Court’s Reading of Statute Opens the Door For Extended Patent Terms for Many Applicants

By Alexandra Cavazos, Ph. D.. A member of our Patent Practice Group

 

Thanks to the Federal Circuit, longer patent terms are available for thousands of patents that have undergone prolonged examinations.

An extended term is of particular value in the pharmaceutical and biotechnology industries. Because of the high regulatory hurdles that new therapeutic molecules have to overcome, and because of the time that it takes to gain market acceptance for some new drugs, patents in these fields tend to be most valuable towards the end of their effective terms. Even a few extra days of patent term can translate into millions of dollars in sales for a blockbuster drug.

Novartis AG v. Lee centers on the interpretation of 35 U.S.C. § 154, the federal statute that awards patent applicants a day-for-day adjustment to their patent term for several kinds of USPTO-caused delays in the prosecution of their patent application. In particular, the statute guarantees applicants “no more than 3-year application pendency” but excludes “any time consumed by continued examination of the application requested by the applicant,” through a request for continued examination (RCE) (emphasis added).

The purpose of an RCE is to re-open and continue prosecution before the USPTO without having to file a new patent application. This may happen when all of an applicant’s claims have been rejected by the USPTO in a Final Office Action and the applicant wants another opportunity to amend its claims or offer evidence of their patentability. It may also happen when the applicant wishes to submit new prior art that pertains to the invention.

Prior to the Federal Circuit’s recent Novartis decision, the USPTO’s policy dictated that an RCE filing at any point during the pendency of a patent application would stop the USPTO’s three-year clock from running.

When this policy was applied to Novartis in 2010, it argued that once a Notice of Allowance was mailed to it, prosecution of the case was closed and thus the subsequent time up until the issue date of the patent was not time consumed by the RCE, but was instead time consumed by the USPTO.

In January 2014, the Federal Circuit agreed with Novartis on this point: “We reject the PTO’s view that the time after allowance, until issuance, is ‘time consumed by continued examination’ and so is excluded from adjustments given to the patentee. Such time from allowance to issuance undisputedly would count towards the PTO’s three-year allotment in a case not involving continued examination. This is no basis for distinguishing a continued examination case.”  (MORE)

Litigator’s Perspective: Winning Party in Patent Litigation Can Now More Easily Recover Attorneys’ Fees

By Brandon Scruggs. A member of our Litigation Practice Group

 

The Patent Act’s fee-shifting provision allows trial judges to award attorneys’ fees to the prevailing party in patent litigation in “exceptional cases.” Last month, the U.S. Supreme Court issued decisions in two cases on this subject, loosening the meaning of “exceptional” and requiring greater deference to a trial judge’s decision on whether to award attorneys’ fees.

In Octane Fitness, LLC v. ICON Health & Fitness, Inc., the Supreme Court addressed whether the Federal Circuit had set the “exceptional case” standard too high. In Brooks Furniture (2005), the Federal Circuit had held that to qualify as “exceptional,” a patent case needed to either (1) involve “material inappropriate conduct” or (2) be both “objectively baseless” and brought in “subjective bad faith.”

The Supreme Court overruled the Federal Circuit’s standard and held that awarding attorneys’ fees is a matter of district court discretion and should be evaluated on a case-by-case basis. Justice Sotomayor, writing for the court, criticized the Brooks Furniture standard as “mechanical” and “unduly rigid.” Since the statute does not define “exceptional,” the standard should be “inherently flexible.”

The Supreme Court held that an “exceptional” case that could support an award of attorneys’ fees is “simply one that stands out from others with respect to the substantive strength of a party’s litigating position (both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”

The decision to award attorneys’ fees should be entrusted to the equitable discretion of the trial judge based on the “totality of the circumstances.” After all, who would know if a case is exceptional better than the judge who has observed the litigants’ conduct and positions for two or more years?

The Supreme Court also rejected the Federal Circuit’s requirement that an “exceptional case” must be proved by “clear and convincing evidence.” The Supreme Court noted that the statute imposes no specific burden of proof and seemed to suggest that the lower “preponderance of the evidence” standard (that is, more likely than not) may be proper. (More)

Contrary to Common Belief, Patents Can Survive Validity Challenges at the Patent Office

By John Stickevers. A member of our Patent Practice Group

The America Invents Act, which went into effect September 2012, introduced new proceedings for challenging a patent before the U.S. Patent and Trademark Office. Inter partes review (“IPR”) is one such proceeding. In the short time that IPRs have been available, more than 1000 petitions have been filed, with more than 600 petitions filed thus far in 2014 alone.

IPRs provide a new forum in which persons accused of infringement can contest the validity of patents in view of prior art. IPR proceedings are an administrative form of litigation, taking place before the Patent Trial and Appeal Board (“PTAB”) that includes written arguments, motion practice, expert testimony, depositions and oral arguments.

IPRs are labor-intensive proceedings that require an intimate understanding of patent law, a firm grasp of IPR complexities and procedures and a detailed strategy mapped out in advance. Without a strong foundation at the beginning, arguments may be lost or rendered unavailable to either the petitioner or the patent owner.

IPR proceedings have, to date, proved to be a mighty sword in the hands of defendants in patent litigations. Most of the PTAB decisions have resulted in the cancellation of all of the challenged patent claims. As of May 2014, the PTAB has instituted and decided 28 proceedings, with the petitioners enjoying better than an 80% success rate.

The length of the proceeding from the initiation of the IPR to the final oral arguments is, as mandated by the rules governing the process, a rapid twelve months. Indeed, the speed of disposition is one reason that patent defendants are increasingly likely to file IPR petitions when facing litigation. Another reason, of course, is the high rate of success so far for petitioners in IPRs that go to decision.

If you are a patent owner, all is not lost. For one thing, the PTAB allows the initiation of an IPR only when the board believes there is a reasonable likelihood that the petitioner will prevail on at least one of the challenged claims. The PTAB has reported that in more than 60 petitions the petitioner failed to meet the threshold burden of proof for instituting the IPR, while more than 70 other IPRs have resulted in a settlement favoring the patent owner.

Thus, the success of petitioners must be seen in context. Although they have won 80% of cases that have gone to decision, petitioners have failed to get out of the box in a large percentage of their challenges. The PTAB has taken up a total of 167 petitions and has not instituted 63 of the petitions. In these cases, patent owners prevail without the public fanfare of a written decision.

For example, last month, the PTAB refused to institute an IPR requested by Twitter, Yelp and Facebook for a patent owned by Evolutionary Intelligence LLC. In related decisions, the board ruled that the petitioners failed to establish a reasonable likelihood that they would prevail on at least one of the patent claims challenged. (More)

What Are the Different Types of Patents?

There are three types of patents that an inventor can obtain in the United States: a utility patent, a design patent and a plant patent. The type of patent with which most people are familiar is a utility patent, which is a patent for a new and useful invention. The subject matter for each of the three types of patents is discussed further below.

Utility Patents

In order to obtain a utility patent, the invention must be for a “new and useful process, machine, manufacture, or composition of matter . . . .” This requirement is fairly straightforward and is usually not a problem, except in certain areas.

A series of very vague, indefinite and often misleading maxims have arisen over time to address what may and may not be patented. For example, “mathematical algorithms,” “mental steps,” “laws of nature,” “products of nature,” “methods of doing business,” and “printed matter” have, in the past, been held to be not patentable. Patents are regularly issued that defy these maxims. For instance, purified products of nature are generally patentable, assuming that the other requirements of patentability are satisfied. In addition, computers and the Internet have now transformed methods of doing business and mathematical algorithms into protectable machines and processes.

Decisions by the Federal Circuit Court of Appeals favorable to patent applicants have caused the U.S. Patent and Trademark Office to rewrite and loosen its guidelines for examining patent applications for software inventions.

Medical procedures are patentable in the United States; however, the patentee’s ability to sue all infringers of a patent directed to a medical procedure has been curtailed by recent legislation. This legislation makes it even more important to consider likely defendants when drafting a patent claim. For instance, it is usually easier to sue the manufacturer of an infringing product than the consumers, so the patent should be drafted to cover the product as it leaves the factory—as opposed to how it may be used by the consumer—so as to avoid having to show the additional elements of contributory infringement. Many foreign countries limit the patentability of medical procedures.

Design Patents

Design patents have different subject matter requirements from utility patents, as set forth in 35 U.S.C. sec. 171, which reads as follows: “Whoever invents any new, original and ornamental design for an article of manufacture may obtain a patent therefor, subject to the conditions and requirements of this title. The provisions of this title relating to patents for inventions shall apply to patents for designs, except as otherwise provided.”

One difference between utility patents and design patents is the length of their terms. Utility patents generally have a term of twenty years from the earliest effective filing date—or seventeen years from issuance, depending on when they were filed. Design patents have a term of fourteen years from issuance. (More)

Patent Practice Tips

Many of the common pitfalls in the defense and enforcement of patent rights can be avoided through careful planning and early consultation with competent patent counsel. Although we assess the needs of each client individually, we find that the following practice pointers are applicable to most companies or individuals who create patentable inventions.

• “File early. File often.” Securing as early a filing date as possible might be critical in getting a patent and in preventing the competition from gaining a patent instead of you. Filing additional applications on variations of and developments on the original conception can result in broader and more robust patent protection.
• Set up a patent committee including heads of marketing, business development, engineering, and in-house legal department to work with patent counsel to develop a patent strategy that is implemented on a company-wide basis to advance your company’s business.
• To protect your investment in research and marketing, consider developing a multi-pronged approach to protecting your intellectual property, incorporating utility patents, design patents, copyrights, trademarks and/or trade secrets. Since there are differences between patents and other types of intellectual property, protecting all of one’s rights in a product line can be very valuable.
• Have written agreements signed by any employee or third party who may be inventing on your behalf. Otherwise, it may not be clear who owns the patent.
• Educate your co-inventors and employees as to why patents are important. Emphasize the importance of early and adequate documentation of developments, which should be considered promptly by a patent attorney or by the patent committee for possible patenting.
• Have searches performed to determine the novelty and the non-obviousness of inventions. In many industries, it is also prudent to learn of patents that may cover your product.
• Consult with a patent attorney early in the development process. A patent application may be filed before a prototype is built, and it is often prudent to file a patent application as quickly as possible.
• Use provisional patent applications to establish an early filing date. (More)

Inter Partes Review

An inter partes review is a litigation proceeding brought before the Patent Trial and Appeal Board (“PTAB”) to challenge the patentability of claims in a patent. A successful inter partes review can cause cancellation of the patent claims so as to prevent future assertion of these claims, wiping out any pending verdict related to these claims and preventing the patent owner from seeking additional claims that are not patentably distinct from those claims found to be unpatentable. The challenge to patentability in an inter partes review can be based only on the theory that the claims are anticipated or rendered obvious by one or more prior art patents or printed publications.

Availability – Unlike the limits placed on the old inter partes reexamination procedure, an inter partes review may be brought against any patent. Parties in litigation charged with patent infringement have a time limit that must be taken into account when planning litigation strategy: an inter partes review must be filed within one year after being served with the complaint.

Certain circumstances may allow for a defendant to bring an inter partes review even after one year. If another party brings an inter partes review, it can be possible to file a petition for an inter partes review beyond the one-year time limit. If the PTAB agrees to institute a first inter partes review, the PTAB is authorized to join a second inter partes review with the first one without regard to the one-year limit.

An inter partes review petition cannot be filed after filing a declaratory judgment action asserting invalidity of the patent. Nevertheless, such a declaratory judgment can be filed the same day or any day after the inter partes review has been filed. Although an inter partes review petition has the effect of automatically staying the declaratory judgment action, nevertheless by filing the declaratory judgment action, the patent challenger has achieved the goal of making a choice of forum, perhaps in the challenger’s home court. If the patent owner pursues its patent infringement claim in court, the automatic stay is lifted. An alternative approach to getting into court and filing an inter partes review is for the challenger to lead off with a declaratory judgment action that is limited in scope to asserting non-infringement of the patent, leaving invalidity to the inter partes review proceeding or for later assertion in answer to a counterclaim.

For patents subject to the first-to-file provisions of the America Invents Act, the first nine months after issuance the patent may be subjected to a post-grant review. An inter partes review may not be filed until after these first nine months and only if a post-grant review has not been instituted. If a post-grant review has been requested but not yet instituted, the petition for inter partes review can be filed in the short period between the end of the nine months and the decision from the PTAB instituting the post-grant review.

Estoppel – A successful inter partes review can invalidate one or more claims of a patent. Once all appeals are exhausted a certificate issues canceling any claim determined to be unpatentable. Current case law suggests that the inter partes review certificate will impact any litigation still pending involving the patent claims that are canceled or amended, regardless of the stage of the litigation, potentially undoing jury verdicts and court awards, even those approved on appeal. In the US Patent and Trademark Office, the adverse decision can take effect sooner. Upon issuance of a final written decision from the PTAB, 37 C.F.R. §42.73(d)(3) provides that the patent owner may not obtain “a claim that is not patentably distinct from a finally refused or canceled claim.” Thus, the final written decision can have an immediate effect on patent owner’s continuation strategies in the USPTO.

An unsuccessful inter partes review has estoppel effect upon issuance of the final written decision of the PTAB confirming the patentability of one or more challenged patent claims. The estoppel effect is on a claim-by-claim basis. A petitioner may not thereafter challenge a surviving patent claim on any ground that was raised or reasonably could have been raised during the inter partes review. A great deal of uncertainty surrounds the meaning of “reasonably could have been raised,” and practitioners anxiously await the involvement of the courts in setting forth a predictable meaning for this term. The unsuccessful petitioner’s recourse is to appeal the PTAB decision to the Federal Circuit Court of Appeals in hopes of getting a reversal that lifts the estoppel. (More)

Copyright Durations

The general framework for understanding statutory copyright duration involves the change of law effective January 1, 1978 (the 1976 Copyright Act). Under the prior law (the 1909 Act) the copyright term began on the date of publication or registration, and originally lasted 28 years; a series of laws, culminating in the Sonny Bono Term Extension Act of 1998, extended the term to a maximum, for some works, of 95 years from publication. The U.S. Supreme Court has upheld the constitutionality of the Sonny Bono Act. Eldred v. Ashcroft, 537 U.S. 186 (2003).

Under the 1976 Act, as amended by the 1998 Act, the copyright term for works created on or after January 1, 1978 begins on the date of creation and ends 70 years after the author’s death, 95 years from publication, or 120 years from creation (depending on the nature of the work, its authorship, and its date of publication).

This term also applies to works created but not published or registered before January 1, 1978. In addition, the 1976 Act, as amended, provides these works with a minimum term until the end of 2002; the term is extended, if the work was published by the end of 2002, through 2047.

We have prepared a flow chart setting forth some general guidelines regarding the duration of United States federal statutory copyright. There are a number of exceptions to these guidelines. In most cases, these exceptions may involve expiration prior to the theoretical date indicated. However, in some cases, copyright protection may continue past the indicated date. In addition, some remnants of state common law copyright protection continue to exist, and may provide protection even when federal copyright does not. See, e.g., Capitol Records, Inc. v. Naxos of Am., Inc., 4 N.Y.3d 540 (2005) (holding that New York state common law copyright protects sound recordings made before 1972 until February 15, 2067).

We recommend consulting with an attorney in our Copyright Practice Group before relying on any conclusions concerning the copyright status of a work reached using this flowchart.

Dates of Note
Use of the flowchart will reveal the following categories of works that have already entered the public domain, and works that will enter the public domain in the next few decades:

• Works published (or registered when unpublished) before January 1, 1923.
• Works published (or registered when unpublished) before January 1, 1964, for which the registration was not properly renewed.

(More)