions
on the way forward, especially on the jurisdiction issue, together
with a checklist of the different areas of patent policy which
the EU needs to address. The Communication will provide a framework
for discussions in the Council and the European Parliament.
The
problems addressed bv the patent dossier are real; it is the solutions
which have proven presistently elusive. Inventors in Europe can only
hope that the Commission's newest attempt doesn't turn into yet another
disappearing act.
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