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.