Patenting in the United States – Where are we now?

Recently, one of my Chinese students commented, “We used to think the United States was the world leader in patent law; now we think it is China” – a view perhaps tinged by natural chauvinism, but nevertheless raising questions as to where the United States patent policy is headed. There has long been a pendulum swinging between pro- and anti-patent environments and during the twenty-year term of a patent the full arc of the pendulum swing may occur. Few would argue that in the decades prior to 2005, the pendulum was swinging in the pro-patent direction and that prior to the Supreme Court’s KSR decision maybe patents were becoming too easy to obtain. Since then the trend has reversed and many would say has already gone too far.

Much of this movement has been triggered by the perception that so-called patent trolls have been using patents that should never have been granted in ways that are unseemly.

Intended remedies have come into being by different routes, but include:

1. Improving the quality of patent examination;
2. Invoking the so-called judicial exceptions to patent eligibility (abstract ideas, natural laws and physical phenomena);
3. Providing for effective methods for challenging the validity of patents in administrative proceedings before the patent office;
4. Limiting the circumstances in which injunctions will be granted against patent infringers; and
5. Making it easier to secure awards of attorney fees against the losing party in patent infringement actions.

Further proposed remedies include: changing the requirements for pleadings in patent infringement cases to require more explicit allegations of why a product is alleged to infringe at the commencement of the law suit and provisions to provide protection in some form for retailers and end users from claims of patent infringement.

The question arises, however, as to whether, when all of this is put together, the cure is worse than the disease. It is worth looking at each of the steps taken in turn.

1. Dealing first with the quality of examination. This has clearly improved over the past few years and is likely to continue to improve as the changes in PTO funding effected by the America Invents Act and new quality control programs take effect. This does not, however, mean that the standards have become the same as those in other countries. For example, as emphasized by the Supreme Court in KSR, the American approach to obviousness starts from the perspective of the public and focuses on whether a patent claim will remove from the public something that is an obvious development of anything that has been done before, irrespective of the problem confronting the inventor. Many other countries approach the question from the perspective of the inventor and whether what is claimed is an obvious solution to the problem confronting him or her.
2. The Supreme Court’s decisions in Bilski, Mayo, Myriad and Alice have had major impacts in the fields of business method, gene and diagnostic patenting. Read in their broadest interpretation, they could have an impact beyond these areas. However, as decisions such as the Federal Circuit decision in DDR Holdings v. Digital River and the December 2014 guidance from the USPTO on implementation of the Supreme Court’s decisions have shown, there are reasons to hope that there will be no further extensions of the types of invention that are deemed ineligible forms of patent protection. The fact that the America Invents Act singled out business method patents as being suspect (by providing for a special type of post-grant administrative challenge in the form of covered business method review) gives some support to the view that Congress does see all software inventions as falling under the same suspicion. Nevertheless, care is still needed when filing software-related patent applications to tie them to a real world (preferably technical) application of the result obtained by use of the software and in particular in order to avoid the risk that a claim will be found indefinites, one should make sure that an adequate description of any algorithm used to implement a claimed method is properly described in the claim.
3. The introduction of post-grant administrative reviews in the form of inter partes review, post-grant review and covered business method review has effected a sea change in patent practice and has, perhaps unintentionally, effected a bifurcation of consideration of infringement (before the district court) and validity (now frequently effectively disposed of by the PTO’s Patent Trial and Appeal Board). Even more significantly, the statutory removal of any presumption of validity in these proceedings and the adoption of rules that have mandated the use of the broadest reasonable interpretation of a claim in these proceedings and have limited the ability to amend claims has resulted in a higher than expected percentage of claims that are challenged in these proceedings being found to be invalid. This is a problem, especially since defendants in infringement suits have a year from the commencement of that suit to institute inter partes review, and so most of them do. Nevertheless, there are signs that this situation may be ameliorated. Changes in the rules of practice in these proceedings are being prepared and it is widely anticipated that, even though the PTO has concerns about claims that have not undergone a formal PTO examination and have been “examined” only by the challenger to the patent, these changes will make it easier to amend claims to preserve what is valid.
4. There was wide concern after the Supreme Court’s decision in E-Bay, reminding us that the patent statute requires consideration of equity before granting an injunction, that the grant of exclusivity given by a patent would be eviscerated. However, the sky has not fallen. Most successful plaintiffs still obtain an injunction and those who do not (because the court determines that money damages provide a more appropriate remedy) receive a damages award setting a royalty at a higher rate than that which was awarded for infringement before the patent was found to be valid and infringed.
5. In Octane Fitness LLC v. Icon Health & Fitness Inc. and Highmark v. Allcare Health Management Systems Inc., the Supreme Court made it easier for district courts to make awards of attorney fees to the prevailing party in exceptional cases, making it clear that this was a matter for the discretion of the district courts and that the Federal Circuit should only intervene in cases where there has been an abuse of that discretion. District courts have been making use of this power to punish frivolous litigants -.both patent owners and defendants..

As to the proposed changes having regard to pleadings, the Federal Rules permit so-called “notice pleading” which permits a law suit to be commenced with only ” a short and plain statement of the claim showing that the pleader is entitled to relief,” and an appendix to the rules provides a simple form for doing this in patent infringement cases, use of which has been held to be sufficient. In situations where no such form exists, however, the Supreme Court has held that the pleading has “sufficient factual content that if assumed to be true would allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” It is proposed to remove the form for patent pleading from the appendix so that the Supreme Court’s requirements apply to patent cases.

The other main proposal is to follow states such as Vermont and provide for protection against bad faith patent litigation.

As can be seen by this summary, despite the bad press that the US patent system has been receiving in some quarters lately, the situation is not as dire as some make out. It is becoming clearer that the “patent troll problem,” if it exists, is one of litigation abuses rather than a defect in the patent system as such. It is also being realized that while it is good to be able to weed out bad patents by relatively cheap proceedings in the patent office, we need to be careful not to throw out the inventive baby with the non-inventive bath water and provide a better way to preserve protection for what is new and non-obvious in a patent while excising from the claims that which is old or obvious. A patent can live for twenty years. I am confident that within that time frame these problems will be solved and that we will be able to affirm Abraham Lincoln’s famous observation that the patent system adds “the fuel of interest to the fire of genius.”

The original English version of this article was first published on April 13, 2015 in Expert Guides – Patents.