Patent FAQ's, Part I

by Bruce D. Sunstein, Timothy M. Murphy and Robert M. Asher

 

With all of the changes to the patent system arising from the decisions of the U.S. Supreme Court and the Court of Appeals for the Federal Circuit, it’s helpful to go back to basics and to contemplate the fundamentals of patent law in view of these decisions.
 

Below, we answer some frequently asked questions about patents. This summary is provided for informational purposes only, and does not constitute legal advice. Any specific question about patent law should be directed to an attorney in our Patent Practice Group.
 

What is a patent?
A patent can be a very valuable asset for a business selling a novel product or using a novel process. A patent is a right, granted by the government, to exclude others from making, using or selling within the government’s jurisdiction the invention as claimed.
Patents are intended to promote innovation and the exchange of ideas. The granting of a patent is traditionally considered an exchange between the applicant and the government: the applicant permits the invention to be disclosed to the public (and pays a variety of fees) and in return the government grants the applicant a monopoly to practice the invention as claimed in the patent document. But of course it’s not that simple, as the invention and the patent application must meet all of the government’s requirements.
Having the right to exclude others from making and using or selling your invention can be a very powerful tool for the success of your business. At Sunstein, our goal is to allow the client to maximize the leverage afforded by patents and other intellectual property.

 

What does a patent look like?
A patent is a document that describes the invention protected by the patent and sets forth in the claims the scope of the invention. To view a typical patent, click here (PDF: 183KB). This patent was prosecuted by Sunstein. It, and other patents, can be found on the website of the United States Patent and Trademark Office.

 

Why are patents important?
If someone else has or obtains a patent that covers your product or process, you (i) may be enjoined from making, using and selling the product or process; and (ii) may be subject to significant monetary damages—even if you did no copying and even if you did not know about the patent. In certain cases, the damages may be doubled or trebled and attorney fees granted.

One of the services provided by Sunstein is to conduct searches of issued patents to determine the degree of risk our clients undertake in introducing new products or in continuing to sell a product accused of infringement. Often, we will suggest design modifications for a product to minimize the risk of a successful patent infringement suit against our clients. Sunstein prepares clearance opinions to address such issues, and we pay particular attention to how such opinions may be used by a defendant in patent litigation to advance its case, as well as to reduce the likelihood of multiple damages and the award of attorney fees.

If you can obtain a patent, you may be able to (i) prevent others from practicing the invention (including even those who independently develop their own product, as well as copycats); (ii) obtain license fees from others who wish to practice the invention; and (iii) use it as a marketing tool. At Sunstein, we view the obtaining of a patent not as an end, but as a means to achieving our clients’ goals, whether it is giving our clients a business advantage over competitors or producing an additional income stream for our clients.

Filing for a patent early (and keeping good records of the invention’s development) puts you in a better position vis-à-vis other inventors. Thus, it is almost always preferable for the patent attorneys to consult with the inventors early on in the development process, rather than waiting for the development of the product to be completed.

The fact that a person obtains a patent for an invention does NOT necessarily mean that the invention can be practiced without infringing someone else’s patent. The Patent and Trademark Office determines whether an invention is new enough to be entitled to a patent, but not whether a device, such as that described in a patent application, infringes anyone else’s patent. A typical example is when someone obtains a patent for an improvement on someone else’s patent: Until the earlier patent expires, a license may be required to practice the later invention. The earlier patent is therefore called a blocking patent. Like any other patent, a blocking patent may be invalidated if sufficient proof of unpatentability is shown during litigation. In some cases, however, the fact that a person obtains a patent for an invention is evidence that the product incorporating that later invention does not infringe an earlier patent cited during the prosecution of the later patent in the U.S. Patent and Trademark Office.

Having a patent portfolio may permit you to enter into cross-licensing arrangements with other companies that have patents on valuable related technology.

Building a patent portfolio can also increase the value of your company in the eyes of potential investors or buyers. A patent is an important piece of property, and may enable a company to obtain capital when it would otherwise be insolvent. Investors, of course, would like to invest in a company that has a product that is in demand, but has no competition. Investors also do not want to invest in a company that has made or will make significant expenditures in research, only to have the product “knocked off” by a low-cost producer that was able to avoid the research costs simply by copying.

On the other hand, if you are a potential investor or licensee, the value of a patent must not be overestimated. Simply because a company has a patent does not mean that the company is valuable—the patent may be narrow (thereby allowing plenty of competition), there may be no demand for the product covered by the patent, or the company’s product might be of poor quality. Patents by themselves do not necessarily result in royalty streams. The invention or the products incorporating the invention still have to be marketed—to customers, licensees or assignees—in order to make money. Frequently, for individual inventors, obtaining the patent is the easy part; it’s the money-making part that’s difficult. Also, a patent is NOT a seal of approval from the U.S. government. If one looks through the weekly Official Gazette published by the U.S. Patent and Trademark Office, one will find plenty of inventions that are not practical and that will not make any money.

These issues should be addressed whenever one is considering a technology transfer. At Sunstein, we feel it is critical to discuss fully such practical aspects of an invention with our clients and to appreciate the business and technical context of an invention, in order to advise our clients on a technology transfer issue. (More)

 

 

 

Why Are Patents Important?

by Timothy M. Murphy and Robert M. Asher, Co-Chairs, Sunstein Patent Group


If someone else has or obtains a patent that covers your product or process, you (i) may be enjoined from making, using and selling the product or process; and (ii) may be subject to significant monetary damages—even if you did no copying and even if you did not know about the patent. In certain cases, the damages may be doubled or trebled and attorney fees granted.

One of the services provided by Sunstein is to conduct searches of issued patents to determine the degree of risk our clients undertake in introducing new products or in continuing to sell a product accused of infringement. Often, we will suggest design modifications for a product to minimize the risk of a successful patent infringement suit against our clients. Sunstein prepares clearance opinions to address such issues, and we pay particular attention to how such opinions may be used by a defendant in patent litigation to advance its case, as well as to reduce the likelihood of multiple damages and the award of attorney fees.

If you can obtain a patent, you may be able to (i) prevent others from practicing the invention (including even those who independently develop their own product, as well as copycats); (ii) obtain license fees from others who wish to practice the invention; and (iii) use it as a marketing tool. At Sunstein, we view the obtaining of a patent not as an end, but as a means to achieving our clients’ goals, whether it is giving our clients a business advantage over competitors or producing an additional income stream for our clients.

Filing for a patent early (and keeping good records of the invention’s development) puts you in a better position vis-à-vis other inventors. Thus, it is almost always preferable for the patent attorneys to consult with the inventors early on in the development process, rather than waiting for the development of the product to be completed.

The fact that a person obtains a patent for an invention does NOT necessarily mean that the invention can be practiced without infringing someone else’s patent. The Patent and Trademark Office determines whether an invention is new enough to be entitled to a patent, but not whether a device, such as that described in a patent application, infringes anyone else’s patent. A typical example is when someone obtains a patent for an improvement on someone else’s patent: Until the earlier patent expires, a license may be required to practice the later invention. The earlier patent is therefore called a blocking patent. Like any other patent, a blocking patent may be invalidated if sufficient proof of unpatentability is shown during litigation. In some cases, however, the fact that a person obtains a patent for an invention is evidence that the product incorporating that later invention does not infringe an earlier patent cited during the prosecution of the later patent in the U.S. Patent and Trademark Office.

Having a patent portfolio may permit you to enter into cross-licensing arrangements with other companies that have patents on valuable related technology.

Building a patent portfolio can also increase the value of your company in the eyes of potential investors or buyers. A patent is an important piece of property, and may enable a company to obtain capital when it would otherwise be insolvent. Investors, of course, would like to invest in a company that has a product that is in demand, but has no competition. Investors also do not want to invest in a company that has made or will make significant expenditures in research, only to have the product “knocked off” by a low-cost producer that was able to avoid the research costs simply by copying.

On the other hand, if you are a potential investor or licensee, the value of a patent must not be overestimated. Simply because a company has a patent does not mean that the company is valuable—the patent may be narrow (thereby allowing plenty of competition), there may be no demand for the product covered by the patent, or the company’s product might be of poor quality. Patents by themselves do not necessarily result in royalty streams. The invention or the products incorporating the invention still have to be marketed—to customers, licensees or assignees—in order to make money. Frequently, for individual inventors, obtaining the patent is the easy part; it’s the money-making part that’s difficult. Also, a patent is NOT a seal of approval from the U.S. government. If one looks through the weekly Official Gazette published by the U.S. Patent and Trademark Office, one will find plenty of inventions that are not practical and that will not make any money.

These issues should be addressed whenever one is considering a technology transfer. At Sunstein, we feel it is critical to discuss fully such practical aspects of an invention with our clients and to appreciate the business and technical context of an invention, in order to advise our clients on a technology transfer issue. (Click here for Frequently Asked Questions About Patents)

FTC Rule Targeting Pharma Licenses Is Upheld by Federal Judge

By Jordana Goodman. Summer Associate

 

Last November, the Federal Trade Commission (“FTC”) announced a rule requiring advance notice of proposed exclusive patent license agreements in the pharmaceutical industry that exceed $75.9 million in value. Upon receipt of such a notice, the FTC or the Justice Department may then oppose the transaction on antitrust grounds.

This was the first industry-specific rule that the FTC had issued under the Hart-Scott-Rodino Antitrust Improvements Act (the “HSR Act”). Sure enough, the Pharmaceutical Research and Manufacturers of America (“PhRMA”) filed suit, arguing that, although the HSR Act allows the FTC to exempt certain industries from the Act’s filing requirements, it does now allow the FTC to create a rule which specifically targets an industry.

PhRMA reasoned that an earlier version of the HSR Act included a provision allowing the FTC to “impose reporting burdens on certain classes or categories of persons” but this was removed from the final version of the Act. Congress’s removal of this language constituted a refusal to grant the FTC the power to target a specific industry, PhRMA contended.

On May 30, 2014, the judge presiding over PhRMA v. FTC granted the FTC’s motion for summary judgment and upheld both the FTC’s power to target a single industry and the new rule (the “Final Rule”) itself. The court turned PhRMA’s argument regarding the legislative history on its head: If the FTC can exempt industries under the HSR Act, it can exempt all industries except for the pharmaceutical industry. Rather than make the FTC pursue this roundabout path to the same result, the court upheld the FTC’s more direct route.

As of this publication, PhRMA has not appealed the court’s decision or announced on its website any intention to do so.

Now that the Final Rule has survived a court challenge, let’s review its scope: The rule requires prior notification to the FTC of exclusive patent licenses in the pharmaceutical industry. The FTC and the Justice Department then have 30 days to decide whether to object to the transaction on antitrust grounds.(More)

Supreme Court Sinks Nautilus, Reformulates the “Definiteness” Requirement for Patents

By Thomas Tuytschaevers. A member of our Patent Practice Group

 

In yet another rejection of prevailing norms for determining patent validity, the U.S. Supreme Court refined the standard by which courts assess the clarity of patent claims. Until now, a patent claim was deemed insufficiently clear, and therefore invalid for indefiniteness, only if a court found the claim language to be “insolubly ambiguous.”

In its June 2 decision in Nautilus, Inc. v. Biosig Instruments, Inc., the Court held that a patent is invalid for indefiniteness if its claims fail to define the scope of the invention with “reasonable certainty.” This lower standard will make patent claims easier to invalidate and portends a surge of indefiniteness defenses in patent litigation.

A patent is a property right that allows the owner to exclude others from using an invention and, “like any property right, its boundaries should be clear.” To that end, U.S. patent law requires that a patent include “claims particularly pointing out and distinctly claiming the subject matter” that the inventor regards as the invention. A claim that does not meet these criteria fails to meet the law’s “public-notice function” because it fails to define the scope of the patent owner’s right to exclude, and is therefore invalid for being indefinite.

However, the courts have recognized that written language is an imperfect tool. The limits of written language are sometimes evident in patent claims that, by definition, describe a new invention, something that has never previously been described. Fittingly, courts have acknowledged that absolute precision in patent claims is unattainable. The issue in Nautilus focused on “just how much imprecision [the law] tolerates.”

Biosig patented a monitor useful for measuring a person’s heart rate while exercising, for example, on a treadmill. Such measurements are challenging because it is difficult to distinguish the electrical signal produced by the heart (an “ECG” signal) from electrical signals produced by other hard-working muscles (“EMG” signals).

Biosig realized that a user’s heart signal appears differently at the user’s left hand than at the user’s right hand, while muscle signals appear the same way at both hands. Biosig capitalized on this discovery by developing a circuit that measures the heart and muscle signals at both hands using two pairs of electrodes – one pair for each of the user’s hands. The patented Biosig circuit subtracts one of the measurements from the other to cancel out the muscle signals and leaves only the heart signal. (More)

Supreme Court Rejects Inducement Liability Where There’s No Direct Infringer

By Kerry Timbers. Co-Chair of our Litigation Practice Group

 

The issue of “divided infringement” — where multiple parties “share” infringement by performing different steps of a method claim — has vexed the courts of late, with the Federal Circuit see-sawing between two very different interpretations of the patent law. The Supreme Court has recently entered the fray, unanimously delivering the blunt criticism that the Federal Circuit, which handles all patent infringement appeals, “fundamentally misunderstands what it means to infringe a method patent.”

The bottom line from the Supreme Court, in Limelight Networks v. Akamai Technologies, is that there is no infringement, direct or by inducement, unless one party performs every step of the method, either itself or through control of another, such as by contract.

The patent asserted in Limelight claims a method for delivering electronic data using a content delivery network (CDN). The patent calls for, among other things, certain components of a website, like music or video files, to be “tagged” for storage on certain servers within the CDN. This increases the speed of accessing files.

The alleged infringer, Limelight, operated a CDN and performed all but one step of the patented method. It left to its customers, however, the task of tagging the files they wanted placed on Limelight’s servers. The claimed method was performed in its entirety, but no one actor performed all the steps.

There is good precedent for rejecting the idea that Limelight could be charged with direct infringement. The Federal Circuit held in 2007 and 2008, in BMC Resources. v. Paymentech and Muniauction v. Thomason, that there is no direct infringer unless a single actor performs all the method steps himself, or all the steps are performed on his behalf by another who is controlled by the alleged infringer.

The question in Limelight was whether Limelight might be guilty of inducing infringement, even in the absence of a direct infringer, because it encouraged or instructed the customer to perform the missing step, thereby ensuring every method step would be performed, albeit not by a single actor. Both BMC Resources and Muniauction answered no — to have inducement, you must first have a direct infringer.

In 2011, as we reported when Akamai’s case against Limelight first came before the Federal Circuit, a three-judge panel of that court further tightened the standard, making clear that mere directions or instructions to another entity — absent a legal obligation of that entity to perform the steps — is insufficient to establish direct infringement, and without that, there could be no inducement. (More)

The Supreme Court Bans Aereo’s Service: An Odd Decision With an Odd Rationale

By Timothy Murphy. Co-chair of our Patent Practice Group

 

Last week the Supreme Court decided, in American Broadcasting Companies, Inc. v. Aereo, Inc., that Aereo was infringing the copyrights of the television broadcasters. This decision was not a surprise in light of the comments of the justices during the April oral argument, which I discussed in “How Will the Supreme Court Decide the Aereo Case?” The court voted 6-3 with Roberts, Kennedy, Ginsburg, Sotomayor and Kagan joining Breyer’s decision in favor of the broadcasters, and Thomas and Alito joining Scalia’s dissent.

Aereo used arrays of small antennas to pick up over-the-air television shows and make them available to Aereo customers. Each customer was assigned a separate antenna. Aereo also allowed its customers to record television shows and save them in a cloud storage dedicated to that customer. For this service, Aereo charged $8 a month. Prior appellate court cases had ruled that cable companies providing such individualized remote storage and playback systems did not infringe the copyright of the content owners. Aereo undoubtedly hoped that this line of thinking would apply to its individualized antennae. ABC and other over-the-air content providers hoped otherwise and sued to enjoin Aereo’s service.

The majority recognized that Aereo and the cable companies distributed content in different ways. However, the majority took the position that—whatever the technical differences may be—Aereo still seemed like and acted enough like a cable company so that, if its technology had existed when Congress passed the Copyright Act of 1976, Congress would have treated Aereo like a cable company, requiring it to pay for the privilege of rebroadcasting over-the-air content. The majority also concluded that Aereo was publicly performing the plaintiffs’ television shows.

An individual is clearly entitled under the law to set up an antenna and record onto a DVR a copyrighted show that was broadcast over the air. But the Aereo majority rejected the view that Aereo was merely a service provider that rented an antenna and a virtual, cloud-based DVR to each of its customers. By providing antennas and a virtual, cloud-based DVR to thousands of subscribers, Aereo crossed a line between what an individual is entitled to do on his or her own and what a company is not allowed to do on a large scale, even if it is merely helping people exercise their legal rights.

Ironically, the more liberal Justices sided with the vested interests—the television broadcasters and cable companies—against the individual who wants an easy, efficient way to enjoy the free over-the-air television transmissions, while the dissenting Justices, who favored allowing individuals to take advantage of the new technology, were from the conservative end of the bench. (More)

Yet Again, the Supreme Court Narrows Patent Eligibility, This Time Targeting Computer-Related Inventions

By Bruce Sunstein. A member of our Patent Practice Group

 

In the wake of its decisions denying eligibility for patent protection to diagnostic procedures (Mayo Collaborative Services v. Prometheus Laboratories, 2012), and isolated genomic DNA (Association for Molecular Pathology v. Myriad Genetics, 2013), the Supreme Court has denied patent eligibility to a computer-implemented invention on the grounds that it is directed merely to an “abstract idea,” in Alice Corporation Pty. Ltd. v. CLS Bank International, decided June 19, 2014.

In what might be a silver lining (or maybe an aluminum foil lining) to this cloud, the Court did not hold all computer-related inventions to be ineligible for patent protection, but only those that are deemed directed to an abstract idea.

Motivating the Court’s decision is a concern that patents impede innovation when they are directed to subject matter that the Court regards as an abstract idea. Abstract ideas are one of three exceptions the Court wrote into section 101 of the patent law, which defines what subject matter is eligible to be considered for patenting.^[1] (Only if subject matter claimed in a patent application is eligible for patenting will the patent application be examined for the additional requirements under patent law that the subject matter must be new^[2], non-obvious^[3], and clearly described^[4] and claimed^[5] in the application.)

The Court explains its rationale for these exceptions by quoting from its Myriad decision: “Laws of nature, natural phenomena, and abstract ideas are the basic tools of scientific and technological work.”^[6] To elaborate on why inventions otherwise eligible to be patented should not be eligible if one of these Court-made exceptions is present, the Court cites its Prometheus decision: “Monopolization of those tools through the grant of a patent might tend to impede innovation more than it would tend to promote it, thereby thwarting the primary object of the patent laws.”^[7] Further relying on Prometheus, the Court admonishes, “We have repeatedly emphasized this concern that patent law not inhibit further discovery by improperly tying up the future use of these building blocks of human ingenuity.”^[8]

So how does the Court determine whether patent claims are directed to an abstract idea—or, for that matter, to a law of nature or natural phenomenon? It specifies a two-step process drawn from Prometheus: “First, we determine whether the claims at issue are directed to one of those patent-ineligible concepts.”^[9] Second, if they are, then there is “a search for an ‘inventive concept’—i.e., an element or combination of elements that is sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept  itself.”^[10]  (More)

^[1] Specifically, the wording of 35 U.S.C. § 101 is as follows; “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”

^[2] 35 U.S.C. § 102.

^[3] 35 U.S.C. § 103.

^[4] 35 U.S.C. § 112.

^[5] 35 U.S.C. § 112.

^[6] Slip opinion, p. 6. For ease of reading, quotations from the opinion may omit interior quotation marks, capitalizations, brackets and ellipses found in the original.

^[7] Id.

^[8] Id.

^[9] Slip opinion, p. 7.

^[10] Id.