Week 7 Blog #3: Factors that Encourage NPE Activity

There are various factors in a patent system that might influence or encourage activity by a NPE. Peter Arrowsmith, a patent attorney and partner at London based firm Cleveland IP put together a comprehensive list of possible factors and comparing the strength of these factors in both Europe and the US.

     1. Low cost risk in litigation

In the US, NPEs can initiate infringement proceedings without incurring a significant cost risk as the losing side does not typically pay the winner’s legal costs and NPEs can often find a law firm willing to take the case on a conditional fee basis. In Europe, the losing side is typically required to pay at least a portion of the winner’s legal costs and conditional fee arrangements are also less common.

           2.  Uncertainty

A NPE is likely to benefit in a patent system where the outcome of a case is difficult to predict, especially if this is coupled with high costs in litigation. This is likely to encourage a NPE to bring more cases on the basis they are statistically likely to register wins which will increase the pressure to settle before trial. Europe may be considered more predictable than the US simply because decisions are made by experienced patent judges, rather than lay juries.

            3.   Size of Market

A NPE is likely to benefit if their patent has a wide geographical scope in an important market because a single adverse decision could have a large economic impact on the other side. In the US a single decision can be effective across the entire country, whereas in Europe it is necessary to enforce patents country-by-country.

            4.  Bifurcation

A system in which the issues of infringement and validity are considered separately are also likely to favor a NPE because the NPE can obtain a favorable decision on infringement before validity is even considered. Europe is considered more attractive to NPEs in this comparison as certain countries permit bifurcation.

            5.  Speed

A fast system can allow a NPE to exert pressure on the other side, which can encourage early settlement, as these systems are likely to favor NPEs. In this comparison, there is little to choose between Europe and the US, since fast or slow decisions are possible in both systems.

Overall, it seems that the US patent system is more attractive than Europe for NPEs. However, the European system is still viable for NPEs, although they may need to be more selective about the cases and targets they pursue.

Week 7 Blog #2: Addressing Patent Trolls

In the case of patent trolls, the Federal Trade Commission and Department of Justice are in the process of assessing the impact of their activities on innovation and competition and their implications for antitrust enforcement and policy. In late 2013, Edith Ramirez, chairwoman of the FTC, planned to ask the full commission to approve an agency inquiry, a 6a(b) study of the so-called "patent troll" issue, that will include the issuance of subpoenas to these patent assertion entities.

The purpose behind this form of action by the government is to gather information from both small "legal shells" which gather patents and issue "demand letters" citing infringement, as well as the large firms who manage portfolio of patents that they license and to investigate if antitrust policy can mitigate the activities of these PAEs.

The government must understand that a one-size-fits-all antitrust enforcement policy approach is one that could possibly fail. While the vast majority of PAE litigation is concentrated in the information technology sector, the diverse range and intangible nature of IT services has led critics to urge Congress to undertake targeted reforms in the industry sector.

The Obama administration has listed several legislative recommendations to Congress that it believes will "bring about greater transparency to the patent system and level the playing field for innovators." These recommendations include requiring patentees and applicants disclose the "real-party-in-interest"; permit increased discretion in awarding fees to prevailing parties in patent cases; expanding the USPTO's transitional program for business method patents to include computer enabled patents; and providing off-the-shelf use by consumers and businesses to name a few of the possible reforms that the government could enact.

In 2013, we saw action take place in the form of two new laws: the re-introduction of the "Saving High-Tech Innovators from Egregious Legal Disputes Act of 2013" ("SHIELD ACT") and the "Patent Quality Improvement Act of 2013" ("STOP Act"). The SHIELD Act applies to all patents (not simply software patents) and requires NPEs that are unsuccessful in suing for patent infringement pay the defendants legal costs if they lose their lawsuit while the STOP Act establishes a new process in which technology patents get reviewed by the PTO before being litigated for alleged infringement, essentially to eliminate "frivolous" claims brought by PAEs.

In essence, the three branches of the federal government are focused on a bipartisan patent law reform addressing PAE litigation abuse and reducing the possible harms that these entities bring about.

Week 7 Blog #1: What is an NPE?

A Non Practicing Entity (NPE) can be broadly defined as "any entity that earns or plans to earn the majority of its revenue from the licensing or enforcement of its patents". Because these entities do not sell actual products or services, they do not infringe on the patent rights contained in others' patent portfolios. This feature is critical as it makes these entities essentially invulnerable to the threat of counter-assertion, one of the most important defensive measures in patent disputes.

NPE litigation is particularly challenging for companies facing it as they can be distracting to management, which must pay money to legal counsel to defend itself, or to the entity to secure a license, or both. Those who support NPEs argue that large technology companies can be regularly found guilty of infringement and thus deserve the onslaught of patent infringement litigation that NPEs offer.

A "patent troll" is a specific type of NPE that uses patents as legal weapons, instead of actually creating any new products or coming up with new ideas. These trolls are in the business of litigation and often simply buy up patents on the cheap from struggling companies. These patents are generally very vague and the trolls will proceed to send out threatening letters to those they argue infringe these vague patents and these letters threaten legal action unless the alleged infringer agrees to pay a licensing fee.

Those companies that receive infringement letters typically choose to pay the licensing fee, even if they believe the patent is bogus or their product did not infringe simply because of the high cost of patent litigation. In particular, the in-app purchasing technology development world has seen Lodsys, a company that neither makes nor sells a product, target small app developers. Lodsys has sued at least 11 of these developers with Apples and Google both intervening within the lawsuits, challenging the validity of Lodsys' patents. However, the slow nature of the justice system leave developers with the present choice of either taking a license from Lodsys or possibly entering into a lawsuit.

Week 6 Blog #4: Novelty and Non-Obviousness

In this video by Rich Goldstein, a patent attorney, he goes into discussing the difference between novelty and non-obviousness.

For novelty, he points out that basically the definition for it is that there is nothing exactly like it in prior art. Proving non-obviousness is the challenging part however. Whatever is different about your invention from what others have done before, you need to show a sense of unexpectedness so someone in the field can witness enough of a difference where they do not come to the conclusion that the invention isn't something they would ordinarily use, but can create and utilize if they wanted too. He gives an example of child-size clothes hangers and while that may be a novel invention, manufacturers have the capability to create this invention, but they simply chose not to. In that case then, the standardization of clothes hangers makes the invention novel, but the production capabilities of individuals in the field can make the same invention if they chose to.

Week 6 Blog #3: AstraZeneca's Drug Patent Deemed Obvious

This article was published on Law360, a website that reviews recent patent decisions. The link to it follows: http://www.law360.com/articles/621755/astrazeneca-s-kid-asthma-drug-patent-deemed-obvious.

A federal judge ruled that AstraZeneca's patent on a generic version of pediatric asthma medication, specifically the patent for sterilizing the drug was invalid as obvious. The judge, Renee Marie Bumb, entered a judgment of non infringement for the defendants ruling they had sufficiently shown there were multiple techniques for sterilization in prior art. While AstraZeneca had initially won an appeal of a non infringement ruling, a Federal Circuit reversed the ruling and remanded the the case, leaving the judge to rule that the patent's claims describe methods of sterilizing the drug that were obvious.

One of the reasons this caught my eye was the fact that we tend to forget the scientific processes behind biotechnology firms in examining patent law. I found it interesting to witness how the defendants managed to prove how there were other known techniques to prepare a sterilization for the drug and how the healthcare industry competes for these different patents to produce the basic medicine necessary for our society. Reading about this demonstrated to me how patents can go way beyond our traditional thoughts of technology and their impact they can have on the pharmaceutical care that we are exposed to.

Week 6 Blog #2: Obviousness is King

Patent Office Litigation Prediction #3: Obviousness is King

*Please click on link to watch video. Unfortunately, I could not upload it directly onto blog for strange reason.

In this blog, I will be discussing the challenges that patent owners now face in terms of recent legislation concerning the obviousness of their existing patents. In this video, Robert Greene Sterne, a patent attorney, provides one of his predictions for a new contested competing world. Contested proceedings test patentability of issued patents before a newly created Patent Trial and Appeal Board. If this test is not met by a patent owner, then this will prove to be fatal for this owner and cause his previously valid patent to become removed.

Greene points out that in order for an invention to be patentable, it must be non-obvious over prior technology. His prediction lies in the fact that he believes these new contested proceedings will feature the issue of obviousness as the central theme. Essentially, this appeal board second guesses the work conducted by the original patent examiners. Obviousness is a tricky issue for patent owners because you need to able to provide the Patent Trial and Appeal Board the best evidence on why your invention is so significant, but this is difficult because of short time period proceedings, which will only be around.

Greene conclude that patent owners must be concerned and prepared for their defense of obviousness in these proceedings, move rapidly to provide evidence, and to prepare and look far out to eventual appeal if their original patent is ruled non-obvious by this newly created board.

Week 6 Blog #1: A Focus on Obviousness

The goal of this week's blog is to examine more into the case of obviousness in the patent world. As discussed in lecture, the non obvious requirement of the patent law looks at multiple pieces of prior art so a person having ordinary skills in the art wouldn't have easily thought of it given the plurality of prior art.

In lecture, an example we went over involved a "glow-in-the-dark toothbrush" invention that was filed to be patented. We noted that while the argument could be made that the invention is obvious when comparing it to the prior art of a glow stick and tooth brush, a case for non-obviousness could be constructed with the defense that the prior art references came from different fields, thus making it less obvious to combine the two prior art than one might conclude. Alternative design cases such as these and whenever an examiner refers to more prior art references has been shown to actually demonstrate the greater non-obvious nature of patent filings.

Bruce Kramer, a patent attorney at Sughrue Mion, PLLC, further delved into the case of obviousness in his article, "Nonobviousness- An Essential Requirement for Patentability". In this article, Mr. Kramer pushes into greater detail about the USPTO's definition of "non-obviousness. The concepts he focuses primarily on include the concepts of prior art, a person having ordinary skill in the art, and the time the invention was made.

In terms of prior art, similar to what we discussed in lecture, Mr. Kramer simply states the definition of what this constitutes, which is prior patents, published patent applications, journal articles, and other references upon which a patent examiner can rely on. When writing on "ordinary skill", Mr. Kramer makes it clear that this does not refer to an expert in the technology, but rather one of an average skill in the technology to which the technology pertains. Ordinary skill however can vary depending on the invention involved. Finally, the time the invention was made is important to consider. Due to the rapidly changing landscape of the technological sphere, it is critical for an examiner to distinguish whether a claimed invention would have been obvious in view of the state of the art at the time the invention was made, not at the time it is being examined. While it may be obvious today, an invention may have not been so obvious at the time it was made.

In the case of Graham v. John Deere Co. (1), the Supreme Court set forth three factual inquiries to be used in considering whether an invention is obvious or non obvious:

1. Determining the scope and content of the prior art
2. Ascertaining the differences between the prior art and the claims at issues; and
3. Resolving the level of ordinary skill in the pertinent art

In essence, when examining obviousness, the following principles ought to be applied in such as analysis:

1. The claimed invention must be considered as a whole 
2. The references must be considered as a whole and must suggest the desirability and thus the obviousness of making the combination
3. The references must be viewed without the benefit of impermissible hindsight afforded by the claimed invention
4. Reasonable expectation of success is the standard by which obviousness is determined 

By fulfilling these principles, non-obviousness can be established when making the case for a patent. While patent law pertaining to obviousness vs. non-obviousness still demonstrates many gray areas, specifically speaking to the broad-based nature of these principles, these factors that are considered in this analysis provide a baseline into determining the obviousness of certain patents when filed.