Two Patent-Related Scourges Addressed

9/4/07

After years of relative neglect, the courts, the U.S. Patent and Trademark Office, and even Congress have taken important steps over the past several months to correct some of the patent system’s most glaring problems. (For one example, see this post from July.) The latest changes attempt to deal with dreaded “submarine patents” and the threat of trumped-up patent suits alleging “willful infringement.”

Submarine patents

In recent years, so-called submarine patents have been produced when savvy applicants have abused the patent office’s option of “continuation applications,” which allows them to repeatedly modify their patent applications while they are in process. There are, of course, legitimate reasons for patent applicants to make modifications. But the existing system has also been exploited by some applicants who have tried to use a series of well-timed continuations to drag out the patenting process. The goal of the strategy is to lurk until a lucrative product related to the patent comes to market. Then the unscrupulous applicants can allow their patents to “surface” and spring potent charges of infringement on an unsuspecting manufacturer.

Now, in an effort to make submarine patents a thing of the past, new rules announced on August 20 will restrict the number of continuation applications a patent seeker can normally file. Jon Dudas, director of the U.S. Patent and Trademark Office, said the changes sought to “bring closure to the examination process more quickly, while ensuring quality and maintaining the right balance between flexibility for applicants and the rights of the public.” More here from the patent office.

Willful Infringement

In other welcome (by most corporations, anyway) patent news, a recent court ruling will make it more difficult for patent holders to collect much-feared treble damages for so-called willful infringement of their patents. The unanimous ruling also came on August 20, but this time from the U.S. Court of Appeals for the Federal Circuit (which handles all federal patent appeals). In the case, which has dragged out for seven years, an inventor had, along with MIT, sued California-based Seagate Technology, alleging willful infringement of two patents on a method to avoid “unwanted dynamics” (i.e. vibrations) in the inputs into mechanical or electronic systems.

In the past, the mere charge of willful infringement, with the associated threat that the accused might have to pay tripled damages and whopping attorneys’ fees, has led many innocent firms to settle patent cases rather than risk a legal battle. With a refreshing dose of common sense, the new decision holds that, to establish willful infringement, plaintiffs need to provide convincing evidence that “the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.”

Further reforms of this willful infringement standard could be coming in the Patent Reform Act of 2007 now wending its way through Congress. The current version of the bill includes a provision that would require companies to warn would-be infringers and give them a chance to respond before they can bring charges of willful infringement. It remains to be seen whether this bill will pass, and the Seagate case could also conceivably be revisited by the U.S. Supreme Court. For the moment, however, companies have won a reprieve from the overly powerful cudgel of frivolous willful infringement charges that have too often held the day until now.

Intrepid interested readers can find the verdict In re Seagate Technology, LLC, No. 06-M830 (Fed. Cir. August 20, 2007) here.

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  • Charles J. Johnson

    While it remains to be seen how the Seagate decision will be interpreted by the respective District Courts, it is likely that fewer awards of enhanced damages for willful infringement will be imposed. This would be bad news for patent trolls and good news for tech companies with plentiful patent portfolios.

  • Steve Wren

    All this talk of a need for patent “deform” is but a red herring fabricated by a handful of large tech firms as a diversion away from the real issue…that they have no valid defense against charges they are using other parties’ technologies without permission. It’s not about reforming the system. It’s about legalizing theft!

    The objective of these large firms is not to fix the patent system, but to destroy it or pervert it so only they may obtain and defend patents; to make it a sport of kings. Patents are a threat against their market dominance. They would rather use their size alone to secure their market position. Patents of others, especially small entities, jeopardize that. For example, the proposed change to eliminate the use of injunctions would only further encourage blatant infringement. Any large company would merely force you to make them take a license. They would have little to lose. Everything would be litigated to death -if a small entity can come up with the cash to pursue. That’s what these large multinationals are betting against. This legislation in regressive, not progressive.

    Sadly, some legislators and other parties have been duped by these slick firms and their well greased lawyers, lobbyists (some disguised as trade or public interest groups), and stealth PR firms. Don’t be surprised to find the Washington lobbyist scandal spreading into the patent deform proceedings.

    While some of these large firms pushing for reform such as Intel may own a lot of patents, the fact is more often than not they find themselves as defendants in patent cases. Many of their patents neither they or anyone else use. For them patents exist mostly for defensive use.

    Actually, even the present threat of injunction is not sufficient to deter would be infringers. Just look at the Blackberry case. RIM had to have known they were infringing or likely so and yet they still held out to the bitter end. They took the nuclear option and guess what…they got nuked. If anything, we need harsher penalties to force large aggressive firms into thinking twice before thumbing their nose at small patent holders. I recently noticed one country is considering jail time for infringers. That sounds like a great solution to me. “Don’t bother to pack boys, we’ve got your suits all ready…pinstripes!”

    The problem is that companies who are using your technology aren’t so genteel as to stop using it merely because you politely ask them to do so. Invention is rough and tumble. The fact is, a patent is merely a right to sue someone to not make your invention without permission. Unless you have the will and money to sue them, they will turn a deaf ear. Unless you have a good patent, you will not get the money. It’s sad, but it’s the reality of business. All this talk about patentees gaming the system with bad patents is then a hoax. Why do these detractors never identify these supposed bad patents? Surely if they exist they can be identified?

    If anyone is gaming the system, it is large multinationals. After losing in court they coerce the Patent Office into conducting a reexamination on the patents they have been found guilty of infringing. That is pure abuse of process!

    The fact is, there is no systematic abuse of the patent system by patentees which would require an overhaul of the system. To the contrary, there is a reason why the patent system works the way it does. We didn’t get here by accident. That’s because of past abuse of the system by large companies who used their wealth to give inventors the run around and make a sham of the system. Take a look at the RCA/Armstrong case of years ago on FM radio. RCA ruined Armstrong with a legion of attorneys. They so destroyed Armstrong and made a mockery of the patent system that he committed suicide. Check out Tom Lewis’s “Empire of the Air”, chapter 10, p313 and p356. Part of RCA’s outrageous conduct was to string Armstrong along making him think they were interested in his invention only to copy his work and file patent applications of their own. Later they then entered into an interference against him at the patent office -a fraudulent act. RCA committed similar abuses of the patent system against electronic television inventor Philo Farnsworth. See “The Boy Who Invented Television” by Paul Schatzkin.

    As to the quality of patents; based on court rulings of the last several years, roughly half of all litigated patents are upheld in court. That’s pretty balanced and suggests there is no problem with patent quality. Further, seldom do cases ever make it to trial as the parties settle out of court. The facts do not support the contention that there is a patent quality issue. Still, with almost half a million patent applications filed each year a few are bound to be issued that shouldn’t. However, rarely are they ever an issue because you can’t enforce them without money and you wont get the money unless you have a good patent. Keep in mind it costs the patent holder about as much in a patent suit as it does the accused infringer. Investors are not stupid. If they don’t have confidence in your patent, they will not invest. It’s that simple. Bad patents do not get funded.

    If there is a problem with the patent system, it is not that patents are issued too hastily but rather that many are issued too slowly. Witness the current backlog and pendency. I for example have applications with a pendency of 15 years! In one instance it took 3 years just to get a first office action. With this kind of pendency by the time an inventor gets their patent their technology is of no value. That is the problem everyone should be focused on -not this imaginary issue of patent quality trumped up and propped up by large multinationals as a way to stifle innovation and further cement their market control. Can you say “monopoly”?

    Further, certain large multinationals speak of the need for harmonization. Why is that necessary? If others are backward would we want to modify our system just to match theirs? When one looks at the efficacy of patent systems throughout the world the US patent system has produced far more innovation than those of other countries over the last several decades. If anything, other countries should be changing their systems to get inline with ours. Rather what’s going on is these large multinationals and those they have duped are using specious arguments to get what will benefit them personally. The rest of the country be damned.

    Ours is a finely tuned patent system developed over 200 years which has led to US dominance in technology. We had better think carefully and move cautiously lest we create more problems than we solve and reap unintended and unforseen consequences.

    All this is then not about present abuse of the system by inventors or a need for patent reform, but rather systematic past and present abuses by large companies. Witness the present conduct of firms like RIM in using the courts to drag out a final verdict. The judge in that case remarked about how delays frustrate justice. Also, look at the exploitations and predations of Medtronic.

    Even worse; not only is there no need for reform, but the proposed changes will actually damage our functional system. The proposed changes:

    1) Increase the costs to small entity patent holders, often by at least an order of magnitude.
    2) Shift costs from large corporate infringers to the small entity.
    3) Open new causes for large entities to litigate.
    4) Open our patent system to a multitude of patent system abuses common in Japan which very much favors big companies.
    5) Delay the possibility of start-ups obtaining investment capital by effectively increasing pendency.
    6) Increase the power and potential abuse of such power by the USPTO which has become increasingly politicized.
    7) Lowers the potential recovery for a patentee by at least one to two orders of magnitude.
    8) Will not decrease the role of attorneys or litigation, but rather will increase their role and legal expenses in a multitude of ways.
    9) Will lead to much higher filing rates for patents which will further bog down the USPTO.

    When corporate America agrees to not use our inventions without consent, American inventors and small entities will agree to stop suing them.

    Sincerely,
    Stephen Wren
    actuary/inventor
    StL, MO

    For further balance and fairness, please contact the following…

    Professional Inventors Alliance
    P.O. Box 27391
    Washington, D.C. 20006
    Ron Riley
    rjr@piausa.org
    202-318-1595

    F. Scott Kieff
    Associate Professor of Law
    Washington University School of Law
    One Brookings Drive, Campus Box 1120
    St. Louis, MO 63130
    Phone: 314-935-5052
    Fax: 314-935-5356
    Email: kieff@wulaw.wustl.edu
    Web: http://www.law.wustl.edu/kieff
    For papers on the SSRN, see:
    http://ssrn.com/author=231064