The Honorable Judge James L. Robart recently took on the challenging task of determining a reasonable and non-discriminatory (“RAND”) royalty rate for Motorola’s standards-essential patents (“SEP”). Microsoft Corp. v. Motorola, Inc., 2013 U.S. Dist. LEXIS 60233, No. C10-11823 (W.D. Wash. Apr. 25, 2013). This decision comes after a two-year patent war between Microsoft and Motorola. In November 2010, Microsoft filed a breach of contract suit, alleging Motorola breached its obligation to license its SEP at a RAND rate.

In its 207-page opinion, the court came to its conclusion, in part, by looking to the policy reasons behind RAND and the importance of providing a reasonable royalty rate to licensees.

Upholding Competition and Innovation in the Industry

The purpose of RAND is to ensure that SEP owners do not unfairly hinder innovation or competition by unreasonably increasing the royalty rates of licensing their patents. SEP owners are in a powerful position to manipulate the market. For example, one of the purposes of RAND is to prevent “hold-up” – where an SEP owner demands more value than the patented technology or demands the total value of the standard, thereby effectively preventing the licensee from licensing the patent. Additionally, the court noted that hold-ups may also harm other firms that hold SEPs and cannot obtain royalties because the product is not being developed.

Where there are reasonable royalties, healthy competition is less hindered. Gaming companies, in particular, are competing for the best, most appealing console to consumers. One possible roadblock to this goal is licensing a patent necessary to comply with industry standards. When a gaming company cannot afford to obtain a necessary license that would contribute in making the system competitive with other systems, the product is less likely to be created. This decreases the marketplace of innovations.

Moreover, where there are reasonable royalties on essential patents, companies are less constrained in their innovation. A gaming console that seeks to set itself apart from the competition will likely require the use of multiple patented technologies and compliance with multiple standards. The court noted that “a RAND royalty should be set at a level consistent with the S.S.Os’ (standard setting organizations) goal of promoting widespread adoption of their standards.”

The court’s decision in this case, at the very least, gives guidance for companies in negotiating RAND rates, and also guides courts when parties are unable to come to a resolution.

Protection of Intellectual Property: Types of Intellectual Property and How to Protect it 
Third Thursday Emerging Company Webinar Series 
May 16, 2013, 12:00 p.m. - 1:00 p.m. PDT 
Presented by Daniel N. Yannuzzi, Partner, Sheppard Mullin 
Via WebEx

On April 1, 2013, the U.S. Patent and Trademark Office (USPTO) published interim final rules revising several patent term adjustment (PTA) provisions in view of the AIA Technical Corrections Act of January 14, 2013. 78 Fed. Reg. 19416. The USPTO’s interim final rules became effective on April 1, 2013, and apply to any patent granted on or after January 14, 2013. Applications pending as of January 14, 2013 are therefore subject to the new rules.

Initial PTA Determination is Eliminated

Under the revised rules, the USPTO will no longer provide its initial PTA determination in the Notice of Allowance. Applicants will now be notified of the actual PTA at the time of patent grant.

Under the previous rules, the USPTO determined the PTA in two separate instances—one at the time of Notice of Allowance (initial determination), and another at the time of Issue Notification (actual determination taking into consideration any delay incurred between the Notice of Allowance and Issue Notification). The old system was flawed because the amount of PTA could not be finally calculated until the patent issued, despite the previous rules that the Office make a determination at the time of the Notice of Allowance.

Deadline for Requesting Reconsideration of PTA is Extended

Under the old rules, a patentee dissatisfied with the Office’s PTA calculation must challenge it within two months after patent grant.

Under the new rules, these two months can be extended for an additional total of five months upon payment of fees. The new rules effectively give patentees more time to review PTA and challenge its calculation.

To challenge the Office’s PTA calculation, a patentee may file a Request for Reconsideration of PTA to request correction of any PTA errors that occurred during prosecution. The new rules also allow patentees for patents granted during the transition period to file or re-file the Request for Reconsideration that is otherwise unavailable under the old rules.

Deadline for Civil Action is Now Set at 180 Days from USPTO Decision on Request for Reconsideration

The interim final rules also implement significant changes related to the conditions and circumstances under which a patentee can bring a district court civil action to challenge a PTA determination.

Under the prior rules, a civil action must be filed “within 180 days after the grant of the patent,” which forced patentees to file suits without having received a decision on a Request for Reconsideration by the USPTO, only to have the actions dismissed if the USPTO’s reconsideration decision was ultimately satisfactory.

The interim final rules now provide the patentees with an additional month to file suits (180 days v. 7 months). Additionally, under the new rules, patentees seeking judicial review of the USPTO’s PTA calculation must first: (1) seek to file a Request with the USPTO Director within seven months of the patent’s grant date; and (2) obtain the USPTO’s decision on the Request. Patentees may seek judicial resolutions only after an unsuccessful administrative challenge within the USPTO, but such legal remedies must be sought with the District Court for the Eastern District of Virginia within 180 days of the USPTO’s decision.

The new rules also make clear that judicial remedies are not alternatives to requesting reconsideration of the PTA, meaning that the Request for Reconsideration is now a pre-requisite to bringing district court civil actions. Patentees wishing to seek judicial review may no longer bypass administrative resolutions, as the USPTO decision date is required to set the 180-day period for filing a civil action.

Interim Final Rules Use the National Stage Commencement Date As the “Application Filing Date” for National Stage Applications

The interim final rules also level the playing field for national stage applications filed under 35 U.S.C. § 371. As background, the current PTA statute (35 U.S.C. § 154) compensates patentees with additional PTA for internal delays caused by the USPTO, including when the first action on the merits is issued more than 14 months after the application filing date (commonly known as the “A” delay).

The old rules prejudiced national stage applicants with respect to the start time for this “A” delay, where the 14-month clock started upon the fulfillment of all formal requirements of 35 U.S.C. § 371 for national stage applications, whereas the clock started on the actual filing date for utility applications filed under 35 U.S.C. 111(a). This meant that national stage applications that were delayed as a result of missing formal documents had a significant disadvantage because of the delayed start of the “A” delay clock.

The new rules seek to remedy this uneven playing field by employing the date of national phase commencement of the national stage applications as the “application filing date,” and not the date on which all requirements of 35 U.S.C. § 371 are satisfied. The new rules permit national stage applicants to take advantage of the new ability to delay submission of formal documents without risking a loss of PTA that would otherwise be granted for domestic utility applications filed under 35 U.S.C. 111(a).

Reinstatement of PTA Is Permitted Under the New Rules Upon Showing of Good Cause

The current PTA statute mandates a reduction in PTA when “the applicant failed to engage in reasonable efforts to conclude prosecution,” which includes taking more than three months to reply to a notice or action by the USPTO. See 37 C.F.R. 1.704.

The new rules now permit an applicant to request reinstatement of all or part of the reduced period of adjustment upon showing that, in spite of all due care, the applicant was unable to respond within three months. Like the old rules, the new rules require such a request to be filed prior to issuance.

Public Comments

The Interim Final Rules have an immediate effective date of April 1, 2013. However, the USPTO will accept public comments within 60 days up to May 31, 2013, after which the final rules are expected to be published.

A little used and often overlooked provision of the California Code of Civil Procedure recently played an important role in three recent cases brought by AF Holdings LLC, a foreign entity formed under the laws of the Federation of Saint Kitts and Nevis, against California residents for allegedly dealing with copyright infringing content through use of BitTorrent software. These decisions, copies appended, are:

AF Holdings LLC v. Trinh, United Stated District Court for the Northern District of California, 2012 U.S. Dist. Lexis 161394 (November 9, 2012) (“AF Holdings I”).

AF Holdings LLC v. Navasca, United Stated District Court for the Northern District of California, No. C-12-2396 EMC (February 5, 2013) (“AF Holdings II”).

AF Holdings LLC v. Magsumbol, United Stated District Court for the Northern District of California, No. 12-4221 SC (March 18, 2013) (“AF Holdings III”).

Section 1030 is a mechanism for the defendant to force the plaintiff to file a bond to secure an award of costs and, if provided by the relevant statute, for attorneys fees. The requirements are simple: 1) The plaintiff resides out of state or is a foreign corporation and 2) there is a “reasonable possibility” (emphasis added) that the defendant will prevail. The whole point of this provision is to enable a California resident to secure costs against an out-of-state plaintiff and to prevent out-of-state plaintiffs from filing frivilous law suits against California residents.[1] Even though the Federal Rules of Civil Procedure have no such specific procedure, the Federal Courts have the inherent power to require plaintiffs to post security for costs and typically follow the forum state’s practices with this regard.[2]

AF Holdings I opened the door on this provision in the context of a BitTorrent claim, where the plaintiff could not convince the Court that the named defendant was the party making use of a particular IP address for purposes of infringing adult content when others had access to the same IP address (as is often the case for internet based claims). Furthermore, absent such showing, the defendant could not, under these circumstances, be held negligent since the defendant had no duty of care to prevent infringement of the plaintiff’s copyrighted works. Accordingly, the Court required the posting of a $48,000 bond.

AF Holdings II required a slightly higher $50,000 bond adding new wrinkles. The Court emphasized that Section 1030 sets a relatively low standard, requiring only a showing of a “reasonable possibility” that the defendant will prevail. As in AF Holdings I, there were others (in this instance five others) who had access to the same IP address. The plaintiff had argued, unsuccessfully, that the defendant was the only likely infringer since, “Plaintiff’s content attracts a specific demographic, and Joe Navasca was the member of the household who best fit that demographic.” Even though Navasca knew a lot about computers -- since he worked in technical support at a gaming company -- the Court pointed out that one doesn’t need to be tech savy to download online information. Even though AF Holdings’ claim would survive a Rule 11 motion naming Navasco as defendant, “…that was a separate issue from whether AF should nevertheless be required to provide an undertaking because it is a reasonable possibility that Mr. Navasca will prevail on the merits.” (Emphasis in original.)

AF Holdings II further disposed of plaintiff’s claim that requiring a bond would effectively deprive it of access to the courts. First, AF Holdings made no showing that it could not post bond. Second, any such claim should be taken “with a grain of salt” since AF Holdings had initiated multiple cases throughout the country in which it managed to pay the filing fees. The Court, noting that the defendant was represented by the same counsel as in AF Holdings I, thus required a slightly higher $50,000 bond.

AF Holdings faired no better in AF Holdings III, in which the Court likewise ordered a bond. Here, however, the defendant (represented by the same counsel as in AF Holdings I and II) ran into some trouble with its requested bond for a projected $73,875 in costs and attorneys fees. The Court found this excessive, “…especially since [counsel] is, by now, an old hand in these matters.” Furthermore, defense counsel had argued that the case was “frivolous and simple” in which case defense fees should be substantially less. The result was, not so surprisingly, a $48,000 bond.

As a minor point, the plaintiff, in AF Holdings III, protested that copyright infringement cases often take place in other courts without the “special disadvantage” of a plaintiff’s bond. The Court’s retort? “Plaintiff is not present in one of those other courts…” This exchange, however, does emphasize the limited application of this trio of decisions to those suits by non-residents or foreign corporations in the California courts. On the other hand, resourceful defense attorneys are likely to find similarly helpful bond provisions in their own home courts.

Blehm v. Jacobs, 10th Cir., No. 11-1479, December 27, 2012 

Some appellate decisions are worth examining because they plow new ground. Others serve to explain the ground that was plowed. This decision – dealing with substantial similarity (or lack thereof) between two sets of stick figures – is among the latter.

Compilations may appear to evince a clear division between protected and unprotected works while, in the case of stick figures, the line (pardon the pun) may be harder to draw. In fact, the Blog title is somewhat of a misnomer. While the Trial Court in Blehm described the stick figure copyrights as “thin,” the 10th Circuit was clearly reluctant to apply this label to works of pictorial authorship where expression and idea are much more difficult to discern. As stated by the 10th Circuit, “Even assuming the distinction between ‘broad’ and ‘thin’ protection is correct, Mr. Blehm’s works would not necessarily fall in the ‘thin’ protection category.” (Blehm at page 18 – all citations are to the slip opinion attached to this article).

This particular case entailed a conflict between two sets of stick figures, the “Penman” of the plaintiff and the “Jake” figures of the defendant. Both were what most people would commonly call stick figures. It was, thus, necessary for the Court, on appeal from summary judgment favoring the defendant, to assess what copyrightable expression could be found in Penman and then determine whether Jake appropriated any of these creative elements.

The Court generally observed that the plaintiff, Mr. Blehm, could claim no copyright over the idea of a cartoon figure holding a birthday cake, catching a Frisbee, skateboarding or taking part in other everyday activities. Likewise, infringement could not be predicated on Penman and Jake sharing common anatomical features such as arms, legs, faces and fingers or in common poses such as reclining while bathing or lounging in an inner tube. What then was protected? “The Penmen at first glance might be considered simple stick figures, but they are more nuanced than a child’s rudimentary doodling.” Blehm at 18-19. The Court found significant that Penman always had a half-rounded smile taking up a substantial portion of the face with all other facial features entirely absent. The Court also described, and found protected expression in, the rules which guided Mr. Blehm in drawing the Penman images: “The figure’s head might be perceived as slightly disproportional to the body. Its arms and legs are too thin, long, and disproportionate to the torso, which is relatively short. Mr. Blehm also chose to give the Penmen four fingers -- each about as thick as their arms and legs -- on each hand, as well as feet that are disproportionately long and thick compared with the rest of the body. Thus, each Penman reflects the stylistic choices Mr. Blehm has made.” Blehm at 19.

The Court then went on to compare in detail two sets of Penman/Jake images for substantial similarity, namely, the Peace Sign images and the Frisbee images. The Court expressly declined to compare substantial similarity between the underlying ideas inherent in the images but only the protected expression. In each instance, the Court explained why the Jake images were far from infringing anything at all. For example, regarding the Peace Sign images, “Jake’s head is very large compared with the body, while the Penman’s head is relatively proportional. The Penman’s arms and legs are long and disproportionate to its truncated torso. Jake, on the other hand, has more proportional limbs compared with his torso. The figures’ feet are distinctly different: the Penman’s are thick, long, and roll-shaped, but Jakes are shorter and triangular.” Blehm at 21-22. “We conclude that no reasonable juror could determine that the Jake figure is substantially similar to the protected expressive (emphasis in original) choices Mr. Blehm used for the Penman figure.” Blehm at 23. In short, the Court appeared to believe that the plaintiff was grasping at straws … or should we say “sticks”?

Why then this Blog about an unremarkable decision in which anyone but the plaintiff apparently could foresee the outcome? First, in an internet age, many minimal works have allegedly been infringed or have been alleged to infringe. How do we determine where a court will draw the line between expression and idea? How can we even guess or begin to guess? Here we have the 10th Circuit’s courteous discussion of dissimilarities between two sets of drawings in which neither set would likely infringe on the other. Second, and most importantly, the Court, in this case, had the eminent wisdom to not only describe these significant, non-infringing differences, but also to include the complete comparison chart comprising sixty-seven sets of paired images for which infringement was alleged. The readers can, as is often not the case, now judge for themselves whether a thin work is protected and, if so, whether an infringement action is meritorious for filing or defending. It has often been said, “You can never be too thin or too rich.” The former obviously no longer applies to copyrights.

On November 12, the State Intellectual Property Office (SIPO) released the Draft Measures on Service Invention《职务发明条例草案(征求意见稿)》(the “Draft Measures”) for public comments. Generally speaking, the Draft Measures enhance the rights of employee inventors, but create some uncertainty for employers.

Article 6 of the Chinese Patent Law provides that a “service invention” is an invention made in the course of employment duties or mainly using the material and technical resources of the employer, and that the employer owns the patent rights over a service invention, including the right to apply for a patent.

Article 16 of the Patent Law provides that an employer shall pay the inventor an reward upon the grant of a patent over a service invention, and a “reasonable remuneration” upon exploitation of the patent based on the scope of the application of the patent and the economic benefit derived from such application.

The Implementing Regulations of the Chinese Patent Law

Article 76 of the Implementing Regulations of the Chinese Patent Law (“Implementing Regulations”) provides that the employer may enter agreement with its employers with respect to rewards and remuneration for service inventions. Furthermore, employer may also set forth rewards and remunerations in its internal policies and procedures in accordance with the law. If there is no contractual agreement or company policy regarding rewards and remuneration, the Implementing Regulation provides specific rewards which will be payable to employees as a default arrangement, namely,

(1) a reward of no less than RMB 3,000 for the issuance of an invention patent (no less than RMB 1000 for a utility model or design patents) to be paid within three (3) months from the date on which a patent is granted, and

(2) a “reasonable remuneration” upon exploitation of an employee’s invention patent amounting to no less than 2% of the after-tax profit generated from implementation of an invention patent (no less than 0.2% for a utility model or design patent), or 10% of the fee generated from the licensing of the patent.

See Article 77 of the Implementation Regulation.

Some employers have viewed the default arrangement as somewhat un-commercial, particularly a “reasonable remuneration” of no less than 2% of the after-tax profit generated from implementation of the patent, or 10% of the fee generated from the licensing of the patent. Thus, many employers have considered overriding the default arrangement by express alternative provisions in the relevant employment contracts or by internal policies and procedures. One frequent question people asked is whether it would be enforceable if the alternative provisions provide NO reward or remuneration for service inventions.

Draft Measures on Service Invention

Generally speaking, the Draft measures are favorable to employees.

Reasonableness Requirement

Article 19 of the Draft Measures provided that any agreements or internal policies and procedures that nullifies or limits an employer inventor’s rights under the Draft Measures is invalid. Thus, a provision in an employment agreement or internal policy that provides NO reward or remuneration for service inventions will likely not pass the muster under the Draft Measure. Rather, employer should ensure that any such provision would be deemed to be reasonable.

This reasonableness requirement is specifically provided by Article 16 of the Chinese Patent Law, which states that a “reasonable remuneration” should be based on the scope of the application of the patent, and the economic benefit derived from such application. Given the attention focused upon this reasonable requirement, employers may want to consider, at least to some extent, modeling their reward and compensation provision after the default arrangement proposed by SIPO. Specifically, it is questionable whether a scheme under which employees receive the same level of compensation regardless of the value of their inventions, would be deemed to be reasonable.

Enhanced Default Arrangement

The Draft Measures enhanced the rewards and remunerations in the default arrangements. Specifically, Articles 21 and 22 of the Draft Measures provide:

(1) a reward of no less than 2 months’ salary for the issuance of an invention patent (no less than one month’s salary for a unity model or design patents) to be paid within three (3) months from the date on which a patent is granted, and

(2) a “reasonable remuneration” upon exploitation of an employee’s invention patent amounting to no less than 5% of the after-tax profit generated from implementation of an invention patent (no less than 3% for other forms of IP), or no less than 0.5% of the revenue (no less than 0.3 for other forms of IP); or 20% of the fee generated from the licensing of the patent. The remuneration can also be paid an annual payment or lump sum payment, but the amount should be reasonable in reference to its profit or revenue.

To protect employee’s rights to rewards and remuneration, the Draft Measure also provides that an employee inventor has the right to be informed during the prosecution of the service invention. In addition, an employee is entitled to compensation if the employer choose to protect the service invention as a trade secret. See Article 14 of the Draft Measures.

Other Substantive Rights to Service Inventions

The Draft Measures also provide employer inventors with some substantive rights to service inventions.

First, if the employer intends to assign or license a service invention, the employee inventor has a right of first refusal. Second, if the employer choose not to apply for a patent or otherwise protect a service invention, the employer may obtain the service invention free of charge or for an amount to be agreed upon with the employer. If the employee obtains the service invention free of charge, the employer will have a licensee for free. Third, for State Owned Enterprises (SOEs), if a patent is not exploited or licensed after three (3) years from the date of issuance, the employer inventor has the right to use the patent himself or license the patent to third parties.

Conclusions

It is anticipated that the Draft Measures will be formally adopted in 2013. Therefore, it is highly recommended that companies carefully review its employment contracts and internal policies in light of the Draft Measures, and craft intellectual property provisions that avoid some of the potential uncertainties, yet reasonable under the applicable laws and regulations.

On Nov. 20, 2012, a three-judge panel of the Court of Appeals of the Federal Circuit, in PerkinElmer Inc., and NTD Laboratories Inc. v. Intema Ltd. (2011-1577), held that the claims in U.S. Patent 6,573,103 (the ‘103 patent”) are invalid as drawn to noneligible subject matter under 35 U.S.C. § 101.

The standard of review is frequently cited but often overlooked as being outcome-determinative in patent cases. A recent trio of decisions by the Federal Circuit illustrates the differences in outcome that result from the standard of review for issued patents, challenged for validity in the Federal Courts, versus that for patent applications examined for patentability by the U.S. Patent and Trademark Office. A renewed consideration of these differences may motivate a patent challenger to proceed proactively under one of the postgrant reexamination procedures within the U.S. Patent Office (i.e., post-grant review (PGR) and inter partes review (IPR)) rather than reactively in the context of an invalidity defense or declaratory judgment action.

On September 25, 2012, the U.S. District Court for the District of Nevada ruled that the common ownership requirements of a terminal disclaimer were not met when the subject patent and its predecessor patent were owned by different wholly owned subsidiaries of a parent company. Takeaways from the case include:

• When asserting a patent that is subject to a terminal disclaimer, a single entity must own both the disclaimed patent and the predecessor patent - ownership of the patents cannot be divided between subsidiary companies.
• Following an example set forth in the Manual of Patent Examining Procedure (MPEP) does not provide a safe harbor regarding common ownership.
• The case highlights the importance of maintaining thorough patent records, especially for entities that divide patent ownership between subsidiaries.

The parties agreed that if ownership of a disclaimed patent is separated from the prior patent, the disclaimed patent is not enforceable.[4] Defendants argued that because the ‘789 patent was owned by Online News Link, the ‘176 patent was unenforceable. Plaintiff argued that because Acacia owned both Email Link and Online News Link, the two patents were commonly owned by Acacia.

The court granted defendants’ motion to dismiss the infringement action, holding that the ‘176 patent was unenforceable as a matter of law for failing to comply with the common ownership provisions of the terminal disclaimer. In granting the motion, the court cited the “the basic tenant of American corporate law . . . that the corporation and its shareholders are distinct entities. . . . A corporate parent which owns the shares of a subsidiary does not, for that reason alone, own or have legal title to the assets of the subsidiary.”[5] Accordingly, the court found that a single entity (i.e., Acacia) did not own the ‘176 and ‘789 patents, and that, therefore, the ‘176 patent was unenforceable as a matter of law.[6]

Interestingly, the court did not address Email Link’s argument that the MPEP (and therefore the USPTO) endorses terminal disclaimers made by a parent company of wholly owned subsidiaries. MPEP § 1490, the section discussing terminal disclaimers, cites MPEP § 706.02(l)(2)[7] as providing examples of common ownership. The first example of common ownership given in MPEP § 706.02(l)(2) is “Parent Company owns 100% of Subsidiaries A and B – inventions of A and B are commonly owned by the Parent Company.” In view of this decision, the examples of MPEP § 706.02(l)(2) should not be relied on as safe harbors for determining if the common ownership requirements for terminal disclaimers are met.[8]

[2] Terminal disclaimers are provided for by 35 U.S.C. § 253 and regulated by 37 C.F.R. § 1.321, which provides that a disclaimer must “[i]nclude a provision that any patent granted on that application . . . shall be enforceable only for and during such period that said patent is commonly owned with the application or patent that formed the basis for the judicially created double patenting.”

[3] When the terminal disclaimer was filed on July 2, 2010, the application that issued as the ‘176 patent and the ‘789 patent were also owned by Email Link and Online News Link.

[4] Merck & Co., Inc. v. U.S. Int’l Trade Comm’n, 774 F.2d 483, 485 (Fed. Cir. 1985).

[5] Dole Food Co v. Patrickson, 538 U.S. 468, 474-75 (2003).

[6] The court did not reach defendants’ other grounds for dismissal. The defendants also argued that the ‘176 patent was invalid because the terminal disclaimer was ineffective because it was signed by Acacia instead of Email Link.

[7] MPEP § 706.02(l)(2) discusses common ownership as required to take advantage of 35 U.S.C. § 103(c).

[8] At least one other district court has found to the contrary. In Goss Int’l Ams., Inc. v. MAN Roland, Inc., et al., 2006 U.S. Dist. LEXIS 25769, *3-*5 (D.N.H. May 2, 2006), the District Court of New Hampshire, citing MPEP § 706.02(l)(2), found that the common ownership requirements are met when the disclaimed patent and prior patent were owned by a parent and its wholly owned subsidiary.

On Tuesday of last week, the Federal Circuit held that a party bringing a request for inter-partes reexamination may not appeal a decision by the Director of the U.S. Patent and Trademark Office that certain prior art does not raise a substantial new question of patentability. See Belkin International, Inc. v. Kappos, Federal Circuit Case No. 2012-1090. Instead the requestor must petition the Director to review such a decision. See id.]]> Belkin International, Inc. v. Kappos, Belkin requested inter partes reexamination of U.S. Patent 7,035,281 based upon four (4) prior art references. The Director found that three (3) of these references did not raise a substantial new question of patentability. The Director also found that the fourth reference raised a substantial new question of patentability and ordered reexamination based upon that single reference. Reexamination addressed only the issue of anticipation by the fourth reference. After reexamination closed, the examiner issued a Right of Appeal Notice, again addressing only anticipation by the fourth reference.

Belkin then appealed to the Board of Patent Appeals and Interferences, challenging the examiner’s failure to reject the ‘281 patent based on the three prior art references that the Director previously determined did not raise a substantial new question of patentability. However, the Board determined that it did not have jurisdiction to review the Director’s prior decision. The Board also noted that Belkin had failed to petition the Director to review this decision. The Federal Circuit affirmed the Board’s ruling.

When a request for reexamination is made, the Director must first determine “whether a substantial new question of patentability affecting any claim of the patent is raised by the request [for reexamination.]” 35 U.S.C. §312(a) This determination is “final and nonappealable.” 35 U.S.C. §313. Next, inter partes reexamination is ordered for resolution of “the substantial new question of patentability determined by the Director.” See 35 U.S.C. §313. Based upon this statutory structure, the Federal Circuit therefore held that “an issue that has been determined by the Director not to raise a substantial new question of patentability with respect to certain prior art cannot later be considered by the examiner and ultimately the Board.”

The Federal Circuit further noted that if a requestor wishes to dispute a determination by the Director that certain prior art does not raise a substantial new question of patentability, then the requestor must file a petition for review to the Director under 37 C.F.R. §1.927. Section 1.927 states that “[t]he third party requester may seek review by a petition to the Director under §1.181 within one month of the mailing date of the examiner's determination refusing to order inter partes reexamination. ... If no petition is timely filed or if the decision on petition affirms that no substantial new question of patentability has been raised, the determination shall be final and nonappealable. However, Belkin failed to file such a petition with regards to the three prior art references it raised on appeal.

Given this statutory scheme, it is important for parties seeking reexamination to carefully note what decisions must be timely raised in a petition to the Director, and what decisions are preserved for appeal. An error can easily result in the inability to promote or preserve arguments.

On August 31, 2012, the Federal Circuit, sitting en banc, issued a seminal, split decision articulating a new standard for induced infringement. Adjudicating two companion cases, Akamai Technologies, Inc. v. Limelight Networks Inc., and McKesson Technologies, Inc. v. Epic Systems Corp. (Fed. Cir., No. 2009-1372, -1380, -1416, -1417), the majority (Chief Judge Rader, and Circuit Judges Lourie, Bryson, Reyna, Moore and Wallach, joining) reversed both district courts and remanded for further proceedings.]]> [1] The Federal Circuit did not resolve that open question, leaving many commentators to speculate as to the future landscape for direct infringement claims implicating two separate actors.

Instead, the majority limited its decision to indirect, inducement claims and eliminated the “single entity rule” therefor, explaining that “it is not necessary to prove that all the steps were committed by a single entity.” The majority thus overruled the contrary holding in BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007), as applied to induced infringement.

Akamai’s patent (U.S. Patent No. 6,108,703) covers a method for the efficient storage and delivery of web content, whereas McKesson’s patent (U.S. Patent No. 6,757,898) covers a method of electronic communication between healthcare providers and their patients. In Akamai, the claimed steps are divided between two actors, the defendant, Limelight, and its customers. In McKesson, the claimed steps are divided between defendant, Epic, and patients and health care providers using Epic’s “MyChart” web-portal. In both McKesson and Akamai, no single entity performed all of the steps of the claimed methods.

Majority looked to “statutory construction, precedent, and sound patent policy”

First, the majority agreed that the inducement statute should cover joint infringement because, unlike the strict liability tort of direct infringement, inducement requires that “the accused inducer act with knowledge that the induced acts constitute patent infringement.” Thus, the scienter requirement avoids “the risk of extending liability to persons who may be unaware of the existence of a patent or even unaware that others are practicing some of the steps claimed in the patent.”

Next, the majority presented several hypotheticals as evidence that upholding the “single entity rule” for purposes of induced infringement would lead to inequitable and bizarre results. According to the majority, “[a] party who knowingly induces others to engage in acts that collectively practice the steps of the patented method—and those others perform those acts—has had precisely the same impact on the patentee as a party who induces the same infringement by a single direct infringer . . . .”

The majority then addressed the inducer who also practices some of the steps of the patented method proposing that “[i]t would be a bizarre result to hold someone liable for inducing another to perform all of the steps of a method claim but to hold harmless one who goes further by actually performing some of the steps himself. The party who actually participates in performing the infringing method is, if anything, more culpable than one who does not perform any steps.”

Turning to § 271 specifically, the majority reasoned that the language of § 271(b) supports the majority opinion because “[n]othing in the text indicates that the term ‘infringement’ in section 271(b) is limited to ‘infringement’ by a single entity. Rather, ‘infringement’ in this context appears to refer most naturally to the acts necessary to infringe a patent, not to whether those acts are performed by one entity or several.”

The majority also relied on the legislative history of the 1952 Patent Act, which provides strong support for eliminating the “single entity rule” for inducement. The majority relied, for the most part, on statements by Judge Rich (then “Mr.” Rich), one of the statute’s principal drafters. Addressing a proposed version of § 271(b) of the 1952 Act, Judge Rich commented on hypothetical patent claims covering television inventions. Judge Rich observed that to describe an invention involving a transmitter that one entity owns and operates and a receiver that another owns and operates, “it is necessary either to specify a new method which involves both transmitting and receiving, or a new combination of an element in the receiver and an element in the transmitter.”

Judge Rich then stated that certain Supreme Court decisions (the cases that spurred Congress to enact the induced infringement statute in the first place) would render Judge Rich’s hypothetical transmitter/receiver method claim not infringed because “while there is obvious infringement of the patent, there is no direct infringer of the patent but only two contributory infringers.” The majority concluded that Judge Rich’s statements reflect his belief that there is liability for indirect infringement “even though there was ‘no direct infringer of the patent.’” The majority pointed to other statements Judge Rich made (concerning joint tortfeasors in patent infringement cases) as evidence that Judge Rich “viewed indirect infringement as an available remedy even in the absence of any single direct infringer.”

The Court then identified other areas of law that embrace the situation in which a principal can be liable for acts that an innocent intermediary commits, if the principal induced the intermediary to so act. The majority pointed to the aiding and abetting provision in 18 U.S.C. § 2(a & b), which “has been construed to permit the conviction of an accessory who induces or causes a criminal offense even when the principal is found not liable for the unlawful conduct.” The majority drew two more analogies to torts (§ 877(a) of the Second Restatement of Torts, and §§ 876 and 877 of the First Restatement of Torts), and reasoned that these exemplars were particularly compelling because § 271(b) derives from “the old common law doctrine of joint tort feasors.” According to the majority, these analogous principles found from other facets of the law support the conclusion that “a party may be liable for inducing infringement even if none of the individuals whose conduct constitute infringement would be liable, as direct infringers, for the act of infringement that was induced.”

Judge Newman dissented

Judge Newman’s dissent criticizes the majority for making “dramatic changes in the law of infringement.” Namely, Judge Newman stated that the “scant majority of the court adopts a new theory of patent infringement…whereby any entity that ‘advises, encourages, or otherwise induces,’ maj. op. 14, or ‘causes, urges, encourages, or aids the infringing conduct,’ id. at 15, is liable for the infringing conduct.”

Judge Newman also points out that “the majority further holds that only the ‘inducer’ is liable for divided infringement, and that the direct infringers are not liable although the patent rights are ‘plainly being violated by the actors’ joint conduct.’” Judge Newman characterizes this “new” and “flawed” type of infringement as the “inducement-only rule.”

According to Judge Newman, the infringement jurisprudence compels a different results—that there is infringement “when all of the claimed steps are performed, whether by a single entity or more than one entity, whether by direction or control, or jointly, or in collaboration or interaction.” Judge Newman’s dissent also touched on remedies in such cases, proposing that the “[r]emedy for infringement may be apportioned on such traditional tort factors as the relative contribution to the injury to the patentee, the economic benefit received by the tortfeasor, and the knowledge and culpability of the actor.”

Judge Linn dissented (Judges Dyk, Prost, and O’Malley. joining)

Judge Linn’s dissent concludes that the rulings in BMC and Muniauction were correct and should be adopted en banc so that “liability under § 271(b) requires the existence of an act of direct infringement under § 271(a), meaning that all steps of a claimed method be practiced, alone or vicariously, by a single entity or joint enterprise.”

Judge Linn’s dissent criticized the majority’s conclusion that the definition of “infringement” is different under § 271(a) and § 271(b). Judge Linn wrote, “Divorcing liability under § 271(a) from liability under § 271(b) is unsupported by the statute, subverts the statutory scheme, and ignores binding Supreme Court precedent.” Judge Linn proposed that “infringement” is expressly defined in § 271(a) alone according to the statutory language, comments contained in House and Senate reports from the statute’s adoption, canons of statutory construction, and statements by the Supreme Court in Aro.

Judge Linn’s dissent also addressed the grounds upon which the majority based its holding by questioning the relevance of Judge Rich’s comments (noting that it is unclear whether Judge Rich’s comments were directed at contributory infringement or induced infringement), calling the majority’s reading of the Fromson opinion “misplaced and misleading,” questioning the propriety of the majority’s reliance on Congress’s more recent additions to § 271, and questioning the propriety of the majority analogizing patent law to other areas of law such as criminal and tort law.

On September 5, 2012, the United States Court of Appeals for the Second Circuit issued its long-awaited and highly anticipated decision in Christian Louboutin S.A. v. Yves Saint Laurent Am. Holding, Inc., Docket No. 11-3303-cv. The Second Circuit reversed the lower court decision, in part, holding that Christian Louboutin’s “red outsole” trademark was valid and enforceable, and affirmed in part, holding that such trademark protection was limited to uses in which the “red outsole” contrasts with the color of the remainder of the shoe. As a result, the appeal of Christian Louboutin (“Louboutin”) was not successful and the fashion atelier Yves Saint Laurent (“YSL”) was not enjoined from using a red sole as part of a monochrome red shoe. The ruling, deciding a novel and hotly debated issue of U.S. trademark law regarding aesthetic functionality, is a victory for both sides in some respects, yet certainly leaves the door open for future debate and lawsuits about the scope of the Louboutin mark’s protection.]]>

On August 10, 2011, Judge Victor Marrero of the United States District Court for the Southern District of New York denied Louboutin’s motion for a preliminary injunction against YSL. In his opinion, Judge Marrero held that a single color can never be protected by trademark in the fashion industry and that, as a result, Louboutin’s trademark was likely not enforceable. The district court ruled that in the fashion industry, single-color marks are per se inherently “functional” (that is, color cannot be used as a brand identifier because it serves significant aesthetic functions unique to the fashion industry), and that any such registered mark would likely be held invalid. Louboutin brought an interlocutory appeal challenging the district court’s application of the “aesthetic functionality” doctrine, and sought to reverse the decision denying that Louboutin’s red sole trademark was entitled to legal protection.

On appeal, the legal issue presented to the Second Circuit was “whether a single color may serve as a legally protected trademark in the fashion industry and, in particular, as the mark for a particular style of high fashion women’s footwear.” The Second Circuit concluded that the district court erred by holding that a single color per se can never serve as a trademark in the fashion industry because such a holding was inconsistent with U.S. Supreme Court precedent on aesthetic functionality and single color trademark protection. After a discussion of the history of both the utilitarian and aesthetic functionality doctrines, the Second Circuit stated that a “mark is aesthetically functional, and therefore ineligible for protection . . . where protection of the marksignificantly undermines competitors’ ability to compete in the relevant market.” (Emphasis in original.) The Second Circuit reasoned that Supreme Court precedent did not sanction an industry-based per se rule that would deny protection for the use of a single color as a trademark, in this case, as it related to the fashion industry.

The Second Circuit then observed that, although the red sole mark was ineligible for trademark protection insofar as it would preclude competitors’ use of red outsoles in all situations, including YSL’s monochromatic use, the Louboutin red sole mark had achieved “secondary meaning,” and thus the requisite “distinctness” to merit protection, when used as a red outsole contrasting with the rest of the shoe. Thus, the Second Circuit reasoned that YSL’s use of red color on a monochromatic shoe did not infringe Louboutin’s red sole mark because the use of the red was not a trademark use.

The Second Circuit held that there was no reason why a single-color mark could not acquire secondary meaning in the context of the fashion industry and serve as a brand identifier if it were used “so consistently and prominently by a particular designer that it becomes a symbol, the primary significance of which is to identify the source of the product rather than the product itself.” Citing Louboutin’s substantial advertising and marketing expenditures over the years to foster goodwill in the red sole, and the successful fame and association of the red soles with Louboutin, the Second Circuit concluded that the red outsole had come to identify and distinguish the Louboutin brand, and thus was a distinctive symbol that qualified for trademark protection under the Lanham Act. However, the Second Circuit was careful to limit the mark’s protection to the bottom sole, explaining that the secondary meaning of the red sole mark did not extend to uses in which the sole does not contrast with the upper part of the shoe, e.g., a monochromatic shoe, stating that the Louboutin mark is closely associated with the contrast between the red sole and the upper sole. The Court of Appeals consequently instructed the USPTO to limit the mark’s registration to only cases where the red sole contrasts with the upper part of the shoe. The Second Circuit also stated that “either party may restore jurisdiction” to the Court “to consider whether argument remain or arise relating to this case by sending a letter to the Clerk” and that “[a]ny such proceedings will be argued to [the same] panel.”

The Second Circuit’s decision, while a landmark ruling in the fields of trademark law, fashion law, and to a certain extent, pop culture, leaves a number of questions unanswered. For example, where exactly is the line to be drawn between “contrasting” and “monochromatic”? At what point does a non-infringing monochromatic red shoe become an infringing contrasting shoe with a pink top and red sole? Such highly fact-specific questions may remain on the horizon so long as competitors seek to trade upon the market power and allure of the red sole trademark. If nothing else, the Second Circuit’s decision represents a compromise: on the one hand, rewarding a company that devoted years and millions of dollars into building a world-known fashion brand, while on the other, preventing that company from overreaching with its color trademark in an industry wholly dependent on the artistic sensibilities, creativity, and ingenuity of its designers.

New FCC regulations on closed captioning of IP-delivered video programming have caught many by surprise even though they have been in the works for the past two years. Many of those who will be directly impacted by the new rules may still be unaware of the rapidly approaching compliance deadline of September 30, 2012. Most pre-recorded video programming must be captioned for IP-delivery if it is shown on television with captions on or after September 30, 2012. The producer or supplier of the content bears the initial responsibility for inserting the captioning but the distributors also have the duty to confirm compliance. There are many variations and different applicable dates for different kinds of programming (e.g., live vs. pre-recorded but edited vs. archived). As in all aspects of the law, the application of the law and the associated regulations depends on the specific circumstances surrounding each video program in a library. However, since the dates for implementation vary widely depending on the content and whether it has been broadcast on television in the US, producers, suppliers and distributors must carefully consider each video program in relationship to the relevant regulations. Video programming distributers will also be subject to new consumer complaint procedures that require distributors to have prescribed procedures in place by September 30, 2012. And while the deadline for device manufacturers to comply with their new closed captioning requirements is not until 2014, the reality of equipment development cycles requires device manufacturers to pay close attention to the new requirements immediately.]]>

With certain exceptions (e.g., archived content), once a television program or motion picture has been shown on television with captions in the United States on or after September 30, 2012, the same video program must also have captions for IP-delivery. Conversely, video programs that are distributed via IP are not required to be captioned unless and until they have been shown on television with captions in the United States on or after September 30, 2012. Foreign television broadcasts do not trigger the new IP closed captioning rules.

Below are several key provisions of the CVAA and the FCC implementing regulations:

1. The CVAA and FCC regulations never apply to -- so that no closed captioning is required for -- programming that is ONLY shown on the Internet and NEVER “published or exhibited” on television in the United States with captions.
2. The strangely worded “edited for Internet distribution” provisions are designed to reach program content altered for the Internet. Absent such a requirement, it might be possible to argue that edited content is a “new” program that was never “published or exhibited” on television and, hence, not subject to the IP closed captioning requirements. This would provide an easy mechanism for closed captioning avoidance simply by altering the content for Internet distribution. On the other hand, since altered content is less likely to include pre-existing captioning, the deadline for compliance is September 30, 2013, one year after the general compliance date.
3. The “live and near-live” programming requirement is designed to reach primarily simulcast retransmissions of live broadcast content such as, for example, the Olympics or other sports events. This requirement has an extended effective date of March 30, 2013.
4. The mandate only applies to full-length programming. It does not apply to “clips” of such programming.
5. The mandate does not apply to consumer-generated content such as the kind of video shorts commonly found on social networking sites like YouTube.
6. The primary obligation applies to video programming owners although the distributors have an obligation to make certain that the content they distribute is in compliance.
7. The video programming distributor must agree upon a mechanism with each video programming owner to determine whether programming is in compliance and then to make a good faith effort to identify programming subject to the requirements of the FCC regulations.
8. A distributor may rely in good faith on a certification from a video programming owner that the video programming need not be captioned if the certification includes a clear and concise explanation of why captioning is not required and the distributor is able to produce the certification to the FCC in the event of a complaint.
9. Nothing in the FCC regulations requires a video programming distributor to accept such a certification. Given the regulatory framework and potential risk, it seems likely that most distributors will, instead, insist on closed captioning prior to delivery especially where they are licensing a large library of content where each individual component would potentially be subject to its own closed captioning deadline.
10. The FCC regulations provide for exemptions based on economic burden. These provisions will likely NOT apply to many programming providers, but they should still be explored before drawing any hard and fast conclusions.
11. The FCC regulations provide for a specific complaint procedure. Complaints must be filed in writing with the FCC or the video programming distributor within 60 days after the date the complainant experienced a problem with the captioning. Video programming distributors must provide contact information for filing such complaints. A general notice on the company website will suffice provided the requisite contact information is included.
12. Private rights of action are expressly prohibited.
13. The CVAA “‘require[s] that, if technically feasible, apparatus designed to receive or play back video programming transmitted simultaneously with sound . . . and us[ing] a picture screen of any size be equipped with built-in closed caption decoder circuitry or capability designed to display closed-captioned video programming.’” This mandate becomes effective on January 1, 2014 and covers devices such as PCs, smartphones, and tablets (as well as any integrate software).
14. The FCC adopted the Society of Motion Picture and Television Engineers Timed Text format (SMPTE ST 2052-1:2010: “Timed Text Format (SMPTE-TT)” 2010) as a safe harbor interchange and delivery format. Where use of an alternate standard results in noncompliant captions, both the video programming owner and the video programming distributor may be held responsible for violations of the new rules.

Although the new FCC closed captioning regulations may be viewed as another regulation requiring burdensome compliance, video programming owners and distributors should be equally concerned by a recently issued decision in the U.S. District Court for the District of Massachusetts. In National Association of the Deaf v Netflix, Inc., C.A. No. 11-CV-30168-MAP, 2012 U.S. Dist. LEXIS 84518 (June 19, 2012), the Court denied Netflix’s motion for Judgment on the Pleadings in a complaint for failure to provide equal access to the Netflix video streaming web site, “Watch Instantly,” for deaf and hearing impaired individuals pursuant to Title III of the Americans with Disabilities Act (the “ADA”). The Court held that the Internet is a “place of public accommodation,” a term it found was not restricted to physical places. The Court did state that Netflix may be able to demonstrate that it does not “control” the content sufficiently to provide closed captioning due to copyright issues, but the Court merely invited the parties to revisit that issue in a later stage of the litigation.

Perhaps most significantly, however, the Court found no irreconcilable conflict between the ADA and the CVAA, since any obligation Netflix may have to provide captioning under the ADA would not contravene any provision of the CVAA. Furthermore, the different CVAA time line for captioning does not create an irreconcilable conflict with the ADA since Netflix can comply with both statutes. Also, the Court found the exclusively administrative complaint procedure under the CVAA was not inconsistent with a private right of action under the ADA for the same wrong. Finally, the Court found no inconsistency between the exemptions in the CVAA for demonstrated economic burdens and the ADA since a court may conclude that the ADA also forecloses liability for a de minimus lack of captioning that is reasonable under the circumstances.

As stated by the Court, “In sum, although the subject matter of the CVAA overlaps with the ADA and the two statutes to some extent impose different requirements on distributors of video programming, such as Defendant, none of these differences create a ‘positive repugnancy’ between the two laws. [Citations omitted.] As such, the court must give effect to both statutes.” The Court further justified its holding by observing that the ADA covers a substantially broader scope of closed captioning as opposed to the narrow scope of the CVAA’s reach that is limited solely to programming first broadcast on television with closed captioning.

The Netflix decision, relying on the ADA, seemingly provides a much broader mandate than the CVAA. Most disturbingly, the ADA mandate would seem largely unregulated whereas, in sharp contrast, the CVAA and the FCC regulations are narrowly tailored to provide a balanced approach to protecting the rights of the impaired while not overly burdening the duties of the video owners and distributors. It is not clear whether the Netflix decision, which is still on the Trial Court’s calendar, will ultimately be decided in the Plaintiff’s favor. However, it does strongly suggest that providing captioning earlier, rather than later, should be a goal of any video programming owner since it will likely be a delivery requirement of most distributors and, in any event, may serve to avoid potential ADA claims.

On September 16th, 2012, new rules go into effect for post-grant proceedings for review of United States Patents. Among these are rules for post-grant review of issued patents, inter partes review and transitional post-grant review proceeding for covered business method patents. This article looks at the new requirements for inter partes review.]]> I. Applicability and Timing

Inter partes review is a new trial proceeding conducted at the Patent Trial and Appeal Board to review the patentability of one or more claims in a granted United States Patent. Effective September 16th, 2012, inter partes review will be available for all patents regardless of their priority date. This provides an expansion over the applicability of the inter partes reexamination process, which is available only for patents issued from an original application filed in the United States on or after November 29th, 1999.

Petitions requesting the institution of an inter partes review may be filed any time after nine months from the grant of the patent or, in the case of a reissue, nine months from the issuance of the reissue patent. However, if a post-grant review proceeding was instituted on the subject patent and is still pending nine months after the patent is granted, the petition cannot be filed until after the post-grant review is terminated.

However, if you are involved in litigation, additional time limitations may kick in. Therefore, you must be careful not to miss your window of opportunity to file for inter partes review. The new rules provide that you will be estopped from filing a petition for inter parties review if (1) you have already filed a civil action challenging the validity of a claim of the patent; or (2) more than one year has elapsed since you were served with a complaint alleging infringement of the patent. You may also be estopped from filing a petition for inter partes review in cases where there has been a final written decision in a post-grant review, a covered business-method patent review, or inter partes review.

The new inter partes review should move along more quickly than the inter partes reexamination it replaces. The new rules provide a one-year period for administering the proceeding after institution, with up to a six-month extension for good cause. In contrast, there are no statutory time limits placed on inter partes reexamination, which can take several years.

II. Grounds for Review

The grounds for seeking an inter partes review will be limited to issues raised under 35 U.S.C. § 102 or 103 and only on the basis of prior art consisting of patents or printed publications. This is in contrast to the grounds for seeking post-grant review, which include grounds that could be raised under 35 U.S.C. §§ 101, 102, 103 and 112.

If you choose to take advantage of the new inter partes review, your petition should identify the precise relief requested for the claims challenged. The new rules require that your petition set forth each claim being challenged by the petition. For each claim being challenged, your petition must set forth the specific statutory grounds on which the claim is being challenged, how the claim is to be construed, how the construed claim is unpatentable under the identified statutory grounds, exhibits showing any supporting evidence relied upon, the relevance of the evidence to the challenge raised and a citation to the portion of the evidence that is relied upon to support the challenge.

III. Patent-Owner Rights

If your patent is challenged under the new inter partes review procedure, you will now have the ability to file a preliminary response to the petition before the Patent Office makes a determination as to whether to institute the proceeding. This is an added benefit to the patent owner that is not permitted under the current inter partes reexamination proceedings. In this response, the patent owner may set forth reasons why inter partes review should not be instituted based upon the failure of the petition to meet its burden. You should note, however, that the preliminary response must be filed within three months from the date of notice that the request to institute an inter partes review has been granted a filing date.

Because the Patent Office has three months from the filing of the patent owner’s preliminary response (or three months from the date such a response was due) to determine whether to institute the review, the patent owner may wish to file a patent-owner preliminary response well before the due date to expedite the determination. For similar reasons, the patent owner may instead file a paper stating that no patent-owner preliminary response will be filed. Under the rules, no adverse inferences will be drawn where a patent owner does not file a preliminary response.

There are some limitations placed on the patent-owner preliminary response. For example, the patent owner is not allowed to present new testimonial evidence such as expert-witness testimony on patentability. This is in contrast with a patent-owner response submitted after institution of the proceeding, which must present, through affidavits or declarations, any additional factual evidence and expert opinions the patent owner relies on in support of the response. Another limitation on the patent-owner preliminary response is that it cannot include any amendment. However, provisions for filing a motion to amend the patent after an inter partes review are provided in the new rules and are addressed below.

Finally, the patent owner may file a statutory disclaimer disclaiming one or more claims in the patent. In cases where patent claims are disclaimed, no inter partes review will be instituted to review those claims.

IV. Patent-Owner Amendments

The patent owner will be given the right to file one motion to amend the patent, which will be entered provided that it complies with the timing and procedural requirements. The motion to amend must be filed no later than the filing of the patent-owner response, and it must respond to the ground(s) of unpatentability advanced in the proceeding. A motion to amend must also include a claim listing showing the changes being made, and it must set forth support in the original disclosure (or earlier-filed disclosure, as applicable) for each amended or added claim. A motion to amend may be denied where it seeks to enlarge the scope of the claims or introduce new matter.

In the motion to amend, the patent owner may cancel a challenged claim or propose a reasonable number of substitute claims. The reasonable number is presumed to be one substitute claim per challenged claim, but this may be rebutted by a demonstration of need.

Any additional motions to amend will require prior authorization by the Patent Trial and Appeal Board. Authorization may be granted where there is good-cause showing or upon a joint request of the petitioner and the patent owner made to materially advance a settlement. In considering whether good cause is shown, the Board will evaluate how the motion would impact the timely completion of the proceeding and the additional burden it places on the petitioner.

Our Intellectual Property lawyers at Sheppard Mullin have many years of experience effectively utilizing post-grant proceedings before the United States Patent and Trademark Office to further our clients’ objectives. We have used the post-grant proceedings both as a way to avoid costly litigation and as a tool to supplement our litigation strategies.