ITC on 337 Cases – No NPE Problem Here?

In the wake of substantial lobbying by many companies in the tech sector to limit ITC jurisdiction to prevent non-practicing entities (NPEs) from initiating 337 actions, the ITC published a press release, Facts and Trends Regarding USITC 337 Investigations.  This "fact sheet" presents some interesting data on recent trends in ITC 337 investigations and spins it in a way that suggests that there is no NPE problem at the ITC (and implying that no remedial action by Congress is required.)   

The data illustrates a clear uptick in the ITC’s case load, including NPE activity, since the Supreme Court’s 2006 EBay decision.  It also shows that, while perhaps not dominating the docket, NPE activity represents a significant portion of the ITC’s docket.  In fact, since 2006, 18% of ITC investigations were brought by NPEs, with what the ITC refers to as “category 1” NPEs (such as universities) accounting for 10% and “category 2” NPEs (patent investors/enforcers, sometimes called the not-so-nice term “trolls”) accounting for 8% of the ITC's 337 case load.  This doesn’t seem too imbalanced at first blush.  But, when one considers all of the enforceable IP rights in the U.S. that could form the basis of an ITC complaint, Category 2 NPEs must own or control some minuscule percentage of those rights.  As a percentage of IP ownership, it can certainly be argued that Category 2 NPEs do in fact represent a disproportionate share of the ITC docket.

With respect to settlements, the ITC data illustrates that on average, about 50% of all 337 investigations are terminated by settlement or consent order prior to completion of the investigation.  Category 2 NPEs show a somewhat higher settlement percentage, at 61 %.  This should not be too surprising, though, since the Category 2 NPE business model is one that ultimately seeks monetary compensation from patent enforcement efforts.  Injunctive relief, such as an exclusion order, only has value to a Category 2 NPE as a source of leverage in maximizing a financial return, not as the ultimate relief obtained.  

The ITC data is nicely presented in a short (four page) fact sheet and is worth a look, even if you don’t agree with the ITC’s spin on the data.  The data is certainly not so compelling as to prove that there is no NPE problem at the ITC or otherwise end the debate as to whether the ITC's domestic industry requirement should be limited in such a way as to foreclose NPE access to the ITC.

Design Patents Deserve Some Respect

In the hierarchy of intellectual property rights, the big three are utility patents, trademarks and copyrights.  Design patents, which protect the appearance of a useful article and not its functionality, have long been relegated to second class citizen status in the IP world and are often dismissed as providing scope that is too narrow or providing too little return on investment.  This perception is misplaced and, as demonstrated by recent developments in the ongoing global IP war between Apple and Samsung, design patents and industrial design registrations should be viewed as a valuable additions to an innovator's intellectual property portfolio.

In one ongoing case in Apple and Samsung’s global patent battle,  Apple v. Samsung, 11-CV-1846, N.D. Cal., Apple is asserting seven utility patents and six design patents against several Samsung smartphones and tablets.  Samsung has returned fire with seven of its own utility patents.  Following a preliminary injunction motion, Federal Circuit appeal, and remand, Samsung is now facing a preliminary injunction on its Galaxy Tab 10.1 tablet computer.  The preliminary injunction is not based on any of Apple’s utility patents.  Instead, it is based on one of Apple’s design patents that cover ornamental features of its iPad design, D504,889, that is ultimately going to prevent Samsung from selling its popular tablet computer, at least until the issues are finally decided at trial.  

When a company invests in industrial design, succeeds in making a great looking product, and that look is important in the marketplace, design patents can be a powerful tool to help protect that investment.  Design patents are relatively inexpensive to obtain and, if prosecuted thoughtfully, can be obtained with reasonable scope.  Enforcement is also less expensive than utility patent litigation and can be quite effective.  Its time for the poor design patent to get the respect it deserves.

The Patent Eligible Subject Matter Debate Continues

No question in patent law in recent times has been quite as vexing as the scope of patent eligible subject matter, especially as it relates to computer-implemented methods.  The Supreme Court has addressed the issue twice in three years in Bilski and Prometheus Labs, and we still seem no closer to understanding what makes an invention “patent elibible” under 35 U.S.C. 101.   The debate keeps on rolling along with the Federal Circuit's recent decision in CLS Bank Int’l  v. Alice Corporation, 2011-1301.

The claims at issue in CLS were found in three patents that each “cover a computerized trading platform for exchanging obligations in which a trusted third party settles obligations between a first and second party so as to eliminate ‘settlement risk..’”  Opinion at 2.  The claims at issue cover three different statutory classes, with method claims, system claims and article of manufacture claims directed to computer instructions stored on computer readable media.  The district court analyzed the claims in each class separately and found all claims invalid as not defining patent eligible subject matter under 35 U.S.C. 101.

In reversing the district court, the majority provided a lengthy discussion on the history of patent eligibility cases, especially addressing the “abstract idea” and “law of nature” exceptions to patent eligibility.  Opinion 11-21.  (Since the first paragraph of the ten page analysis includes the quote 'Congress intended statutory subject matter to "include anything under the sun that is made by man,"' [citations omitted] you quickly get a sense where the majority is headed).  At the end of its 10 page discussion, the majority sets forth a somewhat remarkable holding: “this court holds that when -- after taking all of the claim recitations into consideration — it is not manifestly evident that claim is directed to a patent ineligible abstract idea, that claim must not be deemed for that reason to be inadequate  under 101.”  Opinion at 20.  I for one, am lost by this statement.  A patent is presumed valid and a party seeking to invalidate a patent claim must do so by clear and convincing evidence.  It was my impression that this same standard applies to defenses under 35 U.S.C. 101.  I am not sure what “manifestly evident” is, but it sounds like a higher burden than clear and convincing evidence.  Perhaps, the defendant’s new burden on this issue is to prove by clear and convincing evidence that it is “manifestly evident that [an asserted] claim is directed to a patent ineligible abstract idea” in order to prevail on this issue?

The case includes a spirited dissent by J. Prost (with barbs and jabs laced throughout both the majority and dissenting opinions) that argues that “[t]he majority has failed to follow the Supreme Court’s instructions—not just in its holding, but more importantly in its approach.”  Dissent at 3.

Much more could be said about this 27 page opinion and 11 page dissent.  But, since the petition for rehearing en banc is likely already being drafted (and in my opinion will likely be granted), we might as well wait for the en banc opinion to delve deeper into this case.