Intellectual Property Law

Chapter 21 Lecture Notes

Major points addressed in the chapter materials include the following:

1. Advancements in technology have generally not required significant changes to the
Patent Act, and the Act has proven fairly flexible in accommodating technological
changes and developments.

2. Many new issues in patent law relate to patents for computer software. For years, due
to the expense and time involved in obtaining patent protection, inventors protected
software under copyright law. Many experts believe, however, that when it was held
in Lotus v. Borland that the Lotus menu command system did not constitute
copyrightable expression, courts signaled that copyright law provides little protection
for software. Thereafter, many companies began seeking patent protection for their
computer programs.

3. Courts have struggled with the issue of patentability for software. Programs that are
purely mathematical principles or algorithms are not patentable. In a new and
groundbreaking decision in 1998 in State Street, the Federal Circuit held that certain
software was patentable because it produced a useful, concrete, and tangible result. In
the wake of the case, far more patents were sought for software and for business
methods.

4. In the wake of public criticism of overbroad and often ridiculous patents and a
significant rise in litigation related to such patents, a number of court cases attempted
to clarify what subject matter was patentable. Following are significant cases, each of
which tightened the standards for patentability of software and business methods:

• Bilski v. Kappos. In 2008, the Federal Circuit rejected its previous State Street test
(which allowed a business method patent if the invention produced a useful,
concrete, and tangible result), and held that the sole method of determining
patentability was whether the claimed process was either tied to a particular
machine or apparatus or whether it transformed a particular article into a different
state or thing. Bilski v. Kappos, 545 F.3d 943 (Fed. Cir. 2008). In 2010, however,
the U.S. Supreme Court stated that although the Federal Circuit’s “machine-ortransformation”
test was a “useful and important clue or investigative tool,” it was
not the sole test for patentability. Although the Supreme Court held that the
claimed patent for hedging risk in Bilski was unpatentable because it was merely
an abstract idea, it did not categorically exclude business method patents.
• Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289
(2012). Patent claims directed to processes to help doctors determine correct drug
dosages were held unpatentable. To transform unpatentable law of nature into
patent-eligible application of such law, one must do more than simply state the
law of nature while adding the words “apply it.”
• Alice Corp. v. CLS Bank International, Inc., 134 S. Ct. 2347 (2014). In Alice,
the Supreme Court held that certain software patents for mitigating risk in
financial transactions through use of a computer system were invalid. The Court
found that the claims were an abstract idea, and simply implementing the claims
on a computer was insufficient to transform the abstract idea into a patentable
invention. Alice has been seen by some experts as a death knell for software
patents, and, in fact, in the wake of Alice courts have invalidated numerous
software patents, and a number of software patent applications were abandoned.

5. After Alice, the USPTO issued guidelines to help practitioners determine which types
of software patents might be patentable and four broad categories of nonpatentable
abstract ideas: fundamental economic practices (such as hedging); “an idea of itself”
(such as collecting and comparing data); certain methods of organizing human
activity (such as managing a game of bingo); and mathematical relationships and
formulas.

6. The AIA includes two provisions relating to business method patents:

• Any tax strategy for reducing or avoiding tax liability is deemed prior art and is
thus unpatentable.
• There is a transitional post-grant review program for those charged with
infringing business method patents so they can challenge such patents as invalid.

7. Business method patents are not favored in Europe.

8. One new trend is defensive patenting, meaning obtaining patents not because of a
desire to exploit the invention but solely to thwart others who might claim rights in
similar methods and processes and to have a portfolio of patents that can then be used
to countersue others once one is charged with infringement.

9. Another new patent issue is the rise of patent trolls (or nonpracticing entities or
NPEs), individuals or companies who acquire patents (often from bankrupt
companies) and then begin looking or “trolling” for potential infringers. A provision
in the AIA made joinder of defendants in patent infringement cases more difficult,
which proponents hoped would reduce litigation.

10. Some other measures that have been taken to reduce litigation by patent trolls include
the following:

• Amending the federal rules to eliminate the simple complaint form trolls often
used to initiate patent litigation. Thus, trolls will need to comply with more
specific pleading requirements when alleging patent infringement.
• Congressional proposals for reform, including more specific pleading
requirements and requiring losers in patent litigation to pay the fees of the
prevailing party. Although many measures have been introduced over the past few
years, none have come to fruition.
• State legislation in more than 25 states aimed at curbing litigation by patent trolls
by providing that sending demand letters in bad faith (ones that allege patent
infringement) is a deceptive or unlawful consumer practice.

11. Medicine, science, pharmacology, and agriculture offer other new developments in
patent law.

12. Genes and other genomic inventions are patentable so long as they meet the requisite
statutory criteria of utility, novelty, and nonobviousness, and are not naturally
occurring. Thus, a naturally occurring DNA segment is a product of nature and not
patent eligible merely because it has been isolated; however, synthetically created or
complementary DNA (DNA from which introns are removed) was not naturally
occurring and was thus patentable because it had been manipulated by humans.
Association for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2017 (2013).

13. Other cutting-edge patent issues relate to human organism patents (the AIA prohibits
patents on human organisms); animal-related patents (recall that a clone of Dolly the
Sheep could not be patented because it was an exact genetic replica of a “real”
animal); biopiracy; compulsory licenses (giving royalties to a patent owner to
compensate him/her for loss of patent rights and control, similar to “eminent
domain,” when property is taken for the public good); crowdsourcing prior art, to
allow third parties to comment upon pending applications, which would decrease
“junk” patents); patent donations;collaborative patent efforts (the pledge of patents so
others may use them without fear of infringement); patent pools (contributing patents
to a pool with sharing of revenue derived from use of patents); and patent
consortiums (joining together of companies to buy patents to keep them out of the
hands of trolls).

14. Other new developments include the following:

• Proposals for an “innovation box” that would provide tax incentives for
companies to keep their IP in the United States
• The use of 3D printers for patent infringement (both direct and indirect)

15. Other “new” patents relate to strains of plants and crops that are resistant to drought
and disease and genetically modified varieties of crops.

16. In 2001, the Supreme Court held that utility patents may be granted for plants even
though plants are also protectable under the Plant Patent Act and the Plant Protection
Variety Act.

17. The American Inventors Protection Act of 1999 (AIPA) provided significant changes
in patent law. Some of its key provisions are as follows: protecting inventors against
deceptive practices of invention promotion companies; extending the terms of patents
to compensate for certain USPTO delays in the prosecution of patent applications;
and providing for the publication of most patent applications 18 months after their
filing, the most significant changes to patent law in 20 years.

18. The Leahy Smith America Invents Act (AIA) is the most significant change to patent
law in 60 years and includes the following key provisions:

• First to file system. Effective March 16, 2013, the United States changed from a
patent system that awarded patents to the first to invent to one that awards patents
to the first inventor to file the application (with a one-year grace period for the
inventor’s own disclosures)
• Derivation proceedings. Effective March 16, 2013, interference proceedings
(used to determine which inventor was the first to invent) were abolished and
replaced with derivation proceedings which determine if an earlier application
was actually derived from the inventor of a later-filed application.
• Assignee filing and oaths. The AIA allows assignees of inventions to file patent
applications and allows substitute statements in lieu of oaths when an inventor
cannot be found, is deceased, or refuses to provide an oath.
• Reduced fees for micro entities. The AIA reduced fees for micro entities.
• Post-grant proceedings at the PTAB. The AIA implemented several new postgrant
review proceedings, including post-grant review, inter partes review, and
covered business method review (all of which are trial proceedings at the PTAB).

19. The AIA did not include some provisions that were hotly debated: It did not halt the
practice of fee diversion, did not address or rein in damages in patent infringement
litigation, and did not change venue requirements in patent infringement litigation so
as to prevent forum shopping.

20. The rights granted by a U.S. patent extend only throughout the United States and have
no effect in a foreign country. Therefore, inventors who desire patent protection in
other countries must apply for patents in each of the other countries. Nearly every
country has its own patent laws.

21. The laws of other countries often differ from U.S. law with regard to patents. In most
foreign countries, any publication of the invention before the date of the application
will bar the right to a patent, while in the United States, the one-year grace period
applies so that the inventor has one year after his/her disclosure to file a patent
application. Most foreign countries require that the invention be manufactured within
the country within a certain period of time (usually three years) after the patent is
granted or the patent will be void. In the United States, the invention need never be
made, used, or sold.

22. There are several international treaties relating to IP or patents to which the United
States adheres: the Paris Convention, the Patent Cooperation Treaty (PCT), the Patent
Law Treaty (PLT), TRIPS, and the Hague Agreement.

23. The Paris Convention requires that each country guarantee to the citizens of the other
member nations the same rights in patent and trademark matters that it provides to its
own citizens (the principle of national treatment).

24. The Paris Convention also provides for the right of priority so that if a person files a
utility patent application in any of the more than 175 member nations, the person can
file an application within one year in any of the other member nations and capture the
earlier filing date.

25. The earlier priority date is the critical date for determining whether prior art precludes
granting of a patent.

26. Under the Paris Convention, for design patents and for trademarks, the priority period
is only six months—not one year, as it is for utility patent applications.

27. The prosecution status or history of the application in the foreign country is
irrelevant. If the foreign country refuses to grant a patent or the applicant abandons
the patent, such is irrelevant to the later U.S. application.

28. The Paris Convention thus allows patent applicants the opportunity to file one patent
application and then take 12 months to determine if foreign protection is desired,
saving time and expense in having to file numerous separate applications in various
countries.

29. The PCT came into force in 1978 to reduce the complexity involved in the separate
filing of patent applications in numerous countries. It provides a centralized way of
filing, searching, and examining patent applications in several countries
simultaneously. The PCT is administered by WIPO and is adhered to by more than
145 countries, including the United States. In brief, the PCT allows an inventor to file
one international application, in one language, and with a single set of fees, and seek
protection for the invention simultaneously in several countries.

30. The one PCT application does not automatically mature into a patent that affords
protection in several countries. An applicant must prosecute the application in the
various designated countries (the “national phase”). The PCT does, however, afford a
significant window of time for the applicant to consider whether to pursue patent
protection in various foreign countries.

31. There are separate phases to the PCT process:

International Phase
• Chapter I: The application process. The international application is filed with
the patent office of the applicant’s home country or with WIPO, now called a
receiving office. Effective January 1, 2004, the filing of a PCT application
automatically constitutes the designation of all PCT contracting countries to the
PCT on that filing date. Ultimately the applicant will designate or elect those
countries in which protection is desired. Only one filing fee is paid for the PCT
application, which is called an international patent application. The PCT
application may claim priority (under the Paris Convention) of an earlier filing
date. During Chapter I, the application is subjected to an international search,
which reviews prior art, and an international search report is produced as well as a
written opinion. The PCT application, the international search report, and the
written opinion are then published. Until publication, the application is
maintained in confidence. Chapter I lasts 20 months.
• Chapter II. An applicant may elect to enter Chapter II of the PCT process and
may demand an international preliminary examination (alternatively, the applicant
may enter the national phase or may simply delay entering the national phase until
30 months). A written report on patentability is prepared and an international
preliminary report on patentability will be issued. Although the report is not
binding on any specific nation, it is highly authoritative.

• National phase.

If the applicant decides to go forward with the application in the
elected countries, the applicant commences the national phase. Fees must be paid
to each country. Each national office in which the application is pursued will
conduct its own search and examination procedure, although the process is easier
and faster due to the credible search report and preliminary examination report.
Each of the countries designated in the PCT application will either grant or reject
the application.

32. The most significant advantage provided by the PCT application process is time
because the time limit for entering the national phase (and prosecuting individual
patent applications in the desired countries) is 30 months from the filing date
(whether one enters after Chapter I or elects to enter Chapter II). This additional time
allows the inventor to decide whether to pursue the foreign applications and to gather
the necessary funds. Additionally, the PCT process affords the benefits of a single
application format and a centralized filing, searching, and examination system.

33. The European Patent Organization (“EPO”) was founded in 1973 to provide a
uniform patent system in Europe. A European patent can be obtained by filing a
single application, often with the EPO office in Munich. Once granted, the patent is
valid in any of the nearly 40 EPO countries, which may be designated in the
application.

34. In 2006, the United States launched its Patent Prosecution Highway (“PPH”), which
fast tracks examination of corresponding patent applications filed in the USPTO and
in various IP offices around the world. Under the PPH Program, an applicant who
receives a positive ruling on patent claims from one participating office may request
accelerated prosecution of corresponding claims in another participating office, which
allows the applicant to obtain a patentability decision in the second office more
quickly. The second office can use the first office’s work products, such as search and
examination reports, to streamline and expedite patent processing.

Although each office makes its own determination of patentability, the reusing and
sharing of search and examination results streamlines the process and promotes faster
patent examination.

35. The United States participates in other international initiatives designed to improve
worldwide patent quality. Global Dossier is a program implemented by a forum
called the IP5, an acronym or the world’s five largest IP offices: the European Patent
Office, the Japan Patent Office, the Korean Intellectual Property Office, the State
Intellectual Property Office of the People’s Republic of China, and the U.S. Patent
and Trademark Office, which together handle about 90 percent of the world’s patent
applications.

36. Because applications for the same technology are typically filed at more than one
patent office, in 2015 the USPTO launched Global Dossier, business services
designed to provide access to the file histories of any related patent applications
across all IP5 members’ offices through a single online portal.

37. Global Dossier thus provides access to the file histories of patent and patent family
applications. This streamlines office procedures among different IP offices and leads
to improved efficiency and predictability of global patent prosecution with increased
cost savings for applicants.

38. The Trade-Related Aspects of Intellectual Property Rights (TRIPS) was accepted by
the United States in 1994. It provides enhanced protection for trademarks and
strengthens international patent use. Until adherence to TRIPS, the term of patent
duration was 17 years from the date of grant, allowing patent applicants to drag their
feet during prosecution while they gathered funds, did market research, etc. To
harmonize U.S. law with that of many other countries, the term of a utility patent was
changed under TRIPS to 20 years from the date of the filing of the application
(encouraging applicants to prosecute diligently).

39. WIPO’s newest patent treaty is the Patent Law Treaty, adopted in 2002. Its goal is to
harmonize the formal requirements established by individual patent offices around the
world and streamline the procedures to obtaining and maintaining patents. It is
primarily concerned with patent formalities (such as encouraging electronic filings).
The United States signed the PLT in 2012, and it implemented its provisions in 2013.

40. When President Obama signed the PLT into law in 2012, he also signed the Hague
Agreement Concerning International Registration of Industrial Designs. The Hague
Agreement allows U.S. applicants to apply for design patents by filing a single
application for protection in more than 60 countries. As part of the Hague Agreement,
the term of protection for design patents was lengthened to 15 years (rather than 14
years) from the date of grant (for any applications filed after May 13, 2015).

41. To ensure that national security is not impaired, a person may not file a patent
application in another country for an invention made in the United States unless the
USPTO grants a license allowing the foreign filing or until six months from the filing
of the U.S. application. The six-month period allows the USPTO to review
applications that might affect national security. Filing an application with the USPTO
is deemed to be a request for a license to file in a foreign country and the official
USPTO filing receipt will indicate whether the license is granted or denied.

42. If foreign filing license requirements are violated, any corresponding U.S. application
or patent is invalid and criminal penalties and fines may be imposed. The violation
can be cured, however, and the USPTO can grant the license retroactively.

43. If the USPTO absolutely refuses to allow an application to be filed in a foreign
country, it will issue a secrecy order so the invention is kept secret. No patent can
issue on an application subject to a secrecy order. The government must, however,
award some compensation to the inventor for damages caused due to inability to
procure a patent.

44. Any inventor, regardless of citizenship, can file a patent application in the United
States on the same basis as a U.S. citizen.