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Season’s Greetings

James Yang — Wed, 21 Dec 2011 14:00:24 +0000

Thank you for making 2011 such a wonderful year! May your holiday season be filled with much joy and laughter. May your new year be more prosperous and satisfying than the last.

James Yang

OC Patent Lawyer

James@OCPatentLawyer.com

(949) 433-0900

Recordation of assignment resolves ownership issue

James Yang — Mon, 19 Dec 2011 14:00:52 +0000

Patent attorneys and employment lawyers are becoming creative when crafting invention assignment agreements. When I worked as an engineer, my employer’s invention assignment agreement was straight forward. I aassigned all inventions created on the job to my employer. Back then, this was a typical invention assignment clause.

In the following case, an employer had its employees execute an invention assignment agreement in which the employees assigned all inventions related to the employer even after the employees went to work for another employer. One of its employee eventually went to work for another employer. During the new employment, the employee obtained a patent on an invention and assigned the invention rights over to his new employer. When the new employer asserted the patent, the defendant attempted to avoid liability by arguing that the new employer did not own the patent. In particular, the defendant asserted that the invention belonged to the former employer and not the new employer due to the employee’s invention assignment agreement.

The Court held that recordation of the assignment of the invention from the inventor to the new employer (i.e., Global Locate) provides a presumption of validity of the assignment. The burden of proving otherwise, fell on SiRF (i.e., defendant) which they could not do.

There are two lessons to be learned. First, get patent assignments and file them as early as possible, and preferably with the filing of the patent application. Second, record the assignments since presumptions are advantageous. The opposing party may not be able to rebut the presumption. Plus the cost to record the assignment are nominal compared to the cost to prepare and file a patent application. SiRF Technology v. ITC 2009-1262 (April 12, 2010).

I invite you to contact me with your patent questions at (949) 433-0900 or James@OCPatentLawyer.com. Please feel free to forward this article to your friends. As an Orange County Patent Attorney, I serve Orange County, Irvine, Los Angeles, San Diego and surrounding cities.

Are methods for doing business eligible for patent protection?

James Yang — Sat, 16 Apr 2011 15:51:24 +0000

Yes. In a recent case, the United States Supreme Court held that business methods are eligible for patent protection. Bilski v. Kappos (2010). However, it was a close call since the 9 Supreme Court Justices were divided 5-4 in the decision. .

The Bilski case involved a method for hedging risk. Although the justices agreed that this particular method is not eligible for patent protection as being directed to an abstract idea, five of nine Justices voted that business methods are patent-eligible. The majority arrived at its conclusion through construction of the relevant patent statutes. In particular, the majority reasoned that Congress must have intended business methods to be eligible for patent protection since 35 USC 273 allows a defense of prior use to be made against claims of infringement of a business method.

But there are limits on what methods are patentable. Before the Bilski decision, the United States Patent and Trademark Office determined whether a business method was patentable subject matter solely under a machine or transformation test. Under this test, the invention for which patent protection was sought must be tied to a particular machine or must transform a particular article into a different state or thing. In Bilski, the Supreme Court held that the machine-or-transformation test can be used, but that it is not the sole test under which patent eligibility is determined. Although this Bilski decision was related to business methods (evaluating risk in hedge funds), it has been applied to other methods such as medical diagnostic methods, computer implemented methods, etc.

Based on Bilski, the US Patent Office produced guidelines for its examiners on how to make patent elibility determinations. A number of factors are now reviewed to determine whether the invention is eligible for patent protection. The machine or transformation test is now just one of the factors considered, but it appears to weigh heavily in the Patent Office’s analysis of whether the invention is eligible for patent protection. As such, method claims should still be written to meet the machine or transformation test, if possible. If not, then the claim is not fatally defective but it appears that the claim will most likely be rejected by the Patent Office.

Most Inventions Eligible for Patent Protection

James Yang — Fri, 08 Apr 2011 13:33:56 +0000

The claim section is the most important part of the patent. The claims define the buondaries of patent protection afforded under the patent and the Patent Office. The claims are also reviewed by the courts and compared to the prior art to determine whether the claimed invention is novel and non-obviousness and thus valid and protectable.

The following case looks at whether claiming a step of “informing” someone of an inherent property of a known medical method is eligible for patent protection. King Pharmaceuticals v. Eon Labs, 95 USPQ2d 1833 (Fed. Cir. 2010). The Court held that such step does not make an invention ineligible for patent protection. The Court reviewed the invention as a whole and decided that the invention or subject matter was eligible for patent protection but struck the patent down based on other grounds. In particular, the Court invalidated the patent at issue based on anticipation and obvious grounds. In arriving at its holding, the Court reviewed a line of cases involving “printed matter”. In these cases, the court held that printed matter did not distinguish the invention from the prior art in terms of patentability if the printed matter was not functionally related to the product or item on which the printed matter appeared. Likewise, a known medical method does not become patentable if the “instructional limitation” does not have a new and unobvious functional relationship with the known medical method.

The claim at issue recited the step of informing another that the bioavailability or effectiveness of taking a certain medication increases when taken with food. The Court held that the “informing” step had no functional relationship with the known medical method.

This case teaches how one might impart a patentable aspect into an otherwise unpatentable method. In particular, the steps that you add to a known method should have a functional relationship with the known method.

Combine Claim Elements to Avoid Infringement

James Yang — Tue, 15 Mar 2011 00:20:08 +0000

Claim drafting is one of the harder aspects of preparing a patent application. The reason is that the patent attorney must balance broad claim langauge and avoiding the prior art. A broad claim is desireable because competitors will have difficulty designing around your patent, should one issue. However, broader claims are also subject to rejection as being so broad to encompass the prior art. As such, claims must be broad enough to prevent others from designing around your patent but narrow enough to survive an invalidity attack. The following case illustrates a claim that was narrow enough to mature into a patent but was not broad enough to encompass the design around implemented by a competitor.

In order to infringe a claim, every element of the claim must be found in the accused product. Otherwise, there is no literal infringement. For example, if a claim lists elements a, b and c but the accused product incorporates elements a and b but not c, then the accused product does not infringe the claim. The accused product must incorporate elements a, b and c to infringe the claim.

In Becton v. Tyco, the asserted claim related to a syringe including four separate elements (1) a needle cannula, (2) a guard, (3) a hinged arm and (4) a spring means connected to the hinged arm. During litigation, the Court held that the claim requires four separate elements. In order for the accused product to infringe this claim, the accused product must incorporate all four elements. Unfortunately for the patentee, the accused product incorporated only three elements. The first two elements were found in the accused product. The third and fourth elements were combined into a single component, namely, a hinge member which flexed so as to provide a spring force. Since the claims required two separate components for the hinged arm and the spring means but the accused product only had one component that served both functions, the Court held that the accused product did not infringe the patent. Becton v. Tyco, 2009-1053 (Fed. Cir. 2010).

To help prevent others from designing around your patent, a continuation patent application could be filed. The continuation patent application maintains pendency of the parent patent application and allows the applicant to redraft claims against their competitors. Additionally, during the patent preparation stage, patent attorneys and inventors should analyze the invention as to the basic inventive concept and seek claims directed to such concept without any extraneous elements.

After Acquired Companies Fall Under Existing License

James Yang — Tue, 01 Feb 2011 15:00:50 +0000

A patent provides the right to exclude others from practicing the patented invention. In other words, a patentee can demand that competitors stop selling a device that infringes on the patent. This is the traditional offensive aspect of a patent. However, patents have other purposes. For example, when a company is accused of infringement, the company can look to its own patent portfolio to determine whether a counterclaim of patent infringement can be made based on one of their own patents. This illustrates the defensive aspect of patent protection that may be overlooked compared to the traditional offensive aspect (i.e., the right to exclude others) of patent protection. In making the counter claim of patent infringement, the parties may be motivated to enter into a cross license wherein each party grants a license to their pool of patents to the other party.

In Imation v. Philips, the parties had previously entered into a cross license that enabled the parties and its subsidiaries to operate in a given area of techology, free of the risk that the other party would threaten patent infringemnet. Although it is unclear how the original cross license arose, it could have arisen through prior litigation as discussed above in our hypothetical. Eventually, Philips sued Imation for breach of the cross license after Imation acquired two companies “after” execution of the cross license. These companies did not pay a royalty to Philips because Imation considered them to be subsidiaries under the cross license agreement even though they were acquired “after” execution of the cross license agreement. Most likely, the later acquired subsidiaries may have been infringing on Philips patents, and thus, either considered a source of unwanted competition by Philips or a potential source of royalty revenue for Philips. It is possible that these “subsidiaries” were acquired for the sole purpose of avoiding infringement liability of the Philips patents by coming under the rubric of the cross license agreement. Philips argued that these companies are not “subsidiaries” under the cross license agreement because the cross license agreement only grants a license to companies that were subsidiaries existing at the time of execution of the cross license agreement.

The Court held that these later acquired companies are subsidiaries under the cross license agreement. The gist of the court’s holding is that the cross license expressly stated that philips “agrees to grant and does hereby grant” a license which is a present grant of rights that vests immediately to Imation and its existing subsidiaries but also a future grant to subsidiaries acquired after execution of the cross license agreement. Imation v. Philips 2009-1209 (Fed. Cir. 2009).

When entering into a license, it is important to determine how subsidiaries should be treated and whether future companies can be grandfathered into the license agreement. On one hand, the licensee wants to run business as usual. On the other hand, the licensor does not want an end run around their patent by having the licensee acquire third parties in the future that may be potential streams of royalty revenue for the patentee or unwanted competition.

Comparable Licenses Used to Establish Reasonable Royalty Rate

James Yang — Tue, 18 Jan 2011 13:00:37 +0000

A patentee can seek money damages and/or an injunction against companies that infringe their patent. Damages are calculated as the dollar value that the patentee suffered due to the infringement. However, in certain situations, the patentee may not have suffered any damage or the damage suffered by the patentee was de minimus. For example, the patentee may be a university, a patent holding company, a start up, etc. with few or no sales of the patented product or method. Sales by the infringer did not divert sales away from the patentee. In this case, the court does not set damages to zero but sets damages equal to a reasonable royalty rate which provides the floor or the lowest damage calculation. Unfortunately, the difficulty in determining the reasonable royalty rate is that the rate is based on a hypothetical negotiation between the patentee and the infringer.

The seminal case in determining the reasonable royalty rate is Georgia-Pacific Corp. v U.S. Plywood Corp, 318 F. Supp. 1116 (SDNY 1970) in which the Court held that in calculating the reasonable royalty rate, a party may rely upon comparable licenses entered into by the patentee. In particular, a party may rely on royalty rates paid in connection with other actual licenses for the use of the infringed patent or sufficiently similar patents.

The following case further elaborates on which licenses are “comparable” and could be used to establish a reasonable royalty rate. In ResQNet.com v. Lansa (Fed. Cir. Feb. 5, 2010), the patentee’s expert used licenses which did not involve the patent at issue to establish the reasonable royalty rate that the hypothetical negotiation would have produced. Also, the patentee’s expert used licenses which were bundled with other services and products which would have had a higher than normal royalty rate to establish what was reasonable.

The Court held that the patentee’s expert used unrelated past licenses with no relationship to the patented technology. The past licenses used to determine the reasonable royalty rate did not mention the patent at issue in the present litigation. Additionally, the past licenses referred to by the expert included additional elements such as software products, source code, training, maintenance, marketing and upgrades. Hence, the Court vacated the damages award based on the reasonable royalty rate set by the lower court.

Based on this case, licenses including the patent at issue and not bundled with other services, products or patents should be used as “comparable” licenses to establish the reasonable royalty rate.

Submit New Evidence in Appeal from USPTO

James Yang — Tue, 04 Jan 2011 13:00:53 +0000

You file a patent application. You go through a couple of rounds with the examiner but are unsuccesful in obtaining a patent grant. You appeal to the Board of Patent Appeals and Interferences (“BPAI”) arguing that the examiner is incorrect. At this point, you’ve gone through a lot but there is still more you can do. You can either appeal to the Federal Circuit to review the decision of the United States Patent and Trademark Office (“USPTO”) in rejecting your patent application or file a civil action in the district court for the District of Columbia.

During the examination stage of your patent application at the USPTO, you must submit your evidence in support of patentability before a “final” Office Action issues. When you appeal your case to the BPAI, no new evidence may be submitted. Upon appeal to the Federal Circuit, no new evidence may be submitted for review by the Federal Circuit. Thus, all the appeals must be based on the evidence submitted during the original examination.

However, for a civil action filed in the district court for the District of Columbia, new evidence can be submitted on issues presented during prosecution of the patent application at the USPTO under 35 U.S.C. §145. Hyatt v. Kappos (Fed. Cir. Nov. 8, 2010).

In Hyatt, the USPTO argued that evidence should be admissible at the district court only if the applicant could not have reasonably presented such evidence earlier. The Federal Circuit disagreed. New evidence can be submitted to the district court –but with a few caveats. The new evidence must relate to an issue presented at the USPTO. There is a dual standard of review, namely, a “substantial evidence” with respect to the evidence of record and a de novo review for the new evidence. As such, although the applicant may submit new evidence, the district court may give less weight to the new evidence since the district court now acts as a fact finder with respect to the new evidence.

Based on this case, you should consider the pros and cons of filing your appeal from a USPTO rejection to either the Federal Circuit or the district court for the District of Columbia.

Trade Secret Exception to Section 16600

James Yang — Thu, 02 Dec 2010 13:18:58 +0000

California has a strong public policy that allows employees to change jobs, seek employment, or otherwise practice their trade or skill. This policy is embodied in Business and Professions Code Section 16600 (“Section 16600”). Under Section 16600, all contracts that restrain an employee’s ability to work are void unless the contract is based on a dissolution of partnership or sale of business.

California’s pro-employee public policy compromises the employer’s ability to compete. For example, as an employee gains importance to the employer, the employer must teach the employee the trade and skill of the employer’s operation. In California, the employee is under no obligation to stay with the employer but is allowed to switch companies or even start his/her own business. To mitigate against such situations, some employers require employees to enter into an agreement or contract wherein the employee promises not to use the employer’s trade secrets after termination of employment. This furthers California’s public policy of protecting trade secrets, but conflicts with the public policy favoring employee mobility and use of his/her trade and skill.

In 2008, the California Supreme Court held that Section 16600 is a bright line rule. Edwards v Andersen. Even a contract that partially restrains a person’s ability to work but does not entirely prohibit the employee’s ability to work is still void. Even a narrowly tailored restraint in view of a local geographic region and short time period cannot be saved. However, the California Supreme Court expressly stated the opinion did not decide whether a trade secret exception existed within the framework of Section 16600.

The following case is an explanation of trade secret protection in light of Section 16600. In The Retirement Group v. Galante, the Court reasoned that misappropriation of trade secrets is tortious conduct and not a breach of contract. Section 16600 voids any contract that restrains a person from working. If the restraint is based on other grounds such as tortious conduct, then the restraint does not violate Section 16600. As such, the Court held that employees may be enjoined from utilizing an employer’s trade secret (i.e., tortious conduct) since it is wrongful independent of any contractual obligation.

In The Retirement Group, an employee started a new business which competed directly with his former employer. During litigation, the employer obtained an injunction from the court that prevented the former employee from utilizing information found only on the employer’s computer system. (“Category 3”). The employer also obtained a broader injunction that prevented the former employee from soliciting any customer of former employer to the employee’s new business. (“Category 4”). Upon appeal, the Court held that the scope of the Category 3 injunction is appropriately tailored to protect the former employer’s trade secrets. However, the scope of the Category 4 injunction is too broad because it prevents the employee from competing even if the former employee is not utilizing the former employer’s trade secrets.

Accordingly, Section 16600 must be considered when developing contracts and other policies to protect one’s trade secrets.

I invite you to contact me with your patent questions at (949) 433-0900 or James@OCPatentLawyer.com. Please feel free to forward this article to your friends. As an Orange County Patent Attorney, I serve Orange County, Irvine, Los Angeles, San Diego and surrounding cities.

Dangers of Strategic Partnerships

James Yang — Tue, 16 Nov 2010 14:50:24 +0000

To be liable for patent infringement, a “single” entity must sell a product or perform all of the steps of a claim in a patent. If “two” different parties provide different components or different steps of the patented product or method, then there is no liability unless one party control or directs the other party.

In Golden Hour Data v. emsCharts (Fed. Cir. Aug. 9, 2010), two companies, namely, emsCharts and Softtech formed a strategic partnership. emsCharts manufactures a web-based program which charts patient information and integrates billing. Softtech manufactures computer-aided flight dispatch software which coordinates flight information. The two companies enabled their respective programs to work together and collaborated to sell the two programs as a unit. Golden Hour Data, the patentee, accused emsCharts and Softtech of joint infringement. In this case, neither party had sufficient control or direction over the entire product. Accordingly, the Court held that there was no joint infringement at least for the method claims. The Court mentioned that emsCharts may have been liable for patent infringement on the apparatus claims since emsCharts (i.e., a single entity) sold the combined software but the patentee failed to submit this issue to the jury at trial.

Strategic partnerships require both entities to work together not only on the product being developed for the end user but also on clearing a product for use in the marketplace to avoid patent infringement. For example, the partners may want to obtain opinion of counsel on specific patents. The partners may also want to allocate duties to indemnify, defend and hold harmless based on the jointly developed product(s).

I invite you to contact me regarding your patent questions at (949) 433-0900 or james@ocpatentlawyer.com. Please feel free to forward this article to your friends. As an Orange County Patent Attorney, I serve Orange County, Irvine, Los Angeles, San Diego and surrounding cities.