Category Archives: Patents

Court finds that ambiguous assignment agreement does not break chain of title

It’s always important to ensure that intellectual property agreements are carefully drafted.  However, on rare occasions a court will see past a drafting error and interpret an agreement to match the apparent intent of the parties, even if certain language of the agreement may conflict with that interpretation.

This happened in a recent case from the Southern District of Indiana. In a consolidated order involving suits that GS CleanTech Corporation (CleanTech) brought against various defendants in that court, the defendants filed motions for summary judgment and asserted that CleanTech lacked standing to bring the suit because CleanTech had not established title to the asserted patents.

CleanTech acquired the patents from GS Ethanol Techs. Inc. (GSET) and other entities by an assignment agreement dated May 15, 2009. The defendants asserted that the chain of title in the patents was broken by a January 2008 Security Agreement in which GSET and the other owners conditionally assigned the patents to YA Global Investments, L.P. (YA Global).

The defendants argued that although the document was titled “Security Agreement,” it was actually an assignment because of the grant clause conveyed “a continuing interest in the patents” to YA Global. The wording of the grant clause was immediate, the agreement was recorded against the patents, and so the defendants argued that the Security Agreement passed ownership of the patents to YA Global.

The court disagreed, stating that the remainder of the Agreement made it clear that the intent of the document was to grant “a continuing security interest in the patents” rather than actual title, even if the grant clause didn’t include that specific word.

Federal Circuit reverses course in Ultramercial v. Hulu; finds method of delivering advertisements to be an abstract idea

Yes or NoA method of providing advertising in connection with streaming media is not eligible for patenting, according to the latest decision of the Federal Circuit in the long-running Ultramercial v. Hulu patent saga.

Ultramercial’s patent claimed a method of distributing media over the Internet.  Claim 1 included eleven steps.  The steps described a process of associating ads with streaming media, allowing a consumer to access the media for free if the consumer first views the ad, and receiving payment from the advertiser after the consumer views the ad.

When the Federal Circuit first considered the claims in 2013, it found the claims to be patent-eligible. At the time, the court stated that ” it wrenches meaning from the word to label the claimed invention ‘abstract.’”  The court’s 2013 decision also stated that “the claim appears far from over generalized, with
eleven separate and specific steps with many limitations and sub-steps in each category.”

Fast forward to 2014, after the United States Supreme Court issued its decision in Alice v. CLS Bank.  The Alice decision established a two-part test for determining patent-eligibility: (1) Is the claim directed to an abstract idea? (2) If so, are there other elements in the claim sufficient to ensure that the claim amounts to significantly more than the abstract idea itself?

When faced with a new post-Alice appeal in the case, the Federal Circuit applied the new two-part test of Alice.  This time, the court reached a different conclusion Continue reading

Federal Circuit: Private entities do not infringe patent when performing “quasi-governmental actions”

31220041_sPrivate entities cannot be liable for patent infringement when performing “quasi-governmental actions” with the express or implied consent of the U.S. government, according to a recent decision of the U.S. Court of Appeals in Iris Corporation v. Japan Airlines Corporation (Fed. Cir. 2014).

Iris Corporation’s patent number 6,111,506 covered a method of making an identification document (such as a passport) with a contactless communication unit.  The case arose after Iris accused Japan Airlines Corporation (JAL)  of infringing Iris’ patent by scanning the electronic passports of its U.S. passengers.  Iris argued that by using and scanning passports that contain RFID chips, JAL infringed the patent.

At least two U.S. statutes required JAL to perform the scanning. Because of this, in its defense JAL argued that it could not be liable for infringement because its actions were required by federal law.  JAL also noted that 28 U.S.C. §1498(a)) states (with emphasis added):

Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner’s remedy shall be by action against the United States.

The court agreed with JAL’s argument.  The court noted that an activity is “for the United States” if two requirements are met: (1) it is conducted “for the Government,” and (2) it is conducted “with the authorization or consent of the Government.”

The court found the first requirement to be satisfied because the scanning of passports was a “quasi-governmental activity” done for the benefit of the U.S. government.  The second requirement was satisfied because “JAL cannot comply with its legal obligations without engaging in the allegedly infringing activities.”

Because of this, the court dismissed the case and held that IRIS’s exclusive remedy is to file suit against the U.S. government, not any private entity.

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U.S. patent law needs a definition of “abstract idea”

Recent U.S. Patent and Trademark Office actions relating to software patents have confused and frustrated many patent applicants. After the U.S. Supreme Court published its opinion in Alice Corporation Pty Ltd. v. CLS Bank Int’l, the USPTO’s application of the Court decision to software inventions has been anything but consistent. Does the USPTO’s action signal a need for Congressional action or another Supreme Court decision with more concrete guidelines?

In Alice, and as explained by the recent USPTO Preliminary Examination Instructions in view of the Supreme Court Decision in Alice, the determination of subject matter eligibility involves a two part test:  (1) Is the claim directed to an abstract idea?  (2) If so, are there other elements in the claim sufficient to ensure that the claim amounts to significantly more than the abstract idea itself?

However, rather than a rigorous application of any test, in the past few months the USPTO’s patent-eligibility determinations contain little analysis of any specific claim language. Instead, they primarily consist of a boilerplate paragraph stating that the claimed invention is directed to an abstract idea.

To illustrate this problem, the USPTO recently issued a rejection asserting that the following claim was patent-ineligible because it is directed to a “fundamental economic practice:”

8.   A device for predicting a future occurrence of a transportation system incident, the device comprising:
  a processor; and
  a computer readable medium operably connected to the processor, the computer readable medium containing a set of instructions configured to instruct the processor to perform the following:
          collect historic operating information related to the previous operation of a vehicle along a transportation route,
          determine schedule deviation information for the transportation route based upon the historic operating information and observed schedule adherence for the vehicle along the transportation route, the schedule deviation information comprising at least an identification of a driver and a sequence number for a period of time associated with the historic operating information and the observed schedule adherence,
          construct a plurality of models, each of the plurality of models including at least one combination of factors that contribute to schedule deviation,
          rank each of the plurality of models according to at least one information criterion,
          assess an impact of the driver and the sequence number on a highest ranked model to produce a results set, wherein the results set comprises at least a highest ranked model showing at least one combination of factors that most contributes to schedule deviation, and
          present the results set.

The rejection did not explain what “fundamental economic practice” exists in a transportation schedule management process.  Nor did the rejection point to any particular claim terms to say what “abstract idea” existed in the claim.

Nineteen days later, the USPTO awarded a patent with the following claim:

18. A system comprising: one or more processors configured to obtain a captured state of vehicles that are actually traveling in a transportation network according to associated schedules, the captured state representing actual locations of the vehicles in the transportation network at a selected time, the one or more processors also configured to obtain a proposed modification to one or more selected schedules for one or more of the vehicles, the proposed modification directing the one or more of the vehicles to deviate from the one or more selected schedules, the one or more processors further configured to simulate continued movement of the vehicles from the actual locations and the selected time of the captured state according to the proposed modification, the one or more processors also configured to identify impacts on the movement of the vehicles that is simulated due to the proposed modification and to actually change at least one of the selected schedules using the proposed modification so that continued actual travel of the vehicles is modified by the proposed modification.

It is difficult to understand why software that helps transportation system providers manage their schedules is patent-eligible in one instance, but a mere abstract idea in another. This also illustrates how difficult it is for patent applicants to understand exactly what constitutes an “abstract idea.”

Which leads to the root of the problem:  neither Congress nor the Court decisions have provided the USPTO with sufficient guidance for determining when a software claim passes or fails the “abstract idea” test. While the Supreme Court has made it clear that laws of nature and mathematical formulas are not patent-eligible, the Court has yet to precisely define why and when other inventions will be patent-eligible.

It may be that the USPTO’s recent actions are intended to send a signal to Congress and the courts that it needs clear guidance in this area. Unfortunately, that guidance does not appear to be imminent.

Instead, the Federal Circuit decisions that followed Alice may add to the confusion. For example, in Digitech Image Technologies, Inc. v. Electronics for Imaging, Inc., the Federal Circuit said that “[w]ithout additional limitations, a process that employs mathematical algorithms to manipulate existing information to generate additional information is not patent-eligible.” While the Federal Circuit may have reached the correct result for the claims at issue in Digitech, the quoted statement to seems embody the very definition of software — and it thus suggests that software isn’t patentable.

Then, in Planet Bingo LLC v. VKGS LLC, the Federal Circuit applied the abstract idea test not to the claim itself but instead to the problem that the claim was intended to solve. In Planet Bingo, the court said that claims for a computer-implemented bingo gaming system were directed to the abstract idea of “solv[ing a] tampering problem and also minimiz[ing] other security risks” during bingo ticket purchases. This text came not from the claims themselves, but instead from the patentee’s arguments describing why the invention was useful. By not analyzing whether the invention is an abstract idea, but instead asking whether the motivation for the invention is an abstract idea, the Federal Circuit’s reasoning suggests that no invention is patentable under the “abstract idea” test.

In nearly every court and PTAB decision that applied Alice between July 1, 2014 and September 30, 2014, the court or Board found the claim to be ineligible for patenting. However, even the few decisions that didn’t overturn or deny a claim have provided little insight into when a software or business method patent will be patent-eligible.

In Alice, the Court said:  “we need not labor to delimit the precise contours of the ‘abstract ideas’ category in this case.” However, given the confusion that has resulted, it seems that the time for that labor has come.

Is the predicted “death of hundreds of thousands of patents” coming true?

In May 2013, Judge Moore of the U.S. Court of Appeals for the Federal Circuit predicted that the court’s decision in CLS Bank Int’l v. Alice Corporation Pty Ltd. would result in the “death of hundreds of thousands of patents, including all business method, financial system, and software patents as well as many computer implemented and telecommunications patents.”

In the year that followed, not much changed.  The U.S. Patent and Trademark Office continued to issue patents in these areas.  And the Federal Circuit issued other decisions affirming that software was still patentable.  While patents covering financial business methods and purely human activity faced difficulty, patents for non-financial software inventions continued to grant at a fast clip.

Then, in June 2014, the U.S. Supreme Court issued an opinion that affirmed the Federal Circuit’s decision. The Court’s decision in Alice Corporation Pty. Ltd. v CLS Bank Int’l said: “there is no dispute that many computer-implemented claims are formally addressed to patent-eligible subject matter,” and subsequent USPTO guidance suggested that “the basic inquiries to determine subject matter eligibility remain the same.” Soon afterward, however, the practical effect of the Court’s decision became quite different.

In the weeks following the Supreme Court decision, I’ve seen that the USPTO is rejecting nearly every application assigned to its business methods examining unit for failure to meet the post-Alice patent eligibility standard. Other patent attorneys have noted this too, and have commented on it with concern.

District Courts and the Patent Trial and Appeal Board have been similarly critical of software patents in recent weeks. Dennis Crouch of Patently-O recently published a comprehensive summary of District Court and PTAB decisions that overturned software patents after the Alice decision.

In addition, in one of its first published opinions that addressed the Alice decision, the Federal Circuit found an invention for a computer-implemented method and system for playing bingo to be a mere abstract idea and thus not patent-eligible. Although the case (Planet Bingo LLC v. VKGS LLC) is non-precedential, it may serve as a harbinger of things to come in future software patent cases.

The USPTO is continuing to issue patents for software-related inventions that are assigned to it’s non-business-method examining units, so it’s clear that at least some software remains eligible for patenting. However, it’s also clear that new and potentially significant challenges are now in place for those who want to obtain or enforce software patents in the future.

If a patent says something is “essential,” then it must be so

To help a patent attorney prepare a patent application, inventors often provide a copy of a manuscript for an upcoming technical journal, research publication or white paper. The manuscript often goes into great detail to explain what features of the invention are essential, critical, or otherwise important to achieve certain results.

Then the patent attorney guts all of that language and produces a document that describes nothing with certainty, and that suggests everything is an option.

Why does this happen?

recent opinion from the U.S. Court of Appeals for the Federal Circuit helps to explain the reasoning behind this.

A basic tenet of patent law is that the scope of the patent is defined by the patent’s claims. The detailed description serves as an instruction manual for how to make and use the invention, while the claims define the boundaries of the patent rights that cover the invention.  In order to infringe the patent, someone has to make, use or sell a product or process that contains all elements of at least one of the claims.

Ordinarily, when evaluating a patent infringement case, a court is not supposed to read words into the claims that aren’t already there. A court can use the detailed description to understand what the claim terms mean.  However, in most cases a court should not add features to a claim (and thus narrow the scope of the claim) if those features aren’t expressly recited in the claim.

The recent Federal Circuit decision, X2Y Attenuators, LLC v. Int’l Trade Commission, highlights an exception to this rule:  if the detailed description describes an element as “essential,” then the court may interpret it as being so — even if the claims don’t include that element.

In the X2Y Attenuators case the patent covered a structure for Electrodereducing electromagnetic interference in electrical circuits. The claims covered a structure with four electrodes.  The claims also described the positioning of certain electrodes in a way that caused certain pairs of the electrodes to be physically shielded from each other. The detailed description also said that a common conductive pathway electrode was “an essential element of all embodiments or connotations of the invention.” Because of this language, the court concluded that one could only infringe the patent if one were to make, use or sell a product with a common conductive pathway electrode, even though the patent claims did not specifically recite that element. In particular, the court noted:

we have held that labeling an embodiment as “essential” may rise to a disavowal.

One of the first questions I typically ask an inventor when talking about a new invention is whether he or she has been through the patent process before. If the answer is “no,” then I try to prepare the inventor for the fact that the patent application’s description may soften some of the inventor’s absolute statements.

It’s important to recognize that what’s “essential” to achieve the best possible practical implementation of an invention may not always be “essential” for the purpose of patentability.  The X2Y Attenuators case helps illustrate what happens when a patent application confuses the difference between the two.

If a patent can’t cover an “abstract idea,” can it be a trade secret?

Should I patent my invention or keep it a trade secret?  QuestionInventors often ask me this question.  And after a recent court decision and USPTO actions that raise the bar for patenting software inventions, the question is becoming even more important for software developers who want to protect their IP.

In Alice Corporation Pty Ltd. v. CLS Bank Int’l, the Supreme Court made it clear that “abstract ideas” are not eligible subject matter for patent protection. The decision, as well USPTO Preliminary Examination Instructions that followed the decision, suggest that inventive concepts such as algorithms, financial business methods and methods of organizing human activity are not, in themselves, patentable unless claimed with additional elements that make the claim cover significantly more than just the abstract idea.

So, does this mean that it’s better to keep certain inventions as a trade secret? Will trade secret law protect abstract ideas in a way that patent law can’t?

In most cases, probably not. Several state court decisions suggest that a trade secret needs to be described in an enabling manner in order for the owner to enforce trade secret rights against others.

For example,the Court of Appeal for the State of California recently held that in California, a “trade secrets plaintiff must, prior to commencing discovery, ‘identify the trade secret with reasonable particularity.’” New Castle Beverage, Inc. v. Spicy Beer Mix, Inc., (Cal. App. 6/17/2014).  In that case, the complaint described the trade secret as a “process of applying a secret solution to the inner and outer surfaces adjacent the lip of a beverage cup to permit a first mixture of spices to adhere to those surfaces.” The court found this description to be too vague.  Also, the lower (trial) court expressed a concern that if it were to grant a preliminary injunction, the court would have difficulty determining whether the defendant was violating the injunction.

This means that when deciding whether to patent a process or keep it trade secret, the inventor should work with his or her attorney to assess which area of law provides the best protection, not which regime is easier to use. In both situations, the inventor should identify and document a complete description of the process.  This description needs to include more than just the general idea itself, it needs to explain how the idea is implemented as technology.

So, if the question is “can I protect it,” patent law and trade secret law will often lead to similar answers.  Neither area of law is likely to help an inventor who either can’t or won’t fully describe the process in a way that enables a reader to make and use the process, and that allows a court to determine when an infringer is using the process.

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