Sovereign Immunity, Tribes, & IPR

tribal lands
Tribal lands in the US

A strange way to help immunize US patents from IPR attack has recently emerged – the “sovereign immunity defense”.

IPR attacks: Since the America Invents Act (ACA) went into effect in 2013, a popular way to invalidate patents has been to challenge them in Inter Partes Review (IPR) proceedings. IPR proceedings are a USPTO (Federal) Patent Trial and Appeal Board (PTAB) proceeding where challengers can argue that a given patent is not novel, or is obvious, in view of various published prior art.

Sovereign Immunity: The Eleventh Amendment to the US Constitution reads: “The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.”

Background: The University of Maryland (UMD) owned patent 7,635,386, covering a method of repairing cardiac valves. In May 2017, UMD successfully overcame an IPR challenge by arguing that UMD, as part of the State of Maryland, was therefore immune from the PTAB and IPR under the Eleventh Amendment (Sovereign Immunity).

OK… maybe so. Certainly UMD was able to cite various cases supporting their view. PTAB agreed and dismissed the challenge.

They did what? Allergan PLC, a multinational pharmaceutical company with its own patents to protect, decided to push this concept to the limit.  Allergan sold some of their patents to the St. Regis Mohawk Tribe (located in New York) and then immediately licensed the patents back again. In September 2017 Allergan then argued that since this tribe is also a sovereign government, “the tribe’s” patents also had sovereign immunity to IPR challenges!

Well, points for creativity! I don’t think anyone has ever thought of this angle before. Certainly the tribe was very happy to supplement its Casino business.

We will have to see how this plays out.  In terms of sovereignty, the tribes’ legal status, “domestic dependent nations”, is best described as “it’s complicated”. Has Allergan invented a new form of “patent laundering“? Patent law just took a bizarre turn.

While the courts sort this one out, enjoy the enclosed map of the continental US, showing the larger tribal lands in color. Are these the new frontier in creative patent law strategies?

Patents and national security

Spike, logo of national security satellite NROL61

Filing a patent with national security implications? Check your filing receipt for a foreign filing authorization before filing outside the US.

After you file a US patent application, the USPTO will send you a filing receipt. On page two of this receipt, you will usually find the words: “If Required, Foreign Filing License Granted: [date]”.

What does this mean? Welcome to the interesting rules involving patents and national security.

Under the Invention Secrecy Act of 1951, the US government has the right to classify patent applications that, in the opinion of the USPTO, may pose a threat to the security of the US. In effect, the USPTO subjects every new patent application to at least a cursory security review. Think of it as a patent application TSA (airport style) inspection.

The vast majority of all applications will pass through the security review quickly, and those that pass will get the “Foreign Filing License Granted” clearance. But occasionally, something catches the interest of the national security review staff. For example, I can pretty much guarantee that a patent application for “Improved methods for detecting stealth aircraft” will get a very careful national security review!

What if you are planning to also file your invention outside the US? Doing a foreign patent filing without proper advance approval is much like trying to jump a TSA line. Folks get excited, and unfortunate things may happen. At a minimum, you could easily lose the US patent rights on your invention.

The amount of security review can vary depending upon world events. For example, after 9/11, it appears as if an unusually large amount of scrutiny took place. Scrutiny may also vary according to what areas of technology are considered sensitive at any given time.

So the take-home lesson, which is particularly relevant for US inventors of patent applications with potential dual-purpose civilian/military uses, is to look for that “Foreign Filing License Granted” small print before filing outside the US. Alternatively, if there has been a delay, file a PCT application through the USPTO, rather than filing directly outside the US.

Rapid Litigation: Biotech patent win

Cleaning up a legal mess
Rapid Litigation v Cellzdirect: Federal Circuit cleaning up a patent mess

In Rapid Litigation v Cellzdirect, the Federal Circuit has further cleaned up the patent eligibility mess caused by SCOTUS’s Alice and Mayo decisions.

In 2012 and 2014, the Supreme Court (SCOTUS), which wanted to invalidate a few pesky financial and medical diagnostics patents, decided to use legal “nuclear weapons” rather than legal “fly swatters“.  The SCOTUS legal nuclear weapons were the now infamous two-step “abstract material” patent eligibility test.  Step 1 of this test is summarized below:

Step 1) Determine if the patent is directed to “abstract” subject material.  If not then congratulations, the patent passes this test and is patent eligible.  

SCOTUS refused to define “abstract material”. This allowed the USPTO and the lower courts to run amok and start randomly invalidating patents. This, in turn, started to damage US biotech and software startups, which need patents to get funding, as well as for protection from larger competitors.

The Federal Circuit, one step below SCOTUS, and charged with cleaning-up patent law, waited several years for SCOTUS to correct itself, to no avail.  However, their recent (mid-2016) series of patent eligibility decisions, first Enfish, then Bascom, now Rapid Litigation (Celsis) v Cellzdirect suggest that the Federal Circuit is now getting serious about damage control.

“Abstract” is just as undefined for biotech as it is for software, but for biotech, it seems have more of a “natural law-ish” flavor.  Arguably a technologically illiterate approach since everything involves natural laws, but alas SCOTUS has no STEM majors.

Fortunately, some Federal Circuit judges are STEM majors, and they have the power to do at least some damage control by providing official interpretations/clarifications of SCOTUS decisions. Here they clarified that in step 1, “directed to” is not the same thing as “involving”.

The patent in this case, 7,604,929, was about an improved method of freeze storing liver cells (cryopreservation of hepatocytes).  Before the patent, everyone in the field believed that freezing damages living cells, and that multiple freeze-thaw cycles should be avoided.  The inventors discovered that some hepatocytes were resistant to this problem, and used this discovery to invent an improved hepatocyte cryopreservation method.  This method first freeze-thawed the cells, then used a density gradient to select for the freezing resistant cells, and then refroze these resistant cells again, producing very freeze resistant hepatocytes.

An earlier court had ruled this patent invalid by arguing that discovering that some hepatocytes could survive multiple freeze-thaw cycles involved a “law of nature”. However, the Federal Circuit pointed out that “involved” isn’t enough grounds to invalidate a patent, because the ‘929 methods also claimed other steps, such as using density gradients.  So “directed to” is more than just “involves“.

This Federal Circuit decision makes it harder to invalidate biotech patents, at least in the most common cases where the claims also have other steps in addition to the “natural law” steps.  The fact that the ‘929 claims were relatively simple helps to further clarify the legal issues.

Bascom: another Alice software win

Bascom - fish delivering mail
Bascom – fish delivering mail

The Bascom court decision helps software patents by suggesting that step 2 of the Alice test should follow established obviousness rules.

US software patents got another win from the Federal Circuit Court this week.  This court, which has a Congressional mandate to clarify patent law, made an important clarification to the Alice (software patent killer) “abstract subject matter” test in the Bascom v AT&T case (Bascom).

As you may recall from our last “Enfish” episode, the Supreme Court (SCOTUS) “Alice” decision created a judge-ordered incoherent two-step test that any given patent must pass in order to be patent eligible under 35 USC 101 rules.  To simplify:

Step 1) Determine if the patent is directed to “abstract” subject material.  If not then congratulations, the patent passes this test.  

Step 2) But if the patent is found to be “abstract” in step 1, then determine if the patent contains “something extra” beyond just “abstract” subject material.  If there is nothing extra, then reject the patent as being “abstract”.   

The Federal Circuit is one step down from SCOTUS.  The Federal Circuit doesn’t have enough clout to overrule SCOTUS, but does have enough clout to overrule the USPTO and the lower courts.  More importantly, the Federal Circuit has both the clout and mandate to “clarify” SCOTUS decisions.

The USPTO and the lower courts were often ignoring Alice step 1 and just assuming that a patent had “abstract” subject matter. The previous Federal Circuit “Enfish” decision pointed out that this was improper.  By contrast, the newer Federal Circut “Bascom” case is now clarifying that another common practice, just asserting that the patent fails Alice step 2 because it lacks an undefined “something extra”, isn’t right either.

More specifically, in Bascom, the Federal Circuit pointed out that based on earlier SCOTUS decisions (e.g. Mayo v. Prometheus, which SCOTUS used for “Alice”), Alice step 2 tests if the claim is “well-understood, routine or conventional”.  According to the Federal Circuit’s interpretation, SCOTUS was probably thinking about something similar to an obviousness test.   The Federal Circuit also pointed out that there are well-established rules for establishing obviousness, which the USPTO and the lower courts were (also) ignoring.

Specifically, the Bascom case was an appeal of a lower court decision that had earlier found the Bascom patent claims to be “abstract” and therefore invalid.  The lower court’s arguments (in simplified form) were that the Bascom patent claim language words described conventional computer pieces, and therefore the Bascom claims failed Alice step 2 due to lack of “something more”.  

In Bascom, the Federal Circuit Court, after “clarifying” Alice by pointing out that SCOTUS’s Alice step 2 resembled an obviousness test, then pointed out that the lower court had failed to follow established rules to determine obviousness (35 USC 103 rules).  These 35 USC 103 rules require that the combination of the pieces and the motive for combining the pieces also be considered.  Here conventional pieces, arranged in a non-conventional way, are often not obvious.

The Federal Circuit then looked at the Bascom claims, determined that they were not obvious, and (again somewhat simplifying) therefore had “something more” that satisfied step 2 of the Alice test.  They then overruled the lower court and found the Bascom patent to be “not abstract” and therefore valid under 35 USC 101.

If this holds up, the Bascom decision could almost bring some sanity to the Alice test.  Stay tuned…

International Trademarks: Madrid Protocol

Madrid Protocol countries
Madrid Protocol countries (US color or darker is “in”)

For US companies, the Madrid Protocol can be a low-cost and time efficient way of getting international trademark protection.

The internet makes it almost trivial to sell products and services internationally.  But how do you manage the IP for these products and services? The legal system has been lagging here. Although the 1970’s (pre-internet) PCT system simplifies the process of filing international patents, the underlying international patent system still remains cumbersome and expensive.  In the end, you still have to hire local law firms in each country and work with the local patent offices.

What is the situation in trademarks?  Almost reasonable!  This is because, in the early post-internet era, the international trademark system got a major upgrade, called the Madrid Protocol. So if you are a startup wanting to protect your trademark rights internationally, the Madrid Protocol is a reasonable and cost-effective way to do so.

The Madrid Protocol is a 1996-era refinement of an earlier 1891 Madrid trademark agreement.  The US and over 90 other countries (EU included) are presently members (see the darker countries on the world map), with Canada expected to join in the 2017 to 2018 timeframe.

The main advantage of the Madrid Protocol is that the applicant needs to only file once in the WIPO Madrid system in order to apply for trademark applications in a variety of different countries (such as the entire European Union at a single time).  The application fees, at least by patent standards, are reasonable (e.g. about $1600 to apply for full EU coverage).  This system minimizes the hassles and expense of hiring local law firms and dealing with local trademark offices in each country.

There are a few catches – the applicant must be associated with a Madrid subscribing country, so US based companies can do this; but Canadian companies — not quite yet.  You can’t start from scratch – rather you should have at least one national trademark application pending (and preferably issued), to form the basis of your Madrid application.  US applicants, for example, can use their pre-existing US trademark to file for Madrid coverage through the USPTO. The USPTO will check this Madrid application, and then forward it to the WIPO office in Geneva, Switzerland.

Some other cautions — in the event that your original national trademark application fails within the first five years after filing, your other Madrid filings will likely also fail. Additionally, the various local countries that you designate do have the right to refuse your trademark on an individual basis within the first 12-18 months after filing.

So additional research before filing is recommended.  At a minimum, check the Madrid ROMARIN database for conflicts. Check if your US trademarks might be “generic” or otherwise inappropriate in your Madrid target countries.  Madrid Protocol filings must be renewed every 10 years, so remember to put this on your long-term calendar as well.

Enfish for Alice: a software win

Einfish is good news for software patents
Enfish is good news for software patents

The recent Enfish court decision improves the outlook for US software patents.

Good news for software patents.  The negative impact of the 2014 SCOTUS (Supreme Court of the US) “Alice” decision (invalidating some business method and financial software patents) has been somewhat mitigated by the recent “Enfish” court decision.

What is “abstract?”  “You keep using that word, I do not think it means what you think it means.” Inigo Montoya, “The Princess Bride”.

In “Alice”, SCOTUS did not make business-method and financial software patents patent ineligible.  Instead, they determined that “abstract” subject matter is patent ineligible.  Unfortunately, SCOTUS refused to define the meaning of “abstract”, and then further confused things by using circular logic.  The present two-step, circular-logic, SCOTUS mandated test for patent eligibility is:

Step 1) Determine if the patent is directed to “abstract” subject material.  If not then congratulations, the patent passes this test.   

Step 2) But if the patent is found to be “abstract” in step 1, then determine if the patent contains “something extra” beyond just “abstract” subject material.  If there is nothing extra, then reject the patent as being “abstract”.    

No one knows what “abstract” means.  Unfortunately since late 2014, the USPTO has been generally assuming that patents for software running on standard computers must be abstract under step 1.  Many USPTO examiners (and judges) have been totally skipping step 1 of the two-step Alice test.  They just assume that a given software patent is abstract, and start their Alice test at step 2 “something more”.  This makes it much easier to reject the patent.

What is “something more?”  It is also undefined, but financial and business software generally seems to be lacking.  We could substitute “evil spirits” for “abstract”, and “charisma” for “something more”.  We could almost as validly say that lately, many USPTO examiners and judges have been rejecting most business and financial method patents because 1) assumption of evil spirits and 2) a further lack of charisma.  It is easier to understand if you don’t expect logic.

In 1982, Congress established the Federal Circuit Court to bring more logic and consistency to patent law.  In the recent (May 12, 2016) “Enfish v Microsoft” (Enfish) decision, the Federal Circuit has finally started to do its job.  The Enfish court has ruled that examiners and judges can’t just arbitrarily skip step 1 of the two-step Alice test.  Specifically, the Enfish court ruled that it is improper to assume that software running on standard computers is “step 1” abstract.

The Enfish court pointed out that in Alice, SCOTUS didn’t rule that software is automatically abstract.  Further in Alice, SCOTUS also warned against running amok since every patent is somewhat abstract.  So don’t make software automatically fail the two-step Alice test at step 1.  The Federal Circuit further determined that software running on standard computers that improves an existing technology (such as a database) is not abstract at step 1.

This is another important point:  “abstract” is an undefined legal term, and you and I lack the authority to officially define it.  But the Federal Circuit does have the legal authority to define “abstract”.  The USPTO and other judges have to follow this updated definition.  So Enfish is good news for US software patent law.

Patent restrictions and elections

Why is my examiner holding a chainsaw?

USPTO examiners can require patent restrictions.  These narrow the scope of your originally submitted patent claims.  Choose carefully here.

A while back, you filed a patent application.  Now you have received a phone call or letter from your examiner.  You are informed that there are “Election/Restrictions” and that you must choose between various patent claims on various “Species group” lists.  What is this?

Your initial USPTO patent filing fee buys your patent application about 25 to 30 hours of total examination time.  This is not a lot of time, and frequently examiners think that an application will take longer than this. When this happens, the examiner can reduce his workload by asserting that your application contains “multiple inventions”.  Each of these “multiple inventions” is called a “species”.  These “species” are pieces or fragments of your original claim set.  Examiners divide your claim set among these species, and then send you a notice asking you to “elect” a “species” and claims for examination.  The claims that you don’t elect are called “withdrawn”.

Be careful here.  Examiners have orders to initially reject most patent applications.  The examiner is chopping your invention into smaller pieces to make it quicker and easier to reject. This chopping is uneven. Some pieces may be commercially useful, others not.  Some pieces may be easy to reject, others hard. Sometimes there are only a few pieces, but other times the examiner may split your invention into 15 or even 50+ pieces!

USPTO rules allow restrictions and elections to be done either orally or in writing.  Sometimes your examiner may call you on the phone, explain the restriction and election options, and ask what you want.  A bad decision can be costly, and these oral elections are often legally binding.  I recommend not deciding on the spot.  To be sure you understand all the details and have time to think, request the restriction in writing.

There are restriction rules.  The species need to be distinct, and the restriction should not destroy the invention.  If your examiner has violated these rules, you can and should argue back (this is called a “traverse”) in writing.  Unfortunately, you still have to choose, no matter how unreasonable your examiner’s scheme may look.

Even if your examiner rejects your arguments, there will be other chances.  Later in the examination process, after your elected claims are found to be allowable, you can request “rejoinder” and try to get more claims examined.  You can also have the unelected claims examined later (for extra filing fees) as one or more divisional applications.

Continuation applications

Don’t like having your own inventions used against you?  Before your patent issues, consider filing a continuation application.

Continuation applications
Continuation applications

Just got your US patent application allowed?  Congratulations!  Now before it issues (usually about 2-4 months after you pay the issue fee), you need to decide if you ever will want to file any improvements or variations of that invention in the future.

If you do have some improvements or variations in mind, now is the time to start working on filing a “continuation-in-part” (or CIP).  In a CIP, you are basically telling the USPTO that you have added some new concepts to your original patent application.  This is OK – worst case the examiner may determine that the new concepts have a later filing date, but in any event, the examiner won’t hold your original patent application against you.

In contrast to a CIP, patent continuation applications are essentially a repeat of the original application. Any differences to the claims had better be fully disclosed in the original application.

Why file a continuation?  One common reason is that you think that you may be able to get stronger claims the second time around, perhaps by making the claims shorter and hence stronger.  Or perhaps there was something in the original application that you forgot to put into your original claims. Both types of claim changes are fine so long as you can show that the newer claims were fully disclosed in the original application.

A second common reason is a nagging fear that although you might not have thought of any improvements or variations yet, you can’t rule out the possibility that you might do so in the near future.  Here, if you don’t file a continuation, after your patent issues, your own patent will be used against your later patent applications as if someone else had invented it.

However if you do file a continuation, it essentially keeps your original patent “alive” a while longer (usually at least another year or so).  Then, if you do come up with an improvement, you can then file a CIP to your continuation application.  When you use this strategy, the USPTO will allow you to claim your later improvement without using your original application against you.

Foreign patent traps

trap
It’s a trap!

Outside of the US, foreign patent offices will often use your own prior patent filings against you.  Avoid this trap by planning carefully.

Both US and foreign patent laws are based on various legal fictions.  One legal fiction is that an invention is instantly created in a fully formed state.  Another legal fiction is that even if a particular improvement to the invention was not actually obvious to the real inventor, still an examiner or judge may reject this improvement as being obvious to an imaginary “person of ordinary skill in the art”.  Patent law just doesn’t cope with hindsight well.

In practice, we all know that real inventions often come into life slowly, usually after much trial and error.  Complex inventions may take years to fully develop. The inventor is thus faced with a dilemma – file fast so as to be the first person to file, or keep working on the invention, file a better patent application, but possibly lose to someone who filed sooner?

US patent laws recognize this problem, and allow an inventor file as many patent applications as needed, even over a period of years, and gradually accumulate a “stack” of patent applications.  This stack of patent applications captures both the time of earliest invention, as well as a later time-optimized form of the invention. Intuitively this system seems fair.  Wouldn’t it be unfair to use an inventor’s own earlier work against the inventor?

Doesn’t this basic rule of fairness apply everywhere?  Unfortunately it does not.  The harsh reality is that outside of the US, other countries typically use an inventor’s own earlier patent applications against them.

This assumption of basic fairness often traps inventors and startups.  Here the only way to avoid the trap is to recognize that this problem exists, and take steps to mitigate problems.

As a good rule of thumb for international patents, assume that there is at most a 12 month window after a first (US) patent application has been filed in which to make further improvements. Plan accordingly. If you have thought up improvements to your invention, it is far better to submit these improvements as an updated PCT patent application before the 12 month anniversary of the first patent application.

After 12 months, you can’t claim the priority date of your first US filing. Someone else can jump ahead of you and claim credit.  Even worse, 18 months after filing (when usually your first US patent application will be published) your first US patent application can then be used against your later filed improvement.

It is very irritating to have an international examiner claim that your improved invention is obvious against your own earlier filed application.  Even more irritating when you know that in reality the improvement was totally not obvious.  Perhaps the improvement may have taken you a year or more of hard work!  Too bad — to the foreign examiner, your improvement is obvious.

The lesson here is: if you have made improvements, file them as an updated international patent within 12 months of the filing date of your first invention (or in an emergency, at least before your first patent application is published — usually 18 months after first filing).

Open source software licenses for startups

BSD open source license

Not all open source software licenses are alike. Some are intentionally hostile for commercial use.  Choose wisely.  

Open source software is a wonderful thing.  The open source community has given us a gift pack animal that everyone from individual hackers to the largest companies in the world can ride.  However not all open source software licenses are alike. In particular, some of the most famous open source software comes with legal obligations that can be hazardous for startups.  So if you are doing a startup, resist the temptation to immediately grab your favorite open source software and start hacking.  Instead first take a bit of time to look that gift pack animal in the mouth.

What’s Gnu? Back in the 1980’s, Richard Stallman, who wrote the original and very influential Gnu OS open software license, had a deeply held opinion that in order to create an open software sharing community, it was necessary to “poison the well” for many commercial uses. This underlying hostility towards commercial applications is very evident in “The GNU manifesto”.

These “poison the well for commercial use” Gnu concepts in turn influenced the open source GPL (General Public License), which Linux and MySQL use; along with a number of other popular open source licenses.  Some of these open source license terms can negatively impact your ability to patent your software, as well as your other attempts to make your business profitable.

This problem scares investors.  Sophisticated investors now frequently include open source software questions as part of their routine, pre-funding, due diligence process. So yes, to avoid starving, this stuff matters.

Enter BSD: Not all open source software licenses have these problems. In the 1990’s other software experts decided that an open software sharing community could develop without also poisoning the well for commercial uses.  They developed the Berkeley Software Distribution (BSD) license (initially for their Unix-like operating system). The BSD license encourages sharing, but does not usually limit commercial use or patents.

Although BSD type open source licenses and software are not quite as famous as GPL open source software, a large number of well-respected and highly reliable BSD distributions are available.  Like Linux, there are different flavors of BSD for different applications. Look into FreeBSD for large scale servers, OpenBSD for secure applications, and NetBSD for smaller scale devices.  There are also BSD web servers (e.g. Nginx, httpd, Lighttpd), BSD databases, and many other BSD licensed open source applications.

Use your business model to pick your open source software (license), and not the other way around.  Google’s main revenue is from advertising.  They could afford to base Android on GPL licensed Linux. They have to make Android available for a free download, but given their business model, this isn’t a problem for them.  By contrast Apple has a business model based on selling closed devices.  Apple can’t survive with non-proprietary software. As a result, Apple chose to build iOS and OS X on a BSD foundation.  So pick the license that is best for your business (hint, think permissive or public domain).