New York State Technology and Law Center 2009 Spring Webinar Series

1. New York State Technology and Law Center2009 Spring Webinar Series Patent Law Update George R. McGuire Bond, Schoeneck & King, PLLC April 30, 2009

2. The State of the Law“It’s Tough Out There” 112/101 103 patent patent patent

3. Trends and Hot Topics • Impact of KSR continues • Where obviousness at issue, patentee has not fared well • Predictable v. Unpredictable Arts • Long felt need v. problem identification • (Non)Impact of Seagate on opinions • Opinions still good practice • The “new” §112,¶1 • Harder line stance on written description requirement • Bilski & 101 • Confusion abounds….will the Supreme Court save us? • Licensing Paradigms

4. KSRA flexible approach to 103A couple sound-bites • When there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions, a person of ordinary skill has good reason to pursue the known options within his or her technical grasp. If this leads to anticipated success, it is likely the product not of innovation but of ordinary skill and common sense • In determining whether the subject matter of a patent claim is obvious, neither the particular motivation nor the avowed purpose of the patentee controls. What matters is the objective reach of the claim. If the claim extends to what is obvious, it is invalid under §103. One of the ways in which a patent's subject matter can be proved obvious is by noting that there existed at the time of invention a known problem for which there was an obvious solution encompassed by the patent's claims.

5. Predictable arts are obvious. Line Rothman v. Target(“To the contrary, this invention falls into a very predictable field. In the predictable arts, a trial record may more readily show a motivation to combine known elements to yield a predictable result, thus rendering a claimed invention obvious. . . . Nursing garment design is a predictable art. As Ms. Rothman acknowledged in her testimony, “[a] shoulder strap is a shoulder strap.” Thus, it is hardly surprising that Ms. Rothman, in just one “day into the night” of sewing, combined an off-the-shelf Jockey tank top with a built-in shelf bra and an off-the-shelf Olga nursing bra to arrive at the claimed invention.”) Unpredictable arts are non-obvious. Sanofi Synthelabo v. Apotex Inc.(“[T]he district court concluded: “Whether or not it may have been ‘obvious to try’ separating the enantiomers of PCR 4099 and, secondarily, preparing its dextrorotatory enantiomer as a bisulfate salt, the wide range of possible outcomes and the relative unlikelihood that the resulting compound would exhibit the maximal increase in antiplatelet aggregation activity and the absence of neurotoxicity makes clopidogrel bisulfate non-obvious.’ . . . We discern no error in the district court’s findings . . . a person of ordinary skill would not have had the expectation that separating the enantiomers would be likely to produce an isomer having absolute stereoselectivity as to both the favorable antiplatelet activity and the unfavorable neurotoxicity.”) Predictable v. UnpredictableIs “sweat of the brow” the operative obviousness test?

6. Buffalo TechSome arts are “borderline” and neither predictable nor unpredictable • Technology: WLANs • Problem: Multipath Path Propagation (i.e., Echo) in indoor environment • Claim v. Prior Art: Prior art disclosed all elements except that the hardware be in an indoor environment • SJ of Non-Obviousness Reversed as question of fact existed on whether addressing the same problem in an outdoor environment would make it obvious in an indoor environment (conflicting expert reports on this point)

7. Problems with using predictable / unpredictable arts the obviousness test • If the art is truly unpredictable, then does extraordinary “skill” even matter? If the art is truly unpredictable isn’t it really a matter of putting so many monkeys at so many typewriters and waiting for Hamlet to emerge? • If the art is predictable then why is there no anticipatory art. Isn’t the lack of close prior art within the context of a predictable technology the stongest indication of non-obviousness of all? Use Secondary Considerations to build a strong record. • Why fund research, like gene-mapping, that will get done without patent rights?

8. Long Felt Need Versus Problem Recognition “Long-felt, but unmet, need” is a recognized objective consideration of non-obviousness, but not a magic bullet. Agrizap v. Woodstream, 520 F.3d 1337 (Fed. Cir. 2008) (“the objective evidence of nonobviousness, including the commercial success of the Rat Zapper, copying by Woodstream, and a long felt need in the market for electronic rat traps . . . was presented . . . this evidence is insufficient to overcome the overwhelming strength of Woodstream's prima facie case of obviousness.”) Recognition of the problem may be making a KSR-inspired comeback. Judge Rader in a March 11, 2009 dissent (Chapman case): “KSR . . . held that ‘[w]hen there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions, a person of ordinary skill has good reason to pursue the known options within his or her technical grasp. If this leads to the anticipated success, it is likely the product not of innovation but of ordinary skill and common sense.’ This case, as are [other recognition of the problem cases], is distinguished from KSR because there were no ‘finite number of identified, predictable solutions’ that were used to discover the source of and solution to the problems.” One has to choose between these two approaches. They are inconsistent with each other. In fact, it is probably best to start thinking about this when drafting the BACKGROUND section of a patent application. Are the drawbacks of the prior art really recognized in the prior art or not? Maybe even ask the inventor.

9. Pre-Seagate Affirmative duty to exercise due care to determine whether infringing, including, among other things, a duty to seek and obtain a competent opinion of counsel Underwater Devices v. Morrison-Knudsen, 717 F.2d 1380 (Fed. Cir. 1983) Seagate A finding of willfulness requires: Accused infringer acted despite “an objectively high likelihood that its actions constituted infringement of a valid patent, and This objectively defined risk was known or should have been known by the accused infringer In Re Seagate Tech, LLC, 497 F.3d 1360,1371 (Fed. Cir. 2007) Willfulness

10. Read Factors still apply • Factors to consider: 1. Whether the infringer deliberately copied the ideas or designs of another; 2. Whether the infringer, when he knew of the other's patent protection investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed; 3. The infringer's behavior as a party to the litigation; 4. Defendant's size and financial condition; 5. Closeness of the case; 6. Duration of the defendant's misconduct; 7. Remedial action by the defendant; 8. The defendant's motivation for harm; and 9. Whether the defendant attempted to conceal its misconduct.

11. Objective RecklessnessSince Seagate • 5 cases of no opinion with 3 no willfulness & 2 willfulness • 8 cases of opinion, no willfulness • 3 cases of opinion, willfulness, but: • Incompetent opinion (only stated conclusion) • If relying on an opinion, make sure it is competent

12. No Opinion, but no willfulness • Design around efforts • Strong non-infringement arguments • Patentee’s delay in pursuing suit • In-house (non-legal) technical infringement analysis (but compare Funai v. Daewoo)

13. No opinion, Willful • Wordtech Systems v. Integrated Network Solutions, 2009 U.S. Dist. LEXIS 2806 • Defendants' products were shown to be essentially carbon copies of Plaintiff's designs, and • Defendants were repeatedly notified that their products infringed on Plaintiff's patents. • Despite such notice, Defendants made no effort to determine whether the patents were invalid or not infringed, and they continued to engage in their tortious conduct over the course of a number of years.

14. Opinion, but willful • Funai v. Daewoo, 2009 U.S. Dist. LEXIS 1618 • Daewoo had its own employees, Mr. Song and Mr. Kang, investigate whether Daewoo was infringing Funai's patents • Subsequently, Daewoo retained a South Korean law firm without training in U.S. patent law to render opinion instead of an opinion from a firm competent to render an opinion on U. S. patent law, as Funai had requested.

15. 35 U.S.C. §112,1Non-Bio/Chem (there are issues in that art as well) • LizardTech (2005): Originally filed (non-biochem) claim invalid for WRD. Fed. Cir. is apparently split on whether WRD can invalidate originally filed (non-biochem) claims • are original claims part of the original specification? • If yes, then isn’t this an enablement issue instead of a WRD issue? • En Banc denied (decision denying en banc shows split of opinion on issues) • Power Oasis (2008): applicant created WRD issue with a C-I-P and claim amendment that was ill-advised in 20-20 hindsight (questionable prosecution tactic): traditional use of 112, 1 (determining right to priority) • If arguing for support, why not use parent application to try and get claims? • CIP can then contain more focused claims on what would never be argued is supported in original filing • ICU (2009): even a small, or “obvious,” claim broadening during prosecution is a WRD problem • Must have clear support in original specification • Claims added during prosecution are certainly not part of original disclosure (contrast with LizardTech) • CAFC certainly approves of LizardTech even though facts were not aligned • In the biotech arena, see Carnegie Mellon v. Hoffman-La Roche (decided Sept. 8, 2008), Alonso (decided Oct. 30, 2008) and Eli Lilly (a disclosed species not sufficient to support generic claim to genus)

16. BilskiMachine or Transformation Test • Section 101: Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter . . . may obtain a patent therefor . . . • Bilski: The (exclusive?) test to determine whether a process is patentable subject matter requires whether the process involves use of a machine or a transformation from one physical state to another • Pre-Bilski Exclusions: laws of nature, natural phenomena, and abstract ideas. Has anybody had a client or employer ask to patent any of these types of things as such? • Most likely arts impacted: business methods, diagnostic methods, data processing (protocols)/transformation of data (encryption, compression) • Make sure the data is transformed from one state to another and/or that a MACHINE is necessarily used in the process • Advisable that it be explicit in the specification The author of Parker v. Flook turned 89 this month.

17. Do only method claims create an issue? • In re Comiskey: Fed. Cir. punted this issue back to USPTO for determination of whether Bilski standards apply to system claims including “modules” • Can all “processes” be recast as “manufactures”? • Will Pres. Obama save us?

18. Does the machine-or-transformation test make sense • In re Ferguson: Judge Newman in concurrence: the machine-or-transformation test has little to do with pre-emption, abstraction or the fundamentalness of a principle or idea, even though these are supposedly forbidden things that require the test • In re Ferguson: Is State Street completely overruled? Is Freeman-Walter-Abele (and others, i.e., technological arts)? Probably dicta, but opinion was overly-expansive on these points

19. Cynical View of Current Trends101, 103, 112 • A One-Two Punch • Punch One:  what is happening under 101 makes it harder to claim functionally, which is to say broadly.  Evolving 101 law is pushing us to claim in terms of hardware spec's, and that is incompatible with broad coverage.  Evolving 112 law is saying that:  (i) the broad claim better be in the spec as filed; and (ii) even if it is it might still be invalid for lack of commensurate enablement (Sitrick case) or Eli Lilly type written description problems (LizardTech).  Broad claims are becoming difficult to defend. • Punch Two:  evolving 103 law is saying that nuts and bolts type limitations are obvious because the proverbial nuts and bolts are always known in a given art and it is obvious to make new combinations of known elements, at least in the "predictable arts."  Narrow claims in the predictable arts are becoming difficult at best, at least where the claim is narrow to avoid some prior art in the general vicinity.

20. The Cynical Conclusions 1. Narrow claims in the unpredictable arts; and 2. Broad inventions in the predictable arts (thus passing 103) that are only covered by a set of claims much narrower than the broad scope of the invention (thus passing 101 / 112). • In “predictable arts”, you can have 'coverage' only in cases where we can be sure that your claim is trivially easy to design around with embodiments that still have the advantages of your inventive disclosures – great public policy of encouraging innovation!!!

21. Hot Issue in Patent Licensing • Quanta Computer, Inc. v. LG Electronics, Inc.(2008) • If license authorizes sales, the patent is exhausted in the downstream direction Component Supplier How Retailer many Manufacturer End User bites

22. Patent Exhaustion At CAFC • Excelstor Tech. v. Papst Licensing (Fed. Cir. 2008) • “Patent exhaustion prohibits patentees from enforcing patent rights in certain circumstances, but it does not forbid multiple licenses on a single product or even multiple royalties.” • Transcore v. Electronic Transaction Consul. (Fed. Cir. 2009) • Covenant Not To Sue considered as license • Holding back some patents: Unlicensed patents are exhausted if they are required to practice the licensed ones

23. Strategies To Avoid Exhaustion • Use of multiple patents • E.g., one covering only for component mfgr and one covering only assembler • When do patents “require” each other? Substantial non-infringing use analysis? • Contracting Around • Probably can’t get rid of exhaustion by saying exhaustion does not apply • Probably can get rid of exhaustion by saying that sales to/from unlicensed parties are unlicensed • Dangerous Game: Don’t try to shield licensee while reserving right to go after licensee’s customers and/or suppliers • WHEREFORE: explain motives for multiple license