Federal Circuit Identifies Software as Patentable Subject Matter (post Alice)

By Stephen B. Schott

dreamstime_xs_8424111_med_hrSoftware has been patentable subject matter for a long time but following this summer’s Supreme Court Alice v. CLS Bank decision, exactly when software crosses into patentable subject matter territory has been in flux. Last week, the Federal Circuit’s DDR Holdings, LLC v. Hotels.com, L.P. et al. decision provided some guidance on this point.

The patent in dispute describes what seems commonplace technology today: Sometimes when you go to a website, you’ll click a link and instead of the link taking you to a new web page, the link opens a window within the website you’re currently on. When this application was filed in 1998, it was a new idea. The inventors claimed their invention as follows:

19. A system useful in an outsource provider serving web pages offering commercial opportunities…comprising:
(a) a computer store containing data, for each of a plurality of first web pages, defining a plurality of visually perceptible elements… (ii) wherein each of the first web pages displays at least one active link associated with a commerce object associated with a buying opportunity…
(b) a computer server at the outsource provider, which computer server is coupled to the computer store and programmed to: (i) receive from the web browser of a computer user a signal indicating activation of one of the links displayed by one of the first web pages; …
using the data retrieved, automatically generate and transmit to the web browser a second web page that displays: (A) information associated with the commerce object associated with the link that has been activated, and (B) the plurality of visually perceptible elements visually corresponding to the [first] page.

Facing the question about whether this claim recited patent-eligible subject matter, the court looked to the Supreme Court’s Alice two part test: (1) Determine if the claimed invention covers an abstract idea, and if (1) is satisfied, (2) determine if the claim amounts to “significantly more” than a patent on an ineligible concept.

Turning to the first part of the test regarding whether the claims recite a patent-ineligible abstract idea, the court pointed out that even the patent’s owner struggled to define the abstract idea and in the end, suggested several ways “including ‘making two web pages look the same,’ ‘syndicated commerce on the computer using the Internet,’ and ‘making two e-commerce web pages look alike by using licensed trademarks, logos, color schemes and layouts.’”

Rather than identify which of these was the abstract idea itself, the court determined that no matter which of these characterizations it chose, the second test prong requiring “something more” would be satisfied.

The Big Money Quote. The court distinguished the website-within-a-website claims as “something more” than what had come before with the following reasoning that should be quoted in every software prosecution before the US Patent and Trademark Office for the foreseeable future: “[T]hese claims stand apart because they do not merely recite the performance of some business practice known from the pre-Internet world along with the requirement to perform it on the Internet. Instead, the claimed solution is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.

The court also approvingly noted that the claimed additional features “ensure the claims are ‘more than a drafting effort designed to monopolize the [abstract idea]’…In short, the claimed solution amounts to an inventive concept for resolving this particular Internet-centric problem, rendering the claims patent-eligible.”

The court’s rationale is not without at least one problematic aspect. The three judge Federal Circuit appellate panel that decided the case split 2-1, with the dissenting judge arguing that the claims merely captured an earlier concept and performed it on a general computer. Dissenting Judge Mayer compared website-within-a-website technology to, of all things, branded brick and mortar vendors housed within big box stores. That Judge Mayer, a patent serial killer, could blithely compare a brick and mortar construction with website programming, shows some questionable rationale that is hopefully limited to just him.

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IP Law for Startups: A Primer Presentation

An Article in Schott, P.C.’s IP Law For Start-ups Series
By Stephen B. Schott

I gave this short presentation at the University of Pennsylvania’s Wharton School this past week. The idea was to introduce the students to the IP issues they may see at the beginning of their startup cycle, and only briefly touch upon the IP issues they might see at the end.

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Older Supreme Court Cases Provide Guidance for Determining Patentable Subject Matter Post Alice

By Stephen B. Schott

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The question on almost every patent attorney’s mind these days is: “What is patentable subject matter in the aftermath of the Supreme Court case of Alice Corp. v. CLS Bank?” Because it is so recent, there is not yet a body of case law applying the two-part Alice test and finding claims to contain patentable subject matter. And until that body of case law forms, patent attorneys feel adrift on how to advise their clients and proceed before the USPTO.

But where the Supreme Court sets patent attorneys to sea, it also provides guidance in the form of its older cases discussing patentable subject matter. For example, at least twice in the software era, the Supreme Court took up the question of what is patentable subject matter and found inventions that met the statutory requirement. One case dealt with the creation of a microorganism and is not as relevant to the Alice case. Looking at the second case, however, may give guidance for how to proceed in the wake of Alice. And even in those cases where the Court found that something was not patentable, there may be clues as to how to argue for patentability post-Alice.

Diamond v. Diehr: Patentable subject matter? Yes

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The Diehr patent application (later US patent 4,344,142) claimed a method for determining how rubber should be heated in order to be best cured. The application’s claims use a computer to calculate and control the heating times for the rubber and includes steps relating to heating rubber and removing the rubber from the heat. The calculation steps are a mathematical algorithm containing a timing procedure that was the invention’s novel feature.

The Diehr claim reads as follows:

1.  A method of operating a rubber-molding press for precision molded compounds with the aid of a digital computer, comprising:

providing said computer with a database for said press, including at least,

natural logarithm conversion data (ln),

the activation energy constant (C) unique to each batch of said compound being molded, and

a constant (x) dependent upon the geometry of the particular mold of the press,

initiating an interval timer in said computer upon the closure of the press for monitoring the elapsed time of said closure,

constantly determining the temperature (Z) of the mold at a location closely adjacent to the mold cavity in the press during molding,

constantly providing the computer with the temperature (Z),

repetitively calculating in the computer, at frequent intervals during each cure, the Arrhenius equation for reaction time during the cure, which is

ln v = CZ + x where v is the total required cure time,”

repetitively comparing in the computer at said frequent intervals during the cure each said calculation of the total required cure time calculated with the Arrhenius equation and said elapsed time, and

opening the press automatically when a said comparison indicates equivalence.

The Supreme Court found that the claimed process was not merely a mathematical algorithm but was a process for molding rubber, and hence patentable. Thus, tying the algorithm to a process was the point on which the patent’s subject matter eligibility turned.

Takeaway. The patent practitioner should take the language of the Court and use it at the USPTO. In particular, this quote from Diehr may be helpful: “[W]hen a claim containing a mathematical formula implements or applies that formula in a structure or process which, when considered as a whole, is performing a function which the patent laws were designed to protect (e.g., transforming or reducing an article to a different state or thing), then the claim satisfies the requirements of § 101.”

This “transform” bit is a reference to the somewhat maligned but still alive and well transformation part of the “machine or transformation” test for patentable subject matter eligibility. If you’re up against the USPTO, you might argue that your algorithm or software process results in a specific transformation (protectable under the law), and recite the Supreme Court case of Diehr to support your argument.

The Diehr case creates a safe harbor in the storm of post-Alice uncertainty by tying claims to the solution of a technological problem.  Any such tie avoids the pure mathematical statements, economics and finance formulas, and schemes of a non-technical character (“methods of organizing human activity”) that the Supreme Court identifies as “abstract ideas” that must be include additional elements to achieve patent eligibility.

Parker v. Flook: Patentable subject matter? No


The Flook claims recited a method for monitoring the operation of a catalytic converter for hydrocarbon production by collecting data and applying an algorithm to the data to update an alarm value. The algorithm was well-known but its application to this field of use was not.

Because the Court determined that the algorithm was well-known and thus its application in the claimed field of use was akin to patenting a mathematical principal, the claims were not patentable subject matter.

Takeaway. The Court left a small trail of breadcrumbs to patentability in this quote, and this is what should form the basis for arguments for patentability in post-Alice arguments: “Even though a phenomenon of nature or mathematical formula may be well known, an inventive application of the principle may be patented. Conversely, the discovery of such a phenomenon cannot support a patent unless there is some other inventive concept in its application.”

Thus, a savvy applicant or patentee should focus arguments for patentability around the presence of an “inventive concept in the claims.”

Bilski v. Kappos: Patentable subject matter? No.

Bilski’s claims recited a method for managing risk in financial transactions. Claim 1 recited the following steps.

(a) initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumers;

(b) identifying market participants for said commodity having a counter-risk position to said consumers; and

(c) initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions.”

The Court rejected the “machine or transformation” test as the sole test for patentable subject matter. It stated that this test was useful but not the only measure of patentable subject matter. The Court then went on to invalidate the claims as unpatentable, but not by applying the machine or transformation test exclusively.

Takeaway. In discussing patentable subject matter, the Court stated that “Section 101 is a ‘dynamic provision designed to encompass new and unforeseen inventions.’” An applicant or patentee should use this quote and drive home the newness of a claimed invention when arguing that it contains patentable subject matter. And to the extent that the USPTO or a Court describe a claim as unpatentable because it’s a business method, Bilski forbids any such conclusion noting that “But what [35 USC] Section 273 does is clarify the understanding that a business method is simply one kind of “method” that is, at least in some circumstances, eligible for patenting under §101.”1 This is a quote to lead with when arguing the patentability of any business method claim—even though it arose in a case where a business method claim was found not to be patentable subject matter.

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1. The Court was referring to an earlier version of 35 USC Section 273 that specifically mentioned business method patents but its conclusion is still true, as the more recent version of the statute expanded the statute’s application.

Patent Law for the Lay Person: What do the Words in a Patent Claim Mean?

An Article in Schott, P.C.’s IP Law For Start-ups Series
By Stephen B. Schott


Almost weekly, I have a conversation with someone who looks at a single patent drawing or abstract and asks me how someone could get a patent for “that.” I am happy to explain that the inventor didn’t get a patent for what’s in the abstract or drawing, but for what’s in the claims. At the end of the patent, after the abstract, drawings, and description, is a list of numbered sentences called the claims. The claims are the part of the patent that define exactly what the invention is.

With so much importance invested in the language in the claims, it’s no surprise that courts scrutinize the claims during patent litigation. Multimillion dollar litigations often turn on the meaning of a single word in a claim and this article will review the leading case on patent claim interpretation to shed light on how courts interpret patent claims.

Claim Interpretation: A Matter of Law

Claim interpretation, or claim construction as it is sometimes called, is a matter of law. What that means is that interpreting what the words in a claim mean is an issue decided by a judge, not a jury. Put in the context of a patent infringement trial, the judge will tell the jury how to interpret claims and the jury will decide if an accused product falls within the scope of those interpreted claims.

Usually, a judge will hold a separate hearing from the trial to determine the proper claim interpretation. This hearing is either called a claim construction hearing or a Markman hearing,Markman v. Westview Instruments, Inc. being the Supreme Court case that clearly defined the judge as the person responsible for interpreting claim language.

Given that almost all patent infringement cases turn on the meaning of the claim terms, the judge’s claim interpretation is often dispositive of the case, that is, although the judge makes no decision on infringement when deciding the meaning of the claim terms, the claim construction is often the decision that controls which party wins the case.

How the Judge Interprets the Claims

Claim interpretation is always done not from the judge’s perspective, or even the inventor’s perspective. Judges interpret claims from the perspective of a “person of ordinary skill in the art.”  This person is a fictional construct who has normal skills and knowledge in a particular technical field but is not a genius.

From this person’s perspective, a judge can consider two broad categories of evidence when interpreting patent claims: intrinsic and extrinsic evidence.

– Intrinsic Evidence

The judge must favor the intrinsic sources to the extrinsic ones and absent a specific disclaimer of a claim term’s meaning in the specification, a judge may not need to look any further than the claims’ plain and ordinary meaning to interpret a claim.

The patent specification is the next best source for the meaning of a term after the claim itself. The specification may define the term, provide examples related to the term, or may describe the state of the prior state of the art that helps define the term.

Similarly, the record of the patent’s prosecution at the US Patent and Trademark Office may provide evidence of meaning, disclaimer, or what a term means when compared to other references.

– Extrinsic Evidence

The judge can consult extrinsic evidence sources but should generally give them less weight. The rationale for this is that undue reliance on extrinsic evidence poses the risk that it will be used to change the meaning of claims, and one of the critical reasons for claims is that they provide an important public notice function that lets others know the scope of the patent right.

– Dictionaries

Dictionaries are a special case in patent claim interpretation. Technically, they are extrinsic because they don’t make up the patent or its prosecution record. But when a judge wants to look up a word definition, even to determine its plain meaning, where better to look than a dictionary, which provides an objective reference for the words?

Judges have been cautioned by appellate courts not to overly rely on dictionaries but they remain an oft-cited resource for judges determining claims’ plain and ordinary meaning.

Case Review: Phillips vs. AWH Corp.

The leading case that explains how to properly interpret claims is Phillips vs. AWH Corp. The technology in the case involved temporary prison enclosures. One of the figures from the patent is shown below.

As you can see from the figure, one of the enclosure’s is a sloped steel wall that was helpful in deflecting bullets. This feature became the source of much debate, because the accused product did not have sloped walls but instead uses walls at right angles.

Looking at the claim, the yellow highlighting below is the element related to these walls.

Specifically, the judge had the task of interpreting “internal steel baffles extending inwardly from the steel shell walls.” Phillips, the patent owner, asserted that this language does not specify that the walls are at a specific angle. AWH argued that the walls must extend at an acute or obtuse angle to deflect the bullets effectively.

Taking up the issue, the appellate court (the Federal Circuit Court of Appeals that hears all patent appeals) noted that the claims are silent as to angles, and looked to the specification noting that:

  • “the baffles are described as providing structural support,”
  • “In Figure 7, the overlapping flanges “provide for overlapping and interlocking the baffles to produce substantially an intermediate barrier wall between the opposite [wall] faces,” and
  • “Those baffles thus create small compartments that can be filled with either sound and thermal insulation or rock and gravel to stop projectiles.”

The court described that one of the canons of claim construction is that every claim is presumed valid and thus every claim is assumed to have a different scope. Following this logic, the court noted that there were several other claims that specified angled baffle walls, which implies that no such angular limitation existed in the highlighted language above.

Given that the baffles had purposes other than stopping projectiles and that the claim language itself was not limited as to the angle of the walls, the court concluded “that a person of skill in the art would not interpret the disclosure and claims of the ’798 patent to mean that a structure extending inward from one of the wall faces is a “baffle” if it is at an acute or obtuse angle, but is not a “baffle” if it is disposed at a right angle.”

That’s a summary analysis of how a court interpreted a claim in a single case. If you have questions about other claim construction cases, I would be happy to consider them for a future article.

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Nobel Prize Awarded for the Blue LED: What is it?

By Stephen B. Schott

20131011153017!Nobel Prize

The Nobel Prize in Physics is usually awarded for a Star Trek-sounding discovery or invention like Giant Magnetoresistance. But this year’s award recognizes an invention that we use every day:  the blue LED. You may have one in your pocket or nearby right now. In fact, you’re probably staring at millions of them as you read this.

Before LEDs Part 1: The Incandescent Bulb

Before exploring the LED and blue LED, let’s visit the incandescent bulb that lit the 20th century using the simple principle that things glow when they get hot. In an incandescent light bulb, electricity passes through a conductive wire to a tungsten filament 6 feet long wound up to an inch or so length in a typical bulb. As electricity passes through this filament, electrons move between higher and lower energy states—and on each movement to a lower state, the electrons give off photons, some of which result in significant visible light.


All of that creates a few problems. One problem is that to get significant visible light from a light bulb requires that the tungsten be heated to about 2,200C/4,000F and at such extreme temperatures, tungsten combusts. The air-tight bulb prevents combustion because it seals the bulb from oxygen. No oxygen, no combustion. One problem solved.

The next problem is that all the electricity passing through the tungsten filament causes vibration—this vibration releases tungsten atoms and degrades the filament, making it thinner and thinner until it breaks. The next bit of genius is that the gas inside the bulb is an inert gas called argon.

Remember the periodic table—argon was one of the special noble gasses way out on the right that don’t react with other elements. As tungsten atoms shake free of the filament, they have nowhere to go because the inert argon gas won’t react to it—having nowhere to go, most of the tungsten atoms return to the tungsten filament, slowing its breakdown.

The problem with the incandescent bulb is that only 10% of the energy it uses results in visible light. The remaining 90% of the energy is given off as invisible light and heat, which makes the incandescent bulb an effective but inefficient light source.

Before LEDs Part 2: The Fluorescent Bulb

Enter the fluorescent light bulb, which is probably above you if you’re reading this in an office. These are those long tubes usually paired together in drop ceilings.


Fluorescent bulbs act on the same principle of exciting atoms and jumping electrons between higher and lower energy states. The fluorescent light bulb has two electrodes, one at each end of the tube, that release free electrons into the tube. The free electrons collide with the mercury atoms in the tube, causing the mercury atoms’ electrons to move between higher and lower energy states. Just as with the incandescent bulb, this movement between states releases photons.

But the genius in the fluorescent bulb is that not only does it release visible light from the photons, it makes certain invisible ultraviolet light that we normally cannot see visible by the use of a phosphor coating on the inside of the tube. When a photon hits a phosphor atom, one of the phosphor’s electrons jumps to a higher energy level. When the electron falls back to its normal level, it releases energy in the form of photons that are visible as white light.

Fluorescent bulbs are 4-5 times more efficient than incandescent bulbs but they still release significant amounts of heat and invisible light. Fluorescent bulbs also use mercury, which is toxic.

Part 3: Enter the LED

An LED works using a semiconductor material to transmit electricity across it. Semiconductors are just what their name suggests: They have varying degrees of ability to conduct electricity, and usually are made from a poor conductor with intentional impurities introduced into it in a process called doping.

The typical conductor material used in LEDs is aluminum-gallium-arsenide, which when pure, has no free electrons across that conduct electrical current. But when engineers introduce impurities into the material, the impurities create free electrons (negative charges) and also positive holes where the electrons can go. The free electron material is called an N-type material, and the positive hole area is called a P-type material.

When a battery applies voltage across the LED from the N-type material to the P-type material, electrons begin to move from a depletion zone between the N- and P-type materials to either end of the charged LED (each end having a positive or negative charge). As the electrons and positive holes move, elections “find” the positive holes and when they do, they fall to a lower energy state and give off photons in the form of visible light.

LEDs produce light at about 10 times the efficiency and have a lifetime of about 50 times as long as an incandescent bulb.

Part 4: Enter the blue LED

As you may recall from above, when an electron falls from a higher to a lower energy state, it gives off photons and given the right materials, it gives off photons that have a frequency visible to the human eye. Different light frequencies produce different colors but before this year’s Nobel Laureates came along, LEDs came in just two colors: red and green, which were the results of semiconductor material choice. And while red and green can be combined to make a lot of different colors, they can’t be combined to make white light, which is what we humans are most comfortable with. Imagine reading by red light: You could do it but you wouldn’t be happy.

visible spectrum

Scientists knew that the way to make a reliable white light was to make a blue LED. Professors Akasaki, Amano, and Nakamura knew that the solution lay in using gallium nitride as their semiconductor material in the diodes and they tackled the problem of making gallium nitride crystals of a size large enough for practical use. Professors Akasaki and Amano from Nagoya University in Japan solved this problem by designing a micro-scaffold made partly from sapphire. Professor Nakamura made a similar breakthrough while he was working at the chemical company Nichia. where he created a temperature manipulation process to grow the crystals.

From their discovery, the blue LED became a possibility, and using the blue LED, many people are now able to experience white LED lights, like the kinds in LED displays, long-life flashlights, camera flashes, and even the light on the back of your phone.

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A Beautiful Mind Nobel Laureate’s Theory is No Good for Calculating Patent Damages

By Stephen B. Schott

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Imagine you own several patents for software related to video calling over wireless networks. And further imagine that a mobile phone manufacturer uses a built-in program that you believe infringes your patents. The question that the Federal Circuit in VirnetX v. Cisco faced was: Is an infringing damages calculation based on the price of the entire phone, or just the smallest salable unit that infringes the patent and is contained in the phone?

VirnetX accused iOS devices that had FaceTime and VPN On Demand of infringing its patents  and at trial, VirnetX’s damages expert offered three theories of damages.

(1) Reasonable rate as applied to the sale price of each device. VirnetX’s theory was that it had a policy of seeking to license its patents for 1-2% of the entire value of products sold.

(2) Bargain theory that the parties would have split between themselves the incremental or additional profits associated with the revenue generated from the technology. This theorem is called the Nash Bargaining Solution named for Nobel Laureate John Nash, portrayed by Russell Crowe in A Beautiful Mind.

The damages calculation under this theory is based on the profits associated with FaceTime from the revenue generated from the front-facing camera. From that revenue, VirnetX’s expert surmised that Apple would be entitled to 55% of the profit generated and VirnetX would be entitled to 45% because of its weaker bargaining position.

(3) Bargain theory based on what “drove sales” of the device. This is also a Nash Solution.  Based on a survey, VirnetX concluded that 18% of all iOS sales would not have occurred without the addition of the allegedly infringing FaceTime program installed. VirnetX again invoked its conclusion that it would be entitled to 45% of Apple’s profits under this theory.

When the district court issued its jury instruction, it instructed the jury to consider not just these theories, but also another possible damages theory based on the smallest saleable unit.

In determining a royalty base, you should not use the value of the entire apparatus or product unless either: (1) the patented feature creates the basis for the customers’ demand for the product, or the patented feature substantially creates the value of the other component parts of the product; or (2) the product in question constitutes the smallest saleable unit containing the patented feature.

This opened up the jury to do its damages math based, potentially, on the revenue generated from the entire iOS device, not just the portions that are the subject of the infringement claim. This, according to the Federal Circuit, was not a harmless error since according to Supreme Court precedent dictates that a patentee “must in every case give evidence tending to separate or apportion the defendant’s profits and the patentee’s damages between the patent feature and the unpainted feature….”

The Federal Circuit’s Take on VirnetX’s Damages Theories

250px-John Forbes Nash, Jr. by Peter Badge

The Federal Circuit considered each of VirnetX’s damages theories and found the reasonable royalty rate based theory acceptable—although based on the wrong base—and the theories based on Nash’s theories wanting.

The Federal Circuit did not criticize Nash’s Solution as wrong, but it did take issue with Nash’s starting place in his Bargaining Solution, namely, that each party in the bargain start with half of the profits, and then there is apportionment up and down from that number based on factors around the bargaining power of the parties. The Federal Circuit criticized this 50-50 starting point as “subject to abuse” and compared it to another “rule of thumb” damages theory that it described as originating from a “flawed premise.”

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The Rise of the Startup Manufacturer

An Article in Schott, P.C.’s IP Law For Start-ups Series
By Stephen B. Schott

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“Some software startup founders are evolving into product startup founders. It’s an interesting trend.” A product startup founder said this to me over coffee a few months ago. Since then, I’ve been giving what he said some consideration. Has the time of the startup manufacturer come? Or, given the pre-70s stereotype of the garage startup business, maybe the question is better put, “Has the time for the startup manufacturer returned?”

Companies like Jawbone and GoPro answer yes, as does a recent Wall Street Journal articlethat estimates over 800 million venture dollars were invested in hardware startups last year, almost double the number from 2012. Why the sudden shift?

Communication. 23 years ago, I was an engineering student with access to cutting edge computers. I encouraged my now wife, a humanities major, to go to her university’s computer department and open a “VAX account” so she and I could email. When she showed, up, she had to convince them that she really needed the account (she didn’t) and then and that she knew how to use it (she didn’t). Thus began her first experience with email. Spring ahead two decades and just last week, I had two videoconferences with India and one with Spain. In one conference, we were marking up drawings as we chatted and even showing and discussing a device that one person had in their hands.

That ease of communication makes discussions with large scale manufacturing centers in Asia not only possible, but easy. This takes the ability to manufacture products out of the hands of giant companies and puts it within anyone’s reach.

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3D printing. I visited a product development company earlier this year whose prototype design process has undergone a dramatic shift in the last few years. Walking though a relatively quiet machine shop, it was striking how much things have changed. Now what once took several days of expert machine work only requires that a designer hit print before going home for the day. In the morning, he has a plastic prototype. And if you haven’t seen a high-end 3D printer, they produce amazing products: items with moving parts, wheels, hinged doors, and detailed articles that approach production quality. As the cost of these printers decreases and the quality improves, manufacturing will become even easier for startups.

Design capability. Computer drawing and modeling is now so straightforward that almost anyone can do it. And the modeling includes being able to test material components and material stresses, which skips expensive rounds of prototype and failure.

Hiring experts. Product teams moving an idea from concept to product require many people: designers and engineers with varied scientific backgrounds, salespeople, business leaders, administrative support, lawyers, and others. The startup’s challenge is that it usually lacks to budget to hire all of these people, so in the past, the startup employees wore many hats: The software engineer might also do sales and design. The administrative support person might be the bookkeeper.

But these days, experts are easier to find and connect with. Even if a startup’s network does not include, say, a regulatory lawyer, a survey through LinkedIn should yield someone who can help just two contacts away. As LinkedIn constantly reminds me: My connections connect me to over 10 million people.

And even better, because the startup can find so many experts, it can probably find more than one and negotiate pricing or question them about their expertise to establish a level of comfort before hiring them.

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Manufacturing startup hubs. Companies like NextFab in Philadelphia provide a co-working and support space for manufacturers, where this business model was once only available to software and services businesses. NexFab offers its clients 3D printer capability, laser cutting machines, textiles, metal and wood shops, a photography studio, and access to expensive design and engineering software.

Availability of goods. If you need a Langstrom 7” gangly wrench, you can probably get it shipped to you next day in quantity. Think of the miracle that as several million people place iPhone 6 orders today; they will ship from Shenzhen China on the same day and be in your pocket two days later.

Venture capital. At least in the US, but as I’ve seen first hand in other countries, it has never been easier to merge a great startup company and the money to back it. The key is still to have the “great” startup company. All the bad ideas that you see on Shark Tank won’t get funded but if you’ve possibly got the next big thing, and have the right combination of passion and business sense, you will find backing.

So what are you waiting for? Go make something…but please be sure to patent it.

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Top Ten Most Important Trademark Cases

By Stephen B. Schott

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Patent attorneys appreciate patent law’s rigidity. Unlike many areas of the law, there are hard rules and unextendible deadlines. In some ways, this inflexibility reflects the personality of the scientists and engineers who benefit from it. But if patent law is predictable and rigid, trademark law is its antithesis: unpredictable and changeable. Its practitioners dabble in a dark art that patent practitioners cannot sometimes appreciate. As a mentor of mine used to say, “The beauty of trademark law is that you can argue any point and support it with 10 cases.”

Some of the reason trademark law can support many positions is that where patent law is largely regionally consistent, trademark law may not be. Further, trademark law is often subjective so what trademarks are confusing to one jury may not be to another. Thus, while it was not challenging to come up with a Top Ten Patent Cases article and presentation, the same is not true for trademarks. But given the challenge, here’s my shot at a top ten—that turned out to be eight—trademark cases.


There may be limits on an individual’s rights to use his own name. Taylor Wine Co., Inc. v. Bully Hill Vineyards, Inc. (2d Cir. 1978). This case is famous for its story. Taylor Wine was and is a winery in the Finger Lakes region of New York. Walter Taylor, grandson of Taylor Wine’s founder, began selling wine under his name: Walter Taylor. In a series of colorful cases, the courts denied Walter Taylor the right to sell wines under his own name and went so far as to conclude in one case, “[Walter Taylor], in short, [can] not pretend that his grandfather or his father passed anything on to him as a vintner.” Ouch. The reasoning was based on Taylor’s lack of relation to the wine business before his purchase of a winery and many years after the establishment of the Taylor Wine brand. (The top of Walter Taylor’s Bully Hill Love My Goat wine label reads “They may have my name but they didn’t get my goat.”)

Use of a mark establishes use in commerce, which is a trademark requirement. Zazu Designs v. L’Oreal, S.A. (7th Cir. 1992). In this case, L’Oreal knew that Zazu intended to use the mark ZAZU in hair products but L’Oreal began a wide distribution using the ZAZU mark before Zazu began its own widespread sales. In finding Zazu’s trademark rights not valid, the court stated that “Only active use allows consumers to associate a mark with particular goods and notifies other firms that the mark is so associated.… But use sufficient to register a mark that soon is widely distributed is not necessarily enough to acquire rights in the absence of registration.The Lanham Act allows only trademarks ‘used in commerce’ to be registered.”

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Factors to consider when determining whether there is a likelihood of confusion between two marks. Polaroid Corp. v. Polarad Elecs. Corp. (2d Cir. 1961). AMF Incorporated v. Sleekcraft Boats (9th Cir. 1979). When determining whether one mark infringes another, the test is whether there is a likelihood of confusion between the marks. In making this determination, a court considers the following factors:

  • strength of the senior user’s mark. The stronger or more distinctive the senior user’s mark, the more likely the confusion.
  • similarity of the marks. The more similarity between the two marks, the more likely the confusion.
  • similarity of the products or services. The more that the goods or services are related, the more likely the confusion.
  • likelihood that the senior user will bridge the gap. If it is probable that the senior user will expand into the junior user’s product area, the more likely there will be confusion.
  • the junior user’s intent in adopting the mark. If the junior user adopted the mark in bad faith, confusion is more likely.
  • evidence of actual confusion. If the trademark owner can show that the average reasonably prudent consumer is confused, it is evidence of infringement.
  • sophistication of the buyers. The less sophisticated the purchaser, the more likely the confusion.
  • quality of the junior user’s products or services. The lesser the quality of the junior user’s goods, the more harm is likely from consumer confusion.
  • related products and services. The more related the products and services, the more likely the confusion.

A mark must be deceptively misdescriptive to be invalid. In re Nantucket (CCPA 1982).  In this case, a North Carolina company called Nantucket, Inc. applied to register NANTUCKET for sales of t-shirts. The USTPO and the Appeals Board rejected the application as ”primarily geographically deceptively misdescriptive” since the company had nothing to do with the Nantucket area. The court found that the USPTO did not give enough weight to the word “deceptive” in the law and even discussed the US House of Representative’s debate during the statute’s enactment. “Debate in the House concerning the word “deceptively” indicates that it is not mere surplusage, that its addition was intentional, not accidental, and that it has meaning.” The court found that people do not associate Nantucket with t-shirts and therefore the use of NANTUCKET with t-shirts is not deceptive. (In contrast, selling MAINE branded lobsters would be improper if the lobsters were actually from Rhode Island.)

Proof of secondary meaning is an issue only with respect to descriptive marks: Suggestive and arbitrary or fanciful marks are automatically protected upon registration, and generic terms are unprotectable even if they have acquired secondary meaning. Zatarain’s, Inc. v. Oak Grove Smokehouse, Inc. (5th Cir. 1983). Zatarain’s owned the marks FISH-FRI, which had been in use for a long time and CHICK-FRI, which had been in use for less time. Trademarks can be classified as generic, descriptive, suggestive, or arbitrary/fanciful, and descriptive and Oak Grove challenged the Zatarain’s marks as merely descriptive. The court found that both marks were indeed merely descriptive and thus would only be registerable if they had developed secondary meaning. “Factors such as amount and manner of advertising, volume of sales, and length and manner of use may serve as circumstantial evidence relevant to the issue of secondary meaning.” For FISH-FRI, the court found that Zaitarain was using FISH-FRI to successfully indicate to the public that it was the producer of the product rather than just the product itself. Given CHICK-FRI’s shorter time in use, however, the court found that it had not acquired secondary meaning and canceled the mark.

Even a limited background use of a mark can be enough to create a likelihood of confusion. Playboy Enterprises, Inc. v. Netscape Communications Corp. (9th Cir. 2004). When searching for Playboy Enterprise, Inc.’s mark PLAYBOY, Netscape’s search engine Excite brought up certain “click here” labeled advertisements that were linked to a non-Playboy website. The court held that even though consumers could not see that there was an association of the “click here” ad and the search term Playboy, there was confusion, and this confusion was not nominal because the “click here” advertisements could have been identified in other ways to make it clear they were not associated with Playboy Enterprise, Inc.

False advertising requires that a plaintiff must show either that the advertisement 1) is literally false or 2) is literally true yet likely to mislead or confuse consumers. Johnson & Johnson Merck Pharmaceuticals, Co. v. Smithkline Beecham Corp. (2nd Cir. 1992).  Smithkline ran an advertisement calling attention to the fact that J&J’s MYLANTA contained aluminum and its own TUMS product did not. J&J claimed that Smithkline did this because there were media reports about a link between aluminum and Alzheimers, and that J&J’s conduct amounted to false advertising. In denying J&J’s claim, the court found that false advertising requires that a plaintiff must show either that the advertisement 1) is literally false or 2) is literally true yet likely to mislead or confuse consumers.

If you have a suggestion for trademark cases to round out my top ten, please contact me.

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Patentable Subject Matter: The USPTO’s Guidelines after Alice

An Article in Schott, P.C.’s IP Law For Start-ups Series
By Stephen B. Schott

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As promised when the Supreme Court issuedAlice, the answer to the question “What is patentable?” will be developing over the next several years. But just a few weeks removed from the decision, the USPTO has issued the first of its guidelines for how it will deal with applications after Alice.

The USPTO Guidelines

Shortly after the decision, the USPTO issued preliminary examination instructions to its examiners to help them follow Alice. This often happens as the USPTO adjusts its practices in the wake of a significant case or change in the law.

The USPTO’s instructions reiterate Alice’s two step test for determining patentability.

Step 1. “Determine whether the claim is directed to an abstract idea.”

The USPTO gives a few examples of “abstract ideas” such as “fundamental economic practices, certain methods of organizing human activities, an idea of itself, and mathematical relationships/formulas.”

Step 2. “If an abstract idea is present in the claim, determine whether any element, or  combination of elements, in the claim is sufficient to ensure that the claim amounts to  significantly more than the abstract idea itself. In other words, are there other limitations in the claim that show a patent-eligible application of the abstract idea, e.g., more than a mere instruction to apply the abstract idea? Consider the claim as a whole by considering all claim elements, both individually and in combination.”

Claim limitations referenced in Alice that may be enough to qualify as “significantly more” when used with an abstract idea include:

  • Improvements to another technology or technical fields,
  • Improvements to the functioning of the computer itself, and
  • Meaningful limitations beyond generally linking the use of an abstract idea to a particular technological environment.

Claim limitations referenced in Alice that are not enough to qualify as “significantly more” when used with an abstract idea include:

  • Adding the words “apply it” (or an equivalent) with an abstract idea, or mere instructions to implement an abstract idea on a computer, and
  • Requiring no more than a generic computer to perform generic computer functions that are well-understood, routine and conventional activities previously known to the industry.

Former Federal Circuit Court of Appeals Chief Judge Michel stated that this “something more” test is “vague” and  leaves some patent owners and their lawyers “put to sea with no chart.” The USPTO’s guidelines can’t correct that defect in the Alice opinion, but they at least give us some initial guidance.

As litigation and prosecution develop post-Alice, I will provide more updates on the patentable subject matter standard. [Update 1: First Federal Circuit case finding software patentable afterAlice]

If you have questions, contact me.

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How to Keep an Inventor’s Notebook

An Article in Schott, P.C.’s IP Law For Start-ups Series
By Stephen B. Schott


An inventor’s notebook can be a breeding ground for your creative ideas. Capturing your ideas and improving on them over time in a single notebook lets you revisit older ideas or combine ideas as you solve a problem. And if you think of the notebook like a brainstorming tool for your creations, you might find that just like in a brainstorming session, your best ideas come out in later pages after you have tackled a problem in more predictable ways. So go out and buy an inventor notebook to keep track of your inventions. Slide it in your backpack or briefcase and keep it handy. And once you do start one, keep the following in mind.

Legal Reasons to Keep an Inventor’s Notebook

A few years ago, an inventor notebook was a critical piece of documentation used to establish an inventor’s date of invention. But with recent changes to US law that reward patents based on the first inventor who files their application, establishing a date of invention may be important but it is not as critical as it used to be.

Nevertheless, there are still important reasons to document your inventions in a notebook.

  1. Your notebook shows the date you conceived of the invention  Let’s say someone in your workplace gets access to your notebook and copies your idea. Your notebook can serve as evidence of their theft. Remember: Patents are only awarded to inventors, not people who steal ideas and apply for the patents.
  2. The notebook acts as a log of who has seen your invention. As I mention below, you should record who has access to your workspace and notebook. This record can be critical if someone steals your idea. But be careful: any public disclosure can bar you from getting patents in non-U.S. countries and in the U.S., a public disclosure starts a clock ticking: Within one year of the disclosure, you must file a patent application or you will be barred from doing so in the future.
  3. Your notebook pages can help your patent attorney prepare a patent application. The sketches, tables, and writeup that you keep in the notebook can help your attorney draft a patent application.

Features of an Inventor’s Notebook

  • Permanent binding. Your notebook should have a permanent binding with no removable pages.
  • Gridlines. For sketching and tables, gridlines can be helpful.
  • Page numbers. You can number your pages or buy a notebook with pre-numbered pages.
  • Protective cover. Your notebook will benefit from being hard-covered or at least having a a durable cover.

Format for Entering Information in the Notebook

  • Use pen. I don’t draw well so this goes against my being. Everything that you put into your notebook should be permanent and uneraseable. If you make a mistake, simply line it out and keep writing. Don’t white it out or otherwise make your notebook unreadable.
  • Do not tear pages from your notebook.
  • Number your pages consecutively if they are not numbered.
  • Do not leave gaps in your writing. If you are moving from one idea to another, draw a line after your last written line and begin the new idea. Blank spaces give the impression that you could add material later—you don’t want that impression.
  • Date and sign every entry.
  • Get a witness who is bound by a nondisclosure agreement to sign your entries.

What to Include in the Notebook

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  • Describe your invention in words and drawings. Answer the questions: (1) How does it work, (2) What materials does it use, (3) When did you think of it, (4) What other fields could it be used in?
  • Label your figures “Fig. 1, Fig. 2″ and use arrows and labels to refer to your drawings or steps in flowcharts.
  • If you want to include a drawing or chart printed outside the notebook, make a circle or appropriate shape around it, date the shape, describe the attachment and permanently affix the page into the notebook. If you can leave a gap on one side of your attachment to show the blank page beneath it, that is best.
  • Include variations on your idea, even if they are a little far-fetched. Today’s far-fetched idea may be widely adopted in the future.
  • Make a record of the people who see your invention. As you do this, understand that any public disclosure can bar you from getting patents in non-U.S. countries and that in the U.S., a public disclosure starts a clock ticking: Within one year of the disclosure, you must file a patent application or you will be barred from doing so in the future. The takeaway: Be careful who you show your invention to.

Backup and Safety

  • Backup your notebook. The notebook will be your best source of documentary evidence but that doesn’t mean that you shouldn’t back it up. Make copies of your pages and securely store them electronically or in paper.
  • Keep your notebook safe. When not in use, keep your notebook somewhere private and secure.

If you have questions, contact me.

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