Letter from AmeriKat: 8,000,000, 3, 1970s, 1, $3,340, #24 - US IP News in Numbers

For international travellers coming from the U.S., you will usually find yourself in one of the many Hudson News stores doting our nation's airports pacing the magazine rack for a selection of entertaining flight-fillers. The AmeriKat's favorite staples that are crammed into her already overstuffed Coach carryall, are The Economist, US Weekly (so bad, its good), National Geographic, Psychology Today, Rolling Stone and, front-seat pocket favorites - Time and Newsweek. These are usually the first magazines the AmeriKat starts devouring even before take-off and by the time the plane is taxing to the runway, she has made it to her favorite page - the page with that week's news expressed in numbers. Sadly the AmeriKat is busily stranded in London so the joy of airplane literature have escaped her this summer, but in a tribute to her favorite travel reading she has taken a glossy page out of US news magazines and has put this week's US IP news in figures. (picture, left - the AmeriKat snuggling under her airplane reading)

When IP news is a f(x) of n.....

8,000,000 - The number of patents issued by the USPTO on 16 August 2011 when it granted a patent to Second Sight Medical Products for a product called Argus II - a visual prosthesis apparatus that enhances visual perception for people who have become blind due to outer retinal degeneration. Argus II uses electrical retina stimulation to produce the visual perception of patterns of light. The Argus II is starting its clinical trials in the US and has obtained marketing approval in Europe. President and CEO of Second Sight, Robert Greenberg, stated that "This patent protection and significant federal support for innovation have already played key roles in creating nearly 100 US jobs at our company. Once the Argus II has FDA approval in the United States, we expect to create hundreds of more jobs over the next several years..." IP innovation and protection = economic stimulus, is plainly the message from the USPTO.

75 years - the number of years that it took the USPTO to reach 1 million granted patents in August 1911 when it issued to Francis H. Holton of Akron, Ohio a patent for his improvement in vehicle tires to make them more durable and puncture resistant.

6 years - the number of years that it took the USPTO to go from 7 million patents granted to 8 million patents. The 7 millionth patent was issued to John P. O'Brien for a strong, biodegradable polysaccharide fibers he invented for use in textile applications.

1 - The number of Abercrombie & Fitch articles of clothing the AmeriKat owns - which is far less than the cast of Jersey Shore. IPKat readers may have caught a glance at last week's story that frat-boy favorite apparel retailer, Abercrombie & Fitch, was reported to have offered to pay Michael "The Situation" Sorrentino of MTV reality show Jersey Shore to never where its clothes on air (see A&F press release here) as the "association is contrary to the aspirational nature of our brand, and may be distressing to many of our fans." Many are calling the press release a publicity stunt for a "slow day in August" right before the back-to-school buying begins. However, its interesting to note that a press release about an allegedly detrimental impact on brand reputation was created to increase just that - brand reputation....ahhh, the fickle world of brands!

$3,340 - The cost of the genetic test for breast cancer risk that was subject of Myriad Genetic's recent success in the US Court of Appeals for the Federal Circuit when the court upheld the company's patents on two human genes - BRCA1 and BRCA2 (picture, right - pink ribbon, (c) Science 2002). The sequencing of the genes tests for mutations that increase the risk of a woman getting breast and ovarian cancer. A recent New York Times article reports that despite its recent legal success some commentators are suggesting that the test has been surpassed by newer DNA sequencing techniques which are faster and cheaper. This, the article reports, may be a sign of trouble to come, notwithstanding that Myriad's main patents do not start expiring until 2014. However, Myriad has stated that the company has time to start adapting to the new technology before its patents expire and in the future will be relying more on trade secret protection than on patents. Myriad's CEO Peter D. Meldrum in January stated, in reply to a question about whether Myriad would begin enforcing their European patents, including for BCRA1 and BCRA2, against companies using the genes in tests, that "[i]f I had my druthers, I would not want to go into a new market in a heavy-handed fashion, trying to enforce patents." Instead, the company is reported to begin relying more on its "vastly superior information."

The patent system is premised on requiring public disclosure of inventions - you get to enjoy your monopoly, as long as the rest of us can see and build upon your scientific step for the betterment of society (as long as the use is non-infringing during the limited time you are enjoying your monopoly). Trade secrets, however, are all about keeping information out of the public domain for an indefinite time. Should information, such as the information Myriad has about which of the thousands of mutations in the two genes raise the risk of getting cancer, be kept out of the public domain? If companies with valuable medical information are relying on trade secrets rather than patents, this could have serious impact on the progress of science (Copyright Clause) and in this case, medical research. If this begins to be a trend, are we to blame failings in our patent systems and protections or the desire of companies to maintain a monopoly on proprietary information and technology for as long as possible? Or is this just the same question? Are there public policy arguments for demanding that such information be disclosed, and if so, how does that square with the Anglo-American philosophy of commoditizing property (and IP)for financial gain? Is it only right that a company should use whatever legal means it has to protect its investment and research, regardless of any public policy or ethical considerations? Similiar questions are posed by the New York Times article and by Dan Vorhaus in his blog the Genomics Law Report.

$353 million - the amount of money reported to have been generated by the breast cancer test which accounted for Myriad's $402 million revenue in the year ending June 2011.

3 - The number of grape growers that have successfully claimed that the US government can be joined to a patent invalidity claim. The three Californian grape growers have claimed that a California trade group, The California Table Grape Commission, licensed invalid patents from the US Department of Agriculture(USDA). The USDA owned three patents issued under the Plant Variety Protection Act for grapevines that produce table grapes - Sweet Scarlet, Scarlet Royal and Autumn King. The USDA licensed its rights in the three patents to the California Table Grape Commission, a California state agency. The Commission was established to promote the state's table-grape industry and is funded by a tax levied on each box of table grapes produced in California. The Commission sublicences the patents and under the licences is entitled to retain 60% of the royalties with the remaining 40% going to the USDA. The Commission authorized three nurseries to serve as the exclusive distributors of the patented varieties. The ultimate growers of the grapes have to sign a "Domestic Grower License Agreement" which requires the growers to pay a royalty, prohibits the growers from propagating the plants, and permits the Commission to order the destruction of the purchased plants if the Commission believes the growers are violating the license.

Three grape growers, who purchased the grapevines covered by the patents signed the licence agreement and paid the licensing fee. They then brought a claim for declaratory judgment challenging the patents for invalidity for lack of novelty and that the Sweet Scarlet (picture, left) patent is unenforceable because of alleged inequitable conduct during prosecution at the USPTO. The US Court of Appeals for the Federal Circuit issued a decision last Wednesday that the Administrative Procedures Act ("APA")enables the 3 grape growers to "pursue equitable relief against the USDA on its patent law claims." The 3-judge panel ruled that the USDA could be joined as a party to the claim because the licensing agreement between the USDA and the Commission did no transfer all the rights in the patents, as such the USDA was a necessary and proper party to the grape grower's patents claims. Judge William Bryson, giving the opinion of the Court, held that an amendment to section 702 of the APA "recognizes a right of judicial review for 'agency action'" in that it waives "sovereign immunity for actions seeking relief other than money damages against federal agencies, officers, or employees" - such as the equitable relief sought by the grape growers in their dedicatory judgment for patent invalidity. As such, the grape growers could join the USDA in their action. Allegedly invalid patents are also curse for the US government it seems....

#24 - The ranking given to Girl Talk's album, Feed the Animals, by Rolling Stone in 2008. Girl Talk, the one man band of Gregg Gillis, a former biomedical engineer turned musician, is known for weaving hundreds of samples of recorded music and sounds into frenetic tracks which he releases for free or a la Radiohead model. A recent article in the Huffington Post this week explains why Gillis uses this model when he releases his work under the Illegal Art label. Also this week, EMI won a partial victory in a copyright lawsuit against online music storage site MP3tunes who was found liable for contributory infringement when it failed to remove unauthorized songs from its website after being put on notice. District Judge William Pauley however refused to rule on whether MP3tunes employees were liable for copyright infringement in downloading 171 songs.

1970s - The decade when late sportscaster Myron Cope coined the term "The Terrible Towel" (watch the story here). The Terrible Towel, a yellow and black cloth which is swung about in the air by the Pittsburgh Steeler's (an American football team) fans is the subject of a trade mark infringement suit. The lawsuit brought by the Steelers and Allegheny Valley School (who owns the trade mark and is where Cope's autistic son lived) against Eugene Berry Enterprise alleges that that company filed a trade mark application in May for THE TERRIBLE TOWEL and has been selling shirts with the mark. Eugene Berry Enterprise has been asked to withdraw its application.

Breaking News: US Supreme Court rejects Microsoft in i4i battle

The AmeriKat has been a busy bee ever since her flight from California's INTA 2011 madness touched its wheel's onto Heathrow's tarmac two weeks ago. Since then the AmeriKat has watched helplessly as not one, not two, but three patent decisions rolled out of the US Supreme Court over the past few days. But thankfully, this evening AmeriKat was able to momentarily lift her whiskers from the stack of bundles and papers circulating her desk at the moment, to bring you breaking news of the US Supreme Court's decision in the epic battle between i4i and Microsoft (see previous AmeriKat reports here). She has not and will not have time to digest the yummy decision from Justice Sotomayor until the weekend, but she sets out below a brief summary of the court's decision. (picture, left - with no time for a Kat nap for this kitten, the AmeriKat rests her chin one of her stacks of papers)

Background

The four year epic patent infringement battle between Canadian software company, i4i, and Microsoft, involved i4i’s US Patent No 5.787, 449 (“449 Patent”) which related to markup languages and Extensible Markup Language (“XML”) used in electronic documents. In 2007, i4i filed a patent infringement action against Microsoft in the Eastern District of Texas. Microsoft claimed that i4i's '449 patent was invalid because an earlier version of i4i’s software had anticipated the claim ("on-sale bar" under section 102(b) of the Patent Act 1952). However, this earlier software, S4, had been destroyed ten years prior to the case so the USPTO Patent Examiners never had the opportunity to examine the i4i’s patent application in light of this alleged prior art. Because the S4 data had been destroyed, Microsoft argued that they never had an opportunity to provide “clear and convincing evidence” of invalidity. The trial jury found in i4i’s favor, Microsoft appealed to the Circuit Court of Appeals who upheld the lower court’s finding and then appealed to the US Court of Appeals for the Federal Circuit. The US Court of Appeals upheld the Circuit Court’s ruling and so Microsoft appealed to the Supreme Court. The Supreme Court granted certiorari in the case November 2010.

The Arguments

Microsoft argued that the evidential standard to invalidate a patent should be one of a “preponderance” and not of the higher “clear and convincing” standard. i4i argued that Section 282 (the section that deals with the burden of establishing invalidity)is not silent on the burden of proof requirement. It uses language that has a settled meaning - that of a “clear and convincing” standard which is itself settled by Federal Circuit and Supreme Court case law , i.e., section 282 codified the existing evidential standard. In addition, this heightened standard of proof has specifically been used in cases dealing with prior-use claims of invalidity, such Microsoft's claim in this case. Most of i4i's argument is devoted to the stronger underlying public policy argument of maintaining the heightened evidential standard, i.e., promoting strong and stable patent rights to protect the incentives for innovation and investment. A weaker standard, such as the preponderance standard, would arguably have the counter-effect as well as weakening the powers and judgment of the USPTO. (picture, left - Justice Sotomayor who delivered the opinion of the court)

The Question

The question before the Supreme Court was thus:

Under section 282 of the Patent Act of 1952, "[a] patent shall be presumed valid" and "[t]he burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity." Does section 282 require that a defence of invalidity be proved by a "clear and convincing" standard or a "preponderance of the evidence" standard?

The Supreme Court's Answer

In an unanimous decision (save for Justice Roberts who recused himself due to his ownership of some $100,000 in Microsoft shares), the "clear and convincing" standard is the standard of proof for a party to meet when arguing a defence of patent invalidity under section 282.

The Court held that Congress had indeed prescribed the governing standard of proof in section 282 - that of a clear and convincing standard. Although there was no express articulation of that standard in the statute itself, Congress did use a common-law term in the section, i.e. "presumed valid". Where Congress uses a common-law term in statute, then the Court must assume that the term "comes with a common law meaning" (Safeco Ins Co of America v Burr )(2007)). With this common law meaning comes "nearly a century of case law" where the courts have held that the presumption that a patent is valid should not be overthrown except by clear and cogent evidence. The Court found Microsoft's arguments that decisions prior to the 1952 Patent Act supported the clear and convincing standard were limited to only two instances and their arguements to be unpersuasive.

The Supreme Court also did not find favor with Microsoft's argument that a preponderance standard must apply where evidence was not before the PTO during the patent's examination process. Although the Court agreed that the rationale behind the presumption of validity for granted patents is weakened in such cases (KSR Int'l co v Teleflex), it nevertheless remains that Congress still specified the applicable standard of proof even in these circumstances. Nothing in section 282's text suggests that this standard should be departed from in these circumstances and indeed the Supreme Court has applied the clear and convincing standard irrespective of whether the prior-art evidence has been before the PTO examiner (Smith v Hall).

Despite both camps, especially i4i's, extensive policy arguments advancing their respective positions, the Supreme Court stated that the Court was in

"no position to judge the comparative force of the parties' policy arguments as to the wisdom of the clear-and-convincing evidence standard that Congress adopted."

In short - "we don't care, take your complaints to Congress." ["Love it!" - says the AmeriKat]

The Reaction

The real winner in this case is not i4i itself, but patent owners generally (including you, Microsoft!) and of course the USPTO who can continue to glow under their crown of "assumed validity".

However, patent owners want strong patents that are able to withstand weak invalidity challenges, but they also want to ensure that bad patents are able to be easily invalidated, especially when prior-art evidence is not in front of the examiner during examination proceedings. Microsoft was therefore essentially arguing for and against their interests at the same time - an impossible task that looked destined to fail at some point.

In a statement, Microsoft stated that

“While the outcome is not what we had hoped for, we will continue to advocate for changes to the law that will prevent abuse of the patent system.”

Now it remains to be seen how i4i will spend their $290 million damages award

For more information please see this article in the Financial Times.