Many of my clients have been following the Bilski case.  As our readers know, the case of whether or not a method for hedging risks in commodities trading was recently decided by the U.S. Supreme Court (see our updates here, here and here).  The Supreme Court decided that Mr. Bilski’s “invention” was not directed to patentable subject matter.  But how, you ask, did the question of whether or not Mr. Bilski’s invention was patentable get all the way to the United States Supreme Court?  Shouldn’t these matters normally be decided by the U.S. Patent Office?    Allow me to step you through the road map on how a patent applicant can find themselves before the United States Supreme Court arguing that the Patent Office, and everyone up to that point, is wrong about their invention.

The patent process begins with a spark of genius, i.e., coming up with your invention.  The prudent inventor writes their invention down in an inventor’s log (try using a notebook that cannot have pages torn out of it).  After the inventor gets their invention down on paper (or otherwise reduces the invention to practice), a search is in order.  A great place to start your search is at www.google.com/patents.  If you hit a brick wall, i.e., you cannot find anything close to your invention out there, then talk to a patent attorney and have a search done.  It is highly unlikely that there is absolutely nothing out there like your invention.  There is normally at least something related out there.  After you have found the closest prior art, read it in detail, and point out the differences between the prior art and your invention.  These are points of novelty that will form the basis of your patent protection.

At this point, it seems as though you are ready to file a patent application.  Go to a patent attorney and see which patent application is right for you (see my previous posts on the right patent application for you here).  Let’s assume that you have filed a utility patent application including claims directed to your invention.  The claims of a patent application are the most important thing.  Claims can equate to a property description.  They lay out the boundaries of your protection and serve as the club with which you will later beat infringers or command a high licensing fee. 

We are the gatekeepers of all invention!

Patentability is initially determined by the Patent Office through an initial opinion issued by a Patent Examiner in the form of an Office Action.  It is not uncommon for an initial Office Action to be in the form of a rejection of all the claims that you have filed.  The rejection is not the end of the world.  When filing your application, you should have drafted some broad claims in an attempt to seek as much protection as possible.  Similarly, the Examiner will likely read prior art references broadly and use them to reject your claims. 

After receiving an Office Action, you will engage in a “negotiation” process with the Examiner.  You will attempt to either amend your claims to narrow the scope somewhat, or argue that the prior art cited by the Examiner does not read on the invention as recited in the claims.  In Mr. Bilski’s case, those arguments were futile, and the Examiner issued a Final Office Action.  Your option at this point is to file a response to the Final Office Action, file a Request for Continued Examination (RCE) or appeal.  An RCE starts the examination process over again and, in short, gives you another bite at the apple. 

Mr. Bilski filed an appeal of the Examiner’s decision.  An appeal of an Examiner’s decision is heard at the Board of Patent Appeals and Interferences (BPAI).  The initial step is to file a notice of appeal and an appeal brief.  The Examiner, in turn, files a response brief.  The briefs are reviewed by a group of Examiners prior to going to the BPAI.  Often times, issues are resolved at that level, but not in Mr. Bilski’s case.  If you do not like the decision of the BPAI, then your option is to appeal to the United States Court of Appeals for the Federal Circuit (CAFC).  This is the first step that the inventor has taken outside of the Patent Office. 

This is truly a legal proceeding.  At the CAFC, the inventor will file an appeal brief, and the Patent Office will file an answer brief.  The case will initially be heard by a panel of three judges who will hear the inventor’s arguments and the Examiner’s arguments.  The CAFC will issue a decision either upholding the Examiner’s decision, overturning the Examiner’s decision, or sending it back to the Patent Office with some instructions on how to further examine the case.  In Mr. Bilski’s case, the CAFC upheld the Examiner’s decision and noted that Mr. Bilski’s invention was not patentable.  The game did not end there, however.  Off we go into extra innings (as I’m typing this I’m watching the Phillies/Cubs game). 

Since Mr. Bilski was obviously dissatisfied with the decision of the three judge panel at the CAFC, he then requested a rehearing before the CAFC en banc, meaning that all the judges of the CAFC should hear the case.  It was the decision of the en banc CAFC that gave us the “machine or transformation” test.  As noted in my previous post, the en banc CAFC held that Mr. Bilski’s invention was not patentable because it did not meet the machine or transformation test. 

The case didn’t end there, however.  Mr. Bilski, and much of the patent community, was not satisfied with the en banc CAFC test as it had ramifications in many industries, and essentially did away with business method patents.  The next step was to appeal this decision to the United States Supreme Court.  The parties filed their respective briefs were filed, and several third parties filed amicus briefs (as was also the case at the CAFC) putting forth various points and opinions for both sides.  After the Court took into consideration the briefs filed by both sides, as well as amicus briefs, they eventually handed down the decision that is before us today. 

Clearly it was a long road for Mr. Bilski, and quite the dissatisfying one, but as a patent practitioner, I sure am glad he stuck with it.  His decision to take this case to the High Court brought to the forefront the issues that have been plagued the Patent Office for years, i.e., are business methods patentable and are software inventions patentable.  The answer to both is yes, but that came along with some more questions.  I’ll be back soon with some more analysis about these issues.

As many of you already know, the United States Supreme Court has finally handed down its decision in the case of In re Bilski (Decision).  For some background on the Bilski case, please see my previous posts here and here.  The Court of Appeals for the Federal Circuit held that Mr. Bilski’s invention was not patentable.  In doing so, the Federal Circuit essentially did away with business method patents and pronounced the “machine or transformation” test for patentability.  

The Bilski Patent Application has Died

   The Supreme Court affirmed the Federal Circuit’s decision with respect to Mr. Bilski’s patent application, i.e., his invention is not patentable.  Mr. Bilski’s invention relates to a system for hedging risks in commodities trading.  Although the Supreme Court noted that the Federal Circuit’s decision was too restrictive, the Court still held Mr. Bilski’s invention to be unpatentable.  More specifically, the Court held that Mr. Bilski’s claimed invention fell into one of the three specific exceptions to §101 of the patent statute, finding that it was an abstract idea.  The other two exceptions are laws of nature and physical phenomena.   

In holding that the “machine of transformation” test is not the only test of patentability, the Supreme Court noted that the Federal Circuit erred by violating two principles of statutory interpretation:  Courts should not read into the patent laws limitations and conditions which the legislature has not expressed and that unless otherwise defined, words will be interpreted as taking their ordinary meaning.  Since Mr. Bilski’s invention was defined as a “process” the Court held that there is no meaning of process that would require Mr. Bilski’s invention to be tied to machine or to transform an article.   

Finally, the Supreme Court held that the term “process” does not exclude business methods as being patentable.  The Court specifically noted that it is not clear whether a business method exception would exclude technologies for conducting a business more efficiently.  Of course, that raises many questions for inventors and patent practitioners across the board.  It seems to me that it would be impossible to write a patent application that was not tied to machine or apparatus without it being an abstract idea.  After all, is that not what Mr. Bilski was trying to do?  The court does note that while §273 of the patent statute appears to leave open the possibility of some business method patents, it does not suggest broad patentability of such claimed inventions.  Therefore, the Court just let us all know that if you can somehow get a business method through the PTO, it had better be very narrow.  I suppose you have to question the value of such a patent, i.e., is a patent that can be very easily designed around very valuable?  In many cases, the answer can certainly be yes, but it is something that needs to be analyzed during the patent prosecution process.   

Probably the toughest part to swallow about this decision is that the debate over business method patents and, more than likely, software patents, is far from over.  This is evident in the last paragraph of the syllabus when the Court invites the Federal Circuit to develop other limiting criteria that further the Patent Act’s purposes and are not inconsistent with its text.  At the end of the day, this decision likely created more questions than answers, but at least we know that patent litigators will still be busy over the next few years trying to flush out that which is still patentable.  Stay tuned for some follow up articles on how the Patent Office is handling this decision.

The United States Supreme Court recently heard the case of In re Bilski in which the court was asked to make a determination of what is and what is not patentable subject matter.  For more information on the original holding by the Federal Circuit, please check out our previous post.  For some information on the oral arguments at the U.S. Supreme Court, please check out our Bilski Part Duex post.  The Bilski patent application was rejected by the PTO for failing to meet the requirements of 35 U.S.C. § 101, i.e., the PTO held that the invention was not directed to patentable subject matter.

Me at the Supreme Court.  (I'm the shorter one.)

The opinion might come out here in the next week or two, so I just want to get my prediction on the record.  In short, the court will hold that the subject matter of Bilski’s patent application is not patentable.  The reasons why they find it unpatentable, of course, is what the patent world will be waiting for.  The implications for many different industries can be huge.  Although I realize that this has some implications in the pharmaceutical industry, my main focus is software.  When the Supreme Court gets through with this case, will software still be patentable?  Will they uphold the rule of law set forth by the Federal Circuit (machine or transformation test)?  Will there be a new test that the Supreme Court enters that will have an effect on the way we have drafted our claims for the past couple of years?

Bilski’s patent application was directed to a method of hedging risks in commodities trading.  The issue here is that the Examiner found that the steps involved in the method could all be carried out in the head of the user, i.e., no machine was used to carry out the method associated with assessing the risk of commodities trading.  Accordingly, the Federal Circuit instituted the machine or transformation test.  That is, patentable subject matter must be directed to a new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.

Although our firm has had much success prosecuting software patent applications in the post Federal Circuit / pre U.S. Supreme Court Bilski era, one wonders how things will change, if at all, after the U.S. Supreme Court issues their ruling.  I do not think that things will change much for the software industry.  I know that there is a raging debate as to whether or not software should be patentable, but let me advocate for patentability for just a second.  I think that in this day and age, software can be a useful tool that helps people carry out so many different tasks.  Just from an organizational perspective alone, it is impossible to even imagine what things used to be like without all of the innovations that have been brought about via software.  With that in mind, I believe that those innovations should be rewarded, and that the innovators should be allowed to reap the benefits of their innovation.  Since most of their innovation lies with the function of their invention, the only effective way to provide valuable protection is through our patent system.

"Six 'Yes,' two 'No,' and a 'Maybe.'"

I do not think that the U.S. Supreme Court will preclude patentability of software.  Instead, I believe that whatever test the U.S. Supreme Court comes out with will be close in scope to the test set forth by the Federal Circuit.  I am unsure of whether or not the test will be a bit more narrow or a bit more broad, but my gut (and it’s a big gut) tells me that the test will be a bit more narrow.  Also, I do not expect that we will be getting a unanimous decision.  There will probably be one or two dissenting opinions and at least one concurring opinion.  What else could be taking so long to get this opinion out???  Stay tuned for an update once the case comes out.

Professor Dennis Crouch of Patently-O recently posted an article about the difficulties in collecting royalties pursuant to a patent licensing agreement.  In his post, Professor Crouch referenced a report by Invotex, which noted that 86% of licensees misreported their royalties to their licensor.  This, unfortunately, is not surprising, and is part of the reason why the process of entering into a patent (or any IP) licensing agreement can be so time consuming.

The Invotex report sets forth some of the very issues that a patent licensing attorney tries to avoid when entering into a licensing agreement on behalf of a client that is the licensor.  Often times, however, the negotiation process does not allow for the “tight” agreement that the licensor’s attorney wants.  Instead, licensing agreements can often be open to interpretation.

Some of the royalty reporting errors indicated in the Invotex report include questionable license interpretation, underreported sales, disallowed deductions, underreported sublicenses, and math errors.  There are, of course, ways to avoid these various debacles in the contracts.

The terms of the licensing agreement can vary so much, and should be approached in different ways depending on whether you are the licensee or licensor.  For example, if you are the licensor, i.e., you are licensing your IP to someone that is going to sell it and pay you some amount of money, you likely want that amount of money to be readily quantifiable.  Accordingly, your licensing agreement should seek out a definable number, i.e., $x per unit that is manufactured.  Of course, if you are the licensor, such a term can be unfavorable to you.  $x per unit that is manufactured guarantees that you will have to pay the licensor, regardless of whether or not you are able to sell a single unit.  A better option for a licensor may, for example, be $x per unit sold or, better yet, x% of gross sales or, even better yet, x% of net profit.

Now comes the various ways that the numbers can be fudged.  If you agree to an x% of net profit, how is the net profit calculated?  What if you licensed your product to a large company that sells many products?  Are the costs associated with other products to be factored into the cost associated with selling the product that you have licensed?  These, among many, many other questions, need to be answered before the licensing agreement is entered into.

Another term that I often like to consider is exclusivity.  If you are the licensee, you may want the licensing agreement to provide you with the exclusive right to the IP.  Of course, this can sometimes come with a bit higher price tag.  If you are to expect the licensor to put all of their IP eggs in one basket, then you should likely expect to pay more.  The converse may be true for the licensor.  The licensor must analyze whether or not it would be worth it to grant an exclusive license to the IP.

Mandatory minimums sometimes find their ways into licensing agreements.  These can be very beneficial to the licensor and, if the licensee can deliver on their promises, can be likewise beneficial.  Mandatory minimums can be calculated many different ways.  For example, the mandatory minimum may be tied to the number of products being manufactured, sold, delivered, etc.  The mandatory minimum may also be tied to sales, i.e., a minimum amount of gross sales.  Finally, the mandatory minimum may simply be tied to the royalties, i.e., a minimum royalty guarantee to the licensor.

To wrap it up, the one issue that is sure to destroy any licensing negotiation is reasonableness.  Whether you are the licensee or the licensor, it is really important to approach the negotiation from a reasonable perspective.  When negotiating a license for IP, it is assumed that both the licensee and the licensor see some sort of advantage of working together with one another.  If, however, either the licensee or the licensor are not reasonable in their expectations, then a license agreement might not ever come to fruition.  Worse yet, if the licensee and the licensor still manage to enter into a license agreement while either party is still advocating what may be considered an unreasonable position, then the licensing agreement may just end up in litigation.

The above is truly a very short list of the things that should be considered when entering into a licensing agreement.  There are so many other things that can and should be considered.  At the end of the day, the ultimate advice is to seek out the involvement of an attorney when entering into a licensing agreement.  When seeking out an attorney, please be sure to check into the attorney’s experience with licensing agreements.  These can be very specialized documents, and an attorney who does not have experience with licensing agreements might not be doing you any favors.

In parts I and II of this series, we discussed the importance of setting up an IP holding company where all of your IP is held.  We also provided some pretty good examples of the kinds of things that could happen if your IP is not properly titled in your IP holding company, or if you comingle your IP holding company with other assets.  That leads us to this post – a brief overview of the requirements that MUST be followed in order to properly protect your IP and shield it from other liabilities.

As we recommended in our previous post, you should set up an LLC that has the purpose of holding your IP and licensing the IP for use by others.  This can actually be a rather simple process here in Florida.  The website for the Florida Department of State Division of Corporations is sunbiz.org.  The filing forms for setting up your LLC are available for printing or, if you have an account set up already, you can simply electronically file the forms.  As noted, this can be a simple process, but one that is somewhat easy to do improperly as well. When all else fails, seek the advice of an attorney.

It is especially important to seek some advice of an attorney when starting an LLC that has multiple members.  For example, suppose you have an investor and part of the “deal” is that you will give the investor some percentage of the IP.  The best way to accomplish that is to form an LLC in which both you and the investor are members.  The “deal” will be outlined by the operating agreement that you will enter into when the LLC is formed.  Operating agreements can be somewhat simple, but if they do not address many of the issues that you may encounter in the future, then you can almost always guarantee one certainty – you will be paying a great deal of money to an attorney at a later time in order to sort out ownership, for example, of your IP.  Translation – you will likely be litigating a contractual issue if some dispute arises as to the “deal” and the operating agreement of the LLC doesn’t address how that dispute should be resolved.

After the LLC is set up, it is essential that you open a bank account in the name of the LLC, and be sure that all of the liabilities of the LLC are paid from that bank account… and only from that bank account.  A common mistake of some individuals is to set up the LLC, but still pay for the IP with personal funds, or with the funds of another company.  That leaves the door open to an argument that the corporate veil should be pierced.  In other words, if the corporate requirements are not properly followed, then all your work can be for naught, i.e., a court could find that your IP is not solely held by the company and that your personal liability is co-mingled with any liability created by your IP (see examples in previous post – IP Holding Companies, Part II).

It is also important to hold annual meetings, take minutes, and keep up with the mandatory annual reports necessary to maintain your LLC.  It is not uncommon for us to hear that people did not hold an annual meeting because they are a single member LLC – “what am I going to do, meet with myself?”  YES!  The meeting minutes will read something like “a meeting of the officers was held and no action was taken.”  Simple enough, right.  A good reference of the corporate requirements can be found Chapter 600 of the Florida Statutes.  When all else fails, call an attorney and make sure you are going down the right path.  A consultation fee on the front end can often times save you litigation fees on the back end.

In a previous post, we discussed the importance of forming an intellectual property holding company to own your IP.  That previous post established that starting an IP holding company is necessary.  This post will focus on the details.

Talk to any lawyer, and one of their primary goals for their clients is managing their liabilities.  This generally includes separating assets so that liabilities do not cross over.  For example, suppose you own your IP personally, i.e., it is titled in your name personally.  Now imagine that a thief breaks into your house, slips on your floor, sues you for having a slippery floor, and somehow gets a judgment against you (here is a story about a burglar that sued the homeowner that shot him).  What happens if your homeowner’s insurance does not cover the judgment?  The crazy thief is going to look somewhere for the deficiency and will probably engage in some post-judgment discovery to find out what you own.  During the discovery, the crazy thief may find a bank account or two, but eventually, the thief’s attorney is going to uncover a patent that you own.  Turns out that you started a company last year that manufactures products covered by the patents, but the company does not pay you a royalty, and there is no agreement in place between you and the company.  Guess what — You can bet that the crazy thief’s attorney is now going to seek ownership of that patent to satisfy the judgment.  There is a strong chance that the crazy thief’s attorney will be able to get your patent transferred to his client.

Any guesses on the first thing that the crazy thief does once he has ownership in the patent?  That’s right; he will now demand that you pay royalties for manufacturing the product that is covered by the patent.  If you do not agree to the royalty, the next step is filing a patent infringement suit in Federal Court.  Do you see how this is spiraling downward now?

Simply transferring your IP into an IP holding company, however, is not enough.  It is essential to keep everything separated.  Here’s the next example of how the crazy thief’s attorney will try to get a hold of your IP.  Suppose you did place the patent in a holding company.  Also suppose, however, that you have paid for every expense associated with that company out of your personal bank account or, even worse, with funds from the company that manufactures the product that is protected by the company.  Now you have comingled all your funds, and a court will likely find that you have used your IP holding company as your “alter-ego” thereby allowing the crazy thief’s attorney to “pierce the corporate veil” and start collection efforts against your IP holding company.

The moral of the story is that not only is it important to keep all of your IP separated from anything else that you may own, but it is also important to make sure it is done properly.  This will include taking the steps of forming a corporate entity (in FL, we recommend an LLC), starting a bank account for that company, paying for your IP expenses out of that bank account only, holding annual meetings (yes, even if you are the only member of the LLC, you need to hold an annual meeting, which will be discussed in another post), and generally ensuring that you never comingle the property of the IP holding company with any other property.

If you’re running your own small business, and you don’t have a holding company for your intellectual property, you should make an appointment to have your head examined.  Creating a separate entity, solely for the purpose of owning your IP, is the quickest, easiest, and cheapest way to insure the goodwill associated with your business.

I realize that the subject matter of this post is a bit drier than what you may have grown to expect from Tactical IP, but I’m hoping that at least a few of our readers are here for free tips on how to make their intellectual property work for them.  With that in mind, I’ll try to keep this light and painless.

Liability protection is the name of the game when it comes to creating business entities.  Think of it like an insurance policy.  If you do it right, assets can be protected from creditors, including judgment creditors who may have prevailed in a lawsuit.  As far as the law is concerned, a properly created and maintained business entity is a separate “person” from its owners and employees.  The benefit of that treatment is that, if the property created and maintained business entity incurs debts or gets sued, its assets are the only things that may be taken — not the assets of its owners.  Let’s look at an example to really hammer this point home.

In our example, you own and run your own courier service.  You have a couple of employees and a corresponding number of pickup/delivery vans.  You’ve been extremely successful, turning a good profit, and you’ve been able to afford all of the toys and accoutrement that success should provide.  In our first variation, let’s say that you are operating as a sole proprietor, using a DBA (“doing business as”) name — “Black Hat Couriers.”  You own everything in your own name, or using your DBA name — the vans, all of your office equipment, etc.  Now suppose one day, while making a delivery run, one of your employees is driving a little carelessly and, as a result, is involved in a collision where several people are injured.  You are insured, so you’re not too worried — that is until you get sued and the jury comes back with an award that goes well beyond your policy limits.  Guess what happens now.  All of those toys and accoutrement, your summer house with the pool, your boat, your Porsche — kiss ‘em goodbye.

Now let’s look at an alternative scenario.  You listened to your buddy, who happens to be an attorney, and you formed your business as a Limited Liability Company (LLC).  This time, you’re calling the business “Black Hat Couriers, LLC.”  Now, you are a Managing Member of the LLC, and the business has its own assets that do not belong to you.  The vans are titled in the name of the business.  You used the LLC’s credit card to purchase that office equipment, and you pay the bill out of the LLC’s checking account.  You do everything possible to treat the LLC as if it was a separate entity from you.  The boat, the summer house, the Porsche — all of these things you purchased with your own money, which was paid out to you as income from the LLC.  Now, when the LLC’s insurance policy is insufficient to cover the jury award in that vehicular negligence suit, you get to keep your stuff.  The LLC is the only party responsible for paying the judgment.  Now that we understand a little bit about how a business entity provides a liability shield for assets, let’s take it a step further.

Say you’ve developed a really strong brand in running your courier service.  You have a website, which is reachable through a domain name that incorporates your business name.  You’ve registered for a state trademark, and you’ve started doing pickups and deliveries across the closest state line, so you have registered the federal trademark too.  You’ve learned your lesson about listening to your attorney friend, so you have even registered copyrights in the colorful fliers and advertisements that you have developed.  Life is good.  All of that branding, however, comprises intellectual property assets that may be in danger when that driver starts texting his girlfriend about after-work dinner plans doing 60mph on the highway.  How do we protect them?  Here’s a hint — check the title of this post.

If you create a new business entity — lets call it “Black Hat Intellectual Holdings, LLC” — and let the new entity own all of those intellectual property assets, when that plaintiff’s attorney starts selling off the assets of “Black Hat Couriers, LLC” to collect his contingency fee, you can rest assured that you won’t lose the benefit of your branding efforts.  Since “Black Hat Couriers, LLC” was only licensing the IP from “Black Hat Intellectual Holdings, LLC,” you can always create a new LLC and license the same IP to the new company, if “Black Hat Couriers, LLC” becomes bankrupt after paying the judgment.

Wanna franchise?  No problem.  “Black Hat Intellectual Holdings, LLC” can license the trademarks and copyrights to your brother-in-law who wants to open up shop two states away.

Decided to sell the business?  No problem.  You may even decide that you want to keep “Black Hat Intellectual Holdings, LLC” for ongoing licensing revenue paid by the guy who bought “Black Hat Couriers, LLC.”  Otherwise, if you decide to transfer the IP as well, there’s no break in the continuity of ownership for your domain registry.  Your trademarks all maintain a consistent priority, and the new owner enjoys all the benefits of your prior use.

Given the relatively low cost and effort in creating a business entity, it’s hard to understand why more small business owners don’t take advantage of the powerful asset protections that can be had therefrom.  I guess most people look at it as an expense they can skip, but it’s pretty clear that those are the corners you really can’t afford to cut — penny wise and pound foolish, as they say.

These days it’s all about that little extra.  Why should it be any different when it comes to the United States Patent and Trademark Office?  It was recently decided in Wyeth v. Kappos, No. 2009-1120 (Fed. Cir. Jan. 7, 2010) that the USPTO’s calculation of the Patent Term Adjustments (PTA) took that little extra away from patentees.  The PTA is the amount of additional time allotted to a patent when certain deadlines are not met during the examination process.

The deadlines are laid out in two different subsections within Title 35 of the United State Code:  § 154(b)(1)(A) and § 154(b)(1)(B).  The deadlines included in §154 (b)(1)(A) include an issuance of an Office Action within 14 months of the date the patent application was filed, 4 months to respond to a reply, 4 months to act on an application after a decision by the Board of Patent Appeals and Interferences, and 4 months to issue a patent from the date the issue fee was paid.  Anything longer than that is an “A Delay.”  Pursuant to §154 (b)(1)(B), the USPTO must issue a patent within 3 years of the application of the patent (provided, of course, that the subject matter meets the other requirements for patentability).  Anything longer than that is a “B Delay,” according to the Wyeth Opinion.  Should any of these provisions occur, the patentee is entitled to an extension to the term of their patent until the provision is satisfied.

The confusion for the USPTO’s misinterpretation of the two subsections came from the word “overlap.”  Subsection 154 (b)(2)(A) provides that the extension can be limited.  “To the extent that periods of delay attributable to grounds specified in paragraph (1) overlap, the period of any adjustment granted under this subsection shall not exceed the actual number of days the issuance of the patent was delayed.”  Thus, if a delay occurred under “A” and “B” the USPTO was issuing a PTA according to whether the “A Delay” was greater or the “B Delay” was greater.  This, my friends, was incorrect according to the Federal Circuit.  In Wyeth, that Court held that a patentee was entitled to both the “A Delay” and the “B Delay.”  The “overlap” could only begin if any “A Delay” occurs after the three years since the patentee filed the application.  Therefore, if a patentee accumulated 60 days of “A Delay” and 30 days of “B Delays,” they receive the full 90 days of PTA, as long as the 60 days did not extend into the “B Delay” that begins after 3 years.  Clear as mud?

Now that we have this little clarification from the Federal Circuit, patent holders are able to apply for a revised Patent Term Adjustment, according to the new interpretation.  We thank you, Wyeth, for your fight, for our right, to a proper Patent Term Adjustment.  If you think your PTA was incorrectly calculated, please contact your patent attorney to see if Wyeth has affected your patent term.  If you would like to file a request for a recalculation of your PTA, the USPTO has provided a form for doing so.

On February 23, 2010, Facbook, Inc. was awarded U.S. Patent No. 7,669,123 titled Dynamically Providing A News Feed About A User Of A Social Network.  Anyone that uses Facebook understands how the “news feed” feature works.  You put something in as your status, or you perform some function using Facebook, and your friends can view that you have done or have posted in their news feed, along with the activities of everyone else that they are friends with.  It seems to me that Twitter (feel free to follow us on Twitter @LegalTeamUSA and @TacticalIP, or me personally @PTOLawyer) does something similar, but to a much smaller scale.  A user of Twitter can view updates from people that they follow.  It is a bit more informal than Facebook, and it does not allow a user to provide nearly as much information as they can provide on Facebook.

Claim 1 of the Facebook patent reads as follows:

A method for displaying a news feed in a social network environment, the method comprising:

• monitoring a plurality of activities in a social network environment;
• storing the plurality of activities in a database;
• generating a plurality of news items regarding one or more of the activities, wherein one or more of the news items is for presentation to one or more viewing users and relates to an activity that was performed by another user;
• attaching a link associated with at least one of the activities of another user to at least one of the plurality of news items where the link enables a viewing user to participate in the same activity as the another user;
• limiting access to the plurality of news items to a set of viewing users; and
• displaying a news feed comprising two or more of the plurality of news items to at least one viewing user of the predetermined set of viewing users.

I am the King of Social Networking!

It’s not the broadest patent I have ever read, but I believe it certainly covers their commercial embodiment.  Facebook has been extraordinarily successful in generating revenue while allowing users free access to the social network.  It seems to me that Facebook has done a pretty decent job at allowing their users to connect with one another, for free, and providing those users with the tools that are desirable to share information with others.  What users probably do not realize, however, is that the Facebook system keeps information in a database – probably for a very long time.  Users should be careful what they post on any social networking website, and be cognizant of the fact that the information they post doesn’t just go away once your news feed gets too long for the screen.  Quite the contrary.  As indicated in the above claim, Facebook stores that information in a database.  How long do you think it will be before we hear about law enforcement getting a subpoena for Facebook historical records (it’s probably already happened)?  I know that in Australia, service of process was valid when using Facebook for a foreclosure action.

As if Facebook didn’t already dominate the social networking world, this should give them an even bigger advantage over their competitors.  I am curious to see how this will play out in the future, i.e., whether Facebook will attempt to enforce their patents against other social networks – look out Twitter.

Well, I’ve heard this one before – the Patent Reform Act is moving forward.  This is something that has been, allegedly, moving forward for years.   The article that I read noted that patent reform has been introduced in each of the last three Congresses.  Does this one have a chance of passing?  There’s really no telling.

Senators Leahy and Hatch have been big proponents of patent reform over the years.  I appreciate that they realize the importance of intellectual property.  Over the years, the various versions of the patent reform act have attempted to address issues such as moving to a “first to file” system, damages, and third party comments on pending patent applications.  This proposed bill addresses those issues, as well as others allowing the U.S. Patent and Trademark Office to set fees in an attempt to address the backlog problem.

The two issues that I will be watching closely are the first to file issue and the fees issue.  Most other jurisdictions are on a first to file system, i.e., a race to the patent office.  Conversely, the United States is currently a first to invent system.  That means one may not necessarily be entitled to patent protection if another inventor can prove that they actually invented first.  Under the first to invent system, it is possible for an inventor to get patent protection even if another inventor beat them to the patent office.  This is provided that the inventor can show that he/she actually invented first. It is a bit more complicated than it sounds.  The patent reform act would do away with that capability.   To tell you the truth, I am not sure how I feel about it.  I think the system is fine the way it is, and I do not believe that we should be in a rush to conform to the way that other jurisdictions do things.  At the same time, I believe that this will encourage inventors to seek the protection that is necessary in a more timely fashion.  This will, however, likely put a strain on smaller inventors. We’ll see how this one plays out.

As for giving the USPTO the ability to manipulate fees to address the patent backlog problem, I personally think it is a bad idea.  The issue, as I see it, is not one of a lack of fees generated from Applicants.  Instead, I believe the issue is with mismanagement on many different levels.  I believe that over the years, Examiners have been discouraged from allowing patents, thereby increasing their workload, i.e., necessitating the issuance of multiple office actions.  I appreciate that heightened scrutiny on patent examination is aimed at producing better quality patents, but when the end result is fewer patents are issued, there is a hit to the revenue of the PTO that is enjoyed from the collection of maintenance fees.  I also believe that the years of skimming money off the top of fees that the USPTO has collected has had a toll on the USPTO’s ability to hire additional examiners where needed, or even improving its infrastructure.  The PTO should be able to keep all the fees that it generates, and reinvest those fees into hiring more Examiners, and providing those Examiners with the tools they need to effectively carry out their duties.

We will be monitoring the Patent Reform Act and keep you posted on how it progresses.