I.P. News / Trends

The USPTO recently warned that private companies not associated with the Trademark Office are using trademark application and registration information from publicly available USPTO databases to mail or e-mail trademark related solicitations.

The companies usually offer legal services, trademark monitoring services, recordation of marks with U.S. Customs and Border Protection, and “registration” on a private registry.

While legal, the services often deceptively resemble the USPTO name, or expressions such as “United States” or “U.S.”   USPTO customers may be induced to pay fees to companies offering the services, believing they are affiliated with the Trademark Office.

The USPTO encourages recipients of misleading communications to contact the USPTO about them by emailing TMFeedback@uspto.gov.  When notifying the Office about a misleading communication, include a copy of the communication (including envelope), indicate whether the recipient thought the communication was an official U.S. government communication, and indicate whether fees were mistakenly paid.

Rejecting the existing standard, the Supreme Court held in Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. ___ (May 31, 2011), that inducement of infringement requires either actual knowledge of infringement, or “willful blindness” regarding such knowledge.  The decision clarifies 35 USC Section 271(b), “whoever actively induces infringement of a patent shall be liable as an infringer.”  The Court rejected the existing standard of deliberate indifference to a known risk, finding 271(b) requires actual knowledge that induced acts constitute patent infringement.  Notably, the Court found actual knowledge could be demonstrated under the doctrine of “willful blindness.”

Willful blindness, a theory more common in a criminal context, occurs when a person, believing a fact highly probable, takes deliberate actions to avoid confirming that fact.  In a patent context, induced infringement by willful blindness may be found if a party subjectively believes infringement is highly probable, yet avoids investigating that probability.  The ability to demonstrate knowledge through willful blindness notwithstanding, the Court’s decision requiring actual knowledge or its equivalent is likely to make indirect infringement more difficult to prove.

The Federal Circuit visited the topic of spoilation, the destruction of evidence related to pending or reasonably foreseeable litigation, in two recent opinions involving patents owned by Rambus Technology for computer memory standards.  As explained below, under Micron and Hynix, courts may more easily find spoilation on a mere contingency of litigation, particularly when an accused party is in control of those contingencies.  At the same time, district courts may not impose dispositive sanctions, as the lower Micron court did, without a detailed inquiry into the degree of fault and prejudice and the availability of lesser sanctions.

In Micron v. Rambus (No. 2009-1263 (Fed. Cir. May 13, 2011)), the court addressed document destruction in light of a business strategy Rambus adopted of licensing manufacturers complying with its technical standards, while pursuing legal action against companies adopting a competing standard.  Litigation was contingent on Rambus’ failure to extract license fees from target companies.

Knowing of Micron’s potentially infringing activities, Rambus took certain steps in preparation for litigation prior to shredding the documents in question.  Rambus also, as plaintiff, controlled the decision to commence litigation.  For these reasons, the Circuit found no clear error on the district court’s part in finding spoilation, despite contingencies yet to occur that might preclude litigation.

In Hynix v. Rambus (No. 2009-1299, -1347 (Fed. Cir. May 13, 2011)), the Circuit discussed the requirement that litigation must be reasonably foreseeable to trigger a duty to preserve evidence.  There, the district court found no duty to preserve documents relevant to litigation because events upon which litigation was contingent, while likely, had not yet occurred.  The Circuit rejected the lower court’s reasoning, finding “it would be inequitable to allow a party to destroy documents it expects will be relevant in an expected future litigation, solely because contingencies exist, where the party destroying documents fully expects those contingencies to be resolved.”  The Circuit remanded the case to the district court for additional proceedings as to the reasonableness of Rambus’ actions.

In both cases, the court found dispositive sanctions inappropriate where a court has not considered whether a lesser sanction would deter future spoilation, protect an injured party’s interests, and remedy the prejudice suffered by that party.  Second, in neither case did the court hold the specific actions of developing a licensing and litigation strategy, and retaining counsel to perform licensing and patent prosecution work to be in anticipation of litigation.

In a recent en banc decision, Therasense, Inc. v. Becton, Dickinson and Company, (Fed. Cir. 2011), the Federal Circuit raised the requirement for inequitable conduct in obtaining patents and limited its reach.  Citing the need to rein in inequitable conduct allegations, the Circuit found conduct must be both material to patentability and intended to deceive the Patent Office to be considered inequitable.

Under the new rule, accusers must prove a patent would not have issued had the Patent Office known of a misrepresentation, as well as proving specific intent by clear and convincing evidence of a deliberate decision to deceive.  Furthermore, even if materiality and intent are proven, a patent may only be found unenforceable if the conduct “resulted in the unfair benefit or receiving an unwarranted claim.”

Balancing the new standard for inequitable conduct, the court did find affirmatively egregious conduct to be material on its face, for instance filing an unmistakably false affidavit.

The USPTO has been working on a three-track program for utility patent prosecution.  The program allows applicants to pay additional fees to enter an accelerated track (Track 1).  Track 2 is the standard course of examination, and Track 3 allows applicants to slow down examination while also delaying various fees.  In February, the Patent Office announced it was immediately implementing Track 1.  The prioritized application fee of $4,000 places an application in a special examiner docket to provide a final disposition of the application within twelve months of the prioritized status grant.  A final disposition in any given case means either a notice of allowance, final office action, the applicant filing a request for continued examination or notice of appeal, declaration of an interference, or abandonment.  Eligibility for Track 1 requires an application with no more than four independent claims, and thirty claims total.  Importantly, the prioritized status is forfeited without refund if an applicant ever requests an extension of time to respond to an office action.

The 25 percent rule of thumb is often used for approximating the reasonable royalty rate manufacturers making a patented product would be willing to pay a patentee following a hypothetical negotiation.  In its recent Uniloc v. Microsoft decision, the Federal Circuit found it a fundamentally flawed tool for determining baseline royalty rates.  Uniloc’s expert used the 25% rule in calculating damages against Microsoft for infringing its anti-piracy software patent.  On appeal, the Federal Circuit held the expert’s evidence relying on the 25% rule inadmissible, failing to tie a reasonable base royalty to the facts at issue in the case.  The court found the rule impermissibly abstract and theoretical for not taking into account any hypothetical negotiation or reasonable royalty in any particular technology or industry.  According to the court, there must be some factual basis to associate royalty rates from prior licenses to a particular hypothetical negotiation at issue.

In its long-awaited opinion, the Supreme Court rejected the Court of Appeals decision in Bilski v. Kapos that method patents must be either tied to a particular machine or transform an article from one state to another.  While the so-called machine or transformation test remains an  important analytical tool for examining method patents, it cannot be used as a requirement for patent eligibility.  The Court emphasized that while the definition of “process” in the Patent Act includes business processes, they remain subject to rejection using existing patent rules including novelty, obviousness and the adequate disclosure requirement.  In fact, although the Court rejected the machine or transformation requirement, it nevertheless found Mr. Bilski’s patent claims non-statutory, suggesting that courts will continue requiring business processes to meet the current high bar for patentability.  Arguably what constitutes patentable subject matter is now less clear and defined, although the new more flexible standard should be more adaptable to advances in information technology going forward.

The U.S. Patent Office in partnership with several foreign patent offices will fast track application examination under the Patent Prosecution Highway (PPH) program.  Favorably reviewed applications in their countries of first filing may enter accelerated examination for corresponding foreign claims upon request.  The U.S. Office is partnered with Australia, Canada, Denmark, the European Patent Office, Finland, Germany,  Japan, Korea, Singapore and the United Kingdom currently.  Additionally, a pilot PCT program allows applications to enter accelerated examination based on favorable PCT opinions, but exists only between the U.S., European Patent Office, Japan and Korea.  Before electing to use the PPH, applicants should be aware that non-corresponding claims may not use the accelerated process, and accelerated examination may be outweighed by the likelihood of favorable action by a non-PPH office.  Applicants may also be surprised by the speed of PPH claim allowance in instances where accelerated examination is not a necessity.

In 2009 patent applicants waited an average 36 months after filing for examination.  Although a few applications can be advanced out of turn, these must either fall into narrow specialized categories, or be filed using the existing expedited examination process.  Many practitioners disfavor the current expedited case system due to its increased prosecution cost, and because the mandatory examination support documents can inadvertently affect patents in litigation.  In response, the Office proposed on June 3, 2010 a three-track system using tiered filing fees.  Under the proposal, applicants seeking a faster path to examination could pay elevated fees and advance out of turn.  The system, intended to take effect in 2011, was designed to address budget shortfalls and the Office’s current case backlog.  Intended system benefits include a slower examination for inventors still perfecting or trying to market their inventions, and a faster examination option for others.  Critics fear that poorer inventors may be left behind by the system, and also argue that companies might use slower examination to hide technology from competitors although the current 18 month publication rule helps avoid this problem.  The Patent Office is currently seeking comments on the plan through its website.

LegalZoom has been sued in a Missouri class action for engaging in the unauthorized practice of law.  A marketer of “legal document services,” LegalZoom allows customers to generate legal forms online and download completed forms for filing.  Although the Missouri case is based principally on will and corporation formation, LegalZoom also offers services in the area of Intellectual Property, including low cost trademark applications and provisional patent applications.  It remains to be seen whether the Missouri case will have an impact on LegalZoom’s intellectual property related business.