What Mattered in 2017: Industry Insiders Reflect Biggest Moments in IP

It is one again time to take a moment to look back on the year that was, reflecting on the biggest, most impactful moments of 2017. For us that means looking backward and assessing the key moments and events in the world of intellectual property.

Each year I look back on my own writings and publish the top 10 patent stories, which this year featured a heavy dose of events surrounding Supreme Court decisions and various topics relating to the Patent Trial and Appeal Board.

Each year I also ask a panel of industry experts for their insights for our Biggest Moments in IP series. This year you will see several of our industry experts also mentioned key Supreme Court decisions from 2017, but unlike in previous years where there was near unanimity on the biggest moments, such as in 2014 when the Supreme Court decided Alice v. CLS Bank, there is a great deal of variety of thought, which is the very reason to survey the experts.

Steve Kunin focus primarily on the Supreme Court patent cases, which Bob Stoll also mentions but then goes on to discuss the lack of momentum for more patent reform and the nomination of a new Director for the USPTO as key moments. Paul Morinville also mentions the political on Capitol Hill, but focuses on Members of Congress not buying into the patent troll narrative like they once did. Erik Oliver focuses on a rebound in the patent market, Alden Abbott sees a pro-innovation, pro-patent Assistant Attorney General for Antitrust as a dramatic shift for the DOJ. Ben Natter, Jess Sblendorio and Alexander Callo focus on the Supreme Court’s decision in Matal v. Tam, which declared the prohibition against registering disparaging trademarks unconstitutional.

Without further ado, here is our panel of experts.

Bob Stoll
Partner, Drinker Biddle

As I recount the IP events of 2017 I was struck by the significant changes the year brought. Several Supreme Court cases altered the patent landscape. Probably the most important was TC Heartland v. Kraft Food, which overturned decades of precedent about where infringement litigation could be filed. Also important was the decision by the en banc Federal Circuit In re Aqua Products where a divided court held that the petitioner in a PTAB case has the burden of showing that proposed amendments to the claims are unpatentable. Impression Products v. Lexmark also charted new ground overturning long established law by stating that patent owners can’t put restrictions on patented items after they are sold anywhere in the world. While these are probably the most notable cases, there were many more that affect the patent system.

The legislative arena was not as active. The STRONGER Patents Act was introduced by Sen. Coons from Delaware with other co-signers, but the Hill didn’t enact significant intellectual property legislation in 2017.

Probably the most important event to the IP community in 2017 was the inauguration of President Trump. This provides him with the opportunity to affect IP policy for decades. He has already appointed one Supreme Court justice and has moved to fill several district court and appellate court vacancies. He has also appointed Andrei Iancu to head the USPTO. This will permit implementation of rules to further administration policies relating to IP. And, when little is being accomplished in our divided legislature, this may be the best way to improve the IP system going forward.

Robert L. Stoll has more than 30 years of experience in intellectual property prosecution. Bob retired from the USPTO as Commissioner for Patents at the end of 2011 after a distinguished 34-year government career.

Stephen Kunin
Partner, Oblon, McClelland, Maier & Neustadt, L.L.P.

The Supreme Court issued three impactful decisions in May 2017 causing a “disturbance in the force” of long standing principles of patent law as Star Wars® fans would say.  In SCA Hygiene Prods. AB v. First Quality Baby Prods., LLC the Court held that laches cannot be an equitable defense in a patent suit when the patent owner files suit for past damages within six years of the date of infringement.  In Impression Prods. V. Lexmark Int’l, Inc. the Court created an international exhaustion of patent rights doctrine based upon a first sale of the patented invention anywhere in the world.  This may lead to more attempts by patent owners to seek to license rather than sell products under Mas-Hamilton Group v. LaGard, but cases like Minton v. National Association of Securities Dealers, Inc. could temper such enthusiasm.  Finally, a sea change in the law of patent venue occurred in TC Heartland, LLC v. Kraft Food Brands Group, LLC where the Court held that patent suits can only be brought where the accused infringer is incorporated or has a regular and established place of business.  The Federal Circuit in In re Cray, Inc. sought to define what constitutes a regular and established place of business to provide greater clarity to the law.

Stephen Kunin serves as an expert witness and consultant on patent policy, practice and procedure. Mr. Kunin served three decades at the USPTO, including 10 years as Deputy Commissioner for Patent Examination Policy.

Erik Oliver
Partner, Richardson Oliver Law Group

We think one of the important changes of 2017 has been the rebound in patent sales; our data shows sales up to $296M from $165M last year. Specifically, software sales rates are up 60% year over year. The industry has suffered from years of negative patent decisions, prices have declined, and sentiment has been somewhere between depressed and despondent. The data suggests that the market is turning around. More deals, more participants, and more transparency. We are firm believers that a robust, transparent secondary market benefits the patent system and companies (more information on the IPWatchdog, IAM volume 87 and Bloomberg).

Mr. Oliver counsels clients on a variety of patent and business matters, including licensing, buying, selling, valuation, prosecution and business processes. Prior to founding the ROL Group, Mr. Oliver was a Vice President at ThinkFire Services USA, Ltd’s Silicon Valley office.

Alden Abbott
Heritage Foundation

On November 10, at the University of Southern California Law School, Assistant Attorney General for Antitrust Makan Delrahim delivered an extremely important policy address on the antitrust treatment of standard setting organizations (SSOs). Delrahim’s remarks outlined a dramatic shift in the Antitrust Division’s approach to controversies concerning the licensing of standard essential patents (SEPs, patents that “read on” SSO technical standards) that are often subject to “fair, reasonable, and non-discriminatory” (FRAND) licensing obligations imposed by SSOs. In particular, while Delrahim noted the theoretical concerns of possible “holdups” by SEP holders (when SEP holders threaten to delay licensing until their royalty demands are met), he cogently explained why the problem of “holdouts” by implementers of SEP technologies (when implementers threaten to under-invest in the implementation of a standard, or threaten not to take a license at all, until their royalty demands are met) is a far more serious antitrust concern.

More generally, Delrahim stressed the centrality of patents as property rights, and the need for enforcers not to interfere with the legitimate unilateral exploitation of those rights (whether through licensing, refusals to license, or the filing of injunctive actions). Underlying Delrahim’s commentary is the understanding that innovation is vitally important to the American economy, and the concern that antitrust enforcers’ efforts in recent years have threatened to undermine innovation by inappropriately interfering in free market licensing negotiations between patentees and licensees.

Delrahim’s outstanding speech heralds a possible move back toward sound patent-antitrust policy, which is key to an innovative American economy. Let us hope that the Antitrust Division (hopefully in tandem with the Federal Trade Commission) takes further decisive action in 2018 to build on the foundation laid by the speech in 2018.

Given the many significant patent-related developments in 2017, it would be easy for a short antitrust policy speech delivered in November 2017 to get lost in the shuffle. That speech, however, holds out the prospect for a much-needed Trump Administration reversal of unsound Obama Administration patent-antitrust policy in 2018.

Alden Abbott serves as Deputy Director of Edwin Meese III Center for Legal and Judicial Studies at The Heritage Foundation.

Paul Morinville
Managing Director, US Inventor

The most significant thing to happen in 2017 is the final transformation of Congress from believers in fictional patent trolls, created by huge tech multinationals and perpetuated by the likes of Congressman Darrell Issa, into educated congressional Members who now see it for what it is, the destruction of American ingenuity, economic growth, job creation and national security.

This was made glaringly obvious as Darrell Issa, who barely squeaked by in the last election and probably won’t win this cycle, continued his vain quest to wipe out small inventors in several one-sided patent related hearings: International Trade Commission Patent Litigation, The Impact of Bad Patents on American Businesses, Examining the Supreme Court’s TC Heartland Decision and Sovereign Immunity and the Intellectual Property System.

Issa made his best case in these hearings that mom and pop businesses were being eaten by vile patent trolls and even more legislation was urgently needed to finally put the creature six feet under. But, it seems nobody in Congress buys this nonsense anymore.  The vast majority in Congress now see the damage that the last 12 years of Issa’s brand of patent reform has levied upon us. We are at a 40 year low in startups. Early stage investment is down 62%. Our national security has been compromised as technology moves to China and venture capital follows giving the lead in critical technology spaces like artificial intelligence to China. It is now obvious that Issa was wrong and his leadership is running U.S. innovation off the cliff.

To Issa’s chagrin, there are several bills directed to undo the damage Issa and his clan of swamp creatures brought on us: the Stronger Patent Act, the US Inventor Act and a third bill soon to be introduced. For the first time since 2005, no legislation on the table makes it worse.

Paul Morinville is Managing Director of US Inventor, Inc., which is an inventor organization working in Washington DC and around the US to advocate for strong patent protection for inventors and startups. He is also an inventor and entrepreneur with multiple patents and pending patent applications in the area of Access Management Systems, Cloud Aggregation, Enterprise Software, and Business Process Management Systems.

Ben Natter (left)
Jess Sblendorio (Center)
Alexander Callo (right)
Haug Partners LLP

On May 1, 2017, the Federal Circuit issued an opinion in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., which addressed the AIA’s changes to the on-sale bar rule in 35 U.S.C. § 102. The Federal Circuit panel unanimously held that, under the AIA, there may be an invalidating sale if the mere existence of the sale is public, regardless of whether the details of the invention were publicly disclosed in the terms of sale. In light of the more high-profile, Supreme Court patent decisions this year (e.g., TC Heartland and Lexmark), practitioners may unknowingly overlook the Federal Circuit’s opinion in Helsinn. Innovators, though, will frequently publicly sell their inventions (in the form of distribution agreements, for instance) before securing any patents on the inventions. Practitioners should therefore be on notice that, according to Helsinn, such sales threaten future patent protection of any inventions disclosed, even if the sales only generally disclose the inventions.

This year, both the disparagement clause and the scandalous clause, both part of Section 2(a) of the Lanham Act (15 U.S.C. § 1052(a)), were deemed unconstitutional under the First Amendment by the Supreme Court and the Federal Circuit, respectively. During the pendency of these proceedings, the United States Patent and Trademark Office (“USPTO”) had suspended action on pending applications involve marks subject to refusal under these clauses until Matal v. Tam and In re Brunetti were resolved.

In June, the Supreme Court held in Matal v. Tam that the disparagement clause of the Lanham Act was unconstitutional on First Amendment grounds. The Matal case stemmed from Simon Tam’s trademark application for his band name “The Slants,” an Asian American band. Tam’s application was denied by the USPTO under the Lanham Act because, according to the USPTO, the mark would have been disparaging to those of Asian decent. The Supreme Court not only held that government approval or denial of a trademark application is not government speech, but also held that the law prohibiting offensive trademarks constitutes improper viewpoint discrimination, as the government cannot bar the expression of ideals merely because such ideals are offensive to part of the population.

With regard to the Lanham Act’s scandalous clause, the Federal Circuit issued its ruling in In re Brunetti on December 13, 2017, finding that the scandalous clause was unconstitutional on First Amendment grounds. The USPTO in this case refused a trademark registration for the word “Fuct” for use on clothing apparel on the grounds that it comprised immoral or scandalous material. Although Judge Moore noted that the “trademark at issue is vulgar,” the Federal Circuit found that the First Amendment protects private speech, even in cases where it is offensive to the general public, and the scandalous clause amounted to a content-based discrimination on speech. This decision is different from Matal in that the Supreme Court ruled that the disparagement clause constituted viewpoint discrimination, whereas the Federal Circuit concluded that the scandalous clause was a content-based restriction. Due to the recent nature of the decision in In re Brunetti, no petition for a writ of certiorari has been filed to date challenging the Federal Circuit’s decision.

Because the restrictions of the disparagement clause and scandalous clause no longer exists, and as of yet, there are no apparent restrictions on who can take advantage of these decisions, this may result in more trademark applications for offensive terms. The question now will center on whether there will be any restrictions on controversial trademarks at all.

Ben Natter is a partner in the New York office of Haug Partners LLP. Ben’s practice focuses on all aspects of global trademark strategy, procurement, management and enforcement. Jessica Sblendorio is an associate in the New York office of Haug Partners. She focuses her practice on litigation. Alexander Callo is an associate at the New York office of Haug Partners LLP where his practice primarily focuses on pharmaceutical patent litigation under the Hatch-Waxman Act.