To provide some  background:  in 2008, Ultramercial LLC received U.S. patent 7,346,545 covering media distribution methods that allow users to view copyrighted material over the Internet free of charge in exchange for watching advertisements.  Ultramercial sued Hulu LLC and WildTangent, Inc.  for patent infringement.  However, in August 2011, the U.S. District Court for the Central District of California struck down the patent, finding that its claims covered an abstract idea and thus  were not eligible for patent protection.

Ultramercial appealed, and in September 2011 the U.S. Court of Appeals for the Federal Circuit reversed the decision.  The Federal Circuit explained that “[a]lthough abstract principles are not eligible for patent protection, an application of an abstract idea may well be deserving of patent protection” (emphasis added).  The Federal Circuit also found that the claimed processes  could not be performed by a human but rather “require, among other things, controlled interaction with a consumer via an Internet website, something far removed from purely mental steps.”   Noting that the patent covered the application of certain steps to “monetizing and distributing copyrighted products over the Internet,”  the Federal Circuit found the claims to be patent-eligible.

In the latest development, the Supreme Court may have swung the patent-eligibility pendulum back toward the district court’s conclusion.  The Supreme Court’s order contains no explanation, but merely requires that the Federal Circuit give the patent “further consideration in view of Mayo Collaborative Services v. Prometheus Laboratories, Inc. ” (U.S. 2012).   As explained in a previous IP Spotlight post, Mayo v. Prometheus involved a “personalized medicine” process, in which the patent covered a method of administering a drug and then testing the patient to determine whether to decrease the amount of the drug administered in subsequent doses.  In its Mayo decision, the Supreme Court found the personalized medicine patent to be invalid on the basis that it claimed “laws of nature” that were not patent-eligible.

In its petition for Supreme Court review, WildTangent asked the Court to consider “whether, or in what circumstances, a patent’s general and indeterminate references to ‘over the Internet’ or ‘at an Internet website’ are sufficient to transform an unpatentable abstract idea into a patentable process for purposes of 35 U.S.C. § 101.”  While it’s clear that an Internet advertising method is not a “law of nature,” the Supreme Court’s order may be a nod toward the Mayo opinion’s statement that “to transform a law of nature into a patent-eligible application of such law, one must do more than simply state the law of nature while adding the words ‘apply it.’”

It remains to be seen whether the Federal Circuit will change the outcome of Ultramercial v. Hulu or simply keep the result but elaborate on its reasoning.  Either way, the order suggests that the Supreme Court wants Mayo v. Prometheus to have a wide-ranging impact in software and business method cases.  In the meantime, companies who have or seek patents for Internet-based methods should carefully watch future developments relating to this case.

• utility patent application basic filing fee:  $390 (increase of $10)
• utility patent examination fee:  $260 (increase of $10)
• provisional application filing fee:  $260 (increase of $10)
• extension of time fees:  increased $20 after two months, $40 after three months, $60 after four months, and $80 after five months:
• maintenance fees:  increased $30 at the first stage, $80 at the second stage, and $140 at the third stage.

Although the proposed increases reflect what the USPTO typically implements each year, this may be end up being atypical.  First, the current fees already reflect a 15% increase that occurred in September 2011 in response to requirements of the America Invents Act.  Second, the America Invents Act also gave the USPTO increased fee-setting authority, and the USPTO’s May 14 notice hints of future use of that authority by stating that “[AIA] Section 10 fee-setting will be addressed in a future proposal.”

The USPTO will accept public comments on the fee increases through June 13, 2012.

Sometimes, during prosecution, applicants become aware of additional prior art.  For example, if the application is pending in multiple countries, a foreign patent office may cite a patent or other document that the applicant hasn’t seen before.  If so, the applicant must file an Information Disclosure Statement with the USPTO to ensure that the USPTO is informed of that document.  However, if the issue fee has already been paid, previously applicants needed to file a request for continued examination (and a substantial fee) to ensure that the USPTO considered the newly-discovered document.

The USPTO recently announced a four-month pilot program that will obviate the need for a request for continued examination in most such cases.  Under the new “Quick Path Information Disclosure Statement (QPIDS)” pilot.  Under the pilot, a request for examination (but no fee) must be included with the IDS.  However, the USPTO will only require the fee and act on the request for continued examination if the USPTO determines that the new information warrants reopening prosecution.

The QPIDS pilot program will run through September 30, 2012.

The full article is available on the Pittsburgh Business Times website.  (Subscription may be required to access the full article.)

The new program is intended to help patent owners avoid costly challenges that could be raised against a patent during litigation.  The program is also intended to help patent owners avoid charges of inequitable conduct based on an allegation that the patent holder withheld material information from the USPTO.  However, information pled against a patent holder during litigation is not eligible, so the program’s practical effect may be limited to pre-litigation correction of a patent before a lawsuit is filed.

In addition, because patent holders who are considering litigation will likely be hesitant to highlight potential weaknesses in the patents, and because the supplemental examination rules require patent holders to explain why the submission raises a substantial new question of patentability, patent holders may be hesitant to file for supplemental examination in most situations.

Under the proposed rules, within three months of filing the USPTO will consider the patent owner’s request and either (a) issue a certificate confirming patentability or (b) initiate an ex parte reexamination to review the patent.

The proposed fee for requesting supplemental examination is $5,180.  If the USPTO orders an ex parte reexamination, an additional fee of $16,120 will be required.  In a related action, the USPTO proposed to raise the fees for filing a request for ex parte reexamination from $2,520 to $17,750.

It is a commitment from Twitter to our employees that patents can only be used for defensive purposes. We will not use the patents from employees’ inventions in offensive litigation without their permission. What’s more, this control flows with the patents, so if we sold them to others, they could only use them as the inventor intended.

On this basis, Twitter has rolled out what it calls the Innovator’s Patent Agreement (IPA).  Under the IPA,  Twitter agrees that it will not assert the assigned patent against any third party unless the assertion is for a
“Defensive Purpose.”  The IPA also states that this restriction will follow the patents to any subsequent purchaser.   The announcement states that by introducing the IPA, “employees can be assured that their patents will be used only as a shield rather than as a weapon.”

However,  the IPA’s definition of “Defensive Purpose” is fairly broad.  The IPA defines  ”Defensive Purpose” as the assertion of a patent claim:

• (a) against an Entity that has filed, maintained, threatened, or voluntarily participated in an intellectual property lawsuit against [Twitter] or any of [Twitter's] users, affiliates, customers, suppliers, or distributors;
• (b) against an Entity that has filed, maintained, or voluntarily participated in a patent infringement lawsuit against another in the past ten years, so long as the Entity has not instituted the patent infringement lawsuit defensively in response to a patent litigation threat against the Entity; or
• (c) otherwise to deter a patent litigation threat against [Twitter] or [Twitter's]  users, affiliates, customers, suppliers, or distributors.

In other words, if a company was a plaintiff in any patent infringement suit during the past ten years, or if the company ever threatened or instituted litigation against Twitter or any of its more than 140 million users, customers or suppliers, then that company is fair game to be sued under Twitter’s patents.

Twitter has posted the IPA on GitHub, in an apparent nod to the open source community and as a way to solicit feedback and encourage other companies to use the IPA.   Because of this, we might compare Twitter’s IPA with the patent license clause of the GNU General Public License v3.  The GPL v3 applies to open source software and states that if any “contributor” creates or modifies GPL v3-licensed software, then that contributor grants downstream users a non-exclusive, worldwide, royalty-free  license under the contributor’s essential patent claims, to make, use, sell, offer for sale, import and otherwise run, modify and propagate the contents of the version of the software that the contributor creates or modifies.  There are no restrictions on this license — it applies to all downstream users.

So, the Twitter IPA’s non-assertion clause is not nearly as “open” as the patent licensing terms that are familiar to the open source community under the  GPL v3.  However, as others have commented, a truly open approach would significantly reduce the value of a company’s patent portfolio.  It will be interesting to watch whether other companies use Twitter’s approach, and if so how they may modify it in the future

In Ergo Licensing, Inc. v. Carefusion 303, Inc. (No. 2011-1229, March 26, 2012), the court considered a patent covering an infusion system for metering and delivering fluids into a patient’s body.  An element of the patent’s claims was a “programmable control means” that had data fields with metering properties of individual fluid flows.  The court interpreted this element as a “means-plus-function” limitation, for which Section 112, ¶ 6 of the Patent Act requires the patent to disclose a corresponding structure.  In this case, the court said that the patent’s disclosure corresponding structure of a general purpose computer or control device was not sufficient.  Instead, the court required that the patent disclose the algorithm under which the control is performed.  ”Requiring disclosure of an algorithm properly defines the scope of the claim and prevents pure functional claiming.”  On this basis, the court found the claims to be indefinite.

In the second case, Noah Systems, Inc. v. Intuit, Inc. (No. 2011-1390, April 9, 2012), the court reviewed a patent covering an automated accounting system.  Each of the patent’s claims included an “access means,” such as a “means for providing access to [a] file of [a] financial accounting computer.”  Here, the court again found the claims to be invalid because the patent did not disclose an algorithm by which access is performed.  The court noted that the algorithm didn’t necessarily have to be a mathematical formula:  ”The specification can express the algorithm in any understandable terms including as a mathematical formula, in prose, or as a flow chart, or in any other manner that provides sufficient structure.”  (citing Finisar Corp. v. DirecTV Grp. Inc. (Fed. Cir. 2008)).   The patent did include an algorithm for a passcode function, but the court found even that disclosure to be lacking.  In addition to the passcode function, the court also required disclosure of an algorithm for enabling performance of the delineated operations.

The recent decisions illustrate how caselaw governing the validity of software patents continues to evolve.  While it has long been settled that software patent applications do not need to disclose source code, the Federal Circuit’s caselaw shows that it wants some description beyond purely functional language.   Although the Ergo Licensing and Noah Systems cases were limited to software patents with means-plus-function language, when working with a patent attorney or agent to prepare your patent application,  is a good practice to give him or her process flow diagrams, functional design specifications, and algorithms that describe how the software actually works.  The stronger your disclosure, the less likely that a court (or the USPTO) will find the claims to be indefinite or not enabled in the future.

My advice to clients who receive these letters is generally this:  ”if you didn’t receive it from your attorney, it’s probably a scam.”

My colleague Christopher Kinkade recently published a useful article describing the USPTO’s official warning about such scams for trademarks, along with a companion article relating to domain name registration scams.  To read Chris’ articles, click here (trademarks) or here (for domain names).

• inter partes review (IPR), which may be used to challenge the validity of an issued patent on the basis of prior art patents or published applications;
• post grant review (PGR), used may be used challenge the validity of an issued patent on any basis within 9 months of its grant;
• a transitional program for covered business method patents (CBM), a variant of PGR that may be used by an entity who has been sued or charged with infringement of a patent covering data processing operations used in the management of a financial transaction or service;
• derivation proceedings, which may be used by an inventor who claims that the invention covered by a co-pending application was derived from the inventor.

In each program listed above, any person may request a proceeding by filing a petition for review with the Patent Trial and Appeal Board (PTAB).  The PTAB will notify the patent owner, who may file a preliminary response within two months.  Then, if the Board determines that the petition meets the required criteria, it will initiate a trial to review the patent or application at issue.

Each of the proceedings will follow the general format of a trial, with the petitioner and patent owner each having a period for discovery, and an oral hearing at the end of the discovery period.  Petitioners can request that certain information in the petition be kept confidential and filed under seal.  The time required to obtain a decision in each proceeding can be as much as 15 months, although the parties may terminate a proceeding by written agreement at any time before the PTAB reaches a final decision.

The USPTO will grant a petition if it meets the applicable standards, which are:

• IPR:  The petition must show that there is a reasonable likelihood that the petitioner will prevail on at least one claim of the patent.
• PGR:  The petition must either: (a) show that it is more likely than not that at least one claim of the patent is unpatentable; or (b) raise a novel or unsettled legal question that is important to other patents or applications.  In addition, the petition must be filed within 9 months of the patent’s grant date.
• CBM: The petitioner must have been sued for or charged with infringement of the patent.  In addition, the patent must claim a method or apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, rather than a technological invention.
• Derivation:  The petition must: (a) state with particularity the basis for finding that a named inventor in the earlier application derived the claimed invention from an inventor named in the petitioner’s application; and (b) be filed within one year of first publication of the earlier application.

The IPR, PGR and CBM rules will be made final and implemented by September 16, 2012.  The derivation proceeding rules will be made final and implemented by March 16, 2013.  The CBM rules will remain in effect for only four years, and will be repealed on September 16, 2020.

The new programs will carry hefty fees.  Under the proposal, the cost to file a petition for a PGR or CBM proceeding will be at least $35,800, while the cost to file an IPR petition will be $27,200.  The USPTO asserts that these costs are required to cover its administrative costs, but are in fact likely to result in filing only in cases where the financial implications to the petitioner are significant