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Top 10 Patent, Innovation & IP Events of 2010


Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
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Posted: December 28, 2010 @ 6:30 am
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At this time of the year all typically sit back and reflect on the year that has been, spend time with family and friends, watch some football and set a course to follow into the new year.  It is also that time of the year where we are inundated with lists, top 10 this, top 10 that, it gets rather mind numbing after a while.  So with that in mind — I have my own top 10 list.  I know, I know, but they are so much fun to put together and there is something useful about looking back and reflecting that helps put things into perspective.

Without further ado, here are the top 10 events that shaped the patent, innovation and intellectual property industry during 2010 — at least according to me, and with a heavy patent emphasis.  What did you expect?

10. Patent Reform

Not much to say here other than it died, AGAIN! If you are wondering why you might be tempted to just return to any number of recap articles over the last 5 or 6 years assuming the reasons must be the same, but you would be wrong. I have been told a compromise had been reached on the last remaining stumbling block relative to the first to file versus first to invent, restoring a full 12 month grace period for inventors, making the changes relatively minor then. Even with the compromise the legislation couldn’t move. 25 U.S. Senators from both parties wrote Senator Harry Reid and pleaded with him to schedule some floor time, but he never did. So this year Harry Reid seems to blame for the lack of patent reform. In any event, covering Patent Reform is becoming like living though Bill Murray’s Groundhogs Day, but without any of the joy of possibly getting it right at the end of the day.

9. Popularization of the USPTO

The Patent Office and the Patent System found its way into the public conscious for at least a fleeting few seconds during 2010, which is more than usual. In January 2010, President Obama called the IT systems at the Patent Office embarrassing and vowed to get something done. Well, almost a year has gone by and nothing seems changed really, but at least for long enough to make the remarks the President of the United States thought about a patent issue, which is a start! The New York Times published an op-ed piece written by Chief Judge Michel and Tessera CEO Hank Notthaft, and the folks over at Fox News read that op-ed piece and brought it up on a Sunday morning talk show. That is an awful lot of public notice for the Patent System, but shamefully it didn’t even add up to a full 15 minutes. In truth, it was far closer to 15 seconds than 15 minutes. Not to be disappointed, I view this as a start; a modest start, but a start. Everyone with an interest in the Patent System needs to take it upon themselves to get the word out, talk to friends and family and push the agenda forward. Innovation matters and patents are a huge part of that. I’ll step down off my soapbox — for now.

8. Supreme Court accepts Microsof v. i4i appeal

On November 29, 2010, the United States Supreme Court decided to accept Microsoft’s appeal, which will require the Supreme Court to decide whether to further chip away at the value of patents in general. The appeal seeks to erode the presumption of validity enjoyed by a patent, and Microsoft and others are urging that that prior art not considered by the Patent Office should be treated differently than prior art considered by the Patent Office. Under the law established by the Federal Circuit, in order to invalidate a patent claim there needs to be clear and convincing evidence presented at trial, regardless of whether the prior art offered at trial was considered by the Patent Office. While that might make some sense logically, such a ruling would immediately do devastating harm to the value of individual patents and patent portfolios, erasing tremendous amounts of wealth. It would also further erode the value of a patent, which is something the Supreme Court has been doing over the years in various rulings. Patent owners would lose value and there would be no quid pro quo in return. The ensuing ruling, if it sides with Microsoft, would stall patent prosecution and thousands and thousands of documents would be submitted to patent examiners with applicants demanding they be considered. The process would, without any exaggeration, come to a screeching halt.

This could and maybe should be higher than #8, but it is really a story for next year, so look for this case to be the biggest issue for 2011. Simply put, there is no news yet because so far the Courts below have gotten it right, but that doesn’t mean that we can’t be scared about what the Supreme Court will do; and there is real reason for fear.  The mere fact that they have taken the case has already sent chills down the spine of patent owners, innovators and investors, which causes it to make the list.  After all, the Supreme Court doesn’t take cases to let the Federal Circuit know they think they got it right, they take cases to reverse the Federal Circuit.  Yikes!

7. Apple iPhone 4 and iPad

On the innovation front nothing seemed to grab the public attention this year quite like the iPad. Apple released the first iPad in April 2010 and has reportedly sold more than 8 million units.

On the other end of the spectrum is the iPhone 4. The iPhone 4 has reportedly sold nearly 47 million units, but it has not been without some enormously embarrassing issues. Phone reception was reportedly so bad, even for AT&T service. The phone was getting such a bad wrap that Steve Jobs had to come out and say something publicly. I have an iPhone 3, and have refused to upgrade because of the reports, but allegedly if a user covers the lower left corner of the iPhone 4 the a call will drop. The culprit is widely agreed to be a design flaw in the antenna, which is integrated around the edge of the device. Not acknowledging that Apple could have possibly done anything wrong, despite the rumors that Apple engineers warned of possible problems in advance, Jobs decided to blame the users. I don’t know about you, but I am sick and tired of paying to beta-test, which seems how consumers are treated.

A PR disaster for the iPhone, Apple and Steve Jobs doesn’t seem to have affected sales much, and by some estimates the iPad has over 95% of the market. So it has been an good year for the creator of everything “i”.

6. Supreme Court Ties on Copyright First Sale

Here is another story that really should be higher, but as far as I can tell has flown under the radar screen. I guess that is what happens when there is a tie and no decision from the Supreme Court, but still, the decision that winds up being affirmed is nonsensical.

On Monday, December 13, 2010, the United States Supreme Court issued a non-decision in the matter of Costco Wholesale Corporation v. Omega, S.A. The Per Curiam decision simply read: “The judgment is affirmed by an equally divided Court. Justice Kagan took no part in the consideration or decision of this case.” So a 4-4 tie means the Ninth Circuit decision, which held that there are no first sale rights in goods acquired overseas, remains the law in the Ninth Circuit and governs this case. Never mind that this ruling contradicts previous Supreme Court precedent, and to have reached it 4 Justices would have had to decide that Congress intended to grant foreign copyright owners more rights than US copyright owners. The ruling also means that if you go overseas and buy something that is copyrighted or has a copyrighted symbol on it then you are not authorized to sell it upon returning to the U.S. If you do you would be infringing the rights of the copyright owner. Absolutely ridiculous!

A decision like this makes you wonder whether the Supreme Court is even competent to address intellectual property issues.

5. USPTO Issues Patent Friendly Guidelines

Just three years ago who among us would have ever thought that the United States Patent and Trademark Office would ever issue any Guidelines that were patent friendly, let alone made sense? I certainly wouldn’t have. It was in 2007 that the claims and continuations debacle was in full swing, and just three years later the USPTO seems to be getting a clean bill of health, at least with respect to things they can control. Now the USPTO is not doing everything properly, just witness the bizarre happenings within the Office of Enrollment and Discipline, where those who bilk clients are suspended and have their sentences suspended. But the policy setting end of the establishment seems to be firing on all cylinders, perhaps with an infusion of a bit of nitrous oxide here and again for good measure.

Two particular Guidelines deserve mention. First, the KSR guidelines which were revised actually contained illustrations of what is a patentable invention, although with a lot of favorable language that I am sure patent examiners will be reading again in Arguments and Remarks sections in Office Action Responses. Of course, there were the typical no-soup-for-you illustrations of what is not patentable, but all and all it seemed balanced, which was newsworthy sadly. Second, the Interim Bilski Guidelines seem exceptionally well thought out and mandate that patent examiners shouldn’t get rid of applications for lacking patentable subject matter except in extreme cases, rather forcing patent examiners to get to the heart of the matter, which is this — is there an invention disclosed? This invention disclosure question is and always has been a 112 question that asks about the sufficiency of the disclosure, which is what these cases always were about. Do you have an invention and is it described adequately? That has never properly been a patentable subject matter question, and for now it is where it belongs, at least inside the walls of the Patent Office.

4. The Fight for Adequate USPTO Funding

Who knew that it would be such a fight to get Congress to actually adequately fund the United States Patent and Trademark Office? I mean do people actually walk around the Capitol saying “lets not fund the Patent Office” or perhaps “innovation is overrated” or “the Patent Office doesn’t need a functioning IT system.” Well, if you allow actions to speak for themselves it certainly would seem that these very things are at least running through the heads of Members of Congress who continue to refuse to adequately fund the Patent Office.

Let’s be perfectly clear. This is not a situation where an agency is asking for money, it is asking to KEEP money. The Patent Office collects more than it is allowed to keep, which means that at the end of the year fees paid in by users of the Patent Office are siphoned off and into other projects that don’t relate to the Patent Office. It is a national innovation tax. For fiscal year 2010 it would have amounted to a tax upwards of $200 million, but Congress agreed to let the Patent Office keep an additional $129 million, but that still means over $70 million collected was not allowed to be put to work within the USPTO. As a result of this type of accounting and mismanagement by Congress over the years the Office has not been able to reinvest in itself, which is why the IT systems and computers are literally falling apart. Sickening.

3. Judge Michel Retires

Chief Judge Paul Michel of the United States Court of Appeals for the Federal Circuit announced on Friday, November 20, 2009, that he would not be taking senior status when it was available to him and instead would be stepping down from the Federal Circuit effective May 31, 2010. Effective June 1, 2010, Chief Judge Michel became a private citizen, something that he had not been for virtually all of his adult life. Having started working in the DA’s Office in Philadelphia and moving on the Watergate and then Koreagate investigations in the 1970, to the United States Senate on Senator Arlen Specter’s staff, to his position on the United States Court of Appeals, virtually since leaving law school Chief Judge Michel was unable to freely and openly speak his mind. He left the bench to become an advocate, and has said on many occasions that he does not view this as a retirement but rather as a job change. He has told me he plans to be public enemy #1 in the eyes of many as he unabashedly calls it like he sees it and unapologetically agitates for a better, strong patent system and a Patent Office that is actually adequately funded.

Chief Judge Michel is a giant in the industry, and while we may have lost him on the bench I doubt he will be far from sight. We need more like Chief Judge Michel.

2. Supreme Court Decides Bilski

On June 28, 2010, after many months of waiting, the Supreme Court held that the machine-or-transformation test is not the sole test for patent eligibility under §101, and that the Federal Circuit erred when it ruled that it was the singular test to determine whether an invention is patentable subject matter. Figuring out exactly what the decision meant, however, was complicated by the fact that Justice Scalia, who revels in being one who thinks the Constitution should mean what it meant in 1789, also seems to think that innovation ought to be what it was in 1789. Scalia has created a bit of confusion by not joining the majority opinion with respect to Sections II-B-2 and II-C-2, the sections that dealt with software, the fact that innovation progresses and the law cannot remain static and stagnant, and the desire not to destroy nascent technologies, and then joining Justice Breyers concurring opinion.

What we do know, however, is that 5 Justices, namely Justices Kennedy, Roberts, Thomas, Alito and Scalia all agreed that business methods are patentable subject matter. All 9 Justices agreed that the Federal Circuit misread previous Supreme Court decisions when they mandated that the machine or transformation test be the only test for determining whether a process is patentable subject matter. All 9 Justices agreed that the Bilski application was properly rejected. 8 of the Justices, perhaps only Scalia left out, also seemed to think that software is patentable. Clearly Kennedy, Roberts, Thomas and Alito think software is patentable and said as much directly. Stevens, in footnote 40, suggested a saving interpretation of State Street that would have it not expansively allow business method patents but which would find that Judge Rich meant the otherwise patentable innovation in State Street would not be denied patent status because it relates to a business method. The underlying invention in State Street was software related processes, so that would mean that the software processes were patentable despite the fact that they related to a business method, thus making software patentable in the view of Stevens, Ginsberg, Breyer and Sotomayor.

In any event, business methods, software and medical diagnostics remain patentable subject matter, and the USPTO has issued interim guidelines the mandate that examiners get past 101 in all but the extreme cases and deal with whether there is an innovation present and defined pursuant to 112, which is the way it ought to be anyway. So all and all it seems that the Bilski decision and the aftermath as set forth by the USPTO, as well as the first cases from the CAFC, suggest that disaster was averted and everything is running smoothly on the patentability front.

1. ACLU Challenges Constitutionality of Gene Patents

The biggest news story of the year would have been the Supreme Court’s Bilski decision, but they largely seemed to get it right and everything is working itself out. The expression — every once in a while a blind squirrel finds a nut — comes to mind. Unfortunately, it seems a blind squirrel was assigned to the ALCU challenge to the Myriad Genetics patents at the United States District Court for the Southern District of New York. Judge Sweet, the 89 year old jurist who is one of the most liberal members of the federal judiciary, decided to re-write 30 years of patent law and ignored all of the scientific evidence that conclusively proves that isolated DNA cannot exist in nature because what appears in nature ISN’T ISOLATED! Not to get too technical, but Judge Sweet’s interpretation of the claims at issue had to read the word “isolated” as being of no consequence, which is exactly what he did, finding there is no difference between isolated DNA and DNA that isn’t isolated, which is scientifically not true.

Then the Department of Justice actually files a brief that sides with the challenge to gene patents and completely throwing the Patent Office under the bus. You see, the Patent Office was sued along with Myriad Genetics because the ACLU says that the Patent Office shouldn’t be issuing gene patents. So the Department of Justice, who is supposed to represent the Patent Office, has sided with the party suing the Patent Office. OMG! You can’t make this stuff up! On top of that, the ACLU preemptively filed a motion to recuse, seeking Chief Judge Rader be removed from the case. For crying out loud the panel wasn’t even yet assigned, so the ACLU was clearly grandstanding, nothing else.

This, along with the Microsoft v. i4i appeal will be huge issues in 2011. While the Microsoft case might just trash the value of all issued patents, the Myriad case could throw an entire industry under the bus and render most of its patents, an estimated 20,000 plus issued patents, useless as having been improvidently granted by the Patent Office. Boys and girls, the manufacturing jobs have left and they are not coming back. If we declare open season on innovation and kill off an entire sector of the biotech industry that would be devastating to our economy. Businesses go where the climate is best and rules more favorable. The fate of much of the biotech sector hangs in the balance. I’m sure the Federal Circuit will do the right thing on the appeal, but what about the Supreme Court? What about Congress? Good heavens, it pains me to think of the disaster that could lie ahead in 2011.

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Posted in: Apple, Business Methods, Companies We Follow, Gene Patents, Gene Quinn, IP News, IPWatchdog.com Articles, Patents, Software, US Supreme Court, USPTO

About the Author

is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.

 

9 comments
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  1. I would have thought that Bilski topped the list – just my opinion. All great IP stories though.

  2. Mark-

    I went back and forth between Bilski and the ACLU thing. I couldn’t argue with anyone who would put Bilski first, but the reason I moved it to second was because it seems like everything has turned out fine. Now that in and of itself might make people want to put it first, because how many times does the Supreme Court actually get something like this correct, or at least not so wrong that it is actually workable. Anyway, what nuggets they planted allowed the Patent Office to issue sensible guidelines that focus the question on 112 and not on 101, all good. Disaster averted.

    As I am writing this I am re-convincing myself that Bilski should have been #1!

    Anyway, the Myriad case strikes at the heart of patents. The ACLU couldn’t care less about helping people. This case is about a second opinion, not about being denied a test or treatment. The harm that would befall society if the ACLU prevails would be enormous. Lost jobs in the biotech sector and lost innovations that could be live-saving, and virtually free after the patent expires. I don’t think enough people are paying attention to the Myriad case, so that was why I made it #1… disaster still on the horizon, flying under the radar screen, political intrigue with the Department of Justice at odds with the Department of Commerce and the typical ACLU grandstanding. Factor in that they and their supporters don’t understand the science involved… what a story! On top of that, if the anti-patent forces were to prevail here they wouldn’t stop. Anti-patent forces are gaining momentum, and it seems to largely be unnoticed, as if innovation will happen because it just does happen.

    Cheers!

  3. a weaker patent system would undermine the credibility of the patent law and weaken our faith in the judicial system….why the hell would the supreme court judges want the system weakened unless they’ve been bribed or coerced?

  4. in relation to #8:

    “Microsoft contends that invalid patents stifle, rather than promote, the progress of useful arts and that the PTO is overburdened with the inevitable result that it makes an increasingly large number of mistakes. Thus, because too many dubious patents are granted, accused infringers must prove invalidity by clear and convincing evidence, the standard hinders rather than promotes, progress.”

    if a patent is indeed ‘dubious’ and should never have been issued by the USPTO, why would a contender not able to prove the invalidity of the patent under the C&C standard?

    MSFT’s argument seem self-contradictory.

  5. “lets not fund the Patent Office”

    Perhaps some of the same parties pushing what they call ‘patent reform’ are pushing for further fee diversion? Either way they hinder issuance of more patents they will be subject to.

  6. Gene,

    Aside from clearly demarked “events” in 2010 there is also the slow and unchecked decline of scientific and rational thinking within our society.

    The Bilski and ACLU “events” are merely symptomatic markers for the more disturbing and across the board trend.

    First, in the ACLU (Myriad) case it is disturbing that we have people who believe others are stealing their God-given “genes” and they do not understand that “isolated”/purified DNA is a different “composition of matter” which clearly falls within the scope of 35 USC 101.

    Second, in the Bilski case it is disturbing that we came one vote shy of having major fundamentals of our patent system destroyed by an overzealous retiring justice. Moreover, the 4-1-4 majority in Bilski is no more rational or scientific than was the 4 vote minority. This whole notion of a claim being “abstract” is utter irrationality. And yet it persists –with arrogance and pride in its underlying and exuberant irrationality. That is what is truly disturbing.

    p.s. Let us pray for a more sober and rational 2011. Happy New Year.

  7. Step-

    I can’t disagree. What I will say is that the notion of a claim being “abstract” has allowed the Kappos USPTO to create sensible Bilski Guidelines, albeit interim guidelines. Had they actually been specific and conveyed meaning the task of making sense out of the truly nebulous and ambiguous would have been far more difficult. So at least they did no harm, which is more than we can say for the Supreme Court typically.

    I think the ACLU case more so than the Bilski case puts a face on the real nemesis. There are people who actually believe that innovation happens naturally and would happen at as high a level or higher without the incentive of a patent. Those folks refuse to learn from history and ignore the controlled studies in 3rd world countries without IP systems and those that have adopted IP systems. They scream “correlation is not causation” which is just a way to say “I choose to ignore the facts and needed a fancy way to make myself sound smart and you wrong.” The real culprit isn’t just lack of rational thinking or scientific knowledge, although those are indeed problems, but rather the real problem is an unrealistic view of the world that does not take into account the human condition. I’ll leave it for that now…

    -Gene

  8. wow, no en banc written description decision. Missing a major development here . . .

  9. Interesting list. I’ve a couple of comments:

    The appeal seeks to erode the presumption of validity enjoyed by a patent, and Microsoft and others are urging that that prior art not considered by the Patent Office should be treated differently than prior art considered by the Patent Office. Under the law established by the Federal Circuit, in order to invalidate a patent claim there needs to be clear and convincing evidence presented at trial, regardless of whether the prior art offered at trial was considered by the Patent Office.

    But Prior Art not considered by the Patent Office is different then Prior Art considered by the Patent Office, in that consideration by the Patent Office may have prevented the issuance of the patent. I’m thinking of the Java Model Railroad Interface case, where the patentee patented an existing invention. I’m also thinking about the case where RedHat and Novell were sued in Marshall TX over an operating system feature, that had existed for years before the patent was issued.

    I really dislike Microsoft as a company – they are the ultimate rent seeking behemoth, that steals other companies ideas after signing a non-disclosure agreement (see Stac Electronics), and that is exactly what they are doing in to I4I, a local (Canadian) company. However the patent that I4I sued on should never have been issued, as it covers something that has been commonly done for years, manipulation of data either in memory, or from a file.

    Judge Sweet, the 89 year old jurist who is one of the most liberal members of the federal judiciary, decided to re-write 30 years of patent law and ignored all of the scientific evidence that conclusively proves that isolated DNA cannot exist in nature because what appears in nature ISN’T ISOLATED! Not to get too technical, but Judge Sweet’s interpretation of the claims at issue had to read the word “isolated” as being of no consequence, which is exactly what he did, finding there is no difference between isolated DNA and DNA that isn’t isolated, which is scientifically not true.

    Um, that’s not how I read the case. What I read from it is that you cannot patent a product of nature, and a gene is a product of nature, i.e. there is nothing inventive to be covered by this patent, since it was issued for something that already existed. The machinery used to map the gene could have been patented however, and if the patentee had have designed a new gene, that would be a different situation. Another issue is that the gene in question existed for an unknown period of time before the patent was issued. Prior art anyone?

    Not much to say here other than it died, AGAIN! If you are wondering why you might be tempted to just return to any number of recap articles over the last 5 or 6 years assuming the reasons must be the same, but you would be wrong. I have been told a compromise had been reached on the last remaining stumbling block relative to the first to file versus first to invent, restoring a full 12 month grace period for inventors, making the changes relatively minor then.

    Pardon my cynicism, but how would this have affected the trolls? Gene, you live near Chicago don’t you? You do know that Obama is a Chicago machine politician? Unless something really major happens (and with the refiling of the Paul Allen lawsuit it may have) Patent Reform will remain a Chimera in the United States.

    He has told me he plans to be public enemy #1 in the eyes of many as he unabashedly calls it like he sees it and unapologetically agitates for a better, strong patent system and a Patent Office that is actually adequately funded.

    Good for Judge Michel. I hope he gives society the political equivalent of hot foot. It’s the only thing that could get Patent Reform moving. However I suspect that we will disagree on the direction that reform needs to take, as I think that it should be as difficult as possible to obtain a patent. For that matter, I’ve advocated closing the Patent Office in the past, as it seems totally incapable of doing a proper job.

    Who knew that it would be such a fight to get Congress to actually adequately fund the United States Patent and Trademark Office? I mean do people actually walk around the Capitol saying “lets not fund the Patent Office” or perhaps “innovation is overrated” or “the Patent Office doesn’t need a functioning IT system.” Well, if you allow actions to speak for themselves it certainly would seem that these very things are at least running through the heads of Members of Congress who continue to refuse to adequately fund the Patent Office.

    Pork. Now put offices in other cities, and you may see this change.

    On the innovation front nothing seemed to grab the public attention this year quite like the iPad. Apple released the first iPad in April 2010 and has reportedly sold more than 8 million units.

    I have an Ipad. Great product for taking to the library when you are doing research, and I can hook it up to my electric guitar and make some really neat noises (You can see my review of the IPad/IRig combination over on Lefty Guitar Trader Forum).

    However calling the IPad innovative is like saying that I’m a ballet dancer. Well designed, yes. Well engineered, yes. Innovative? No. Tablet computers using Microsoft Windows have been available for ten years. Prior to that, Palm made neat mini-tablets, which eventually morphed into the early smartphones. Grid made tablets. At which point someone is no doubt going to say that the Touch Screen is the innovative part, but there have been touch screen devices on the market for decades – in fact a touch device was entered into the school science fair when I was in High School, don’t remember the exact year, but it was probably 1973 or 1974.

    The only thing that makes the IPad different, is that it came from Apple, and Apple, as usual, did their homework, and produced a device that was easy to use, which fulfilled a need in the marketplace. I predicted several months before the IPad came to market that it would probably kill the Netbook, and take market share from lower end Notebooks. It appears that I was right.

    As to the IPhone4, well, do you know of any company that hasn’t made engineering mistakes?

    A Happy New Year to all.

    Wayne aka The Mad Hatter