Category : patent trolls

New USPTO Director Andrei Iancu’s Pro-innovation Remarks

Following the last several years where Congress, the courts, and even the former U.S. Patent and Trademark Office Director were accused of being anti-innovation, the new director Andrei Iancu delivered these pointedly pro-innovation remarks yesterday. Innovators should applaud what some believe is an overdue return of a painful pendulum swing. Here is his introduction:

Dr. Eli Harari, an electrical engineer, always tinkered and invented things. He tells, for example, that he invented a new type of fishing rod, although he never fished.

“Imagine how much more successful you’d be,” his wife said, “if you’d invent in a field you knew something about.”

And so he did. Dr. Harari is credited with inventing the Electrically Erasable Programmable Read-Only Memory, also known as EEPROM, or “E-squared PROM.” This was in the 1970s, when Harari was working at a major corporation, where he was a star. But a few years later, he wanted to be on his own, to invent, to perfect, to commercialize. In his late 30s, he was also married and had a child. So in the prime of his career, with a family at home, Harari left his comfortable life with major corporations.

Seeding it in part with his own money, Harari started a company of his own. And he did not even draw a salary the first several months. He risked everything: his career, his finances, and his family. That first company actually did not work out well, but a few years later, Harari risked it all again and co-founded a new company, which he ultimately called SanDisk.

At SanDisk, Harari built upon his EEPROM technology, added critically important new inventions, and perfected flash memory data storage. And he obtained patents, including on how to turn memory chips into reliable systems. Harari’s flash technology came to be used almost universally in devices like digital cameras and cell phones. In 2016, Western Digital acquired SanDisk for $19 billion.

But think about it: without patents, how could someone like Dr. Harari risk everything, put aside his secure career at an established company, and strike it on his own?

As Dr. Harari told me, “The only asset you have is your idea. If you have no way to protect your idea, you are at the mercy of the next bad guy. The U.S. patent system is genius, really the bedrock foundation of capitalism.” Harari’s sentiment was echoed by President Ronald Reagan, who said in 1982: “Throughout our nation’s history, the patent system has played a critically important role in stimulating technological advances.”

How true that is.

Yet today, our patent system is at a crossroads. For more than just a few years, our system has been pushed and pulled, poked and prodded. The cumulative result is a system in which the patent grant is less reliable today than it should be. This onslaught has come from all directions. There has been major reform legislation, and proposed legislation. There have been massive changes brought about by major court cases. And the USPTO itself has taken a variety of actions in an effort to implement these changes. Plus, importantly, the rhetoric surrounding the patent system has focused relentlessly on certain faults in, or abuses of, the system—instead of the incredible benefits the system brings to our nation. We see the result of this years-long onslaught in your own study, the U.S. Chamber’s 6th Annual International IP Index.

I don’t need to tell this audience that the American patent system, which in prior years was deservedly ranked as the number one system in the world, in 2017 fell to number 10. And this year it fell further, tied for number 12. But make no mistake: we are still an elite system, a mere ¼ point away from the systems ranked 2-11.  And the United States remains the leader for overall IP rights.

Still, we are at an inflection point with respect to the patent system. As a nation, we cannot continue down the same path if we want to maintain our global economic leadership. And we will not continue down the same path. This administration has a mission to create sustained economic growth, and innovation and IP protection are key goals in support of that mission.

So, how do we reverse the trend? The good news is that reclaiming our patent leadership status is within reach.

For today, let me focus on two principal points:

  1. 1. Creating a new pro-innovation, pro-IP dialogue, and
  2. 2. Increasing the reliability of the patent grant.

First, we must change the dialogue surrounding patents. Words have meaning. Words impact perception and drive public policy. And for too long, the words surrounding our patent system have been overly-focused on its faults. A successful system cannot be defined by its faults. Rather, a successful system must be defined by its goals, aspirations, and successes. Obviously, errors in the system should be corrected. And no abuse should be tolerated. Errors and abuse should be identified and swiftly eliminated. However, the focus for discussion, and the focus for IP policy, must be on the positive. We must create a new narrative that defines the patent system by the brilliance of inventors, the excitement of invention, and the incredible benefits they bring to society. And it is these benefits that must drive our patent policies.

At my swearing-in, I remarked that through the doors of the U.S. Patent and Trademark Office comes our future. And indeed it does, and it always did. We must celebrate that. From Thomas Edison to the Wright Brothers, from Stanley Cohen and Herbert Boyer to Steve Jobs, American inventors have fueled the imagination of our people for generations. We are a pioneering people who overcome large obstacles in order to realize our dreams and create prosperity. Inventors help make dreams reality, and American invention changes the world. Indeed, with American patents, humans made light, began to fly, treated disease, and enabled instant communications across the globe from tiny devices in our pockets.

And those patents also enabled these inventors to start companies and grow our economy. Our dialogue and policies need to be focused on these amazing achievements, and how we can encourage more of them. Take Walter Hawkins as another example: Hawkins, who in 1942 became the first African American scientist on staff at AT&T’s Bell Labs, developed the plastic coating that covers telephone wires, a more versatile, durable and eco-friendly alternative to the lead standard at the time. It was so durable, in fact, and so effective, that Hawkins’ invention enabled huge investments to bring affordable phone service across America, including rural areas, and to millions of people in the 20th century.

Inventor stories like Hawkins’ and Harari’s are those we need to tell.

This is the American patent system. This is the dialogue we need to have. And this should be the focus of our patent policy. This is how we incentivize innovation and growth. But, how exactly do we translate this into a better patent system?

Here’s a start: when we write, interpret, and administer patent laws, we must consistently ask ourselves “Are we helping these inventors?” Whether it’s an individual tinkering in her garage, or a team at a large corporation, or a laboratory on a university campus, we must ask ourselves “Are we helping them? Are we incentivizing innovation?

Supreme Court: Patent Infringement Lawsuits Only in State of Incorporation or Regular Place of Business

The Supreme Court issued a unanimous decision (it does happen) today in TC Heartland LLC v Kraft Food Group Brands LLC. The Court found that a plaintiff must bring patent infringement suits in the defendant’s state of incorporation or where the defendant has committed acts of infringement and has a regular and established place of business.

This holding overturns almost 30 years of precedent in the federal courts and should put an end to the odd popularity of geographically inconvenient districts like the Eastern District of Texas.

The statute in question is 28 USC 1400(b): “Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.”

The United States Federal Circuit Court of Appeals had interpreted this section in view of  28 USC 1391(c), which states that “[f]or purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced.” VE Holding Corp. v. Johnson Gas Appliance Co., 917 F. 2d 1574 (Fed. Cir. 1990).

The Supreme Court rejected the Federal Circuit’s interpretation, “The current version of §1391 does not contain any indication that Congress intended to alter the meaning of §1400(b).”

This holding should give rise to increased patent litigation suits in Delaware and other states that are friendly to corporations.

Justice Thomas wrote the opinion for the Court.


Patent Month in Review September

dreamstime_s_38780059 2By Stephen B. Schott

Abstract Idea Step in Patentable Subject Matter: Animated Lip Syncing Not Abstract, is Eligible
MCRO, Inc. v. Bandai Namco Games America, Inc., 2015-1080 (Fed. Cir. 2016)

“Here, the structure of the limited rules reflects a specific implementation not demonstrated as that which “any [animator] engaged in the search for [an automation process] would likely have utilized.” By incorporating the specific features of the rules as claim limitations, claim 1 is limited to a specific process for automatically animating characters using particular information and techniques and does not preempt approaches that use rules of a different structure or different techniques. See Morse. When looked at as a whole, claim 1 is directed to a patentable, technological improvement over the existing, manual 3-D animation techniques. The claim uses the limited rules in a process specifically designed to achieve an improved technological result in conventional industry practice. Alice. Claim 1 of the ’576 patent, therefore, is not directed to an abstract idea.”

‘576 patent claim 1 reads as follows.

1. A method for automatically animating lip synchronization and facial expression of three-dimensional characters comprising:
obtaining a first set of rules that define output morph weight set stream as a function of phoneme sequence and time of said phoneme sequence
obtaining a timed data file of phonemes having a plurality of sub-sequences
generating an intermediate stream of output morph weight sets and a plurality of transition parameters between two adjacent morph weight sets by evaluating said plurality of sub-sequences against said first set of rules
generating a final stream of output morph weight sets at a desired frame rate from said intermediate stream of output morph weight sets and said plurality of transition parameters;
an applying said final stream of output morph weight sets to a sequence of animated characters to produce lip synchronization and facial expression control of said animated characters.

Declaratory Judgment: Even if you don’t identify a product, you might be sued for DJ
Asia Vital v. Asetek Danmark, 2015-1597 (Fed. Cir. 2016)
Asetek (1) rehashed the volatile relationship between the parties, saying that poor experiences with AVC [Asia Vital] in the past have “sown distrust in Asetek for AVC”; (2) stated that it “does not license its patents” generally and, more specifically, that it would not license them to AVC due to the previous conflicts between the parties; (3) accused AVC of “likely selling other infringing products in the United States”; (4) warned AVC that it “enforced its IP” and noted its “pending litigations against CoolIT and Cooler Master”— companies that AVC alleges sell products similar to the K7 and K9; and (5) emphasized that it has been allowed a patent in the European Union with claims similar to the asserted patents and also has similar claims pending in China…Moreover, AVC alleges that Asetek made threats to its customers regarding AVC’s infringement of the asserted patents.

The Federal Circuit concluded that “Such threats constitute affirmative actions by Asetek to impede and frustrate AVC’s attempts to meaningfully participate in the liquid cooling market and further support our conclusion that a substantial controversy existed between the parties.”

FTC Releases Patent Assertion Entity Report

The FTC issued a report on patent assertion entities (pejoratively called patent trolls by some). The FTC differentiated between litigation assertion entities (those that sue) and portfolio assertion entities (those that look to license and develop technologies).  This may be a critical distinction if legislators take action against patent assertion entities.

USPTO Raising Patent Fees on January 1, 2017
Official Announcement

Patent fees will rise on January 1. Most fees will increase by 10%, with some fees for reexaminations rising by more than 20-30%.

Patent Complaint Must Identify Infringement with Element-by-Element Specificity
Lyda v. CBS Corp., 2015-1923 (Fed. Cir. 2016)

Amended Complaint must plausibly allege that Defendants exercise the requisite “direction or control” over the performance of the claim steps, such that performance of every step is attributable to Defendants. The Amended Complaint alleges that CBS Interactive controls certain independent contractors who in turn direct and control the “participation” of unnamed third persons to send votes on either their own or borrowed cell phones. Mr. Lyda does not set forth any factual allegations in support of his assertion that CBS Interactive directed or controlled the independent contractors….There are thus no allegations in the Amended Complaint that can form the basis of a reasonable inference that each claim step was performed by or should be attributed to Defendants. The Amended Complaint fails to plausibly plead sufficient facts to ground a joint infringement claim under this court’s Akamai decision and does not satisfy the Iqbal/Twombly pleading standard.
Supreme Court Denies All Patentable Subject Matter Petitions For Upcoming Term
Patently-O Story


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For the next Two Weeks, Google is Buying Patents

By Stephen B. Schott

Do you have a patent you want to sell? Want to sell it to one of the biggest companies in the world? You might have a partner in Google.

How to Participate

googThrough May 22, Google is buying patents through an experimental Patent Purchase Promotion. The transaction process is simple. Patent owners go to this site, fill out some forms, name their price, then wait to hear from Google, who will finalize the form assignment agreement and wire the asking price, if it is interested.

The Details

Here’s how it works.

  • Google is only buying one patent at a time. If you have more than one patent you want to sell, you need to complete the form multiple times.
  • Google is only interested in US patents for now.
  • Google is not interested in your patent if you/your company share ownership in the patent.
  • Your patent cannot be subject to litigation, encumbrances, etc.
  • You must have the authority to sell the patent.
  • You must provide an asking price.
  • All terms in Google’s Patent Purchase Agreement are nonnegotiable.
  • You will retain a license back to your patent. The license is “irrevocable, non­exclusive, non­transferable, non­assignable (including by operation of law or otherwise), non­sublicensable, worldwide, [and] fully paid­ up.”
  • Google will let you know by June 26, 2015 if it tentatively accepts your offer and if it does, it will request more information from you. 
  • Upon finalization of the agreement, Google will wire the asking price amount to you.

Why is Google Doing This?

In its announcement about the Patent Purchase Promotion, Google states that

We view this as an experiment. We are looking for ways to help improve the patent landscape, and we hope that by removing some of the friction that exists in the secondary market for patents, this program might yield better, more immediate results for patent owners versus partnering with non­practicing entities.

dreamstime_xs_34612811Google’s employee Code of Conduct and unofficial Mission Statement is “Don’t be evil.” You have to read between the lines of the announcement and Google’s mission statement, and its previous criticism of nonpracticing entities (NPEs, often called patent trolls) to figure out Google’s possible motivation.

Google has long been in tension with patent trolls, and is regularly in the top 10 of companies most sued by NPEs. Gene Quinn at IPWatchdog argues that Google promotes the demise of the patent system. I’m fairly certain that Google is not actively promoting the demise of the patent system, but it is almost certainly trying to take on NPEs.

One of the problems with attacking NPEs is that they often buy patents from smaller inventors who don’t have resources to sue, license, or transact business around their patents. Thus the NPEs play a critical role in the idea economy–creating a marketplace for ideas.

Google, in buying patents, is entering the NPE arena and hoping to also become a buyer of ideas. In so doing, Google itself is taking on the role of NPE because it states that it “can license [the purchased patents] to others, etc.” It’s hard to see how this plays out, but I suppose the optimistic among us would hope that Google’s “Don’t be evil” will prevail over any nefarious use of the purchased patents.

Should you try this?

If you have a patent that is generating no value for you, or that has an upcoming maintenance fee that you don’t want to pay, you might want to give this try. Might be like getting money for nothing. You also might sign up to see if Google will give you more money than you think your patent is worth.

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John Oliver’s Anti-Patent-Troll Rant: Simple Thinking

By Stephen B. Schott

last-week-tonightUp is down and right is left when my inbox fills up with 10 friends linking me to something about patents. But this floppy-watches-hanging-from-trees moment came recently after comedian John Oliver, during his Last Week Tonight show, took on patent trolls. In doing so, he follows comedian Adam Corolla, who also had an anti-patent troll rant go viral (for patent news) last year.

Take a gander: It’s possibly not safe for work on language.

My favorite line, of a few that were excellent, is his comparison of patents to “legally binding ‘dibs.'” Unfortunately, as with his rant about pharmaceutical companies marketing to doctors, Oliver took the easy route and attacked a few bad actors who everyone would dislike and ignored many other businesses that fulfill an important role in the idea economy.

Who are these patent trolls?

Patent trolls prefer to be called non-practicing entities or NPEs, but the patent troll term is too pejoratively inviting to go away. The problem of patent trolls is, as my friends across the Atlantic might say, a sticky wicket. A lot of people feel like there’s some kind of a problem but no one seems to agree on who’s an actual troll.

A few examples illustrate the difficulty of defining a patent troll. Let’s say that a major automobile manufacturer invests several million dollars developing a new diesel engine. Along the way, it secures 50 patents on the technology, but then decides not to pursue the diesel engine and instead focuses on hybrid engines. A few years pass and one of its competitors releases a diesel engine using the patented technology. Is our automobile manufacturer a troll if it pursues the competitor for patent infringement, just because it didn’t produce the diesel engines?

Another problem example that commonly arises is universities, which are petri dishes of innovation that rarely make any products. Most universities do, however, have a technology transfer office that secures patent protection for innovations. If a university sees a company using its patented technology and approaches the company seeking a royalty, is the university a troll that should be punished?

And a third category is also troublesome. Picture a small business that invents a new technology and secures a patent on it. Later, a multinational corporation starts using the technology. The small business doesn’t have millions of dollars to bring a patent infringement lawsuit so it sells its patent to a third party who has enough money to bring the lawsuit. In this David and Goliath scenario, small-business David needed a sling, and the third party provided it. The third party may be in the business of nothing more than collecting promising patents—but legislation attacking the third party patent collector harms the small business and stifles innovation.

At the other end of the spectrum is an example where a patent attorney purchased a patent from an inventor. The patent was for a consumer product. The patent-owner/attorney sued a manufacturer for infringement even though it was clear that there was no infringement. The manufacturer was faced with a terrible decision tree: Choice 1: Pay the patent-owner a small amount of money to settle the lawsuit, or Choice 2: Pay litigation costs (hundreds of thousands of dollars at least) to win the lawsuit and pray for the never-to-be-found Questing Beast that is judge-awared attorney’s fees for bringing a frivolous lawsuit. Choice 1, as painful as it is, is often the better business decision. So yes, there are definitely bad patent trolls.

The Problems With Oliver’s Rant

One of the biggest problems with the Oliver rant is that he fails to acknowledge that in the last two years, a lot has happened to curb bad actors in the patent world. Patent litigation is down 20% in the last year. The most-abused patents, those based on software, are now undergoing heightened legal scrutiny following the Alice Supreme Court case. The US Patent and Trademark Office has set up several new procedures for challenging the validity of granted patents. In all, a lot of work has already been done to fix this problem: The laws, procedures, and cases are having an effect.

dreamstime_xs_8645058Another problem, and perhaps it is obvious from the above descriptions of trolls, is that some of these patent entities help, not hurt, smaller inventors. Patent enforcement is expensive, and without patent entity companies help smaller companies enforce their patent rights against infringers. Thus, many trolls fill an economic need by helping small inventors protect their rights when the costs for doing so get too high.

Oliver encourages more legal action to curb patent trolls, but no one yet knows how all the solutions that were enacted in the last 2 years will play out. In the end, Oliver will hopefully get his dream of fewer true trolls and more innovation, but that will take time and politicians should be careful not to create more problems in their haste to react to the anti-troll sentiment.

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