The U.S. Supreme Court handed a big victory to Quanta Computer on Monday when it held that the doctrine of patent exhaustion barred LG Electronics' claims against it.
In doing so, the Supreme Court reversed the U.S. Court of Appeals for the Federal Circuit's previous decision that patent exhaustion did not apply to method claims and extended that doctrine to licenses for products that "substantially embod[y] a patent." This case is likely to substantially change the playing field for patentees seeking to monetize their patents in a vertical industry value chain. ... Read more
THE RAMBUS SAGA
Rambus is a licensing company that holds a number of patents relating to DRAM memory architecture. In the early 1990s, representatives from Rambus attended meetings of the JEDEC working group that was developing new standards for what became known as the double data rate, or "DDR" type of DRAM. During those meetings, Rambus did not disclose some of its patents and patent applications to the committee. The new technology was included in the standard, and became widely used.
Beginning in 1999, after the new standard was well established, Rambus informed many of the major players in the DRAM market that it held patent rights that covered the standard, and warned them that they'd better pay for licenses. Rambus extracted substantial license fees from Samsung and Toshiba, and increased the pressure on others by suing several industry participants. This led the FTC bring an antitrust lawsuit against Rambus in 2002, alleging unfair and deceptive acts or practices in violation of the FTC act, and unlawful monopolization in violation of the Sherman Antitrust Act. Meanwhile, Infineon, who Rambus accused of patent infringement, countersued Rambus for fraud due to its conduct before the JEDEC standards committee.
Both the FTC and a jury in the Eastern District of Virginia found that Rambus conduct was wrong, and that Rambus was liable for antitrust and fraud. However, both decisions were ultimately overturned because the then-prevailing language of JEDEC's patent policy was found to be less-than-clear, both results were ultimately overturned. The Federal Circuit Court of Appeals overturned the jury's finding of fraud in 2003 because the wording of JEDEC's patent policy was found not to create a clear duty for Rambus to have disclosed its patents. Rambus, Inc., v. Infineon Tech. AG, 318 F.3d 1081, 1098 (Fed. Cir. 2003). However, Rambus quickly settled its remaining patent dispute with Infineon after the Virginia trial court found Rambus guilty of spoliation of evidence. In a subsequent dispute with Samsung, Rambus dismissed its patent claims and agreed to pay Samsung's attorney's fees to avoid further adverse decisions. On Tuesday, the Federal Circuit found that by dismissing the dispute and offering to pay Samsung's attorney's fees, Rambus rendered all remaining disputes moot. See Rambus v. Samsung Decision. As for the FTC action, last week, the DC Court of Appeals overturned the judgment of the FTC because the FTC failed to prove that Rambus had injured competitors. See Rambus Inc. v. FTC, Slip Op. 07-1086, 4/22/2008.
IMPLICATIONS FOR STANDARD SETTING
The Rambus cases, and the allegations associated with them have been closely watched by standards organizations, and the companies that participate in standards efforts. While Rambus appears to have avoided disaster, some standard setting bodies are beginning to change their policies and procedures to make patent obligations, and positions more clear. Historically, this has been a sticky area for standards organizations. On the one hand, standards organizations and their members wish to avoid "hold up" situations like the Rambus case. On the other hand, standards organizations and their members do not wish to be accused of price fixing or other anti-competitive behavior by adopting coercive polices that are later found to injure competition.
Recently, two standards bodies have sought and obtained approval from the department of justice of patent policies that should lead to increased patent disclosure. The IEEE obtained approval from the Department of Justice to adopt a policy that requires participants in standard setting initiatives to take a definitive, binding position regarding their willingness to license patents, or to expressly refuse to provide assurance. IEEE Announcement Another standards organization, VITA, which creates standards for certain computer bus architectures, also obtained DOJ approval of its new standards policy requiring disclosure of patents and licensing terms by industry participants. VITA Letter from DOJ.
At the same time, three of the worlds largest standards organizations, namely the IEC, ISO, and ITU, have adopted patent policies that strongly encourage disclosure of patents that are necessary for standards, and require participants in the standard setting practice to make patent positions more clear. See IEC, ISO, and ITU press release.
As more standards organizations change their polices to favor increased disclosure and more transparent obligations on their members, "hold-up" situations, such as happened in Rambus, should become less common. However, the new policies are likely to increase the burden on participating organizations that find themselves under increased pressure to commit to licensing terms before they fully understand the value of their patents.
Quick appellate review of patent claim constructions: Is the door opening for interlocutory appeals?
The high reversal rate for claim construction is especially problematic because most claim construction decisions cannot be immediately appealed. Interpreting the claims is only the first step in the infringement analysis. After they're interpreted, that construction has to be applied to the accused product or process. Most often that's something the jury is supposed to decide, which means you may have to go through a long and costly trial before a judgment is entered. That judgment--either that the patent claims are infringed or they are not--is what the U.S. Court of Appeals for the Federal Circuit (the "Federal Circuit") ultimately reviews.
However, if the claim construction was wrong in the first place, the jury's verdict on infringement is usually wrong, too. That means a second trial will likely be necessary, which results in more work for the courts, more time lost in litigation, and more money spent on lawyers. The rub, argue critics, is that much of this additional expense and inefficiency could be avoided if claim construction opinions could be appealed prior to a final judgment on infringement.
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Because many software patents fail to describe the necessary algorithms, the Aristocrat case will likely result in more software patent claims being invalidated by the courts (at least those written in means-plus-function format) and should encourage patent practitioners to include more details in their specifications. Though the algorithm need not be spelled out in detail, patent practitioners would do well to make sure that their software patents discloses algorithms.
The problem of unreadable software claims
In light of the "algorithm rule", one might ask why a patentee would ever write a software patent using "means-plus-function" language in the first place. One reason has to do with the difficulty patent drafters face writing claims that cover software.
Patent claims are a linguistic nightmare, a fact that tends to be all the more true for software inventions. Part of the reason is that no matter how complex the invention may be, every patent claim is written in one long run-on sentence. Though not required by Congress, Patent Office procedure insists that patent claims be written in single-sentence form. (See MPEP Sec. 608.01(m).) In the only case to challenge the one-sentence rule, the court sided with the Patent Office. See Fressola v. Manbeck, 36 USPQ2d 1211 (D.D.C. 1995). By its very nature, software tends to be a complex series of steps, often iterative and interrelated--which makes it hard to describe precisely in a single sentence.
For example, if a software invention included a mortgage calculator with a routine for calculating compound interest, one way to claim the subroutine would be to detail the steps of the algorithm: (1) receiving the principal, interest rate, compounding period, and term of the loan; (2) applying the compound interest formula to determine the amount to be paid; (3) determining the number of payments in the payment period; and (4) dividing the amount to be paid by the number of payments to determine the size of each payment. Writing this out, along with the other aspects of the program that presumably made it patentable, in a single sentence, all but guarantees unreadable prose.
The use of means-plus-function claims in software
One solution that patent lawyers sometimes use is to write claims using the means-plus-function format. Rather than detail all the steps performed by the computer program, the patent drafter recites a "means for calculating compound interest." This kind of patent shorthand makes the claim much easier to read. But, there is an important catch. Claims written in means-plus function language do not cover every means for performing the recited function. Instead, by statute, they are limited to the structure disclosed in the specification that is clearly linked to performing the function, and to equivalent structures. (See 35 USC § 112, ¶ 6) In the world of software, this means the claims are limited to the algorithm or algorithms disclosed in the patent, and equivalents thereto.
The problem arises if the patent never mentions the general steps that a computer would follow to calculate interest. There is no doubt that a skilled programmer could write a mortgage interest calculator, perhaps as a subroutine, perhaps as an object, perhaps as a lookup table. There could be many ways to write such a program, all within the expected ability of an undergraduate computer student. But, that's not the issue. If the patent claim recites a "means for calculating compound interest," then the patent must disclose an algorithm that is clearly linked to calculating compound interest.
One alternative is simply not to use means-plus-function claim language, and to find a different solution to the claim drafting challenge. But even so, it still makes sense to disclose some specific algorithms in the patent. Patents and the form of their claims often evolve during the years before they issue from the Patent Office. It will generally be good practice to err on the side of additional disclosure up front to provide support for the claims as they evolve.
When a company finds itself in court defending against a patent lawsuit, it will usually assert two major defenses. First, the company will say "I don't practice (or produce) what is claimed in this patent." Second, a defendant in a patent lawsuit will also attempt to "invalidate" the claims of the patent by showing that "prior art" described the claims in the patent prior to the application date of the patent. While this defense can take multiple forms (see, for example, 35 U.S.C. § 102 ), a defendant must often show that the prior art relied upon was in fact publicly known or publicly used. So now its time for a pop quiz--which one of three options would you consider not being "publicly accessible" for the purposes of United States patent law:
A: The use of a centrifuge in a secure laboratory at the National Institute for Health;
B: The posting of a paper on an unsecured FTP server; or
C: Indexing a dissertation in a paper file and placing it on a shelf...in Germany.
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The U.S. Court of Appeals for the Federal Circuit will be on tour in Silicon Valley the week of November 3.
The court, which is in charge of reviewing appeals of patent-related cases for the entire United States, normally works only in Washington, D.C. So if you live near Silicon Valley, and you're interested in patent law, this is a rare opportunity to see the judges in your own backyard.
Judges from the court will hear cases at several locations during that week including at Santa Clara University School of Law, Stanford University School of Law, and the U.S. District Courts in San Francisco and San Jose. For more, see the court's official announcements.
Maybe you are of a sufficient vintage to remember the game show Let's Make a Deal. But have you ever thought about the similarities between that show and the U.S. patent system?
In the game show, contestants would have to pay a price (a wallet containing $500) to see what was behind door No. 3 (maybe a live goat; maybe a brand new faux wood-paneled station wagon). Similarly, in the U.S. Patent and Trademark Office, the government pays a price (allowing a unique brand of monopoly) to see what is in envelope No. 3 (your invention). The analogy may seem far-fetched, but the basic premise is the same: that is, paying a price to see what is otherwise concealed. And even in the realm of patent law, sometimes the government ends up with...a goat.
Fortunately, unlike the game show, there are several ways the USPTO can get out of the deal even after the envelope is opened and the invention disclosed. To be worthy of a patent, the invention must be new, useful, and non-obvious. While the "new" and "non-obvious" requirements normally get most of the attention, the USPTO and the U.S. Court of Appeals for patent cases (the Federal Circuit) have taken a somewhat surprising approach in the past couple of months to back out of deals with potential patentees--rejecting patent applications on the basis of usefulness. In other words, the Federal Circuit has been deciding that certain classes of inventions just aren't patentable.
What is really creating a buzz in the patent world is that the USPTO and the Federal Circuit have recently addressed an almost decade-old class of patents that has developed a reputation as the runt of the litter as far as patents go--business method patents. Love them or hate them, the Federal Circuit's 1998 decision in the State Street Bank case has been widely interpreted to allow for the patenting of new and novel business methods. Since that case, the USPTO has been inundated with business method patent applications and, more specifically, software applications. The question is, will this trend continue?
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Forum selection--or the ability to choose the geographic location of the court where a suit for patent infringement is litigated--is one of many controversial issues related to patents these days.
Generally, the first person to file the lawsuit gets to choose where the suit is brought. This is called the "first-to-file" rule. It works much like the lines you stand in at the grocery store, airport security, or countless other places; it's simply first come, first served.
However, in the context of patent litigation, being first in line is a big deal. Different courts have different procedural rules that can affect the way a case is litigated and the speed at which the case goes to trial. Moreover, there is a perception that courts in certain areas are more plaintiff-friendly than others.
The venue chosen by the most patentees over the last few years is the Eastern District of Texas. Rather than filing suit in Northern California near Silicon Valley or in New York, the most popular choice for patentees these days are small Texas towns like Marshall and Tyler. This is true even when both the plaintiff and defendant reside outside Texas.
While defendants can ask the court to transfer the case to a more convenient forum, lawyers commonly view such motions as near futile and potentially more harmful than helpful. For example, you can upset the local judge by saying you want out of his or her courthouse. Indeed, under the current rules, so much deference is given to who was first-to-file that patent infringement suits are often litigated in places that have almost nothing to do with the parties, the patents-at-issue, or any of facts underlying the case.
But those rules may be changing. This past Friday, the Court of Appeals for the Federal Circuit--the appellate court in charge of reviewing all patent cases--issued the Micron Technology decision (full text available here in PDF), which suggests that trial courts should give more weight to convenience in deciding where a case will be litigated.
In that case, the patentee, Mosaid Technologies, is a Canadian company operating in California. The company accused of infringement, Micron, did business in both California and Texas. Micron had filed a lawsuit challenging Mosaid's patents in California, and the next day Mosaid sued Micron for patent infringement in the Eastern District of Texas. The Federal Circuit ruled that under the particular facts of that case, California was the more convenient forum because neither the location of the parties, nor the availability of witnesses or evidence, favored Texas over California.
So will the Micron decision limit forum selection in patent cases? It's hard to tell. The court did say that the "first-filed suit rule...will not always yield the most convenient and suitable forum" and that instead of "automatically going with the first filed action, the more appropriate analysis takes account" of convenience.
Arguably, that wasn't as important in that case because Micron actually was the first-to-file. As such, some may dismiss the court's remarks as mere "dicta" (Wikipedia: dictum), that is, more of an editorial aside than true binding precedent.
Regardless, the Micron decision shows at least how some judges are leaning and, as such, where the law may well be headed.
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