Intellectual Property Directions

I have never liked so-called business methods patents (in fact, I dislike a majority of “methods” patents). Today the Supreme Court hand down its ruling on the Bilski case, upholding the USPTO’s rejection of Bilski’s patent application on “101″ grounds. That is, the PTO rejected the application because the claimed invention did not address a patentable subject. Specifically the Court ruled that Bilski’s application was an attempt to patent an abstract idea - a catagory that has long been ruled not subject to patenting.

Many people, myself included, had been hoping that the Supreme Court would address the patentablity of software and business methods at a broader level since there has been much huffing and puffing on the topic of should business methods as a class and should software as a class be patent eligible. Unfortunately we will have to wait until, perhaps, the Congress acts since the Court explicitly said it:

… declines to impose limitations on the Patent Act that are inconsistent with the Act’s text. The patent application here can be rejected underour precedents on the unpatentability of abstract ideas.The Court, therefore, need not define further what constitutes a patentable “process”…

In effect, the Court said that if Congress didn’t like the way the PTO was defining a patentable process then Congress can amend the patent statutes.

As many of you might be aware, the past year or so has seen the emergence of a new type of troll - the patent marking troll. This PMT seeks out products that have incorrect patent marking (non-applicable or expired patent numbers) and sues the manufacturer. The penalty under the current patent law is up to $500 per violation. That doesn’t seem like much until you realize that each individual item sold is a unique violation, as has recently been confirmed by the courts. You don’t have to be a math whiz to realize that $500 times the number of, say, DVD players starts to add up to real money.

The poster child for patent marking trolling is Solo Cup. Apparently, Solo cup has been producing those plastic lids for coffee cups marked with an expired patent number. Each individual lid, retail value in the pennies, is in theory an “up to” $500 violation. So Washington DC patent attorney Matthew Pequignot sued them (he splits the fine 50:50 with the government).

To make a long story short(er), the case ended up at the Federal Circuit which decided that:

1. Marking with an expired patent number is the same, under the law, as marking an “unpatented” item with an inapplicable number (the actual wording in the law). Solo had argued that the cup lids were patented, just that the patent had expired, but the court said unpatented means not protected from copying by a patent.
2. For a violation to occur, the “with intent to deceive” part of the law must be rigorously demonstrated. More to the point, the court ruled that simple knowledge of the falsity of the marking was not proof of intent to deceive. Solo argued successfully that the cost of making new molds to remove the expired patent number(s) was uneconomical and that, as the molds needed to be replaced, they were removing the offending numbers. Whether or not you or I believe it, the court found is plausible enough to allow Solo to dodge the bullet.
3. Surprisingly, the court also found that the mealy mouthed wording we often see - “may be covered by one or more of the following patents” - might support the argument of no-intent-to-deceive. I think that such conditional wording is at best a smoke screen to cover a desire to suggest patent protection when there is none. Except for reasonable delay in removing expired patents I cannot justify a company not knowing for sure what patents apply to the product in question. Heck, the purpose of patent marking is to warn off competitors; if you don’t know what patents apply, why should the competitor have to try to figure it out. I’d allow such conditional marking only if those markings lost their purpose of informing competitors of their infringement liability.

Can you trespass on someone’s property before they own it? More to the point, can you be forced to pay back rent for the time during which you were acting like a squatter on public land that was later sold to a developer? In the world of land development the answer is (probably) no; in the world of IP development the answer is a definite maybe.

Back in the olden days, BP (Before Publication), the invention you disclosed in your patent application was kept secret until your patent issued. You could mark your product “patent pending”, which gave anyone copying your product fair warning that IF your patent issued they might have to stop making, using, selling an infringing product.

With the advent of pre-allowance application publication (~ 18 months after the priority date), the world was given access to your invention even though you had no patent to stop them from copying it. This, it would seem, violated the quid-pro-quo of the applicant’s “contract with society” [if you teach society about your invention you can have ~ 17 years of exclusionary rights]. To correct this imbalance, Congress added a modicum of pre-grant patent protection.

Of course, it’s still the case that no infringement action may be started until the patent is issued. After all, the patent may NEVER issue, in which case there can’t be infringement. However, once the patent issues, a patent owner can  collect “reasonable” royalties for infringement activities that occurred between an application’s publication and the date of issuance. In theory, that is. [for you doubting Thomases, see 35 U.S.C. § 154, section (d)].

To collect these royalties, a patent owner has to:

1. sue to prove infringement (no cheap feat),
2. prove that the claims that survived to form the issued patent are “substantially identical” to the claims in the published application,
3. demonstrate that the infringer had “actual notice” of the published application, and
4. show the infringing activity took place after the date of publication.

Of these 4 conditions, only the last will be easy to satisfy. The other three conditions are likely to cause more headaches and expense than the “reasonable royalties” are worth.

For an example of the headaches, consider the “actual notice” condition. Presumably this means the patent applicant has to observe a competitor building something that will possibly infringe the yet-to-be-examined patent and then send them a copy of the published application. But if they were working on it before publication (i.e., before public disclosure of the application), then their work might be prior art and you are probably required to inform the patent office, under your duty of candor. Failure to notify the patent office may cost you your patent even if the actual information turns out not to affect the examiner’s decision.

And on the other side of the equation, the “what’s in it for me” side, the “reasonable royalty” limit on what you can collect is reasonable, since the “infringement” being addressed is infringement of a non-existent patent. Indeed, infringement of a patent that might never come into existence at all. The patent application process should not become a show stopper for competitors. Competitors are already put on warning that they may have to stop selling their product if/when your patent issues; the reasonable royalty cost allows them to make a rational business decision about the risks of pre-issue activity.

So, my recommendation to a patent applicant is, in most situations, let this sleeping dog lie. And to the potential infringer, I suggest worrying more about what changes you might have to make if and when the patent issues, rather than worrying about the “reasonable” royalty you might have to pay for what you are doing now.

Last month on LinkedIn an individual asked (and I’m paraphrasing here) whether an expired provisional application could affect (presumably for the better) the priority date of a regular patent application filed after the expiration of the provisional. That’s kind of like asking if you can make ice cream from soured milk. The answer, of course, is no; even worse, including a expired provisional application by reference in an application seems like a good way to ensure you lose the priority battle in an interference procedure.

First, let’s remember why you might file a provisional application in the first place. A provisional application is a temporary filing used to hold your priority for getting a patent - your place in line, so to speak - for getting a patent, while you consider the pros and cons of moving ahead with the process of prosecuting the patent application for that particular invention. For example, you might want to see if you can find some capital to build your business or you might be working on an even better approach to your product so putting a one year hold on the process can save you from prosecuting a patent you don’t ultimately want. By filing a provisional application you get that extra year without worrying about losing your patent rights because of public disclosures or because someone else has independently come up with the same invention during that year.

Getting back to the question posed on LinkedIn. Expired means expired (see 4/29/10 post), so your expired provisional application has lost its “place holding” value. You could always include a copy of your provisional filing as a reference in your regular application, but only bad things can accrue from that. If the provisional app has material that you are not claiming in the regular application then you are making public some material that was otherwise still confidential. Additionally, by including it and not claiming it you run the risk of dedicating it to the public.

If, on the other hand, your regular application covers all the material in your provisional application and you find yourself in an interference procedure, the admission that your invention was ready for patenting more than a year before the priority (filing) date of your regular application gives ammunition to the other party. Here in the US, the patent (if it is granted) goes to the first person to conceive of the invention AND diligently reduce it to practice, where the filing of the patent application is really the indicator that you have finished the reduction to practice. Thus, without the priority date of the provisional application on your side, you are in the difficult position of arguing away a year or more of delay in filing.

About the only argument I could imaging is poverty: “I couldn’t afford the filing fees”. But you’d probably have to produce evidence to that effect. You certainly would have a better chance of winning the interference if your regular application included new material (viz., beyond the provisional app) and did not reference the expired (NON-PUBLIC) application explicitly.