Patentology Cited in Academic Paper on Cost of Patent Trolls

About a month ago we published an article in response to a widely-reported study, conducted by Boston University law researchers James Besson and Michael Meurer, which concluded that, in 2011, patent ‘trolls’ imposed a $29 billion burden on innovation in the US, and that this is further proof that the patent system is ‘broken’ (see A $29 Billion US Troll-Tax or Just Another Statistical Smokescreen?).

Our interest was piqued by the sheer unbelievability of the quoted cost, and in addition to questioning the plausibility of the conclusion we raised three main criticisms of the assumptions and methodology in the Besson and Meurer study:

1. there is ‘selection bias’ in the sources of the data used in the study;
2. the study makes no meaningful distinction between different types of non-practicing entity (NPE), and thus fails to distinguish between deadweight costs (which are genuine burden on the economy) and transfer costs (which are not); and
3. the statistical methods and assumptions employed in the study are decidedly opaque, and fail to place any estimate of confidence on the $29 billion figure.

We were therefore very pleased to read a paper entitled Analyzing the Role of Non-Practicing Entities in the Patent System, which was placed up on SSRN in the past week, authored by David L Schwartz of the Chicago-Kent College of Law and Jay P Kesan of the University of Illinois College of Law, which concurs with our criticisms, and even cites the Patentology article (see footnote 4). 

Apple v Samsung – Trial Commences, But Will It Matter?

This week marked the first five days, in Sydney, of a trial scheduled to run for a total of 34 days between now and October, with Apple and Samsung before Justice Annabelle Bennett in the Federal Court of Australia.  This country has not seen a more extensive set of bookings in any major venue since US pop star P!NK played 58 dates here on her Funhouse tour in 2009!

Some good coverage of the week’s events has been provided by ZDNet reporter Josh Taylor: Australian Apple v. Samsung patent hearing begins; Samsung sacrificed Qualcomm truce for Apple war; Apple: our 3G isn't Samsung's 3G; and Samsung accuses Apple of ‘ambush litigation’.  Rather than simply rehash these stories, in this article we will review some of the issues that have arisen in recent days – both at the trial and more widely – and look at what this might all mean for the longer-term outcome of the ongoing dispute.

Free Breakfast Seminar in Chatswood (Sydney), 8 August 2012

Readers of this blog who are located in Sydney may be interested in a free seminar being co-hosted by Watermark Intellectual Asset Management (employer of yours truly) and our friends at Atkinson Vinden Lawyers.

From Watermark, Steve Krouzecky and David Perkins will speak on the topic of Patents and IT – Why Bother? while Kate Mahady will talk about getting the most from the Australian government’s new R&D tax incentive scheme.

From Atkinson Vinden, Sheena Joshi and Jessica Lobow will be discussing Hidden Traps and Confidentiality with respect to your Intellectual Property, while Tom Howard will explain Anton Piller Orders - the nuclear warhead of IP protection.

When: 7.15am register for 7.30am start on Wednesday 8 August 2012
Where: Civic Pavillion at The Concourse 409 Victoria Avenue Chatswood (map)

The seminar and breakfast are completely free, however early registration is advised because places are limited.

More information is available on the Watermark website.

Friends of Watermark (and this blog) can register by contacting Maryanne Cidoni via email, or phone (02) 9888 6600.

Friends of Atkinson Vinden can register by contacting Janice Martin via email or phone (02) 9411 4466.

IP Australia Changes Tack on Changing Names

Someone always playing corporation games.
Who cares? They’re always changing corporation names!

– Jefferson Starship, ‘We Built this City’

'’If anyone knows of any lawful reason why this man should not marry this patentee, speak now or forever hold your peace…’ ‘Hang on – don’t we get three months to oppose this change of name?!’

In a bizarre change to long-standing practice, we understand that IP Australia has determined that it is required to advertise, for opposition purposes, all requests to record a change of name of a patent owner.  Although this change has yet to be announced, we hear that it has been in effect since at least 18 July 2012.

From now on, therefore, if a corporate or individual patentee simply changes name – whether by choice, marriage, or for any other reason – and does the right thing by requesting the change be recorded on the Register of Patents, the request will be open to opposition for a three-month period.

So a simple administrative change, which currently takes no more than a few business days to process, will now be delayed by around four months (assuming no opposition is filed).  Brilliant.

Ric Richardson: ‘I’m No Troll’. We’re Not So Sure About Uniloc!

The Interwebs went all stabby over the weekend on the back of news that ‘technology innovator’ Uniloc – famous for having successfully won a big settlement from Microsoft over patented copy protection technology – has sued Minecraft developer Mojang for infringement of a patent covering software licensing systems.

Specifically, an outpouring of hostility was generated by a tweet from Mojang founder Markus ‘Notch’ Persson, saying simply ‘Step 1: Wake up. Step 2: Check email. Step 3: See we're being sued for patent infringement. Step 4: Smile.’

Step 5: internet bays mindlessly for the blood of Uniloc’s most well-known human face, Australian Ric Richardson, who was responsible for the invention covered by the patent before which Microsoft eventually laid down and paid up.

Just one small problem: Richardson has nothing to do with the patent in question, or the decision by Uniloc to sue Swedish company Mojang AB – or Square Enix Inc, Polarbit AB, Madfinger Games a.s., Laminar Research LLC, Gameloft S.A, Fullfat Productions Ltd, Electronic Arts Inc, Distinctive Developments Inc and Australian Fruit Ninja developer Halfbrick Studios Pty Ltd – all of which were named in separate suits filed by Uniloc USA Inc in the Eastern District of Texas on 20 July 2012.

Having been targeted in social media and via email, Richardson was compelled to remove his email address from his blog site, and to publish a response to what he described as ‘people making inflammatory remarks from the cheap seats’.

And you know what?  He’s right.  There are currently many opinions on the patent system, and what is wrong with it (and what is not).  In some cases they are deeply and sincerely held views.  But patent laws are passed by governments, and to the extent that many of us are fortunate to live in democratic nations, with the privilege of free speech, all that can be achieved by hurling abuse at individuals whose views differ from our own is a debasement of that privilege.  Frankly, democracy and freedom of expression are wasted on some people.

Extended Monopoly on ARAVA (Leflunomide) Upheld on Appeal

Appeal Decision:	Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd (No 2) [2012] FCAFC 102 (18 July 2012)
Appeal from:	Sanofi-Aventis Australia Pty Ltd v Apotex Pty Ltd (No 3) [2011] FCA 846
See also:	Australian Federal Court ‘Evergreens’ ARAVA for Sanofi-Aventis

Claim construction – second medical use claims directed to treating specific ailments – Novelty – application of the ‘reverse infringement test’ where effect may be ‘inherent’ in practising the prior art – Infringement – infringement by supply of products

A Full Bench of the Federal Court of Australia has unanimously upheld a July 2011 decision of Justice Jagot barring the introduction of generic alternatives to Sanofi-Aventis’ ARAVA and ARABLOC products.  At first instance, the court found that a ‘second medical use’ patent directed to the use of the active ingredient leflunomide for the treatment of psoriasis effectively extends an existing monopoly on marketing of the drug for treatment of rheumatoid and psoriatic arthritis until 2014.  Sanofi’s original patent on leflunomide expired in 2004.

The three main patent issues in the case are:

1. the correct interpretation of a ‘second medical use’ claim;
2. whether a prior art teaching to administer a compound to a patient anticipates a claimed effect of the compound on the patient; and
3. whether, and in what circumstances, marketing a compound for one medical purpose constitutes an indirect infringement of a patent directed to an alternative use of the compound.

A fourth issue – whether the patent claims were directed to suitable subject matter, i.e. a ‘manner of manufacture’ – was readily dismissed at first instance and on appeal.

The three appeal judges unanimously overturned Justice Jagot’s claim construction finding (quite rightly so, in our opinion).  However, the court’s original finding of novelty was upheld (Chief Justice Keane adopting different reasoning from Justices Bennett and Yates), as was a finding that supply of products containing leflunomide as an active ingredient would be an infringement under section 117 of the Patents Act 1990.

Pharmaceutical Extensions of Term: Is It Time for a Fix?

In light of news from Europe today, via the IPKat, it is becoming ever more clear that the law in Australia regarding the grant of extensions of term for pharmaceutical patents is flawed, and out-of-step with all of our major trading partners.

We have covered this topic before, most recently in the article Australia Slips Further Out-of-Step on Pharmaceutical Extensions, in which we highlighted the disparity between the Australian law and its Japanese counterpart.  We had previously discussed the difference in approaches between Australia and the US.  A new ruling from the Court of Justice of the European Union (CJEU) now establishes that a similar disparity exists between Australian and European law and practice.

The upshot of this is that patentees in Australia may obtain a shorter term of protection for various classes of pharmaceutical inventions, when compared with trading partners such as the US, Europe and Japan.  While some may see this as a benefit – shorter patent terms mean earlier availability of generic competitors, resulting in lower prices – the flip side is that jurisdictions with lesser protections tend to seen as less attractive for investment.  This may mean less funding for R&D to be conducted in Australia, fewer innovative drug manufacturers operating in this country, and a reduced focus on the specific needs of the Australian community and environment.

If Australia wishes to stand side-by-side with other advanced developed economies, to maintain and develop local capabilities for drug discovery and development, reduce its reliance on primary industry, and progress along the path of becoming a ‘knowledge economy’, we need to ensure that the laws protecting IP in this country are on a par with those nations against which we would compare ourselves.

As matters stand right now, this is clearly not the case when it comes to patent protection for pharmaceutical inventions.

Patent Office Told: Factual Matters Preclude Summary Dismissal

Preference Manufacturing (Aust) Pty Ltd and Commissioner of Patents and Breezway Australia (Holdings) Pty Ltd (Joined Party) [2012] AATA 393 (27 June 2012)

Practice and procedure – opposition to the allowance of an amendment of notice of entitlement summarily dismissed – whether matter capable of being determined summarily

In the latest development in a dispute which could turn out to be a great expenditure of time, money and public resources for little substantive effect, the Administrative Appeals Tribunal (AAT) has ruled that a delegate of the Australian Commissioner of Patents was wrong to summarily dismiss an opposition to a request to correct a document which was filed in the course of prosecution of a patent application.

According to the AAT’s decision (at [22]), there were ‘factual matters that warranted investigation and proper consideration’, and it was therefore inappropriate for the opposition to be dismissed without submission of evidence or argument, and without (if requested) conducting a hearing.

The erroneous document in question is a ‘Notice of Entitlement’.  For readers unfamiliar with Australian patent procedures, this is a statement which must be filed by, or on behalf of, a patent applicant before the Patent Office can issue a patent.  The statement explains the basis upon which the ‘nominated person’ (i.e. the applicant for the patent) gains the rights required for it to be the legitimate owner of the patent.  Usually this is by some chain of assignment, or other contractual provision (such as employment) leading back to the original inventor(s).

Australian Public Inquiry into the Compulsory Licensing of Patents

The Australian Government has asked its Productivity Commission to conduct a nine-month inquiry into the compulsory licensing provisions in the Patents Act 1990. 


The stated purpose of the inquiry is to ‘assess, advise and recommend on the impacts and mechanisms of compulsory licensing invoked by the Patent Act's public interest and anti-competitive safeguard.’

The Terms of Reference require the Commission to:

1. assess whether the current Australian provisions can be invoked efficiently and effectively;
2. recommend any measures to efficiently and effectively exercise these safeguard provisions, in a manner consistent with Australia's international obligations; and
3. recommend any alternative mechanisms, to ensure that the balance between incentives to innovate and access to technology best reflects the objectives of reasonable access to health care solutions, maximising economic growth and growing the Australian manufacturing industry.

The inquiry will be relatively wide-ranging, taking into account an number of specific areas of sensitivity and public interest, including access to affordable healthcare, impact of gene patents, climate change mitigation, food security and alternative energy technologies, and technical standards essential patents.  It will also look at comparisons with compulsory licensing provisions in other jurisdictions, and consider how the provisions interact with crown use (i.e. provisions enabling government authorities to compulsorily acquire patent licenses) and the new research exemption to infringement introduced by the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (see Bar Raised, as IP Law Reforms Signed Into Law).

The Commission is inviting submissions from interested stakeholders, and will be conducting public hearings.

Mobile Patent Disputes Creating a New Class of ‘Celebrity Judge’

Question: What do Lucy Koh, William Alsup, Richard Posner, Annabelle Bennett and Colin Birss have in common?  Answer: They have all been receiving far more press coverage than they probably would ever have imagined when they chose a career in law!

In case you are not familiar with these names (although most readers of this blog would most likely have heard of at least one of them):

1. Judge Lucy H Koh is the judge of the US District Court for the Northern District of California, San Jose, who is presiding over the patent dispute between Apple and Samsung in that court, and who recently issued preliminary injunctions against Samsung’s Galaxy Nexus and Galaxy Tab 10.1 devices;
2. Judge William Alsup is the judge of the US District Court for the Northern District of California, San Francisco, who presided over the case brought by Oracle against Google, finding that Google’s Android operating system does not infringe Oracle’s Java patents and copyrights;
3. Judge Richard Posner is an appellate judge in the 7th Circuit who volunteered to step down into the US District Court for the Northern District of Illinois to hear patent infringement cases brought by Motorola and Apple against one another, only to toss the entire dispute out on the basis that neither party had any viable claim for damages against the other;
4. Justice Annabelle Bennett is the Australian Federal Court judge who last year issued a preliminary injunction delaying the launch of Samsung’s Galaxy Tab 10.1 tablet for five months, until her decision was overturned on appeal; and
5. Judge Colin Birss is the UK Patents Court judge who this week ruled that Samsung’s Galaxy Tab 10.1 does not infringe registered design rights owned by Apple relating to the iPad.

Of course, it is the role of a judge to hear cases and issue decisions in all matters, great and small, which may come before them.  But such is the level of interest and media attention to the global disputes currently playing out between tech giants, there has been virtually nothing of even minor note to have played out in these judges’ courtrooms that has not been widely reported.  With journalists stationed in the galleries listening to days of – mostly tedious – technical and legal testimony and argument, it is hardly surprising that anything remotely interesting, entertaining or quotable should be quickly disseminated, especially with most judges permitting (or at least tolerating) live tweeting from their courtrooms.

Hate Bad Patents? You Could Try Being More Observant!

It is widely believed that there are a lot of ‘bad patents’ around – ones that the examiner should have rejected, if only the search had turned up the most relevant prior art.

There is certainly some truth to this belief.  Examiners in all patent offices are only human, they have limited time to examine each application which comes before them, and the searching tools available to them are imperfect.  Indeed, there is no such thing as a perfect search, because the world’s stores of public knowledge are just not fully available in a readily searchable form.

In this context, crowdsourcing of patent searching makes a great deal of sense.  Patent laws and regulations are increasingly making provision for ‘third parties’ (i.e. people who are neither the applicant, nor the examiner) to submit information that may be pertinent to the validity of claims in filed patent applications.  For example, under provisions of the America Invents Act, an expanded third party submission program will commence on 16 September 2012.

The latest passenger on the bandwagon is the World Intellectual Property Organisation (WIPO), which from 2 July 2012 is accepting ‘third party observations’ on pending international applications (IAs) filed under the Patent Cooperation Treaty (PCT).

UK Decision in HTC v Apple Will Not Influence Cases in Australia

On 4 July 2012, the England and Wales High Court (Patents Court) delivered a judgement in HTC Europe Co Ltd v Apple Inc [2012] EWHC 1789 (Pat), finding that five HTC devices – all running Android 2.3 (Gingerbread) – do not infringe any valid claims of four Apple patents.

This decision is the ultimate outcome of an an action brought by HTC, seeking revocation of three Apple patents.  In response, Apple counterclaimed for infringement of the three patents, and added a fourth – which HTC duly alleged was also invalid.

Overall, the court made the following findings:

1. HTC’s Gingerbread devices do not infringe any claims of European Patent no. EP2098948, entitled ‘touch event model’;
2. claims 1 and 2 of the ‘touch event model’ patent are invalid – claim 1 for obviousness, and both claims for being directed to unpatentable subject matter under the European ‘computer programs’ exclusion;
3. the Gingerbread devices infringe claims 1, 6 and 18 of European Patent no. EP1964022, entitled ‘unlocking a device by performing gestures on an unlock image’ (a.k.a. ‘slide-to-unlock’);
4. however, the claims of the ‘slide-to-unlock’ patent are invalid in view of various items of prior art, most dramatically the Swedish Neonode N1, originally launched in July 2004, in view of which the court found all Apple’s claims to be obvious (you can watch the N1 in action in this YouTube video – the ‘unlock’ feature is demonstrated at around 4:14);
5. European Patent no. EP2059868, entitled ‘portable electronic device for photo management’, was found to be valid, but not infringed by the HTC Gingerbread devices; and
6. European Patent no. EP1168859, entitled ‘portable radio communication apparatus using different alphabets’, was found wholly invalid for obviousness, though had it been valid the Gingerbread devices would have infringed.

A number of these European/UK patents have Australian counterparts, some of which have been asserted by Apple in its ongoing litigation against Samsung.

Florian Mueller, in a posting on his FOSS Patents blog, has suggested that the UK ruling ‘will have some relevance … in Australia’.  We disagree.  There is no reason whatsoever to think that the Australian courts will be influenced in any way by the outcome of a case involving a different party, different accused products, and which was decided under different laws.  If anything, quite the opposite is true – an Australian court may well be obliged to reject any attempt by either party to point to this UK decision as having some level of persuasive value.

IP Australia Has Lost Perspective On ‘Business Method’ Claims

We recently reported the Australian Patent Office decision in Celgene Corporation [2012] APO 71, relating to a system for dispensing drugs with significant safety issues (such as thalidomide).  In doing so, we indicated that we agreed with the outcome (i.e. that the system as claimed was not a patent-eligible ‘manner of manufacture’), but not with the Hearing Officer’s reasoning.

In this article, we go into further detail about where we think the Hearing Officer – and indeed the Patent Office generally – has been led astray, as well as why we think the Celgene claims are not patentable.

It seems that the Patent Office has now built up such a body of its own decisions on the patentability of ‘business methods’ (a term which now appears to apply to a range of computer-implemented inventions which do not necessarily have to relate to financial data processing) that it is in clear danger of losing sight of the basic principles underlying the ‘manner of manufacture’ test.

As we shall explain, the Celgene claims can be shown to be unpatentable based upon some very simple and long-standing principles.  However, by arriving at a conclusion via a circuitous route involving previous Patent Office decisions, the Hearing Officer produces a line of reasoning that just does not add up.  If we remove the specifics relating to the information content in Celgene’s system, leaving only a generic statement relating to structure and function, then paragraph [15] of the recent Celgene decision says something absurd:

The system in claim 1 can be a computer system. While a computer system is a tangible article, in the present case that computer is characterised solely by the processing that it carries out. As a consequence, the essence of the claimed system is the processing of information about X, and the generation of a Y. The purpose of the processing is Z. While this is clearly a sensible thing to do, the way in which it is achieved by the system does not lie in the useful arts, or the field of economic endeavour.

The logical conclusion of this reasoning is that no computer-implemented invention would be patentable. Not only is this not the current state of the law in Australia, it is not even consistent with IP Australia’s current public position on ‘software patents’.

Celgene Tries – and Fails – Again With Drug Safety Business Method

Celgene Corporation [2012] APO 71 (25 June 2012)

Manner of Manufacture – whether a system for dispensing a drug which provides a ‘prescription approval’ is patent-eligible

Back in January, we reported a decision of the Australian Patent Office in which patent claims from Celgene corporation, relating to a method of dispensing drugs with significant safety issues (such as thalidomide), were rejected as being directed to an unpatentable ‘business method’ (see Evergreening by Business Method? Patent Office Says ‘No’!).

Celgene has appealed that decision to the Federal Court of Australia (case no. VID102/2012), but in the meantime a further divisional innovation patent, no. 2011101702, directed to substantially the same invention has been undergoing examination.

Unsurprisingly, the claims of the divisional application were also rejected.  An adverse examination report was issued on 16 April 2012.  Celgene provided minor amendments addressing clarity objections in the examination report, and asked that a formal, appealable, decision be issued if the examiner was not persuaded to certify the patent.

Again, unsurprisingly, the examiner was not persuaded to certify the patent, and a written decision, maintaining rejections on grounds of lack of manner of manufacture (i.e. the the claims are not directed to patent-eligible subject matter), lack of novelty, and lack of inventive step, has now been issued by the same Hearing Officer who decided the fate of the parent patent back in January.