Patent Reform Bill Becomes Patent Reform Law

No surprises here, but now its official.  President Obama has signed the America Invents Act and has now officially brought us patent reform.  As of today, the old qui tam false marking cases are dead.  As of today, multi-defendant patent cases will be less frequent.  As of today, the clock is ticking to when the other significant provisions of the new law go into effect.  If nothing else, it should be interesting.  Stay tuned.

Highlights of the America Invents Act

I didn't get around to writing up a summary of the changes that are coming when H.R. 1249 gets the President's signature this week.  Fortunately, many others have.  Here is a link to one such write up put together by Ken Levitt and Ryan Fortin in Dorsey's Minneapolis office.  Thanks guys!

Unintended Consequences from Patent Reform- Joinder and the Race to the Courthouse

One of the many features of the America Invents Act, is a new statute addressing joinder in patent cases. (Added as 35 U.S.C. 299).  Under this new section of the Patent Act, a plaintiff will no longer be able to group unrelated defendants together simply because they are accused of infringing the same patent.  Once President Obama signs the patent reform bill into law (which is expected to happen tomorrow), there will need to be a legitimate factual nexus among the various defendants – which in most cases will require making, using or selling the same product.

What this means for plaintiffs’ is that in more cases than not, new cases will have only one defendant per complaint instead of the large collection of defendants that are now common in most patent cases.  This won’t stop the case from being filed, of course, but will result in a modest increase in transaction costs for filing a complaint since for 10 defendants a plaintiff will need to file 10 complaints and pay $3500 in filing fees instead of $350.  (We should expect to see a spike in the number of patent cases filed next year, since the “typical” case filed recently will now require multiple filings).  This change should also make it easier for individual defendants seeking to transfer the case from a venue that it has little or no connection to, since (in theory) it no longer needs to consider the potential ties other defendants may have to the plaintiff’s chosen forum.  On the downside, it may also make the logistics of joint defense groups slightly more complicated as defendants’ will need to coordinate across a number of related cases instead of acting within a single case.  (As a practical matter, I expect that most judges will likely be inclined to consolidate the related cases at least for purposes of discovery, minimizing the logistical complications.)

So, what are the unintended consequences referred to in the title of this post?  It may be coincidence (if you believe in such stuff), but the number of multi-defendant cases filed since the Senate passed the patent reform bill seems unusually high.  PriorSmart litigation alerts so far this week show 88 new complaints with 515 defendants, including today's report of 18 new complaints against a whopping 196 defendants.  It looks like plaintiffs are racing to the court house to get there last multi-defendant complaints filed before President Obama signs the bill into law and changes the rules of the game.  No one is being sued who wouldn’t eventually be sued anyway, but they may be seeing the lawsuit a bit sooner.  Welcome to the brave new world of patent reform.

Does First Inventor To File REALLY favor Big Business?

Patent reform is now a reality.  The bill is in the hands of President Obama and it’s expected that it will be signed into law on Friday.  One of the significant and controversial changes in the America Invents Act is that patents will now be awarded to the first inventor to file, rather than the first inventor.  Every time first-to-file has been proposed for the U.S., many commentators would cry out that first-to-file is bad for small companies and individual inventors since large corporations have the resources needed to get applications on file fast.  Clearly, big corporations have financial resources, but does that really mean that they have an edge in a first-to-file system? 

In a race to the patent office, speed and agility will be at a premium.  Currently at many large companies, the large budget – those resources that the commentators all fear- comes with a price.   Layers of corporate bureaucracy make the process from invention to filing fairly long. Many months, sometimes years may pass before an application is filed.   For these large companies to succeed in a first-to-file paradigm, the process currently used to identify inventions, gather and evaluate invention disclosures from inventors, approve a disclosure for filing, prepare the application, and approve the application for filing need to be reviewed and streamlined.   These companies are currently built for power, not speed, and need to change their thinking or suffer a disadvantage in the first-to-file system. 

In contrast, small companies, should be able to move quickly to get applications for important inventions on file.  Budget will, of course, play a part in the decision to move forward, but its certainly not the only (or main) factor that will determine who has the advantage in the new first inventor to file paradigm.  The reduced patent office fees available for small entities, the strategic use of provisional patent applications, and a lower cost “Track 3” filing system that will  be rolled out by the patent office that will allow applicants to pay a lower fee to file while deferring examination for a later date, should provide small entities with the tools needed to insure that the first inventor to file system serves them well.

In short, I don’t believe that the first inventor to file system will inherently favor big entities over small.  It will ultimately favor those that adapt best to the new system.  Ladies and gentleman, start your engines – the race to the patent office is on.

Steve Jobs: Visionary and Prolific Inventor on Design Patents

In the wake of Steve Jobs' announcement that he is stepping down as C.E.O. of Apple, today's New York Times has an interesting interactive piece illustrating over 300 patents in which Mr. Jobs is a named inventor.
Given Apple's ability to consistently deliver sleek consumer products with a unique look and feel over the years, it is not too surprising that a majority of these patents are design patents, rather than utility patents.  Creative industrial design has been a hallmark of Apple, and Apple recognized that this key aspect of its innovation was worthy of protection.

The lesson from Steve Jobs:  If you invest in distinguishing your product in the market place with unique industrial design, you should also protect that investment through design patent protection.

Parallel Networks: Judge Davis Grants Summary Judgment in Favor of 99 Defendants

Following up on  my June 9 post regarding the Parallel Networks case, Judge Davis has now issued an order granting summary judgment in favor of 99 of the 112 defendants in these related cases.  This decision is a vindication of the defendants' position and, more importantly, justifies the use of the expedited process Judge Davis used in this case.  For a more comprehensive write up on this order, see Michael Smith's EDTexweblog.

Federal Circuit Rejects Computer Readable Media Claims under Section 101

The ebb and flow regarding the scope of patentable subject matter for computer-related inventions continues this week with the Federal Circuits decision in Cybersource Corp. v. Retail Decisions, Inc.

In Cybersource, two claims of U.S. Patent No. 6,029,154 (“the ‘154 patent”) were invalidated by the district court under 35 U.S.C. § 101 for failure to recite patent-eligible subject matter.  One of the claims, Claim 3 was directed to a “method for verifying the validity of a credit card transaction” and recited three steps, including “obtaining information…”, “constructing a map of credit card numbers…,” and “utilizing the map…to determine if the credit card transaction is valid.”   Claim 2 was directed to “computer readable medium containing programming instructions” and recited “execution of the program instructions by one or more processors of a computer system” in the body of the claim.  The Federal Circuit affirmed. 

The decision with respect to the naked method claim (claim 3) is not too controversial.  The outcome with respect to Claim 2, however, represents a significant shift in the patent-eligible subject matter landscape.  Why, you ask?  Because for the last 15 years, patent practitioners in the computer arts have relied on In re Beauregard, 53 F.3d 1583 (Fed. Cir. 1995) for the proposition that claims drawn to “computer readable media” were patent-eligible articles of manufacture, not methods subject to the vagaries of Section 101. (“The Commissioner now states ‘that computer programs embodied in a tangible medium, such as floppy diskettes, are patentable subject matter under 35 U.S.C. § 101 and must be examined under 35 U.S.C. §§ 102 and 103.’)  (Note - there was no actual holding from the Federal Circuit in In re Beauregard, simply a remand. Since the Commissioner ultimately agreed with Beauregard’s position, there was no longer a case or controversy and thus no jurisdiction before the Federal Circuit.) The Federal Circuit has now dispelled this long-held reliance: 

Cybersource contends that, by definition, a tangible, man-made article of manufacture such as a ‘computer readable medium containing program instructions’ cannot possibly fall within any of ht three patent-eligibility exceptions the Supreme Court has recognized for ‘laws of nature, physical phenomena, [or] abstract ideas.” [citation omitted] We disagree.  Opinion at 16.

With those two words, the validity of claims in thousands of issued patents to computer-related inventions  are now in doubt. 

One line from this opinion that I find somewhat disturbing is that “[r]egardless of what statutory category (‘process, machine, manufacture, or composition of matter’ 35 U.S.C. § 101) a claims language is crafted to literally invoke, we look to the underlying invention for patent-eligibility purposes.”  In every other context we need to look at the claim language, all of the claim language, in order to define the “invention.”  Under the Cybersource analysis, courts may now ignore express limitations in the claim (such as “computer readable media” or “one or more processors”) to determine an “underlying invention” that is broader than what is actually claimed in order to invoke Section 101.  Creating a double standard for the Section 101 analysis just doesn’t feel right.

Very little is certain about the scope of patent-eligible subject matter for computer-related inventions in view of the Cybersource decision except this:  we have not seen the end of this issue.  My bet is that en banc review is in our near future.