Federal Internet Law & Policy
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IP: Patents

Dont be a FOOL; The Law is Not DIY

Derived From: Brian T. Yeh, An Overview of the "Patent Troll" Debate, Congressional Research Service (Aug. 20, 2012):

Patent Law Fundamentals

Patent law finds its constitutional basis in Article I, Section 8, Clause 8, of the U.S. Constitution and its statutory basis in the Patent Act of 1952. Patents provide the right to exclude others from making, using, selling, or importing claimed inventions for a limited period of time, generally 20 years. Inventors may acquire patents by submitting an application to the U.S. Patent and Trademark Office (PTO), where officials will examine it to determine whether the statutory requirements are met. This process is commonly known as “prosecution.”

Derived From: Intellectual Property: Assessing Factors that Affect Patent Infringement Litigation Could Help Improve Patent Quality, GAO-13-465 (August 2013)

When PTO receives a patent application, it assigns it to a team of patent examiners with relevant technology expertise. PTO does not begin examining patent applications upon receiving them and PTO’s data shows that, as of June 2013, the average time between filing and an examiner’s initial decision on the application was about 18 months.16 On average, it takes 30 months for PTO to issue a patent once an application is submitted.

The focus of patent examination is determining whether the patent application satisfies the statutory requirements for a patent, including: (1) novelty, (2) nonobviousness, (3) utility, and (4) patentable subject matter.17 Generally, other patents, publications, and publicly disclosed but unpatented inventions that pre-date the patent application’s filing date are known as prior art. During patent examination, the examiner, among other things, compares an application’s claims to the prior art to determine whether the claimed invention is novel and nonobvious.18 The examiner then decides to reject or grant the claims in the application and deny the application or grant a patent.

U.S. patents include the specification and the claims:

Once issued by PTO, a patent is presumed to be valid. However, the patentability of its claims can be challenged in administrative proceedings before PTO or its Patent Trial and Appeal Board and its validity can be challenged in federal court. For example, the AIA established three new administrative proceedings for entities to challenge the patentability of a patent’s claims:

In addition, a patent’s validity can be challenged in the 94 federal district courts throughout the country by, for example, presenting additional prior art that PTO may have been unaware of when it granted the patent. Challenges to a patent’s validity are often brought by an accused infringer who has been sued for infringing the patent.21 Patent owners can bring infringement lawsuits against anyone who uses, makes, sells, offers to sell, or imports the patented invention without authorization because a patent is a right to exclude others from practicing the invention. Exactly what a patent covers and whether another product infringes the patent’s claims are rarely easy questions to resolve in litigation, according to legal commentators. As noted, appeals of district court decisions in infringement cases are heard in the U.S. Court of Appeals for the Federal Circuit in Washington D.C.

If a patent infringement lawsuit is not dismissed in the initial stages, it proceeds to discovery (a process that exists in all federal civil litigation) and claim construction. Discovery requires the accused infringer to produce documents or other information that shows, among other things, how the allegedly infringing product is made and operates to help the patent owner establish infringement. Similarly, the patent owner must produce documents or other information that the accused infringer can use to challenge the patent’s validity, among other things. However, parties that do not offer products or services using the patents at issue often have far fewer documents to disclose—because they do not have any documents related to their products or services—than patent owners or accused infringers who do offer products or services.

With this information the patent owner specifies which patent claims allegedly are infringed and the alleged infringer responds by explaining why the allegedly infringing product is not covered by the patent’s claims. This identifies the patent claims the court needs to interpret. Known as claim construction, this is a fundamental issue in patent cases, and each party tries to persuade the court to interpret the patent claims in its favor. The court has broad discretion in how it goes about this process, which can involve a hearing with testimony from witnesses, according to legal commentators. In addition, if the patent’s validity is being challenged, the alleged infringer specifies why the patent allegedly is not valid, including any prior art.

Once the judge interprets the claims, the claims are then applied to the allegedly infringing product, to determine infringement, and to the prior art, to determine the patent’s validity if it is challenged. If the patent is found to be both valid and infringed, the court can award the patent owner monetary damages, issue an injunction to prohibit further infringement, or both. The court is required to award damages adequate to compensate for the infringement that are at least what a reasonable royalty would be for the use made of the invention by the infringer.

In addition to being enforced in the federal courts, patents can also be enforced at ITC, which handles investigations into allegations of certain unfair practices in import trade. Specifically, certain patent owners can file a complaint with ITC if imported goods infringe their patent or are made by a process covered by the patent’s claims.25 If ITC determines after an investigation that an imported good infringes a patent, the agency can issue an exclusion order barring the products at issue from entry into the United States, which the President can disapprove for policy reasons. ITC decisions can be appealed to the U.S. Court of Appeals for the Federal Circuit. Legal commentators have reported that a 2006 Supreme Court decision led to increased complaints alleging imported goods infringed U.S. patents being filed with ITC, and recent ITC data show that the number of investigations instituted by ITC increased from 32 in 2006 to 37 in 2012.

Derived From: Brian T. Yeh, An Overview of the "Patent Troll" Debate, Congressional Research Service (Aug. 20, 2012):

Patent Trolls

Congress has recently demonstrated significant ongoing interest in the issue of “patent assertion entities” (PAEs), which are popularly referred to as “patent trolls.” The Leahy-Smith America Invents Act of 2011 (AIA) included an order for further study of PAE litigation,1 and in July 2012 both the House and the Senate held hearings regarding patent disputes at the International Trade Commission, which has seen a surge in patent complaints as federal courts have become less patentee-friendly after passage of the AIA in 2011 and a landmark Supreme Court ruling in 2006.2 The much-publicized proliferation of PAEs was among the central factors that prompted the AIA, but at the end of the day, Congress passed a few provisions arguably addressing PAEs while leaving several other PAE-related issues unresolved, apparently in light of lively debate over what, if anything, should be done about them.

The PAE business model focuses not on developing or commercializing technologies but on buying and asserting patents against companies that have already begun using them, often after independently developing them without knowledge of the PAE’s patent, according to a report by the Federal Trade Commission (FTC). PAEs emerged alongside the burgeoning tech industry around the turn of the 21st century and gained notoriety with lawsuits claiming exclusive ownership of such ubiquitous technologies as wireless email, digital video streaming, and the interactive Web. They have had the attention of Congress, the press, and the public since at least 2006, when a successful PAE suit almost caused the shutdown of BlackBerry wireless service.

Such victories in court are rare for PAEs. According to one empirical study, they lose 92 percent of merits judgments, but few cases make it that far. The vast majority end in settlements because litigation is risky, costly, and disruptive for defendants, and PAEs often offer to settle for amounts well below litigation costs to make the business decision to settle an obvious one.

Observers expect that the AIA will reduce the volume of meritless lawsuits, but not dramatically. While the provisions for post-grant examination and transitional scrubbing of business method patents will help with assertions of invalid patents, they do not address the supposed use of valid patents to extract undue royalties from defendants that are either locked in to the patented technology or not infringing the patent at all. Additionally, post-grant examination is not available for patents granted prior to the AIA, and joinder restrictions do not apply in the ITC.

Reform advocates fear that PAEs impede innovation, undermine the patent system, and wreak havoc on businesses that play a vital role in the American economy. According to one study, PAE activity cost defendants and licensees $29 billion in 2011, a 400 percent increase over $7 billion in 2005, and the losses are mostly deadweight, with less than 25 percent flowing to innovation and at least that much going towards legal fees. Another recent study suggests that PAE activity could harm competition to the extent that operating companies use or “sponsor” PAEs as a means of imposing costs on rivals and achieving other anticompetitive ends.

Defenders of PAEs argue that they actually promote invention by increasing the liquidity and managing the risk of investments in applied research and invention, as well as by compensating small inventors. PAEs’ strongest allies include universities and other non-practicing entities that benefit from having PAEs as buyers for their patents and are not as vulnerable to lawsuits because they ordinarily do not make or sell anything that could be infringing. Other defenders of the status quo raise concerns about unintended consequences and collateral effects of changes to the law.

The Federal Trade Commission and numerous scholars suggest that PAE activity does indeed have beneficial effects but that, under current law, these benefits are significantly outweighed by the costs. What remains unclear is the extent of the imbalance between costs and benefits and whether Congress should attempt to rebalance any disparity. In Section 34 of the AIA, Congress instructed the Government Accountability Office to study the costs, benefits, and consequences of litigation by “non-practicing entities” and “patent assertion entities” and report back with findings and recommendations on how to “minimize any negative impact” of such litigation by September 2012.




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